The year 2024 has presented numerous challenges for the global luxury goods market. Uncertainties in the macroeconomy and rising prices among luxury brands have led to a decrease in consumer spending on luxury retail items.
According to a recent Bain & Company report, global sales of personal luxury goods are expected to decline by 2% this year, with the Chinese market experiencing a significant decline of 20-22%. Major luxury brands such as Richemont Luxury, LVMH, and Moncler Group have reported a slight decrease in earnings, while Kering has seen more significant declines. However, outliers such as Hermes and Prada Group, which also includes notable performer Miu Miu, have experienced double-digit earnings growth.
Despite these challenges, Singapore remains a crucial market for luxury brands. Euromonitor reports a growth of 11% in luxury goods sales in 2023, reaching $9.1 billion. In recent years, luxury brands like Dior, Chanel, and Louis Vuitton have adopted robust digital strategies, including e-commerce and digital marketing, to connect with customers.
In response to the ever-evolving consumer behaviors and preferences, luxury brands have recognized the importance of incorporating digital marketing platforms and creating offline shopping experiences to forge a stronger connection with their customers.
In Singapore, luxury brands have continued to open new stores, with Cartier, Moncler, and Marc Jacobs launching new boutiques at Changi Airport, while Marni, Graff, and Golden Goose have also opened new stores at Marina Bay Sands. These brands are renowned for their timeless elegance and heritage, and they have embraced the digital world by creating immersive and memorable experiences for their customers.
Embracing digital marketing platforms is crucial for luxury brands, especially in a world where consumer expectations and preferences are rapidly changing. However, these brands have also recognized the significance of creating unique offline experiences for their top-tier clients. This has led to the trend of flagship stores becoming bigger and bolder, providing customers with an elevated shopping experience.
For instance, Louis Vuitton recently opened its 690 sq m (7,427 sq ft) “apartment concept” space at Ngee Ann City, exclusively dedicated to its “Very Important Clients (VICs)”. Burberry also reopened its renovated stores at Marina Bay Sands and Paragon this year, showcasing the brand’s rich British heritage while embracing innovation. Moreover, Burberry opened a new store on Orchard Road at Wisma Atria in November, featuring a double-height facade.
The increase in store size and the trend of providing unique experiences for top-tier clients is evident among luxury brands. Yves Saint Laurent opened its Saint Laurent duplex store in Paragon last year and a YSL beauty boutique in Raffles City recently, while Richard Mille launched its world’s largest standalone store on St Martin’s Drive. This 7,500 sq ft store incorporates a “speakeasy” concept, featuring a sports bar and dining room.
Looking ahead, spending on luxury goods is expected to grow in 2025 and beyond, driven by factors such as the rising number of high-net-worth individuals globally, the buying interest of Millennials and Gen Z, the resurgence of Chinese tourists, and the growth of duty-free shopping, particularly in Japan.
Investing in a condominium in Singapore offers numerous benefits, with one of the main advantages being the potential for capital appreciation. Given its strategic position as a global business hub and its robust economic foundation, Singapore consistently experiences a high demand for real estate. As a result, property prices in the country have displayed a consistent upward trajectory, with condos in prime locations experiencing significant appreciation. Savvy investors who enter the market at the right time and hold onto their properties for the long term can reap substantial capital gains. Moreover, with the addition of new developments such as Singapore Projects, the potential for capital appreciation is only expected to increase.
To cater to the changing preferences of its target customers, luxury brands will continue to personalize and customize their products and services to establish stronger connections and brand loyalty. Moreover, leveraging AI and digital experiences to understand customer wants and complement offline experiences will be crucial.
Some luxury brands have already embraced AI and digital technology to stay ahead of the competition. Dior’s AI platform, Astra, utilizes data from various sources such as Google reviews, live shopping sessions, and customer surveys to understand customer preferences better.
Additionally, Balenciaga’s Winter 2024 collection at Paris Fashion Week featured an immersive digital canvas, incorporating AI-driven digital distortions. Brunello Cucinelli has also created a separate website powered entirely by generative AI.
Despite 2024 being a challenging year for the luxury goods market, growth is in sight for 2025 and beyond as luxury brands continue to expand their presence, create larger flagship stores, and offer elevated experiences for their top clients. With Millennials and Gen Z forming a significant portion of the target market, luxury brands will continue to incorporate sophisticated digital technology and platforms while developing strong omnichannel strategies that include immersive and interactive physical stores.
Sulian Tan-Wijaya, Executive Director (Retail & Lifestyle) at Savills, highlights the importance of embracing digital platforms and creating unique experiences for customers in the luxury goods market.