The luxury sector experienced an ongoing slowdown in the first quarter following a difficult end to 2023, as evidenced by Q1 results released by various luxury groups in recent weeks.
While there were pockets of success, certain brands, particularly those targeting aspirational customers, are adopting a more conservative approach in response to current conditions, especially in the Chinese market, where recovery is tracking slower than hoped.
Retail in Asia takes a closer look into Q1 results, with a focus on Asia.
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Brands with momentum
Miu Miu, the luxury brand under the Prada Group, has been gaining significant momentum in the fashion industry.
As the top-ranked brand on Lyst’s Hottest Brands index, Miu Miu’s popularity aligns with the overall success of the Prada Group, which has seen a surge in demand for Miu Miu products.
The Prada Group’s performance in the Asia-Pacific region, particularly in China, South Korea, and Japan, has been exceptional, with notable sales growth and increased market demand.
As travel returns, Asia’s holiday hotspots provide opportunities for brands
Travel is back in full swing, and for luxury brands, it might be worth considering where Asian consumers are headed.
Japan has long been favoured by Chinese travellers. According to data from the Japan National Tourism Organisation, Japan is on track to surpass the pre-pandemic number of 32 million annual foreign visitors by 2025, recording 8.56 million visitors in the Q1, which indicates the country’s positive trajectory in achieving this target.
Bloomberg has also reported that the weak yen has been a driving force behind the surge in luxury demand in Japan, fuelled by affluent Chinese tourists.
Indeed, Q1 sales in Japan consistently offered a bright spot for European luxury groups (see above), as APAC delivered varying degrees of success.
Kering, which suffered a blow in Q1, saw a small increase in sales in Japan; LVMH, Hermes, and Prada saw a spike there in Q1.
“Chinese consumers are travelling more and more outside China, so some of the consumption growth from this market will be caught abroad, or in airports mainly in Asia for now,” notes Lorenzo Barberio, general manager, APAC, of Marcolin, a leading eyewear company that distributes brands including Zegna, Max Mara, and more.
Why ‘quiet luxury’ is still trending
Isabel Bazzani, who specialises in global luxury sourcing at isabelbazzani.com, an online digital membership programme providing exclusive access to fashion items, says ‘quiet luxury’ has remained the aesthetic of choice for many luxury consumers who are placing greater value on craftsmanship, superior fabrics and enduring style.
According to Bazzani, her global clients’ waitlists include products considered “investment pieces” from brands such as The Row and Loro Piana.
“We’ve observed a notable shift in consumer preferences that would be termed as ‘quiet luxury,’ marked by a growing demand for timeless styles and less trend-driven pieces from VICs and consumers at large for brands like The Row, Loro Piana, Brunello Cucinelli,” Bazzani says. “This trend signifies a broader shift towards quality and versatility, in comparison to demand led by trend-driven pieces in previous years.”
In contrast, brands that have traditionally led with trend-focused designs are experiencing decline in demand.
“Whilst popular during peak periods with social media hype, they are more susceptible to market fluctuations too. This is exacerbated by regular shifts in creative direction within large luxury groups, which can lead to a dilution of brand identity and a subsequent loss of loyalty from consumers,” Bazzani says.
Hermès and Brunello Cucinelli, on the other hand, “already have a very loyal customer base that remains strong, and this segment is not hugely impacted by the rise in cost of living,” Bazzani notes.
Angelito Perez Tan Jr., founder and CEO of RTG Group Asia, the parent company of business consultancy RTG Consulting Group and investment firm RTG Capital, says there is more to ‘quiet luxury’ than aesthetics.
“Brands which primarily target the ultra-high-end luxury segment are less affected by economic uncertainties for two main reasons. Firstly, their clients are generally less sensitive to down market conditions and price fluctuations when purchasing luxury consumer goods,” Tan Jr. says.
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“Second is the perceived value retention that these brands have created through both scarcity strategies as well as materials used. The belief that a luxury product has a high resale value, even though rarely actually executed by HNWIs, is often a strong justifier for purchasing.”
“Given the wider macroeconomic situation, consumers are also opting to be more discreet, typically shying away from ostentatious shows of wealth. This is particularly so in countries in the midst of news scandals with the ultra-rich that highlight the gap between socio-economic groups,” Tan Jr. says.