Luxury and fashion are going through significant changes in terms of their geographical focus, driven by a variety of factors such as geopolitical tensions, the aftermath of the pandemic, and the fear of an impending recession. Just a year ago, the industry appeared to be on the path to recovery, but it is now grappling with persistent instability. Consequently, luxury brands are reassessing their strategies and reconfiguring their geographic networks.

During the Milano Fashion Global Summit 2022, which was held virtually on October 25, industry insiders delved into these challenges and discussed how they are navigating the evolving landscape. One particular market that has captured the attention of brands is Asia, with a particular emphasis on China. However, despite the recent easing of restrictions and positive sales indicators, there are concerns about China’s short-term growth potential. After experiencing double-digit growth over the past two years, experts predict that the country will only see single-digit growth in 2023. Nevertheless, analysts believe that China still presents significant opportunities due to the rising prosperity of the middle class and younger generations, as well as the potential for business expansion in second-tier cities.

Alfonso Dolce, the CEO of Dolce & Gabbana, holds an optimistic view of China’s recovery, suggesting that it may take six to eighteen months to fully regain stability and witness a stronger China than before. He highlights the importance of creating a sense of belonging and a lifestyle experience for consumers, rather than solely focusing on product sales. Dolce believes that this shift in consumer behavior will lead to a more qualitative and meaningful luxury market in China.

The United States has also witnessed a shift in the luxury market. While it was hailed as the industry’s new Eldorado just over a year ago, sales growth has become minimal between July and September. Americans are now choosing to shop in Europe, taking advantage of the favorable exchange rate. Despite this, the United States remains a crucial market for luxury retail development, with significant long-term growth potential. Luxury brands that were once concentrated in New York are now expanding to other cities such as Chicago and San Francisco.

In a surprising turn of events, Europe, which was at the bottom of the pack in 2021, has experienced a revival in the luxury market due to the return of tourist traffic and the recovery of local consumption. The region has emerged as a driving force in the industry this year. Alongside China and the United States, other regions such as the United Arab Emirates, Turkey, Japan, South Korea, and parts of South America also show promise for luxury market growth. The Middle East, in particular, has been referred to as the “new China” by some industry leaders.

Despite the challenges posed by geopolitical tensions and economic uncertainties, the luxury and fashion industry continues to adapt and seize new opportunities. The shifting geographical landscape necessitates brands to reevaluate their strategies and establish a presence in emerging markets and regions. By understanding the unique dynamics of each market and catering to evolving consumer preferences, luxury brands can successfully navigate the geographical shift and consolidate their positions in the ever-changing industry.

Useful links:
1. Business of Fashion
2. Vogue Business