Retailers are entering the holiday season with an excess of inventory, which could lead to aggressive discounting and potentially harm the brand image. Leading luxury brands have been selling mainly through their own stores to avoid discounts and maintain control over their brand image. Direct-to-consumer sales by these brands have been increasing, accounting for 52% of the personal luxury goods market in 2023, up from 40% in 2019. Despite the challenges, luxury fashion houses have become more adept at handling crises, using artificial intelligence to predict sales volumes and adjust production accordingly.
Key takeaways:
- Luxury goods spending in the United States has seen a significant decline, with a 15% drop year over year in November, following a 14% decline in October, according to Barclays.
- Retailers entered the holiday season with excessive inventory levels, which were ordered before the luxury sector began to cool off after a post-pandemic splurge.
- The luxury industry is facing challenges due to geopolitical uncertainty in the Middle East, inflationary pressures, and a property crisis in China that has derailed expectations for a post-pandemic rebound.
- Direct-to-consumer sales by luxury brands have been increasing, accounting for 52% of the personal luxury goods market in 2023, up from 40% in 2019. These brands have also embraced AI to predict sales volumes and adjust production accordingly.