Luxury = Experience, Not Price: Renewing "Value" as Deciphered from Economic and Brand Trends
Today, the standard of luxury is shifting from "how much you pay" to "what you experience."
The luxury goods market for individuals is expected to remain stable or decline slightly in 2024, and polarization between brands has become clear. On the other hand, "experiential luxury" (travel, food, hospitality, etc.) is relatively strong, and consumers are beginning to find value in "spending time" rather than "having." In an era where price alone is no longer persuasive, the quality of the experience is becoming the currency of trust.
Looking at the macro environment, the post-pandemic rebound in demand has subsided, and slowing growth in the US and China, rising prices, and currency volatility are having an impact.
Bain & Company/Altagamma predicts that personal luxury will remain flat to decline slightly in 2024, and points out that "reinvention" is essential for recovery from 2025 onwards. In other words, we have entered a stage where the overall strength of corporate management will be put to the test, not only in terms of product lines and pricing strategies, but also in terms of experience design, technology utilization, and sustainability implementation.
The strength of each category also reflects the shift to an emphasis on experiences . Fragrances, beauty, and jewelry are relatively tenacious, while experience-based categories such as travel and dining out are showing notable growth.
On the other hand, watches, leather goods, and footwear are likely to slow down due to a lack of innovation and a backlash from rising prices. Younger generations are more likely to choose "experiences they can talk about" over "ownership that they can show off," and brands are shifting their focus from providing product-centered value to building "narrative experiences" through all customer touchpoints.
While the industry's overall revenue structure remains biased toward luxury goods, growth is slowing. McKinsey forecasts a slow growth rate of 2-4% for the entire fashion industry in 2024, and while the luxury goods segment will still generate the majority of economic profits, it will also face headwinds .
A model that relies on short-term sales promotions and price increases has its limits, and only brands that have long-term consistency in creativity, design, communication, and management can maintain a relative advantage.
Another trend driving "experience over price" is the expansion of the recycling market. BCG estimates that the resale (second-hand) market accounts for 3-5% of apparel, shoes, and accessories, and could expand to up to 40% in the future. Gen Z is the most active in both buying and selling, and is being driven by rising prices in the primary market, diversifying values, and growing awareness of sustainability. The spread of resale relativizes the value of "things," forcing primary brands to design "post-purchase experiences (care, repairs, resale value)."
In terms of sustainability, "experience" will also be a key differentiator. For example, Kering has incorporated EP&L (Environmental Profit and Loss) into its management decision-making process, and is working to visualize the impact across the entire value chain. Providing transparency through public data and progress reports, rather than simply making declarations, is an act of transforming the basis for pricing into "experienceable trust."
Repairs and maintenance are the best embodiment of the "post-purchase experience. " Hermès has an official after-sales and repair service, providing support by skilled craftsmen to ensure long-term use. "Long-lasting" design and operation create "time value" that goes beyond price. Not only the dazzling appearance of a new item, but also the satisfaction that deepens with years of ownership - this is the core of "luxury as an experience."
The dilemma between price and creativity has also become apparent over the past two years. The drive to raise prices after the pandemic has boosted margins, but consumers are finding it increasingly difficult to trust whether the creativity and experience they receive justify the price. As major fashion houses continue to change creative talent, support is divided over a comprehensive range of factors, including the freshness of the products, the persuasiveness of the story, and the integrated experience between stores and digital.
So, how will "experience-based luxury" be measured in the future?
First, "time ." Materials, stitching, and design provide "long-lasting comfort," ease of repair and care, and sustained resale value.
Second, transparency . Disclosure of the origin, process, environmental impact, and wages makes the reasons for the price visible, creating a sense of satisfaction.
Third, "storytelling consistency" - does the tone of the story remain in the customer's memory, not just in advertising, but also in customer service, packaging, and the online experience?
Finally, there's "personalization." AI and CRM make suggestions tailored to individual tastes and preferences, and the more you use the product, the more it becomes personalized. When these two elements come together, the price becomes the price of a satisfying experience.
From a regional perspective, China's slowdown is paralleled by tourism spending in Europe and Japan, and the newly wealthy in India, Southeast Asia, and the Middle East. Bain/Altagamma's basic assessment is that while volatility is high, total demand is expected to grow in the medium to long term. The challenge for brands has shifted from being price-driven to whether they can recapture demand by "designing authentic experiences."
Conclusion: "Luxury is the experience, not the price" is not just a pretty phrase.
In an environment of slowing growth and increasing polarization, the key to success lies in how well a company can design a series of moments before, during, and after a purchase. Long-lasting design and ease of repair (time value), transparency that discloses consideration for the environment and people (trust value), and memorable stories and proposals for each customer (meaning value). When these three elements are combined, even the same "black leather bag" creates a difference that cannot be explained by price. The next growth will come from the refinement of the experience.
