In this context, Louis Vuitton is betting on luxury tourism to improve its profits. Consumers plan to spend more on handbag purchases, indicating that the trend towards more 'premium' luxury houses continues to increase. Product quality, value for money and unique designs are crucial factors for consumers, and in this case, will be Louis Vuitton's lifeline to overcome poor results.
Luxury tourism: key to recovery
In the U.S., purchase intent has increased across most categories, with about 40% of consumers noting a significant price increase in the last six months. Country of origin, designer and customization have become important factors for shoppers.
Brands that have seen stronger spending intent include Cartier, Bulgari, Saint Laurent and Moncler; in China, Louis Vuitton and Burberry; and in the U.S., Gucci has led in spending intent. Luxury companies have taken a long-term approach to building and maintaining brand equity.
Market experts are forecasting a recovery across the luxury sector in the second half of the year after a below-average first half. The most common reasons for this recovery include an easier comparative period and a general rebound in GDP and consumer confidence related to the macro-economy.
Price increases in Louis Vuitton's products have affected its sales. Experts suggest that luxury firms will have to use innovative combinations and materials to attract consumers, as lowering prices is not a viable option to maintain the luxury brand image.
International tourism will partially recover until early 2024, which will benefit Louis Vuitton. With this recovery, luxury firms will be able to plan and allocate inventories more effectively to meet sales in physical stores.
"Local designs, new stores and categories, and e-commerce support tourism spending, which represents more than a third of the total this year. Louis Vuitton continues to demonstrate its ability to enter the largest luxury markets, including China," say Bloomberg analysts.
Thanks to the recovery in spending and luxury tourism, the personal luxury goods market could surpass €400 billion by 2024 and reach €500 billion by 2028, with a medium-term compound annual rate of 8%. This increase in spending will help firms such as Louis Vuitton recover from post-Pandemic instability and the current crises.
Europe's popularity as a travel destination has increased from 14% in January to 22%, which is positive for luxury sales. In addition, airport renovations and improved terminal experience can increase shopping appeal.
Louis Vuitton's strategy is to reposition itself as an exclusive brand. The company believes it has become too close to customers with lower purchasing power and plans to strengthen and open new stores in key markets for its business and strategy.
