The luxury market is entering unfamiliar territory after years of double-digit growth. Global sales of personal luxury goods shrank by 1% in 2024. Projections for Q1 2025 suggest a further 1% to 3% dip as the slowdown gathers pace. Bain & Company and Altagamma forecast a full-year contraction ranging from 2% to 5%.
Market turbulence alone doesn’t explain the contraction. According to the report, deeper undercurrents are at play: “Economic uncertainty, global unrest and shifting cultural trends and attitudes are weighing on the luxury sector and putting pressure on brands.”
Bain Recommends Brand Focus Over Short-Term Gains
Luxury brands are being advised to double down on what defines them rather than chase quick wins. Bain calls for a sharper brand focus and stronger alignment with customer values. “Grounding value propositions in clear and differentiated brand identities and shaping a precise and unique positioning,” the report stresses.
Gen Z Drives Reevaluation of Luxury Value
The generational shift is bringing new scrutiny to long-standing norms in luxury. Gen Z, in particular, is questioning both the cost and meaning behind high-end goods. “This shift is most notable in Gen Z, who are questioning the sector’s price-to-value proposition and their relationship with luxury.” The report suggests that what once stood for aspiration is now being reexamined for its authenticity.
Consumer Spending Shifts Towards Experiences
The downturn hasn’t touched every corner of the luxury market equally. Demand for personal items and fine wines has dipped, but luxury travel and hospitality continue to draw spending. “Luxury hospitality spending remained robust, reflecting consumers’ desire to spend more on experiences rather than things,” according to Bain. The divide suggests that legacy brands may be out of sync with changing priorities.
Brand Engagement Metrics Reflect Growing Fatigue
Brand engagement metrics further highlight the sector’s malaise. Online searches have declined for over 40% of luxury brands, social media follower growth has plummeted by 90%, and engagement rates are down by 40%. According to Bain, the drop-offs are driven by “price fatigue and stagnant creativity.”
Some brands are experimenting with “experiential formats, category diversification and ‘beyond product’ experiences” to reinvigorate interest.
Legacy brands are being challenged by upstarts who move with speed and purpose. The newer entrants are thriving by “blending authenticity with modern strategy and creativity,” providing a contrast to heritage labels caught flat-footed by change.
“Luxury brands are entering a pivotal new chapter,” said Federica Levato, senior partner at Bain. Her call to action is clear: “Who are we as a brand, and what do we stand for?”