Why Louis Vuitton is struggling but Hermès is not

There will be fewer designer handbags or high heels under the Christmas tree this year. Spending on personal luxury goods is set to fall by 2% in 2024, according to Bain, a consultancy.

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Sales of fashion and leather items at LVMH, the world's biggest luxury conglomerate, have tumbled. Kering, which owns Gucci, has issued a string of profit warnings. Anyone that receives Versace goodies from Santa may feel a little less pleased than usual. The luxury brand is selling 40% of its products at a discount.

These travails follow an extraordinary rise for the luxury industry. For two decades it expanded smartly as brands reached new customers. In 2023 global sales of personal luxury goods hit $400bn, up from a little over $100bn in 2000, according to Bain. The combined market capitalization of the ten most valuable Western luxury firms approached $1trn, compared with around $300bn in 2013. Over the past 12 months, however, their value has fallen by more than a tenth and growth has reversed. Can luxury recapture its lost allure?

Two trends fuelled the growth of the luxury business. The first was globalization. Brands that began life catering to Western elites in places such as London, New York and Paris increasingly turned eastwards for growth—and to China in particular, for good reason. In 2000 there were 39,000 dollar millionaires in the country, according to UBS, a bank; by 2023 there were 6m, more than anywhere else other than America, and twice as many as in Britain, the third-biggest home for millionaires. The Chinese market made up around 15% of global personal-luxury-goods sales in 2023, about five times its share in 2000.