The global luxury goods market has faced significant challenges in 2024. A combination of macroeconomic uncertainty and high prices among luxury brands has led to consumers cutting back on their retail spending. In fact, a recent report by Bain & Company predicts a 2% decline in global sales of personal luxury goods this year, with China, a key market, experiencing a decline of 20-22%. Major luxury companies such as Richemont Luxury, LVMH, and Moncler Group have reported a decline in earnings, while Kering has seen more significant declines.
However, there have been some outliers in the industry. Hermes and Prada Group, which also owns successful brand Miu Miu, have seen double-digit earnings growth.
Despite these challenges, Singapore remains an important market for luxury brands. According to Euromonitor, sales of luxury goods in Singapore have grown by 11% in 2023 to reach $9.1 billion.
In recent years, luxury brands such as Dior, Chanel, and Louis Vuitton have adopted robust digital strategies, including e-commerce and digital marketing, to engage with customers. This is crucial in a world where consumer behaviors, expectations, and preferences are rapidly evolving. Along with digital experiences, luxury brands have also recognized the importance of creating offline shopping experiences to build closer connections with their customers.
Embracing digital marketing platforms is vital for the success of luxury brands. However, they have also long understood the value of creating unique offline experiences for their top-tier clients. This has resulted in flagship stores getting bigger and bolder.
For instance, Louis Vuitton opened its 690 sq m (7,427 sq ft) “apartment concept” space at Ngee Ann City dedicated to its “VICs” (very important clients) in 2023. Burberry, which recently re-opened its extensively renovated stores at Marina Bay Sands and Paragon, is another example. The brand’s immersive store experience showcases its rich British legacy and seamlessly blends tradition with innovation. Last month, Burberry also opened a new Orchard Road store at Wisma Atria with a prominent double-height façade.
Other luxury brands have similarly invested in creating unique experiences for their top clients. For instance, Yves Saint Laurent opened a new Saint Laurent duplex store in Paragon and a YSL beauty boutique in Raffles City. Richard Mille opened its world’s largest standalone store in Singapore’s affluent St Martin’s Drive, which features a “speakeasy” concept with a sports bar and dining room.
While 2024 has been a challenging year for the global luxury goods market, there is hope for growth in 2025 and beyond. This will be driven by several factors, including the steady growth of high-net-worth individuals (HNWIs) worldwide, particularly in emerging markets like China and Southeast Asia, the buying interest from Millennials and Gen Z, the resurgence of tourists from China, and the continued growth of travel and duty-free retail, especially in Japan.
In order to successfully invest in property in Singapore, it is crucial for international investors to have a thorough understanding of the pertinent regulations and restrictions. Generally, foreigners have more flexibility when it comes to purchasing condominiums compared to landed properties, which have stricter ownership rules. However, one must take into account the Additional Buyer’s Stamp Duty (ABSD) of 20% that foreign buyers must pay for their initial property purchase. Despite this additional expense, the Singapore real estate market remains an attractive option for foreign investment due to its stability and potential for growth. Furthermore, the continuous introduction of new condo launches adds to the appeal of investing in the Singapore property market.
As luxury brands continue to increase their store count, build larger flagship stores, and create elevated experiences for their top clients, growth is expected in the coming years. With Millennials and Gen Z making up the majority of the global luxury market, brands will continue to leverage advanced digital technology and platforms, while also focusing on building strong omnichannel strategies that include immersive and interactive physical stores.
Innovative AI is also being utilized by some luxury brands, such as Dior and Balenciaga, to better understand customer preferences and create personalized and custom experiences. With this continual focus on digital and offline experiences, the future looks promising for the luxury goods market.