Editor’s Note
This article explores the evolving challenge for luxury brands as they navigate the delicate balance between offering immersive experiences and driving sales of high-margin products. It examines whether this dual focus is becoming the central strategic pivot for major houses in the modern luxury landscape.
Is the balance between immersive experience and the sale of high-margin products becoming the new major challenge for the strategies of major luxury houses?
After decades of dominance, the Chinese luxury market is embarking on a new trajectory, marked by unexpected turns and fundamental transformations. According to Bain & Company, Chinese consumers’ spending on personal luxury goods fell by 18-20% in 2023, settling around 350 billion yuan (approximately $49 billion), with stagnation expected for 2025.
This contraction is partly explained by a shift in consumer priorities. Affected by the economic climate and uncertainties related to the real estate market, many Chinese buyers are now turning towards experiences, such as travel, dining, or wellness, rather than material acquisitions.
This phenomenon is revealingly summarized by a Prada customer who stated,
in an interview for The Economic Times while visiting a brand café. It’s understood that this is not a rejection of luxury or brands, but rather a shift in desire. This desire is turning towards experience, memory, the moment, social sharing, rather than the object. Towards the symbolic and collective rather than pure individual status. It’s a transmutation of brand attachment: the consumer belongs to the brand’s community without necessarily acquiring its object.
If experience speaks louder than material goods, it questions consumption dynamics. What incentives may have led consumers to make this change? Part of the answer may lie in the fact that purchasing an expensive luxury item can now seem risky if market tastes or financial situations change rapidly. Customers today are more hesitant to tie up thousands of euros in an object that could quickly become “dated.” Obsolescence is no longer limited to technology or fashion dictates; it is now deeply ingrained in perception.
Paradoxically, in contemporary luxury, the “new” is also what becomes obsolete the fastest. This highlights the need for instantaneity. Or as we might phrase it,
Rather than risking a purchase that quickly goes out of style, the customer consumes a moment, an emotion experienced and shared live, which cannot expire. The product may lose its perceived value, but the memory and photo remain. This is the DNA of experiential retail, which consists of offering an intangible, ephemeral but emotionally strong value that will never be “unsellable” in the future. This sociological trend sees Gen Z and Millennials valuing story value more than use value, as confirmed by Euromonitor and McKinsey.
While spending on luxury goods is declining overall by 1-3%, Bain notes that spending on immersive experiences, hospitality, or dining has increased by 5% in 2024. For brands, the challenge is twofold. On one hand, an experience is expensive to produce, including prime space, design, and staff. On the other hand, it has a low average ticket (e.g., a €10-20 coffee is far from a €3,000 bag). The immediate return on investment (ROI) is low; the effect is mainly on image and brand equity. The challenge, therefore, is to maintain a high level of profitability when the core market is shifting towards intangible assets.
Faced with this situation, “The Louis,” Louis Vuitton’s new flagship in Shanghai, embodies this experiential strategy. Combining a traditional store, café, exhibition space, and “Instagrammable” zones, it aims to generate buzz as much as direct sales. Louis Vuitton is betting on immersion to reactivate the interest of a clientele that has become more cautious.