The luxury landscape is changing again

With the release of the new quarterly sales report, LVMH reported a slowdown in sales growth in the third quarter of this year. A decline that comes as consumers have started to tighten their belts on voluptuous expenses such as luxury clothes, five-star resorts and exorbitant bottles of cognac. In short, the reduced sales are a clear indication that the post-pandemic luxury boom is gradually losing momentum. According to the mega-group's report, organic sales of its crucial fashion and leather goods unit, which includes iconic brands such as Louis Vuitton and Christian Dior, increased by 9 per cent. However, this figure fell short of the 11.2 per cent increase predicted by analysts. But the real haemorrhage is elsewhere: sales in the wines and spirits unit suffered a significant setback, falling 14 per cent, a much worse result than expected.

This change can be attributed to the fact that the recovery of the Chinese economy has not lived up to expectations and demand from US consumers has weakened. The luxury conglomerate even relinquished its title as Europe's most valued company last month, ousted by pharmaceutical company Novo Nordisk A/S. The impact of these challenges is evident in the performance of LVMH's shares, which fell nearly 20 per cent from their all-time high in April, although it should be noted that the stock is still up 7.9 per cent this year. In the big picture, however, the entire LVMH group managed to record organic sales growth of 9 per cent in the third quarter. Even though this is still a positive figure, the forecasts still fell short. It is clear that the rest of the luxury market is looking at LVMH as a litmus test of the health of the sector as a whole - although for a more complete anamnesis we will certainly have to wait for the results of Hermès and Kering, which will arrive in the coming weeks. Unfortunately, the luxury sector is not immune to the shifting tides of consumer demand, which are indeed influenced by economic conditions and players in a new digital ecosystem. These very changes are the subject of a report recently presented by Manhattan Associates Inc., a leading supply chain and omnichannel commerce technology company, based on interviews with 6,000 consumers and 1150 industry executives.

What is changing for retailers and consumers

A report by Manhattan Associates Inc. revealed that consumers are increasingly using e-mail and social media to engage with brands. This trend reflects the evolution of how they communicate and interact with companies. As the report states, «shoppers expect all touchpoints to be connected, convenient and increasingly personalised». This highlights the importance for retailers to adapt to these new forms of communication to meet customer expectations. The research also explained that convenience has become the first parameter for purchases, even surpassing sustainability. This shift in consumer priorities is influenced by the cost of living and has a significant impact on retailers' strategies. One of the main challenges retailers are facing is stock visibility. The report indicates that only 70% of retailers have an accurate indication of stock across their entire business. This can lead to problems such as unused or devalued stock. According to Henri Seroux, SVP EMEA at Manhattan Associates, «not knowing where a third of your stock is, or what you have on hand, means that you have a lot of stock that is not sold, that is devalued or, in the worst case, thrown away». To meet this challenge, retailers need access to accurate data and flexible solutions to improve inventory management and the customer experience. Consumers want a seamless shopping experience that is connected between online and offline channels. However, the report points out that 16% of retailers still manage in-store and online operations as separate functions.

This indicates that there is still room for improvement to offer a more seamless omnichannel experience. According to Natalie Berg, retail analyst, «the role of the physical store evolves beyond the simple transaction, the task of the employees must also go beyond mere sales assistance». This underlines the importance of equipping employees with accurate technology and data to improve customer service. The research indicates that only 45% of consumers consider sustainability an important factor when choosing where to shop, down from 50% the previous year. However, the younger generation is more aware of sustainability, with 55% of 18-24 year olds considering it a fundamental or important condition. The report also emphasises the importance of omnichannel commerce and supply chain unification to address the long-term environmental impact of uncontrolled consumerism. It is important that retailers remain flexible and agile, able to react to changes in real time to meet customer needs. As Henri Seroux states:«With access to accurate data, retailers can put useful information in the hands of their employees, enabling them to enhance the unique buying journey of each customer»