Why Luxury Brands Are Losing Customers And 6 Ways To Win Them Back

Forbes

5 days ago

People walk past a Louis Vuitton advertisement in front of the high-end department store Plaza 66 in central Shanghai, China. (Photo by Ryan Pyle/Corbis via Getty Images) Corbis via Getty Images
Luxury brands are quietly putting away their bottles of Taittinger as earnings reports are not quite what they expected. Revenue for Gucci is gruesomely down 26%. Versace's bloodbath is almost as bad at 21.2% with Burberry having slightly less to mop up at 17%. Even Bernard Arnault's empire is showing cracks as LVMH slipped 4%. Prada is faring best among the worst with a modest 2% dip. Unsurprisingly, my favorite harness maker, Hermès, continues to gallop ahead of all the others with 7% gain
While analysts study crystal monitors trying to predict what happened and what's happening next, Julius Baer's Global Wealth and Lifestyle Report 2025 suggests a novel idea. HNWI aren't spending less because they're cash-strapped. They're just bored. Value for money has overtaken heritage and innovation as the top priority for European respondents.
"People are being more selective," notes the Julius Baer research. 'Whereas previously they bought high-end goods in many categories, now they focus on fewer categories and are looking for quality rather than quantity.'
They're trading material for memorable. A promotion used to mean a new car. Now, it's a gastronomic tour of Italy. Luxury is evolving from goods-based signifiers to an all-encompassing lifestyle, with the well-heeled crowd now looking for more excitement than a relaunch of the Chanel on The Pavement collection.
McKinsey's State of the Consumer 2025 agrees: more than one-third of global consumers are trading down in some categories to splurge in others. Nineteen percent plan to cut back on non-discretionary spending so they can spend more freely elsewhere. Even among inflation-worried consumers, over one-third still plan to splurge, but these high rollers are mostly in Brazil, China, and the UAE. Apparently, luxury brands assuming they would always be automatic beneficiaries of discretionary spending has gone the way of Anna Wintour's editor-in-chief title.
Qatar, Doha, Villaggio shopping mall, Fendi. (Photo by: Giovanni Mereghetti/UCG/Universal Images Group via Getty Images) UCG/Universal Images Group via Getty Images
Julius Baer data shows spending still remains high in the Middle East, APAC, and Latin America, while Europe and North America have become more conservative. Even still within these regions, specific categories outperform others.
Business class flights are showing dramatic regional variations. London saw prices surge 28.3% while Milan dropped 16.4%. Mexico City skyrocketed 86.6% while Hong Kong fell 10.6%. Zurich climbed 15.3% but Singapore managed only 6.4% growth. These disparities reflect changing corporate policies as business travel rebounds and leisure travelers occupy previously vacant premium seats. This creates opportunities for luxury brands to partner with travel experiences rather than compete with them for wallet share.
"Health as wealth" continues as a theme, according to Julius Baer, with almost universal interest in longevity among survey respondents. High-net-worth individuals increasingly view healthcare spending as an investment. Luxury brands positioned to capture this trend through wellness partnerships, longevity-focused products, or health-adjacent services can benefit from this spending reallocation.
Geographic nuances matter more than ever. While European luxury spending shows value-for-money priorities, Middle Eastern consumers increased luxury goods spending across multiple categories: 65% spent more on hotels, 62% on fine jewelry, 60% on fine wine, 58% on high-end women's handbags, and 57% on high-end watches.
Meanwhile, in the APAC region, 65% of luxury consumers are increasing healthcare spending, 64% boosting smartphones, 63% spending more on fine jewelry, and 55% increasing fine dining expenditures. Global luxury brands here should consider investing in more co-hosted one-night only fine dining experiences with celebrity chefs, where their best customers are invited to remember the good life also includes a Montblanc pen. Luxury Spending Is Still Out There, Just Not Where Some Luxury Brands Are Looking
The luxury consumer is still passionately pursuing luxury, but they've just reallocated their splurge to places that feel more meaningful, more personal, and more worth it. Brands stuck in status-quo strategy are the ones losing relevance by the quarter. Consumers have changed, and the industry is only now realizing just how far behind it's fallen. Here are six mistakes some luxury brands are making—and exactly how to fix them. 1. Some Luxury Brands Confused Global Reach with Geographic Relevance
The collapse of Chinese tourism revealed a glaring vulnerability in luxury's growth model. Brands overly dependent on tourist-driven sales were hit hardest, while those that had invested in cultivating loyal local clientele weathered the storm with far less turbulence. Hermès's continued global ascent is the result of blending geographic diversification with hyper-local intimacy.
Now's the time to stop treating 'emerging markets' as afterthoughts. The Middle East isn't slowing down as regional consumers are spending across categories with intent. Latin America is quietly becoming one of the most promising engines of growth. If luxury leaders want to future-proof their market position, they must stop chasing passport stamps and start building real roots.
How to Fix It:
Geographic independence doesn't mean global presence. It means local relevance. This means boots-on-the-ground marketing, localized partnerships, and customer service that meets regional expectations. Treating non-Western markets like satellite outposts is a relic of colonialism, which has fallen entirely out of favor. 2. Some Luxury Brands Chased Social Media Instead of Building Trust
Consumers say they don't trust social media for product recommendations, yet nearly 30% in the U.S., UK, and Germany say they've bought luxury brands discovered through it, according to McKinsey. Friends and family remain the most trusted influence source worldwide.
Hermès reads this paradox better than anyone. They don't chase influencers or celebrity noise. Instead, they cultivate desire through scarcity, word-of-mouth, and surgical restraint. Demand is engineered through discipline, not hype.
While competitors flail with declining sales in China and Japan, Hermès grew across regions. Gucci's wholesale channel dropped 42% year-over-year. LVMH, hit by waning Asian tourism, contracted too. Meanwhile, Hermès remained as irresistible as ever simply by saying less.
How to Fix It:
To win in this new era, luxury brands must marry social discovery with trust-rich signals. Awareness might come from a feed, but purchase intent still comes from belief. 3. Some Luxury Brands Raised Prices Without Raising Value
Globally, consumer 'consideration' for luxury brands is down 25%, with younger demographics leading the retreat. Years of unchecked price hikes (often 10% or more annually) have eroded aspirational appeal. Entry-level and core products feel gouged.
Hermès knows how to keep their customers. Their 41.4% operating margins come not from pricing games but production discipline. Every price increase is tied to something real: craftsmanship, materials, detail.
How To Fix It:
If you're going to charge more, earn it . Tie pricing to quality upgrades or experience enhancements. Consumers know the difference between a luxury markup and a cash grab. 4. Some Luxury Brands Still Thinking Luxury Means Objects
The Julius Baer Lifestyle Index, which tracks the cost of premium goods and services across 25 global cities, fell 2% in USD from 2024 to 2025. Historically, luxury prices rise at double the pace of average inflation.
This decline signals is a consequence of consumers pushing back against price hikes that outpaced value. There's only so long you can charge more just because you can, which was the strategy for certain luxury brands now re-evaluating their greed. Hotels, fine dining, and healthcare led regional spending increases, however, while traditional luxury goods were flat or negative.
Interestingly, these variance are geography based. In APAC, 65% of HNWIs increased healthcare spend, 63% spent more on women's fashion, and 55% dined finer. In North America, hotel and fine dining rose sharply at 43% and 35% respectively. The Middle East outpaced them all with 65% spent more on hotels, 60% on fine wine.
Take note: the newest competitor isn't another fashion house. Consider that a Hermès client might now opt for a longevity clinic over a new Kelly. A Porsche prospect might trade the keys for a curated Arctic expedition. The new competition is now a passport stamp, a health optimization protocol, an F1 Grand Prix.
How to Fix it:
Expand the definition of luxury beyond goods. Build partnerships with travel, wellness, or cultural experience providers. Curate memories, not just merchandise. 5. Some Luxury Brands Are Misreading Gen Z's Contradictions
As with any rebellion, the kids are leading it—specifically, Gen Z, according to McKinsey.
Despite 40% of them worrying about their financial future (and half of U.S. Gen Zers having less than a month of savings), they remain the most willing to splurge and take on debt. Thirty-four percent buy on credit, a figure 13 points higher than older generations.
They prioritize apparel (34%) and beauty (29%), happily pay for convenience, and measure identity through achievement. Gen Zers are 73% more likely to define success through career milestones, and 36% more likely to prioritize wealth creation.
Spending by this generation is growing twice as fast as prior generations and is on track to eclipse boomers globally by 2029. By 2035, they'll inject $8.9 trillion into the global economy.
By the way, Gen Z is telling us exactly where they're headed: they're willing to pay for time, ease, and moments that matter. Their premium-spending behavior shows they'll trade cash for convenience.
According to McKinsey, nearly 40 percent of German, UK, and US Gen Z consumers used grocery delivery within the week, pumping up food delivery's share of global food service spending from 9% in 2019 to 21% in 2024.
How to Fix it:
Treat Gen Z as both strivers and spenders. Create ecosystems that reward convenience and tap into their self-identity. They'll splurge. But only when it feels like a good investment in their own narrative. Brands that meet them with seamless, sensory-rich experiences will win their money and their loyalty. 6. Some Luxury Brands Are Ignoring the Experiences Consumers Already Value
The current state of luxury is ripe for creative problem solving, such as cross-category partnerships that continue to keep the brand top of mind. A customer who skips the car upgrade to splurge on luxury travel is a target customer, not a lost prospect. The $40,000 they didn't spend on a new vehicle might now be fueling private villas, spa buyouts, or bespoke retreats. But if a McLaren were waiting at one of those hotels for a weekend test drive, that 'no' to the car becomes a 'not yet.'
Today's luxury winners aren't selling products—they're building ecosystems. Smart partnerships with high-end travel, wellness, and experience providers put brands in the path of the splurge while elevating their cultural relevance.
How To Fix It:
Think like your customer. Partner across categories where splurge spending is already happening—hospitality, wellness, premium travel, even health optimization. Don't compete with their lifestyle—integrate into it. A Crisis Luxury Brands Caused Themselves
NEW YORK - FEBRUARY 09: General view of atmosphere at the opening of the first Hermes Men's Store on Madison Avenue on February 9, 2010 in New York City. (Photo byfor Hermes) getty
The luxury industry's current crisis is a fundamental reordering of consumer priorities. Splurge spending only been reallocated. Today's consumers are recalculating value, shifting spend toward experiences, authenticity, and personal meaning and away from old-school status signaling.
Hermès, as usual, offers the clearest blueprint for how to win in this new landscape. While competitors raced toward accessibility, Hermès doubled down on exclusivity. While others chased tourist dollars, Hermès built local resilience. And while many leaned on manufactured hype, Hermès cultivated genuine desire. Most critically, they understood one key truth: luxury isn't a category, it's a lifestyle. And lifestyle spending isn't confined to handbags and watches.
For luxury CMOs, the path forward starts by abandoning outdated assumptions about consumer loyalty and category dominance. Today's buyer makes intentional trade-offs across categories. They're not just buying objects, they're curating moments.
The real paradox isn't that consumers stopped splurging. It's that too many luxury brands stopped paying attention to where and why the splurges happen. The brands solving this riddle will emerge stronger from this downturn. The ret will keep bleeding market share while hoping for a reversion that's never coming.
We're entering the era of the individual. The luxury consumers' new passionate pursuit of luxury will be characterized by what that consumer believes most true for them, and not what luxury brands dictate it to be.