Yves Hanania, founder of Parisian consulting firm Lighthouse, specialises in brand strategy and development, and has co-authored the books Le Luxe Demain (luxury tomorrow) and Le Luxe contre-attaque (luxury on the counter-attack) by Dunod Editions. For FashionNetwork.com, Hanania has analysed the main changes that faced the luxury industry in 2024, a year marked by increased geopolitical tensions and a profound economic crisis, as well as the challenges awaiting in 2025.
 

FashionNetwork.com: What picture would you draw of 2024?
 
Yves Hanania: The environment is extremely panicky. We’re witnessing a generalised [luxury market] decline as several very important regions, Europe, China, even South Korea, are slowing down, a rare phenomenon because such slumps are generally more localised. I’d even add the USA to the list of major regions that are experiencing a setback. Having said that, we must differentiate between segments and labels. A consumption decrease for certain products sometimes results in a shift to new product segments as assortments broaden.
  
FNW: How would you describe this crisis?

YH: We’re dealing with a prolonged slowdown. Growth is still happening, but it has been halved in some cases. Even if Japan and the USA are holding firm for the time being, this crisis is characterised by a convergence of the structural and the cyclical. On the one hand, the luxury industry’s business model is being questioned, and on the other, consumption [is being hit]. Despite the resilience of luxury as a driver of social status, consumption has been impacted. For example, the purchasing power of Chinese consumers has significantly reduced owing to the country’s real estate crisis. Inflation has played a role. There has clearly been an impact on product costs, which has been mostly passed on to consumers. This is where a correction will very likely occur.
 
FNW: There has also been a significant rise in product prices.
 
YH: They say that labels aren’t eternal, but luxury probably is. It all depends on how it is treated. If it is unbridled luxury, coupled with overconsumption and overvaluation, we have a problem. And indeed there have been abuses. Prices are sometimes exorbitant. In the last five years, they have increased twofold, even threefold, causing consumer fatigue and rejection, a kind of disaffection. People also want to find their bearings. You can’t buy a handbag just because it’s iconic. Many, unable to buy the most prestigious brands, have gone down a notch, turning to more affordable products, or products offering better value for money. This has also favoured the resale market, one of whose attractions is that it features unique products, since the vintage era dates back to a time when luxury goods weren’t mass-produced. They were unique items made to order. So consumers can buy a unique piece, one that comes with its own history. Greater value is attached to such items, almost a throwback to the original concept of luxury.
 
FNW: What role did the post-pandemic rebound play?

YH: It had a distorting effect, like a mirage. The post-pandemic period brought on such high demand, such a craze for watches, jewellery, and fashion, that it caused availability problems. For example, for certain categories such as champagne, [producers] wouldn’t serve the French market, as their whole output was exported because it paid better. This led to distributors in some segments and countries refusing to buy, feeling they had been treated poorly. In the watches sector, some brands went too far, putting pressure on retailers by forcing them to buy more and more. All of a sudden, overstocking ensued. During the post-pandemic rebound, in 2022 and 2023, retailers overstocked, and we are all still paying the price.
 
FNW: How did labels react to this situation?

YH: Labels adopted a strategy that simultaneously involved managing demand, and reviewing their positioning and growth rates in the markets where they were operating. They were also forced to reassess the status of their sales channels, to understand how much of their business they should generate from wholesale, e-tail and direct retail.

Demand challenge

 
FNW: What will be the main challenges for 2025?

YH: One of the main challenges will be to keep a steady level of demand, while repositioning somewhat to meet accessibility and perceived value criteria.
 
FNW: What measures should be taken?

YH: Labels are likely to expand their assortments, introducing products at more affordable prices, entry-level handbags for example, or new categories. It’s a classic strategy. Diversification can act as a potential growth driver for strong brands, through popular segments such as eyewear, fragrance and beauty products. Diversifying also means promoting more immersive experiences, via a plethora of temporary venues, for example restaurants, scores of which were activated last summer in resorts like Saint-Tropez, Capri, etc. It is no longer a purely transactional relationship, but a deeper emotional relationship. Labels will also have to rethink their price positioning, reducing their dependence on very high-end products, while maintaining brand consistency and desirability.
 
FNW: Which other growth drivers do you see?

YH: One is geographic expansion. Another is brand-image innovation. [Labels] need to strengthen their emotional bond with customers, especially through their storytelling, while placing greater emphasis on art, craftsmanship and heritage. Talking about value and authenticity, I think therein lies real luxury. An even more important element of the narrative is respect for the values of luxury. Besides product quality, there is something of a philosophy behind the way labels produce, for example, handbags. Narrative elements focused on the manufacturing process have become much more crucial.

Assortment changes

 
FNW: What market impact will sustainability have?

YH: Sustainable development isn’t yet a reality. Possibly in terms of sourcing. There is a huge contradiction between runaway growth and output reduction. It’s easier to grow than to shrink. New strategies will involve volume adjustments. In some cases, there will be a more elitist approach, with a need for volumes to meet financial or environmental imperatives. In the next five years, labels will be more and more constrained in selling new products. According to my projections, within 10 years, half of the in-store assortment will be composed of upcycled and second-hand products, as well as services. It will not just be straightforward selling, something that could perhaps become e-tail’s preserve. Stores will have another role, as is already happening today.
 
FNW: So what are the key issues in terms of sustainability?

YH: Pressure will increase for materials and producers to become more sustainable, leading to short-term stress and a slew of necessary supply chain adjustments.
 
FNW: How will the luxury market’s map be redrawn?

YH: There will be a dichotomy between an elite and a mass segment. Luxury has been widely democratised. A large part of the industry’s output consists of products that, if not entry-level, are in any case affordable. Demand will not diminish. On the contrary, it will probably grow and strengthen. What will change is how labels are run. In the past, they relied on growth and brand desirability, responding to demand rather than working on their assortment. Now, labels will have to go back to the drawing board, strategically rethinking how they perceive their brands. Especially since executives are currently focused on the short term, and less on a strategic outlook. They’ve been under such pressure on the demand side that they’ve possibly lost strategic perspective. We will therefore witness a recalibration, because there is a need to regulate demand, and certain practices. But beyond maintaining demand, it is also crucial for labels to remain desirable.