Jakarta –
More than a hundred Paris 2024 Olympic athletes returned rusty medals – this was a bad sign for companies that designed it. The medal was designed by a French jewelry company, Chaumet, owned by LVMH, a giant luxury goods.
Although the medal was produced by the French money printing agency, LVMH got a bad image of excessive promotion but failed to display a commensurate quality.
Pioneer of luxury goods that are not okay
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LVMH based in Paris is now stagnant.
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At the end of 2022, the LVMH market value jumped high, this made Bernard Arnault, the founder and leader of the company who had about half the shares of the company was asked to be the richest person in the world.
But since then, the stock prices of 75 prestigious and expensive brands such as Louis Vuitton, Dior, and Bulgari and Tiffany & Co jewelry have decreased significantly.
The first semester data of 2025 released by the company on July 24, showed a decrease in revenue of 4% compared to the same period in 2024.
Operating profit dropped 15% to € 9 billion (170 trillion rupiah). Wine, alcoholic drinks, fashion, and product from the skin experienced a decrease in income and operating profit, while the sale of luxury watches, jewelry, perfume, and cosmetics remains stable.
LVMH stated, his company “showed good resistance and maintaining strong innovation in the midst of geopolitical and economic disorders.” Demand in Europe is said to be ‘strong’ while the US demand is “stable”.
Prices that are ‘skyrocketing’ and excess stock
LVMH is not the only manufacturer of luxury goods that are experiencing difficulties. Dry, which is based in Paris that houses brands such as Gucci, Bottega Veneta, and Yves Saint Laurent, also reported a significant decline in sales in the first half of this year.
“The luxury goods industry is entering the vortex of death,” Katharine K. Zarrella’s prediction in the New York Times Opinion rubric in December 2024. “After a decade of almost uncontrolled growth, this sector experienced a dramatic decline globally. Analysts suspect, middle class buyers reduced their expenses for luxury goods, and the demand for luxury goods in China declined.”
Zarrella, an experienced fashion editor, sees this bad sign – such as price increases and poor quality. In addition, more and more branded items are left from excess stock, which are sold at discount stores. Increasingly common luxury goods, the less attractiveness
“The places that used to be respected with proud to highlight the expertise of handicrafts, services, and foster loyal customer-based policies, now turned into a ‘mass marketing machine’, comparable to the M&M’s chocolate shop in the Times Square,” he concluded.
‘Devastated’ US tariff
Tariff uncertainty is another problem for the industry. At present, the Trump government has imposed a 15% tariff for goods from the European Union and even 39% tariff for goods from Switzerland. Many luxury items are produced in France or Italy, and many watches come from Switzerland.
Generally people are willing to spend money to shop for luxury goods if they feel optimistic about the future, a stable economy, their work is safe, and investment can develop. However, trade tariffs that are down or lost cause a lot of uncertainty.
Chinese buyers are more careful
“Although some of the luxury brands are still popular in China, other brand sales dropped dramatically,” said Imke Wouters, partners at the Oliver Wyman consulting company and retail experts with a 15 -year experience in China.
In the future, Wouters estimate that this industry will experience moderate growth, “This is not like the previous heyday,” he told DW. There will be a brand that survives some will go bankrupt.
US fares on European luxury goods will not affect Chinese buyers, but geopolitical uncertainty makes them prefer to shop at home.
Shopping trends in this country are estimated to rise from 40% to around 75%. However, with Chinese economic conditions that tend to weaken, many middle class buyers stop buying luxury goods.
To remain attracting the remaining consumers in China, luxury brand producers must focus on improving shopping experiences, offering product uniqueness, and ensuring price increases are comparable to quality.
Targeting young upper class buyers
According to the Bain & Company consultant company, the sluggish purchase made the luxury goods industry face the biggest setbacks since the financial crisis that occurred in 2008-2009, beyond the impact of Pandemi Covid-19.
Last year, the sale of luxury goods fell 1% globally, and this year the sales rate continues to decline. Bain & Company estimates that there will be a decrease of 2-5% until the end of the year, but they believe the prospects are brighter in the future.
Claudia D’Arpizio and Federica Levato Two Bain & Company analysts stated, the number of buyers of luxury goods can still be increased by “expanding the reach to the growing market and targeting more buyers of young generation from the upper middle class.”
But the large number of buyers is not enough, “these brands must change the way to interact with young consumers, reduce their dependence on old customers, and build deeper emotional relationships and cross mere transactional loyalty limits.
This article was first published in English
Adapted by Sorta Caroline
Editor: Agus Setiawan
(ITA/ITA)
