Tech over luxury: Consumers flock to devices over fashion

By wazup on October 25, 2023 Comments Closed / 79 views

Tech over luxury: Consumers flock to devices over fashion

If you had $1,000 to spend on tech products or items from luxury brands, which would you buy? It’s looking like the consumer has spoken.

While tech giants like Microsoft Corp, Alphabet Inc, and Spotify Technology SA posted astronomical growth in their earnings this week, an emerging trend reveals that luxury brands, including stalwarts like Gucci, are seeing a downturn—a hint at a changing behavior among global consumers.

Tech magnates, for years, have been the driving force behind innovative developments, and this round of earnings proves their unwavering dominance. Microsoft’s first-quarter earnings print showed a staggering 13 percent year-over-year revenue surge to $56.5 billion. Alphabet, Google‘s parent company, wasn’t not far behind, registering an 11 percent year-over-year spike, hitting $76.69 billion in third-quarter revenue. Spotify, a beacon in the audio streaming realm, wasn’t left out, with a 3 percent increase in premium subscribers and a 4 percent uptick in monthly active users from the last quarter.

However, under the hood of the booming tech narrative presents a stark contrast to the luxury fashion sector’s trajectory. Gucci, under the eminent Kering SA umbrella, saw a 7 percent drop in sales in the third quarter. Other revered names, like Yves Saint Laurent and Bottega Veneta, mirrored similar disappointing patterns. Diamond sales also lack sparkle, with some in the industry claiming that it’s due to a reduction in marriages as well as inflation.

Amy Hood, Executive Vice President and CFO of Microsoft, attributed the company’s roaring success to their sales teams’ consistent execution and partner collaborations. Echoing her sentiment, Microsoft’s Chairman and CEO, Satya Nadella, said the role of artificial intelligence (AI) was crucial in their first-quarter triumphs. Like Nadella, Sundar Pichai, the driving force behind Alphabet, credits their upsurge to innovations steered by AI.

In contrast, François-Henri Pinault, helming Kering as its Chairman and CEO, believes macroeconomic hiccups and a strategic repositioning aimed at refining brand distribution have dented luxury sales.

So, what does the pronounced dichotomy between tech and luxury signify for the larger market? As tech behemoths persistently hone their innovative capacities and broaden their horizon, they are evidently reaping substantial financial rewards. The rise insinuates a marked shift in global consumer inclinations, tilting favorably towards tech, while luxury fashion seems to grapple with external economic adversities.

The overarching financial landscape, marred by escalating interest rates and still-high inflation, is likely influencing the metamorphosis.

For the individual, a swing towards tech further cements an increasingly evident trend—a craving for digital experiences and technological advancements. Reliance on tech and the overwhelming value offered by the digital realm suggests that luxury fashion is now relegated to the background.