For centuries, luxury has been a sign of wealth, status, and prestige. In the reddening market of the fashion luxury industry, Kering’s revenue is down 9%, despite its ambitious efforts for a revamp. While the impact of the global luxury slowdown stalls the revamp at Kering, there is no denying its dire need for reinvention and reinvigoration.
1. Luxury Slump Stymies Kering’s Revitalization Plans
Kering, the French luxury conglomerate, is weathering a storm of soft sales and a lack of consumer interest in its high-end merchandise. The company’s revenues dropped 4.6 percent in 2019, and analysts forecast a continued decline in 2020. Although the identifiable brands - Gucci, Yves Saint Laurent, Balenciaga, Bottega Veneta and Alexander McQueen - remain popular, the high costs associated with their production are straining the limits of Kering’s revitalization efforts.
Kering’s portfolio approach, while financially sound, is becoming less attractive to shoppers. The rising cost of luxury items, combined with the low wages, poor working conditions, and environmental damage historically associated with their production, has many shoppers calling for more accountability from luxury companies. In order to meet customers’ demands and remain competitive, Kering is now putting more emphasis on:
- Increasing Transparency to ensure their brands remain socially responsible.
- Moving Towards Eco-Friendly Strategies to lower production-related emissions and mitigate its impact on the environment.
- Enhancing Its E-commerce Presence so customers can purchase its items in a fast and efficient manner.
In order to stay one step ahead of changing consumer preferences, Kering must continue to refine its strategies and adjust its model accordingly. With clear parameters in place, the company could find itself back on the path of growth and continued success.
2. 9% Drop in Kering Sales Not Popular with Investors
Kering, one of Europe’s most popular luxury goods makers, has recently published sales figures that have left investors less than impressed. In the third quarter of 2020, sales dropped by more than 9%, leaving many observers scratching their heads; is this a temporary dip, or something more long-term?
The French company, famous for brands like Yves Saint Laurent, Gucci, and others, is equipped to weather the storm of changing economic conditions better than other companies, as they often attract wealthy customers who remain affluent even in times of uncertainty. Unfortunately, the trend doesn’t appear to be affecting all of Kering’s holdings equally. It appears that the most important elements of their portfolio are the ones feeling the brunt of the financial downturn.
- It is expected that Kering’s ten largest markets will take the brunt of the sales dip.
- Headquarters of Kering have promised to reassess their strategies and better prepare for future economic irregularities.
3. Analysts Analyzing Impact of Slip in High-End Market Demand
Recent Slowdown in High-End Market Demand
It has been reported that the demand for luxury goods and services has hit a downturn during the current financial quarter. This slump in demand has put analysts on high alert as they endeavor to assess the implications of the change.
- A decrease in demand for costly products could stymie sales of high-end products in the long run.
- Marketers have indicated that the drop in sales of luxury goods is likely to worsen before it gets better.
What This Means for Analysts
Analysts are bracing themselves for what the unanticipated shift in market demand ultimately means. The data gathered from the analysis of the slump could shape the market’s future direction for a variety of products.
- Advisers may need to adjust their strategies by focusing on lower-priced items.
- Economic experts may need to redraw their graphs and limit their predictions accordingly.
4. Kering Hoping to Turn Things Around Despite Present Slowdown
Kering, the French luxury powerhouse known for its stable of prestigious fashion labels, is looking to turn things around despite the current global economic slowdown. In order to do this, the company has implemented several measures to strengthen its long-term prospects.
One such move has been to triple its online sales. Kering has invested heavily in both marketing and technology to build up its digital capabilities, resulting in over 100 million euros of investment last year alone. On top of that, it has also furthered its sustainability efforts, investing in a wide range of initiatives from using sustainable materials to creating efficient supply chains.
- Tripling online sales
- Investing heavily in marketing and technology
- Promoting sustainability initiatives
Kering is also aiming to create new products and services that appeal to its core customer base. It has launched limited-edition collections with luxury streetwear brands such as Off-White, signed up high-profile influencers, and even added lifestyle offerings such as hotels, residences, and spas to its portfolio.
- Launching limited-edition collections
- Collaborating with high-profile influencers
- Broadening portfolio to include lifestyle offerings
The luxury market has recently taken some hits, yet Kering still stands tall despite the 9% decrease in sales. It’s still impressive that Kering has managed to maintain their image as a leader in innovation and quite evidently, they still have plenty of gas in the tank. We can only wait and see what they have in store for the future!
