Is the luxury trade reaching its end?

So the latest earnings for LVMH and Kering came out this week and both had declining profit figures and flat to negative topline growth with 2024 H2 forecasts not looking any more rosy.

China had been for the past decade the make or break market for luxury with most luxury brands seeing regular 20% + growth in revenue in the region. But it seems this luxury bonanza reached its peak in 2022 and slowly started to decline as government imposed lockdowns in China eased. Market recovery was tempered by a property crisis, slowing economic growth, inflation,  rising youth unemployment and low consumer confidence. 

This led to an oversupply as luxury retailers had hiked prices massively due to inflation and also because they could get away with it as demand seemed insatiable. However this caused issues in that these brands are now being left with too much inventory and have started offering increasingly discounted products. It’s reached a point that luxury goods are being discounted by as high as 50% in China as their middle class reins spending on big ticket items.

This is a huge issue as discounts largely influence future purchase decisions negatively especially in luxury. As people start to doubt the actual value of the expensive products they’re purchasing. This is very problematic during high inflation times as it becomes harder to justify purchasing a product that’s falling in value massively and people have less disposable income for literal luxury.   

Additionally, one of the issues is that luxury especially the likes of LV, Gucci and others have become a supermarket of supposedly luxury goods. Very different from a decade or so ago when a lot of these products were hand made or designed by artisanal designers working in high end ateliers having a specific know how and each product was made with high precision and lots of attention.  Nowadays many of luxury products have entire lines being mass produced and using fake leather for a lot of their bags. 

Saying all this, maybe its just a dip and there is a recovery. But where is demand going to come from? Europe and North America are pretty saturated markets, China is having large economic problems. Maybe India with its rising middle class and desire for show off become the next growth pillar for luxury?