Luxury goods conglomerate LVMH is in the midst of an ever-changing industry as competition heats up and consumer preferences are largely unpredictable. As the French giant continues to grapple with the financial turbulence facing the global luxury business, the financial times shines a light on how the brand is navigating the shifting ground.
1. Luxury Industry Faces Turbulent Times
The luxury industry has been hit hard by the current financial crisis, as its extravagant products and services are often seen as unnecessary in times of economic downturn. As consumers become more price conscious, sales of luxury items have declined drastically.
- Travel – Luxury travel packages have seen major losses, as consumer are cutting back on cruise bookings, holidays and overseas trips.
- Fashion – High end fashion items such as designer clothes and accessories have become harder to sell as people are more focused on necessity items.
- Cars – Luxury car brands are feeling the pinch just like other car brands, but more expensive cars are taking the brunt of the downturn.
For a sector that largely caters to the affluent elite, luxury brands face a hard time ahead as global recession puts a halt to spending. Brands must now find innovative ways to keep customers interested whilst adapting to the current economic situation.
2. LVMH’s Diminished Market Share
In the past several years, LVMH’s market share has been in a downward spiral. It has gone from being the largest luxury conglomerate by market share in 2009 to currently being the second behind Richemont, with no sign of that changing any time soon.
So why has this happened? It’s simple, yet complex. On one hand, luxury consumption has declined due to economic austerity measures, leaving LVMH without a solid base for growth. On the other, competition from Chinese-owned luxury brands, such as Shang Xia and JNBY, has been fierce, creating further pressure on LVMH’s share of the market.
- Weaker Consumption Base : Economic austerity measures have led to a weaker consumer base that’s less interested in luxury goods.
- Increased Competition : Chinese luxury brands such as Shang Xia and JNBY pose a serious challenge to LVMH’s market share.
3. How Is the Vibe Shifting in the Luxury Business?
The luxury business is experiencing a dramatic upheaval right now, as the industry faces a challenging future influenced by powerful and disruptive digital forces. These changes have caused some interesting shifts in the luxury business landscape.
- Green and Sustainable Luxury: Green and sustainable luxury–where products are made with sustainable materials–is gaining traction in the luxury world. As consumers become more aware of the environmental impact of their purchases, brands are adopting eco-friendly policies to stay competitive.
- Tying Luxury to Experiences: Luxury products no longer need to be defined purely by their aesthetic quality. An increasing number of luxury brands are now coupling their products with unique experiences like food and wine tastings, access to exclusive events, and more.
- Tech-Savvy Shopping: Luxury businesses are also Primarily, luxury customers utilize mobile apps for mobile shopping, research, and advice, and websites are beginning to get more interactive, with virtual reality, augmented reality, and tailored user experiences to draw in customers that then drive up sales.
Technology is another key factor in informing how luxury markets are changing their business tactics. As shoppers move to more online-based platforms, luxury brands must ensure that their digital stores are stylish, robust, and secure. Luxury products are also being augmented by digital wearables, such as smart watches with an alluring classic design. Moving forward, luxury markets must be willing to embrace innovation and stay abreast of the rising trends if they are to remain viable participants in the luxury sphere.
4. What Do Industry Experts Say about LVMH’s Troubles?
With the retail landscape facing countless changes, industry experts have much to say about the troubles of LVMH, the world’s leading luxury goods conglomerate. From declining share prices to the negative impact of the pandemic, here’s how the opinion leaders in the business of luxury are viewing the situation:
- Retailers should stay focused. With many of the world’s luxury retailers facing troubles, experts believe the key to weathering the storm is to remain focused on customer service. It’s essential for retailers to stay connected with their customer base, while simultaneously adapting to the ever-changing demands of luxury consumers.
- Innovation is key. To maintain their competitive edge, experts suggest that brands must leverage technology, increasing their engagement with the digital luxury market. Solutions such as virtual showrooms and digital styling services have been incredibly successful for some luxury brands, and could be a key tool in streamlining their success.
Though the future of the luxury industry may be uncertain, experts agree that LVMH must continue striving for innovation and remain focused on their customer base in order to continue succeeding in the market. In a competitive industry dependent on the buying power of luxury consumers, the ability to remain agile and creative will go a long way in securing a relevant future for the world’s largest luxury retailer.
It is clear that while the ultra-luxury market may be booming, not all luxury brands are turning a profit. LVMH is no exception, showing early signs of the potential shift in the luxury space. It remains to be seen how things will play out for the company but one thing is for sure; LVMH will have to continue to innovate and disrupt if it wants to remain competitive in the ever-evolving business of luxury.