New research from procurement consultancy Inverto reveals that profitability within the luxury goods sector is under increasing pressure. While the global luxury market has grown significantly since the pandemic, profit margins among the world's 20 largest luxury groups have declined from an average of 24% in 2022 to approximately 13% today. Several companies have experienced margin erosion, while others are currently operating at a loss.
With demand softening across key markets such as Europe, China, and the Middle East, luxury brands are shifting their focus from revenue growth to profitability improvement. The study highlights significant opportunities within indirect procurement categories such as IT, logistics, marketing, telecommunications, and office services, where organizations can achieve meaningful savings without affecting product quality or brand perception.
The report also emphasizes the growing role of artificial intelligence in identifying operational efficiencies, optimizing logistics networks, improving demand forecasting, and reducing inventory waste. By adopting a more data-driven procurement approach, luxury companies can improve margins while maintaining the exclusivity and customer experience that define their brands.
The ProcureScore View
The luxury industry has long enjoyed strong pricing power and healthy margins, but the market environment is becoming increasingly challenging. Slower consumer spending, economic uncertainty, and changing buying patterns are forcing many luxury brands to look beyond revenue growth and focus more closely on profitability.
What's particularly interesting is that the conversation is no longer about cutting costs at the product level. Luxury brands understand that compromising craftsmanship, quality, or customer experience could damage the very attributes that make them successful. Instead, the focus is shifting toward improving efficiency in areas that customers rarely see, such as procurement, logistics, IT, and operational support functions.
This highlights the growing strategic importance of procurement within luxury organizations. Indirect procurement has often received less attention than direct materials and production, yet it represents a significant portion of overall spending. Better supplier management, contract optimization, spend visibility, and category management can deliver substantial savings without impacting the brand experience.
The article also reinforces how artificial intelligence is becoming a practical business tool rather than simply a technology trend. Whether through improved demand forecasting, transportation optimization, or spend analysis, AI is helping organizations identify opportunities that would be difficult to uncover through traditional methods alone.
Overall, the luxury sector appears to be entering a phase where operational excellence and cost discipline will become just as important as brand strength and revenue growth. The companies that can improve efficiency while preserving their premium positioning are likely to be best placed to navigate an increasingly competitive and uncertain market.