E-Commerce Who? Luxury Brands Are on a Building Spree

Against the Grain

The rise of e-commerce, coupled with the pandemic’s impact on people’s shopping behavior (read: high-tech, low-touch) has changed the game for many retailers. But there are some that are swimming against the stream.

Luxury brands see a void to fill. Premium brands like Gucci (PPRUY), Hermes (HESAY), and Rolex have been rushing to open new stores.

Surging Sales

Luxury brands bounced back quickly after the pandemic — and sales are still rising. Total sales of luxury goods are expected to hit $75.9 billion this year, up some 9% from last year.

Many fashion houses in particular have benefited from this surging demand. LVMH (LVMUY) — which owns Louis Vuitton, Hennessy, Dior, and more — reported revenue of $79.2 billion in 2022, up 23% annually.

To capitalize on this, luxury retailers have scooped up 650,000 square feet of space in the U.S. over the past 12 months. Stores are also getting bigger. The average location now averages 5,000 square feet, up 28% from last year.

Dozens of luxury brands have taken part in expanding their physical footprint. To name a few:

•   Hermes opened a new 20,500 foot flagship location on Madison Ave.

•   Chanel doubled its Beverly Hills flagship location to more than 30,000 square feet.

•   Gucci has rapidly expanded throughout the U.S. and now operates eight locations in Texas.

Grand Opening

For premium brands, brick-and-mortar stores are essential to their strategy. Window shopping is real, and after all, few people are likely to buy a $15,000 Rolex without trying it on first.

Luxury brands are also spending big to make their locations more accommodating, adding cafes and bars.

Despite high inflation and economic uncertainty, spending on luxury goods looks unlikely to slow anytime soon.

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