Luxury spending in the U.S. on the decline

One problem for luxury brands is that the U.S. market can be very promotional. Pressure to offer deals led brands to pull their products out of U.S. department stores and sell through their own boutiques, where they have greater control over prices.

Compared with the Chinese market, U.S. advertising happens through traditional channels such as fashion magazines and TV, where the cost of campaigns can be much higher This has made it hard for all but the biggest brands to get noticed.

The market changed dramatically during the pandemic. Americans flipped from accounting for 22% of global luxury sales in 2019 to 33% in 2022, based on Bain & Company data. The shift almost doubled the size of the U.S. luxury market in only 3 years

Demand for the lower-priced goods of luxury brands is very weak. Sales of cognac have seen a “brutal” slowdown in the U.S., according  to LVMH. Second-tier cities such as Austin and Nashville, which  boomed during the pandemic, have lost momentum.

Americans’ appetite for luxury has been impacted, and they see to splurge rather on classic brands like Hermès. Even with the recent slowdown, U.S. shoppers from all income levels are still splashing out a 10th more on luxury goods than they were in 2019

Hermès store on Madison Avenue in New York