Sales of luxury apparel fell by 25%

Not an easy autumn amidst a slowing economy and decreased willingness to consume. As MFF discovered, luxury fashion shopping has decreased by an average of 25%, which has had an impact on the entire fashion industry. It is unsurprising that Italian buyers have already took measures, reducing their budgets by an average of 30% for spring-summer 2024. This trend applies to foreign markets from the Us to the East and throughout Europe, which have experienced similar dynamics.

Concerned buyers are calling for increased system synergies and closer partnerships with brands, as “only together can we address the current situation and create new opportunities,” according to MFF’s survey of some of the multibrands associated with Camera Buyer Italia. The association have nearly 100 members, totaling 400 stores, and generate an estimated annual turnover of 3.5 billion euros. The issue affecting revenues is not related to the collections in stores or buyer apprehension about changes to creative direction. In fact, the recent debuts of Sabato De Sarno at Gucci, Peter Hawkings at Tom Ford (see MFF of September 26), and the arrival of Chemena Kamali at Chloé have been viewed positively. The revenue decline can be attributed to factors such as the sluggish economy, inflation, high interest rates, two ongoing wars, rising prices, and an excessive amount of available products in the market.

The 2021 and 2022 post-pandemic frenzy led to increased production and ordering from brands and buyers. The contraction was unforeseeable. However, the resulting oversupply and lower consumer demand has caused a rise in promotions, leading to significant margin erosion in both online platforms and physical retail. «The economy is facing a challenging period, with reduced spending and a drive for expansion, amidst high inflationary pressures resulting in widespread implications for the fashion industry. Although e-commerce is burgeoning, it is coming at the cost of profit margins, leading to an increase in promotional tactics. There is an oversupply in the market. Luxury needs to prioritize desirability, using organic growth and long-term strategies. These approaches often conflict with financial regulations» Andrea Molteni, ceo of Tessabit, stated. Tessabit operates 20 boutiques in Como, Cernobbio, Menaggio, and Bellagio, and forecasts a turnover of 90 million euros in 2023, which is a 20% increase over 2022. «To navigate this period, we require genuine partnerships that rely on robust integration and alignment of strategies among brands and retailers. In the meantime, our focus is on wholesale 4.0, meaning more strategic partnerships and unique experiences on Lake Como, providing added value and increased visibility for our partner brands through pop-up stores, events, and special products», Molteni added, who has reduced the number of brands and concentrated budgets in an increasingly divided market.

Luxury retailers are facing changes in consumer behavior. «As a result of economic uncertainty, consumers are making more conscious purchases and demanding higher standards. Comfort, well-being, fitness, travel, and appearance have become more important priorities than dressing. Although the collections are always intriguing due to their uniqueness, quality, and beauty, the prices are excessively high» Beppe Angiolini, the owner of Sugar in Arezzo, said. «I believe that the store can thrive without e-commerce, rather than the reverse. Additionally, implementing an innovative project with a distinct personality can lead to a significant impact. The online experience can be generic, so it is important to express your personality by connecting channels while staying true to your brand» Angiolini added. Times of challenge present opportunities for activity reorganization, but preparing beforehand is crucial.

«Our multibrand clients who invested in technology, operating systems, human resources, management, and space are advantaged in dealing with and anticipating these changes» Alessandro Locati, co-founder of Plas Consulting, stated. The company manages the purchasing of 40 multibrand signs in Italy and Europe. «In today’s market, the first margin is achieved through savvy and prudent buying. We need to carefully assess orders across the physical, proprietary site, and platform channels». The buyer’s guiding principle is to review strategies, given that the current surplus is a result of market euphoria in 2021 and 2022. «n the past two years, we have experienced growth and maintained our investment. However, we have encountered economic and political challenges that have affected us globally. Additionally, our region of Romagna has suffered from a flood» Sabina Zabberoni, the owner of Julian Fashion, stated, which has seven boutiques in Milano Marittima, Rimini, and San Marino.

«We are currently choosing budgets and brands and renegotiating terms with various companies. As an example, we have encountered positive attitudes and cooperation regarding advance payments. However, the substantial and irresponsible price hikes are a significant obstacle. We must establish feasible delivery solutions as companies still expect them with a 30-day balance. Unfortunately, when we sell the goods after 3 or 4 months, it causes cash flow issues» Zabberoni explained, highlighting that «we try to do our best by increasing staff training, hosting events, and offering personal shopping to improve our physical store’s performance. This is especially important since there is much more competition online worldwide, excluding Europe».

Claudio Betti, owner of Spinnaker with 15 stores in San Remo, Alassio, Portofino, and Santa Margherita, agreed: «Online sales, which has consistently grown over the past decade, despite an expansion of the brand mix in-store, has now plateaued and is not being compensated by the increase in physical sales. Market saturation due to the Chinese market slowdown has caused an excess of merchandise, leading to fierce competition, price cuts, and margin erosion». Additionally, pricing has significantly risen, but the Italian consumer is not receptive. «We would like the brands to restructure their prices by offering entry-level options to local customers, in order to regain their loyalty towards luxury products. Our purchasing decisions are now more mindful, resulting in a considerable decrease in budget in comparison to the overexcitement of 2022. As a result, we will navigate this situation with renewed equilibrium in wholesale and more balanced business models,» Betti added.

However, the decrease in shopping is not attributable to in-store collections, and the turnover of creative directions is not a worry. «The primary goal is for stylistic and managerial changes to occur seamlessly, without disruptions, and to promote greater coherence of vision and collaboration among brands and multibrands. We recently launched a collection with Off-White and hosted an event with Brunello Cucinelli» Beppe Nugnes, owner of Nugnes in Trani, said. «Customers are currently dealing with various issues, including economic recession, inflation, high rates, and nearby wars, making them distracted, and increasing prices are not helping. Rather than focusing solely on price, a balance between product, quality, research, and style is crucial. Customers frequently ask us why garments are priced so high. We are not hesitant to sell at high prices, but if the prices do not align with their perceived value, it becomes challenging. Moreover, our margin has been decreasing continually» Nugnes added. «Fashion and the world are facing an exceptional time, but the determination and eagerness to progress are more robust than any crisis» Angiolini concluded, expressing a mindset shared by all buyers. (All rights reserved)