According to a report by consultancy firm Bain & Company, luxury brands in the United States that focus on wealthier consumers are performing better than those appealing to aspirational shoppers with lower incomes.
Economic uncertainty is cited as a primary deterrent for the latter group. Interestingly, Bain has increased its annual sales forecasts for the global personal luxury goods market, expecting growth of between 5% and 12% this year, a bump up from the previous 3% to 8% prediction. China is highlighted as a major driver of this growth, following the lifting of COVID-19 lockdowns.
However, the report also indicates that the strong post-pandemic spending spree in the United States is showing signs of slowing down, especially in categories like streetwear and sneakers that appeal to the "aspiration side" of the consumer base. Luxury brands that cater to the needs of top-tier customers are outperforming their counterparts. This trend has led to a shift in merchandising strategies among high-end labels, with many moving upmarket to better cater to their wealthiest clients who are more resilient to economic headwinds.
The report also notes the unique challenges faced by younger shoppers who are feeling the pressure from rising prices more acutely than older generations with higher incomes. One example of a brand successfully navigating these changing market dynamics is premium fashion retailer Hugo Boss, which recently raised its sales and profit targets for 2025. The company is seeing strong growth in the U.S. market and anticipates revenue growth in the Asia-Pacific region as well.
Finally, despite potential concerns about China's middle class and a possible slowing of sales growth, there is still significant demand for luxury goods in the region. The global luxury sales stood at 345 billion euros last year, according to Bain's findings.
