The year 2024 has presented a number of challenges for the global luxury goods market. With macroeconomic uncertainty and rising prices among brands, consumers have been cutting back on luxury retail spending. According to a recent report by Bain & Company, global sales of personal luxury goods are expected to decline by 2% this year, with a significant drop of 20-22% in China, a key market. Major luxury conglomerates like Richemont, LVMH and Moncler Group have reported slight declines in earnings, while Kering has seen more significant decreases. However, outliers like Hermes and Prada Group, which also owns the successful brand Miu Miu, have bucked this trend with double-digit earnings growth.
Despite these challenges, Singapore remains an important market for luxury brands. Euromonitor reported a growth of 11% in luxury goods sales, totaling $9.1 billion in 2023. In recent years, luxury brands such as Dior, Chanel and Louis Vuitton have adopted strong digital strategies, including e-commerce and digital marketing, to engage with customers. This is crucial in a world where consumer behaviors, expectations, and preferences are evolving at a rapid pace. Along with digital experiences, luxury brands have also recognized the importance of creating offline shopping experiences to foster closer connections with their customers.
One strategy that luxury brands have been embracing is the creation of unique experiences for their top-tier clients. Flagship stores have become larger and more extravagant. For example, Louis Vuitton has opened a 690 sq m (7,427 sq ft) “apartment concept” space at Ngee Ann City, dedicated to its “VICs” or very important clients. Burberry has also re-opened its extensively renovated stores at Marina Bay Sands and Paragon this year, showcasing its rich British heritage and blending tradition with innovation. In addition, the brand opened a new street-facing store at Wisma Atria in November.
Other luxury brands have also been expanding their presence in Singapore. Yves Saint Laurent opened a new Saint Laurent duplex store in Paragon shopping mall and a beauty boutique in Raffles City. Richard Mille opened its world’s largest standalone store, spanning 7,500 sq ft, in Singapore’s affluent St Martin’s Drive. This store incorporates a “speakeasy” concept with a sports bar and dining room, providing a unique and elevated retail experience.
Despite the challenges faced in 2024, luxury brands can expect growth in the following years due to a few factors. These include the steady growth of high-net-worth individuals (HNWIs) in emerging markets like China and Southeast Asia, the buying interest of Millennials and Gen Z (who will make up 75% of the global luxury market), the resurgence of tourists from China, and the continued growth of travel retail, especially in Japan.
Some future trends for luxury brands include personalization and customizations to build deeper connections and loyalty with customers, as well as leveraging AI and digital experiences to better understand customer preferences and complement offline experiences. A few luxury brands have already been utilizing AI in innovative ways. For instance, Dior’s AI platform, Astra, extracts data from various channels to stay in tune with customer preferences. Additionally, Balenciaga’s Paris Fashion Week show for its Winter 2024 collection went viral as it incorporated AI and digital technology to create an immersive and visually stunning experience. Brunello Cucinelli also stands out with its separate website, powered entirely by generative AI.
While 2024 has been a challenging year for the luxury goods market, there is hope for growth in the coming years as luxury brands continue to expand their store counts, build larger flagship stores, and create unique experiences for their top clients. With Millennials and Gen Z forming the majority of their customer base, luxury brands will continue to embrace sophisticated digital technology and platforms while building strong omnichannel strategies that include immersive and interactive physical stores.