In any market, consumer’s perception of the brand – Is it trustworthy and reliable? Does it deliver promised benefits? Is the value worth the price? – drives customer engagement and purchase.
In the luxury market, the stakes are even higher because consumers must fork over exorbitant amounts of money for exclusive goods when often perfectly acceptable substitutes are available at lower costs. For example, mid-tier luxury brands such as Buti, Tusting and Parisa Wang offer Hermès Kelly and Birkin dupes for under $1,000 compared with $12,000+ for the real thing, if they can be had.
There are numerous ways to measure consumer brand perception, but one of the most statistically reliable, broadest based and longest running is that from Boston-based RepTrak.
Its Reputation Index collects results from nearly 250,000 survey responses across 14 global markets measuring brands with over $2 billion in revenues across seven dimensions: Products & Services, Performance, Leadership, Innovation, Conduct, Workplace and Citizenship.
Consistently, many of the world’s largest luxury brands make the RepTrak cut, and this year, as in last year’s survey, luxury brands’ reputation ranking in the top 100 brands globally took a downward turn, with one notable exception. Dior entered the list at number 28. And while Rolex and Chanel moved up from last year’s poll position, they both remain under their 2022 ranking. Meanwhile, Prada fell off the top 100 list entirely.
Luxury brands’ reputational shortfall couldn’t come at a worse time. All signs point to a challenged luxury market in 2024.
Speed Bumps
The global personal luxury market is facing an inflection point. After growing a nearly unimaginable 20% in 2022, it settled down to a more normal 4% uptick in 2023, from $380 billion (€349 billion) to $394 (€362 billion) last year at current exchange rates, according to Bain. Hedging their bets, Bain expects a “relatively soft” personal luxury goods performance in 2024 in the low-to-mid-single-digit range.
But underneath those more or less reassuring topline results lie troubling trends that lean toward the lower end of that forecast. Throughout 2022, the pace of growth slowed, from 28% in the first quarter to 12% in the fourth quarter. Then, it continued to slow as the year progressed in 2023.
Even more worrisome is the weak performance in the Americas, the traditional global luxury leader. Revenues declined 8% to $110 billion in 2023, and the global quarter-by-quarter deceleration was even more pronounced here.
Early signs from Consumer Edge, which tracks transaction data across the U.S., U.K. and Europe, shows that the U.S. slowdown continues in the first quarter 2024 with sales off 8% from same period previous year. Consumer Edge’s data was right in line with Bain’s findings last year as it reported U.S. luxury consumer spending was down over 7% in 2023.
All the “usual suspects” are included in Consumer Edge brand tracking. It calls out Burberry and Kering’s Yves Saint Laurent and Gucci as particularly weak in the first quarter, reflected in company results. Burberry was off 12% in the Americas in its most recent quarter and Kering was down 11% in North America.
Reputation Work To Do
On the reputational front, RepTrak reports an improvement in brand scores across the thousand of brand’s tracked, up from an average of 73.2 points in 2023 to 73.8 points on a 100-point scale, and all drivers that make up the reputation score rose too. This uptick follows a two-year decline in the average reputation index after reaching a high of 74.9 points in 2021.
Stephen Hahn, RepTrak global executive vice president, explains that after reaching an historic high in 2021, brands experienced a ‘reputation recession’ because consumers felt many companies didn’t live up to their promises of good corporate citizenship made during the pandemic crisis.
“Now we are seeing a ‘reputation renaissance’ because brands realized they needed to make good on those promises and repair relationships. And we’re seeing brands taking hold to meet those expectations so reputations are starting to rise,” he explained.
But while the reputations of brands overall have started to recover, that is not the case for luxury brands. “One could argue that luxury has lost some of its luster. It means that other non-luxury brands have gained in reputation disproportionally, while the luxury brands have gone down,” he continued.
Of note, RepTrak doesn’t publically report brand ratings only their relative movement within the top 100 ranking; nonetheless it’s telling.
Global RepTrak Top 100 Luxury Brand Rating, 2022-2024
Notably Prada fell off the top 100 list this year after being number 99 last year. Replacing Prada in that slot is Hermès. LVMH also lost ground, dropping from number 48 in 2022 to number 93. Also in the bottom decile are Burberry, L’Oréal and Hugo Boss.
Among the 11 brands that entered the top 100 this year, Dior reached the highest level of all, arriving at number 28, just under Chanel at number 24 and above Estée Lauder and Giorgio Armani.
Dior, LVMH’s second-largest fashion and leather goods brand after Louis Vuitton, is ranked by Luxe Digital as the most popular luxury brand online at 13%, followed by Gucci (11% and not in the RepTrak Top 100) and Chanel, also at 11%.
Restoring Luxury’s Reputational Luster
Hahn offers some ways luxury brands can learn from their reputational slide and change course:
Aspiration Isn’t Enough
Luxury brands work hard to create aspiration for the brand, to elevate it above the ordinary to the extraordinary. That involves spending heavily on advertising to enhance the brand image.
But Hahn observes, ““You can’t just buy your way to building a strong reputation. You have to give people a reason to believe.”
The sharp price increases implemented by many luxury brands post-recession gives the impression that they’ve gotten greedy, which is certainly a bad look when many consumers face economic challenges.
“It puts you at risk of being perceived as self-serving and a little egregious in your pricing philosophies. Luxury brands have to stand for bigger things that transcend the products and services they sell,” Hahn observes.
Greater Cultural Sensitivity
Given the global footprint of luxury brands and the global scope of RepTrak’s consumer sample, Hahn sees growing bifurcation between luxury brand reputations in traditional Western countries and those in Asia.
“In China specifically we are seeing some malaise against luxury and equally a pushback on westernized culture,” he said, noting that Chinese consumers are experiencing economic challenges making luxury brands less accessible.
“You’ve got to find a way to uniquely tell your story as potent in the culture. Perhaps some brands are selling the ‘internationalism’ of the brands too much, and not the Chinese variation of what it means for society there,” he continued and called out Chanel as doing a good job in making meaning for Chinese consumers.
Be More Than What You Sell
Consumers today are placing greater emphasis on good corporate citizenship, being ethical and transparent, environmentally conscious, supporting employees and positively influencing society.
While product and service factors, such as high quality, meeting customer needs, standing behind products and representing good value, still rank highest in the overall reputation score, other factors continue to weigh heavily in the reputation scores.
“In many ways corporate ethics trump quality,” Hahn said. “The whole organization must prioritize toward its virtues around good ethics, being an honorable corporate citizen and make it less about conspicuous consumption. A brand’s values matter more than the intrinsic value of what they sell.”
Corporate Culture Matters
Ultimately, the people who really know if the company is living up to its promises and commitments are its employees.
“You need to build a corporate culture where employees feel rewarded and part of the company’s success. That actually helps enhance a brand’s prestige and luxury. Presenting culture and luxury through the lens of the people who work to make it – the nobility of hard work – has never been more important,” he said.
Raising The Bar
Perhaps because luxury brands ask a lot from their customers, consumers ask a lot of those brands to be good corporate citizens and a force for good in the world. Their continued reputational decline set against the rise of many non-luxury brands shows they still have work to do.
“As a result of the pandemic, companies are facing an increasingly complex set of pressures and demands from stakeholders, including seismic shifts in societal engagement and corporate citizenship expectations and acute uncertainty about the future,” the report states.
“We are living in a stakeholder economy, and like it or not, consumers are setting a high bar – higher than it’s ever been,” it concludes.
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