The luxury goods market is currently facing challenges as demand weakens, but Rachid Mohamed Rachid, the head of Qatari investment fund Mayhoola and president of Valentino and Balmain, believes that it has now become “a game for the big players.” Speaking during Paris Fashion Week, Rachid mentioned that although there is an overall slowdown, there may still be a growth of around 4% to 5% in the luxury market this year. However, this growth will not be evenly distributed across all brands.
While the luxury market in the USA is showing some positive signs with a slow increase in consumption expenditure, department stores are struggling and footfall in Europe has significantly declined. China’s recovery has also been slow so far, and stakeholders are eagerly waiting for the Chinese New Year celebrations to assess China’s performance in 2024. However, other Asian countries like Japan, Indonesia, Singapore, and Thailand are performing better than expected. Despite their importance, these markets may not have a significant impact on the luxury market as a whole.
Looking ahead, it is expected that 2024 will be a relatively sluggish year for the luxury industry. However, Rachid believes that the industry has enough resilience to navigate through this challenging period and enter into a new era.
Valentino recently entered into a partnership deal with Kering, wherein Kering acquired a 30% stake in the company, with the possibility of acquiring a 100% stake by 2028. Rachid also mentioned that Mayhoola may acquire a stake in Kering in the future. While the partnership with Kering will benefit Valentino’s expansion, the decision to acquire Kering shares will depend on the evolution of their relationship.
Rachid emphasized that the luxury market game has changed significantly in the last five years, with major luxury groups like LVMH, Kering, and Richemont heavily investing in advertising, celebrity partnerships, and expanding their store presence. These groups are creating barriers to entry for new players and increasing the overall cost of participating in the luxury market. As a result, entering the luxury market has become more challenging and is now primarily dominated by the big players. Valentino is considering its options and is open to partnering with a major group if it aligns with their growth strategy.
When it comes to Balmain, Rachid mentioned that it is a smaller label compared to Valentino. While Balmain still has room to grow and expand internationally, Rachid believes that a partnership with a major group may not be necessary in the next few years. Balmain currently has around 40 stores worldwide, compared to Valentino’s 220. The brand’s presence is strong in the USA but relatively weaker in Asia and Europe. However, Balmain has the potential for further global recognition and growth.
In conclusion, the luxury goods market is experiencing significant changes, with larger luxury groups dominating the industry. Despite the challenges, there is still potential for growth and expansion, especially in emerging Asian markets. Valentino and Balmain are strategically positioning themselves in this evolving market and are open to partnerships with major groups to fuel their growth strategies.
Useful links:
1. Business of Fashion
2. Vogue Business
