Three strategies the luxury sector should focus on to boost sales

Gen Zs and tourist shoppers will be crucial for the sector.

Luxury brands and retailers should tap into the younger generations, focus on vacation shopping and prioritise the critical segment to pursue growth as the demand for luxury products slows down globally.

In a report, GlobalData the luxury market boomed following the pandemic with the US leading in terms of consumer spending with $134.6b, followed by China at $77.3b and Japan at $34.4b.

However, whilst the US still dominated the luxury market in 2023, its sales declined by 3.7%. According to Capri’s latest finding, luxury brands are experiencing declines with Michael Kors suffering a 5.6% year-on-year (YoY) fall in revenue as of 30 December 2023, Jimmy Choo with a 1.2% dip, and Versace with 8.8%.

To increase sales, GlobaData said the luxury market should look into the younger generations as they continue to value luxury products. They also have larger disposable income and are willing to cut back on other spending areas to afford luxury goods and they have fewer financial commitments.

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Vacation shopping will also be crucial for the sector as global travel is expected to exceed pre-pandemic levels in 2024. Tourists often take advantage of strong conversion rates and tax-free shopping.

GlobalData added that the market should also focus on the ultra-rich as they continue to dominate spending power and are largely unaffected by the economic uncertainties due to their wealth.

“Although growth opportunities seem anaemic in comparison to recent years, they remain respectable compared to pre-pandemic levels. Long-term the global economy will improve, drawing many consumers back to the market,” Harry Butterfield, Consultant and Retail Analyst Consumer Custom Solutions at GlobalData, said. 

“In the meantime, luxury retailers will need to double down on their core audience, whilst not hesitating to invest in new opportunities, like the rising importance of Gen Z and the revival of vacation-focused shopping,” he added.