Luxury

Economic weakness in key markets dims luxury sales

Consumers warm to unique craftsmanship

Of the 13 categories tracked in the BrandZ™ Top 100 Most Valuable Global Brands, luxury declined most in Brand Value, with a 6 percent drop compared with a 16 percent rise a year ago.

Following a strong recovery from the global financial crisis, the pace of sales flattened for several reasons, including the economic slowdown in China, Brazil and Russia. In addition, China's anti-corruption regulations trimmed luxury gift giving in that country.

Changing values and attitudes about consumption also impacted luxury brands. Some consumers, particularly millennials, viewed luxury products as expensive indulgences inconsistent with their desire to live in a modest and sustainable way.

In addition, luxury brands limited efforts to reach a mass audience and instead reaffirmed exclusivity as a vital characteristic of luxury. Instead of offering trinkets at entry-level price points to widen accessibility, brands relied on content, such as live streaming fashion shows, to introduce new customers to the brand experience.

This resurgence of exclusivity created an opportunity for more ubiquitous and popularly priced luxury brands like Michael Kors. Sold both at its own locations and in department stores in over 85 countries, Michael Kors entered the BrandZ™ Luxury Top 10 for the first time this year.

Meanwhile, new luxury markets emerged – in Mexico, Turkey and Nigeria, for example. And brands also targeted the large and fast-growing demographic made up of international travelers who purchase luxury at airport shops.

Economic and currency factors

The slowdown of the Chinese economy especially impacted Prada. With one-third of its sales coming from the Asia-Pacific region, Prada's annual profits and brand value dropped. Both Louis Vuitton and Gucci, which expanded rapidly in China, were impacted by the economic slowdown and the anti-corruption regulations that dampened official gift giving.

Top 10 Chart

In contrast, Hermès was less affected by China's economic slowdown, perhaps because the brand is a relative newcomer to China, and also because of its more discreet designs. Without the logo emphasis that had characterized some of its competitors, it better fit the more reserved mood of today's Chinese consumers. Jewelry was popular in Asia because of its timelessness and investment value.

Because of the price transparency created by the Internet, many brands harmonized their prices across regions. Some brands harmonized prices to slow the grey market of goods purchased in Europe, at relatively lower prices, for sale in China at a profit.

While these actions protected brand equity by eliminating large price differences across markets, they also trimmed lucrative margins in certain markets. Chanel lowered retail prices in Hong Kong and China while raising prices in Europe. Other luxury brands, such as Cartier, Patek Philippe and Burberry, took similar actions.

Changing ideas of luxury

For many post-recession luxury consumers, it was acceptable to purchase and enjoy luxury but not to be profligate and ostentatious. Even shoppers who typically had purchased an expensive leather bag every season instead looked for durability, adopting an attitude that The Futures Company calls "considered consumption."

Durability came in the form of a wellmade leather bag from a famous brand, for example, or a bag from a lesser-known brand recognized by only those "in the know" for unique design and craftsmanship. One example of these small but growing brands was The Row, whose creative head left to take on the job at Hermès.

To satisfy the consumer desire for more discreet luxury, some of the large brand houses introduced more understated designs and promoted their artisan roots. Burberry personalized perfume by etching the user's initials on the bottle.

New products and communications

Brands responded to these trends both with new products and communications. Burberry expanded the link between fashion shows and music with Burberry Acoustic, a project that promotes young musicians. While Burberry continued to be a communication innovator, other brands began to catch up.

Louis Vuitton created a campaign around travel, connecting the brand with its heritage in fine luggage. Its Fondation Louis Vuitton art museum in Paris, designed by the renowned architect Frank Gehry, was among the most notable expressions of brand experience. Rather than sponsoring an existing art exhibition, Louis Vuitton curated its own collection.

Louis Vuitton also released a campaign called Series 1. Produced by a collective of photographers rather than a single photographer, the campaign created variety and more of a local feel rather than a global statement. The brand also built Louis Vuitton hotels, for the ultimate brand immersion.

Under the leadership of a new design head, Tiffany reinvented some of its traditional collection to meet contemporary tastes. While still a brand known for gift purchasing, it appealed to women desiring to purchase jewelry for themselves. The T collection – bracelets and other items featuring the Tiffany "T" created a new access point to the brand while maintaining exclusivity.

Matching the social mood of the times, Tiffany introduced a line of men's wedding bands and engagement rings for samesex couples. The initiative benefited from both the increase in same-sex marriages and the growing men's fashion market.

Chanel made headlines at Paris Fashion Week with innovative presentations at both the spring and fall shows. In the spring, Chanel staged its fashion show as a women's rights demonstration, while in the fall, Chanel presented its fashions ironically, using a set designed as a hypermarket. On aisles transformed into catwalks, models paraded past Chanel-branded hardware and FMCG products.

Brand Building Action Points

1.

Less is more. In luxury, brands cannot be everything to everybody. Focus on developing a unique and niche perspective.

2.

Start collecting data across all different channels of the business. Luxury traditionally has been a space driven by qualitative and artistic expression, rather than data-driven strategies. However, today brands must tap into this new information stream to effectively maneuver the global market.

3.

Heritage remains important; the average age of a BrandZ™ Luxury Top 10 brand is 129. But to cultivate the next generation of luxury customers, brands need to present the brand experience – if not the products – more accessibly.

4.

As people travel more, the luxury brands need to have a consistent brand story that works internationally without being bland, and with resonance for local markets.

10-Year Trends & Analysis

Changing consumption attitudes impact category

The consumer view that the BrandZ™ Luxury Top 10 are responsible brands has declined over the past decade.

In 2007, consumers viewed the Top 10 luxury brands as being more responsible than the Global Top 100 brands. On an index where an average brand scores 100, the Luxury Top 10 scored 105 and the Top 100 scored 101.

But the responsibility score of the BrandZ™ Luxury Top 10 plummeted with the global economic crisis in 2009, and it has not fully recovered. By 2015, the Luxury Top 10 scored only 98 in responsibility compared with 107 for the Top 100.

Although Hermès scored marginally better, all brands felt the impact of changing consumer attitudes about consumption. Post-recession consumers, especially millennials, have a harder time aligning luxury purchases with their views about consuming responsibly and expecting brands to serve a higher societal purpose.

In addition, the Brand Value of the Luxury Top 10 dipped sharply last year after rising steadily over the past 9 years. The decline resulted from the economic slowdown of important luxury markets like China and Russia.

Luxury Top 10 declined in responsibility

Future View

  • Preferences are moving away from the traditional global luxury brands to brands that have a much more refined design perspective and overall concept. Exclusivity is not just about price, but about personalization of the experience and the emotional connection a consumer makes with the brand. The new status is having something that speaks to you as an individual, not something that exhibits wealth.
  • The growth of international travel will continue to shape the business, and will present special challenges for communicating to consumers before, during, and after travel. These travelers will come from China, certainly, but also other markets with growing affluence, such as Mexico, Turkey and Nigeria.
  • Heritage will remain important. However, brands need to adjust for millennial consumers and their expectations of authenticity, individuality, creativity and a higher purpose beyond consumption. The purpose may be about how the brands make things – how they preserve skills and crafts.

Down -6%


Luxury - Top 10 Total Brand Value
$104.6 BILLION


Category Definition
The luxury category includes brands that design, craft and market high-end clothing, leather goods, fragrances, accessories and watches.


BrandZ Top 100 2015

BrandZ Global 2014 Report Top 100 Report

Top 100 Chart

Top 100 Infographic


Methodology and valuation by Millward Brown

Share