According to expert analyst Claudia D’Arpizio, luxury leathergoods brands will do well to emphasise the “emotional experience” involved in owning beautiful products made from the most circular material in the world. 

Altagamma, the association that promotes luxury brands producing in Italy, held the 2024 edition of its Observatory event in Milan in November. This was the twenty-third edition, which analyses the situation in the global luxury industry. It is an industry that seems to have delivered a litany of confidence-lowering results in 2024, although positive ideas emerged from the event too.

Full-year figures for 2024 were unavailable at the time of writing, but results for the first nine months of the year from the most high-profile groups paint a mixed picture, at best. The leathergoods division of LVMH achieved revenues of €29.9 billion for the nine-month period, down by 3% year on year. Kering reported total revenues of €12.8 billion, a fall of 12% compared to the same period in 2023. The figures for Kering’s biggest brand, Gucci, showed revenues of €5.7 billion, a year-on-year decline of 22%. At Yves Saint Laurent, revenues reached €2.1 billion, down by 10% compared to the first nine months of 2023, while a third major Kering leathergoods brand, Bottega Veneta, provided some respite from the bad news. It contributed more than €1.2 billion to the group’s nine-month total, an increase of 2% year on year.

At Hermès, revenues for the nine-month period reached €11.2 billion, an increase of 11.4% year on year. Its leathergoods and saddlery business contributed nearly €4.8 billion towards the total, growing by 14.7% compared to the January-September period last year. Ready-to-wear and accessories, the category in which Hermès includes its footwear and glove segments, achieved revenue of nearly €3.3 billion over the period, up by 12.3%. The group says it remains fully committed to its long-term development strategy, which it describes as being “based on creativity, maintaining control over know-how and singular communication”. 

Sliding doors
Research from analyst firm Bain & Company, a pivotal partner of Altagamma’s, suggests that the overall personal luxury goods market could finish 2024 with a fall in value of 2% year on year. The view of senior partner and global head of fashion & luxury at Bain, Claudia D’Arpizio, is that the luxury sector is at a crossroads, facing what she calls “a Sliding Doors moment”. This is a reference to a 1998 film that presents two parallel possible lives, the plot depending on whether or not the main character catches a train. She says 2024 was a year of major change and that the industry is at a crossroads because there are important decisions to make.

“There is a wide range of possible scenarios for the sector,” Ms D’Arpizio says. “What happens depends on lots of factors, including macroeconomics, risks, what is going on in various countries around the world, demographics and so on. But, as far as we can tell, the strategies of brands will be the decisive factor in around 50% of the possible scenarios because this is a sector that is supply-driven.” 

This is not new, she explains. Growth in spending on experiences rather than on products is what she calls a mega-trend that has been in evidence for years. “It was interrupted by covid-19,” she says, “but it is back and is firmly running its course again.” Spending on travel, expensive restaurants, concert tickets and other experiences has grown among luxury consumers, according to Bain’s data, often to the detriment of spending on more traditional physical products. But there is also grounds for optimism for brands selling finished products, she insists, if their products offer “emotional content” too, and if they can become better at incorporating that content into their storytelling. 

Emotional appeal

Desire for exciting and memorable experiences has led to growth in the building or refurbishment of high-end hotels, cruise ships and restaurants. All of these consume leather. We would argue that their use of leather helps to increase their emotional appeal. It helps create desirable environments in which consumers will be happy to spend time and money, even though these are, by definition, assets that they have to share with other customers.

The people at the top of the wealth charts, a group Ms D’Arpizio refers to as “the happy few”, are able to buy and keep individual products that satisfy the same desire because they, too, provide high levels of emotional content. Some of the examples she gives of products that can do this are super-luxury cars, private yachts and private jets. The Bain senior partner expresses confidence that 2024 will prove to have been a record year for private yacht orders. Each of these products also frequently consume heartening quantities of leather in their interiors.

Important lessons

Because they are beyond the budget of almost everyone on earth, it may seem at first glance that these segments can do little to help the wider global leather industry withstand the current economic storm. But if Claudia D’Arpizio’s take on things is correct, there are important lessons that manufacturers of mainstream shoes, cars, bags and furniture can take from what is happening. She says: “When you sell a product now, the emotional aspect, the experiential aspect, has an increasingly important role.”

She is not surprised that 2024 was a difficult year for brands selling bags, regarding this as a to-be-expected calming down after a post-covid sales surge. Here, too, there are lessons. Ms D’Arpizio is convinced the immediate uplift following covid was about more than people suddenly being able to spend money again and splashing out cash that they had saved up during lockdown. “The psychological aspects were important too,” she insists, referring to people’s desire to celebrate and enjoy their newly restored post-pandemic freedom. “And these are factors that are going to be increasingly important for brands to anchor themselves to in the years ahead. Their ability to do this will go a long way towards determining whether these segments can achieve growth again.”

Free-wheeling

Some brands already know this. A call to celebrate personal freedom is a clear component of automotive group Lexus’s presentation of its newest model, the LM (Luxury Mover) people carrier. It claims that the vehicle is a “perfect expression” of ‘omotenashi’, Japan’s traditional commitment to hospitality. In keeping with this, the rear passenger seats have integrated heating, ventilation and massage functions and are equipped with extendable ottomans to support the lower legs, and recline, airline-style, to fully horizontal if passengers desire it.

The rear cabin also hosts a 48-inch high-definition widescreen for watching films or taking part in online meetings. It has a 23-speaker surround-sound audio system, tailor-made for the LM, and a 14-litre wine fridge. Naturally, the seats are upholstered in aniline leather. What other material would work in this setting, in this context? Lexus calls the model “a new kind of limousine for the modern age”, in which business, leisure and relaxation can overlap in a single journey and where “peace, quiet and privacy are the most highly valued luxury qualities”. All of this combines to offer what the company calls a level of sophistication and exclusivity more in keeping with private jets than with four-wheeled transport. Leather’s naturalness, durability, lasting beauty and sensuousness work perfectly.

Audience participation

Bag brands have the opportunity to remind consumers that their products, too, can be a means of celebrating freedom, individuality, exclusivity and excellence. At the top end of the market, artisans train for years to be able to spend hours making each bag for its owner. Brands, increasingly, have the chance also to highlight the uniqueness of each piece of leather they use, tracing it back to the country, the region, the farm and, sometimes, even the animal of its origin. If the leather traceability requirements of the European Deforestation Regulation (EUDR) are unfair and unnecessary, they could also offer finished product manufacturers and brands a new chance to differentiate themselves. All the data and detail companies have to collect anyway, whether they like it or not, to satisfy EUDR constitute raw material for engaging stories.

A large, global consumer audience is keen to hear these stories, Claudia D’Arpizio continues. She says brands must keep trying to reach them. She urges an element of caution when it comes to price increases, pointing out that it would be a pity to undo “the huge effort” companies have already carried out to begin to win the emotional engagement of these people, connecting them “to your creativity, your aesthetics, your cultural world”.

To spell out for them that the products they are buying are special because the talented, skilled people who made them are special, the traditional artisan techniques and knowledge they have learned are special, and the material they use is special is a good thing. It is also easier than ever to do, on a QR code, on social media or on a corporate website. “The audience exists,” Ms D’Arpizio concludes. “It is very large and it has a strong appetite for products of this kind.”

A story to tell. A Bottega Veneta handbag on display in a store in Hong Kong.
Credit: Shutterstock/Sorbis

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