Bouncing back

In reaction to the luxury market slowing, some of the major players are ramping up their digital offerings and creating immersive store experiences to drive demand.

Challenges in luxury spend
Bain expects the luxury market to grow by just 1-4% in 2024, compared to the estimated 8-10 10% in 2023. The overall luxury market is around 25% above 2019 levels, so this level of growth is unsustainable, and consumers have also recently been affected by inflation, reducing their disposable income.

Compared to the first three months of last year, LVMH sales declined in Asia (excluding Japan) by 6%, which is LVMH’s largest market by revenue share, driven by Chinese shoppers. In comparison, US and European revenues for LVMH grew by just 2% (source: FT). Another trend impacting the luxury sector is the decrease in aspirational shoppers – those consumers who buy a few affordable luxury products such as accessories.

Improved online experiences
LVMH remains proactive in the Chinese market through online and offline activations. This year they unveiled five dragon installations at pop-ups and flagship stores across China to celebrate the Lunar New Year. Acknowledging the high social media usage of Chinese consumers, LVMH also strengthened their online presence by opening flagship stores on Tmall Luxury Pavilion (a high-end e-commerce platform), and Louis Vuitton began posting long-form content on Douyin (China's version of TikTok).

This strategy of building an online presence and community has helped attract over 2.5m  engagements on the platform. In addition, LVMH continues to position themselves strongly in China with LVMH flagship brands opening in DFS Yalong Bay, a seven-star luxury retail and entertainment destination in Sanya, Hainan province, opening in 2026. This destination will house over 1,000 luxury brands and intends to attract over 16m visitors a year by 2030.

Wow moments in stores
Physical boutiques are increasingly becoming places that seek to amaze and excite consumers through immersive displays and non-retail elements.

Mega boutiques and flagships transcend retail, providing exceptional service and immersive art installations that narrate the brand's story, while also integrating F&B and hospitality for a luxurious five-star experience. Mega flagship stores, like Tiffany's The Landmark in New York, which opened last year, offer immersive experiences such as art installations, displays, and exclusive jewellery pieces, along with expert styling advice. These experiences have the potential to encourage spending through a uniquely curated experience while converting consumers into luxury enthusiasts through exceptional service.

Blending retail with art, Gentle Monster incorporates art installations into every boutique, creating an immersive and unique experience for every shopper. Additionally, Mwaz in Riyadh, a new conceptual luxury fashion and lifestyle destination opened last year, is a fusion of fashion, technology, and entertainment in a 2,750 sqm space, incorporating areas for pop-ups and various activations.

Luxury brands are also extending their luxury experiences into hospitality and airports. Qatar Airways has opened a Louis Vuitton Lounge in collaboration with a three Michelin-star chef, providing a novel avenue for luxury consumers to experience the brand. Additionally, in 2026, Louis Vuitton plans to open its first-ever hotel in Paris.

Luxury brands are undergoing huge challenges driven by changing consumer behaviors and global economic factors. Ultimately, the retail experience delivered by brands is crucial to continuously engage with consumers in new and innovative ways to maintain their market position.

Hui Wen Lim