For the first quarter of 2023, the majority of luxury brands and groups saw a decline in sales in America (Kering, Burberry, Prada, Richemont etc). Hermès is one of the few exceptions with its sales in Americas rising 21% in the latest quarter.
America has more dollar millionaires than any other country in the world: According to Credit Suisse, four in 10 of the world’s millionaires live in the U.S., compared with one in 10 in China. But luxury sales haven’t lived up to the promise.
One problem for luxury brands is that the U.S. market can be very promotional. Pressure to offer deals led brands to pull their products out of U.S. department stores and sell through their own boutiques, where they have greater control over prices.
Compared with the Chinese market, U.S. advertising happens through traditional channels such as fashion magazines and TV, where the cost of campaigns can be much higher This has made it hard for all but the biggest brands to get noticed.
The market changed dramatically during the pandemic. Americans flipped from accounting for 22% of global luxury sales in 2019 to 33% in 2022, based on Bain & Company data. The shift almost doubled the size of the U.S. luxury market in only 3 years
In March 2021, the U.S. government handed $1,400 to most Americans. In the quarter after the checks began to be distributed, people earning less than $50,000 a year spent 46% more on luxury fashion than they did in the same period of 2019,
Demand for the lower-priced goods of luxury brands is very weak. Sales of cognac have seen a “brutal” slowdown in the U.S., according to LVMH. Second-tier cities such as Austin and Nashville, which boomed during the pandemic, have lost momentum.
Americans’ appetite for luxury has been impacted, and they see to splurge rather on classic brands like Hermès. Even with the recent slowdown, U.S. shoppers from all income levels are still splashing out a 10th more on luxury goods than they were in 2019
Several reports indicate that luxury retailers in the U.S., especially department stores, have been cutting back on their orders and are postponing payments to the luxury brands they distribute. Some have already been shutting down brick & mortar locations.