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Forbes
10 hours ago
- Business
- Forbes
Luxury Lethargy Sets In As The Market Braces For Up To A 5% Drop In 2025
Side view of crop anonymous female wearing blue dress and high heels while lying on sofa near coffee ... More table with potted plant and bag on sunny day The personal luxury goods market faces a decline of up to 5% this year as consumer enthusiasm wanes, according to the latest projections from Bain and Company in association with Altagamma. Not since the 2008-2009 financial crisis has the luxury market experienced such a significant contraction, except for the 2020 Covid pandemic. Besides the obvious flashpoints creating uncertainty in the market, including rising geopolitical tensions, currency fluctuations and volatile economic pressures, luxury consumers are disillusioned by the industry's offerings, particularly after post-pandemic price increases threw a monkey wrench into brands' traditional price-value relationship. 'There's a sense of emotional detachment, even among the wealthy, who can't explain why the same bag that cost $1,200 before now costs $2,000 – prices are too high for such a low level of creativity,' Bain's senior partner Federica Levato shared with me. 'The disillusionment and detachment we talk about is particularly noted among younger consumers.' Rising luxury consumer detachment was reflected last year, as the luxury market declined 1% at current exchange rates to $418 billion (€364 billion) – or remained flat at constant rates. Yet, most telling was that the luxury market lost some 50 million customers over the last two years. Today, the estimated number of luxury consumers worldwide is approximately 353 million, down from 400 million in 2022. 'This is true alienation, meaning many people are just not buying anymore,' she observed, adding that engagement with luxury brands across all demographics, not just the younger aspirational cohort, has declined since 2022. Brand-related searches and engagement rates are down more than 40% and social media follower growth has plummeted by 90% – 'largely due to price fatigue and stagnant creativity.' For an industry that thrives on artistic creativity, the growing churn in luxury brand senior executives and creative directors is taking its toll. Consumers may not be aware of what's going on behind the curtain, but they see it in the stores and the brands ultimately feel it on their top and bottom line. 'While companies are waiting for a new creative director to introduce a new collection, it can take nine months to a year for the transition – like giving birth to a baby,' Levato explained. 'Consumers may not know about the shifts, but they see it when no new products arrive and the brands are totally silent during the transition.' And she added, 'Then there's also a 50% probability that the new collection doesn't work, as has been the case for some brands in the recent past.' All this is sinking to luxury brands' bottom line. Bain notes that since 2021, margins (defined by earnings before interest and taxes) have either stagnated or declined, even among top industry performers, and margins are expected to erode further in 2025. 'All the macroeconomic uncertainties, tariffs, lower traffic, fewer new products – over 70% of luxury brands are pulling back volume from multi-brand retail platforms – have an impact on the topline, but have a more than proportional impact on the bottom line and on the EBIT,' Levato said. 'The message is to some extent is positive because brands are not hitting the brakes on investments in technology, marketing, clienteling and stores, but they still must absorb the costs,' she continued, adding further price increases are probably off the table in the current environment. Saying the luxury market faces 'far-reaching disruptions,' the Bain report also stresses the industry's proven resiliency, yet Levato stresses industry players can't rest on their laurels. 'As the industry faces an increasingly complex global landscape, luxury brands are entering a pivotal new chapter – one that demands sharper focus, greater cultural relevance, and growth rooted in purpose. 'At the heart of this transformation is a redefinition of value and meaning that resonates across all generations – with those shaping luxury today, and those who will define it tomorrow,' she observed. Because the U.S. is the world's richest market – last year 1,000 new millionaires were minted here each day, totaling nearly 400,000, and more than half of all new millionaires globally – and the largest personal luxury market by far – the Americas totaled about $115 billion last year with the lion's share in the U.S., compared to $51 billion in Mainland China – what happens here will have a profound impact on the global personal luxury market overall. According to the Affluent Consumer Research Company's May luxury tracking survey, luxury consumer fatigue is measurable. Specifically, 52% of the 300+ affluent Americans with incomes of $250,000 and above reported being disappointed with luxury options, and 46% were unable to justify new purchases. But most telling is that among those affluents who tend to opt for the luxury option most often, 55% said they're bidding their time, and the same 55% share signaled that the available options simply do not move them. 'Purchase hesitation isn't one-size-fits-all,' observed ACRC's founder and CEO Chandler Mount. 'At the top of the market, it's not about affordability – it's about emotional resonance. They're bidding their time, a signal of flexibility, not resistance. Yet, there remains a lack of enthusiasm and emotional draw for affluent consumers.' Note: I am professionally affiliated with ACRC. While Americans wait for luxury goods brands to present more compelling options, Bain reports that the luxury experiences market, including hospitality, fine dining, cruising and private jets, is 'flourishing,' as consumers prioritize meaningful experiences over goods, particularly among older consumers, where wealth tends to accumulate. At its core, luxury is a cultural construct rooted in personal meaning, social status, and an expression of self-worth. While owning an abundance of luxury goods can confer some of those advantages, increasingly affluent and high-net-worth individuals are turning luxury expression inward toward personal growth and well-being. This cultural shift in consumer consciousness has profound implications for the goods side of the luxury market. 'This isn't a trend – it's a complete reconstruction of how success is defined by the world's most affluent and influential consumers,' said Mark Miller, chief strategy officer at Publicis Groupe's Team One agency. 'It's a shift from building high-net-worth to pursuing high-life-worth.' He was speaking about Team One's latest study entitled 'Worth Beyond Wealth,' based upon research among its exclusive Global Affluent Collective. The collective represents the top 10% of global earnings across 22 countries and totals some 4,200 consumers aged 25 and above. 'The most provocative finding is how they've moved beyond asking 'What do I own?' to 'Who am I becoming?' This transformation demands an entirely new approach from premium brands,' he continued. Findings that popped in the study, which combined both qualitative and quantitative research, include: This shift toward pursuit of high-life-worth through meaningful experiences requires luxury goods brands adapt to a new 'return on worth' price-value framework. Miller described this as a selective abundance approach, where people with means will spend abundantly on things that have special worth and save abundantly, i.e. trade down, in purchases that are substitutable or replaceable. 'There's a strong need in this world of selective abundance for luxury goods brands to not just make things that are functionally excellent – consumers will know the difference – but to offer a value proposition that goes above and beyond the functional things they make,' he explained, stressing the need for greater high-life-worth storytelling, rather than relying on product features, benefits, brand heritage, design and quality. 'Luxury is no longer only about having exceptional things – it's about integrating excellence with impact. The best premium brands won't just sell luxury – they'll help architect high-worth lives,' shared Tahini Candelaria, Team One's director of cultural anthropology. Miller added, 'Luxury isn't just about possessions anymore. It's about acquiring the learning and relationships to become a more evolved version of who I aspire to be over time.' While the Bain study acknowledges some of this – 'Across generations, drivers linked with self-reward, status, personal identity and the celebration of achievements will continue to drive engagement, reinforcing and building the lasting relevance of luxury with the consumers' lives,' Claudia D'Arpizio said in a statement – Team One's perspective pushes the concepts of luxury as self-reward, status, personal identity and celebrating achievements further toward value beyond what money can buy. These insights require luxury goods brands to reframe their value proposition above the price-value relationship toward a return on worth. 'The notion of worth is becoming far more dominant in how affluent consumers express themselves. Luxury consumption is becoming more conscious, purposeful, meaningful and impactful with a long-tail orientation that looks to the future, not to the past,' Miller concluded.
Business Insider
11 hours ago
- Business
- Business Insider
The luxury market is poised for a big slowdown, but there are some areas where people are still willing to splurge
It's been a rough year for luxury retailers, as economic headwinds have reduced consumer demand, but there are still a few places where people are willing to spend money. Luxury brands could be facing their biggest setback in 15 years, according to a report published by Bain & Company and Italian luxury goods industry association Altagamma on Thursday. In addition to a global trade war, the industry is struggling to adapt to social and cultural changes. Demand in the US and China, the two biggest markets for luxury products, has been slowing. Some legacy companies are facing financial difficulties with debt and restructuring. Another challenge for the luxury market is Gen Z, a demographic with growing skepticism toward luxury goods, according to Bain. This younger generation of consumers prioritizes self-expression and creativity, and the luxury industry will need to successfully adapt its messaging if it wants to woo more Gen Z customers. Bain estimates that spending on personal luxury goods could be on track for a "continued slip." In a worst-case scenario, Bain estimates the market for personal luxury goods could shrink by 5% to 9%. Consumers are still splurging selectively However, that doesn't mean consumers are pulling back everywhere. Luxury experiences outperformed personal goods in the first quarter of 2025, and companies are leaning hard into "beyond product" experiences such as vacations and gourmet restaurants. Luxury hospitality — think White Lotus -esque resorts — is taking off, with this year seeing rising hotel occupancy rates and longer stays. While traditional luxury markets in the US, China, and Europe are stagnating, the Middle East, Latin America, and other parts of Asia are seeing increased demand from consumers seeking high-end tourism experiences. The UAE, Qatar, and Saudi Arabia are leading the charge in this new trend, according to Bain. Consumers are also eager for luxury cruises. Following the trend of increased personalization, they prefer slower, more immersive trips on smaller ships. Yachts and private jets are experiencing a backlog of demand. Fine dining and gourmet food rank high on consumers' radars, and they chase highly curated experiences. Some areas of personal luxury goods are also thriving. Demand for jewelry, apparel, and eyewear has been robust this year for both uber-luxury and aspirational offerings. Fragrances are a top-performing category due to their popularity with Gen Z and "premiumization." Luxury brands are elevating their perfume offerings by making them more exclusive, expensive, and experiential. Bain also identified some categories that haven't been doing so well: watches, leather goods, and footwear. Unless there's more innovation in these products, it's likely they'll continue to see declining demand. As luxury brands adapt to changing consumer preferences, Bain predicts the gap between the industry leaders and laggards will only become more pronounced. Luxury's winners will be the brands that offer the kind of personalization and novelty that convinces even cautious consumers to spend.
Yahoo
17 hours ago
- Business
- Yahoo
Luxury confronts slowdown amid economic headwinds and market disruptions, while industry resilience and strong fundamentals underpin future prospects
Turbulence set to be sector's new baseline for extended period as economic uncertainties and cultural shifts impact demand. But positive longer-term outlook requires brands to decode the new market rhythm and go back to fundamentals on brand value propositions MILAN, June 19, 2025 /PRNewswire/ -- The global luxury sector this year confronts its most far-reaching disruptions – and its biggest potential setbacks for at least 15 years – amid mounting economic turbulence, alongside complex social and cultural shifts, Bain & Company, in partnership with Altagamma, the Italian luxury goods industry association, reports today. Worldwide luxury spending, historically sensitive to uncertainty, is coming under intensified pressure as luxury consumers' confidence is eroded by current economic upheavals, geopolitical and trade tensions, currency fluctuations, and financial market volatility, today's report warns. This is despite a relatively upbeat end to 2024 for the luxury sector, bolstered by a double-digit rise in tax-free spending in Europe, as well as decreased US market volatility at the time. Heightened volatility for the luxury industry is being exacerbated by increasingly exposed cultural fractures for the sector, today's report cautions. Luxury brands are contending with not only weakening consumer sentiment but also a growing disillusionment with their offerings among younger generations, notably Generation Z. This trend is calling into question the luxury sector's long-standing price-to-value equilibrium as a growing group of younger consumers reassess their relationship with luxury. A series of further, critical stresses are also weighing on the luxury industry, Bain reports. Distribution channels – especially physical and digital multi-brand outlets – are grappling with financial pressures as industry players seek to stabilize debt and preserve liquidity, with some engaged in restructuring. Alongside, the industry's innovation engine appears to be losing momentum and appeal, while the creative leadership that is vital to the sector is under strain and rotating across brands. Supply chains are also under growing stress as geopolitical challenges grow and regulatory oversight increases. As these disruptive forces converge as headwinds for luxury businesses, the report cautions that turbulence may be luxury's new baseline for an extended period – and that the €1.5 trillion revenue industry faces its first slowdown since the global financial crisis of 2008-09, excluding the temporary shock of the Covid-19 pandemic. For the personal luxury goods segment, a potent post-pandemic rebound saw the market reach €369 billion in 2023. But this slipped last year to €364 billion, down 1% at current exchange rates (flat when adjusted for currency movements) and Q1 of this year is expected to have seen a further slide of between 1% and 3% at current exchange rates. Long-standing resilience buttresses future performance Yet despite volatility becoming 'business as usual', today's analysis underlines the luxury industry's long-standing resilience in the face of such challenges, as well as significant outperformance by some key segments and geographies. Bain urges the industry to respond to present disruptions by refocusing on the fundamentals of the luxury business, grounding value propositions in clear and differentiated brand identities, anchored in strong product quality and thoughtful price architectures. Brands should pursue efforts to nurture consumers' desire and shape clear and unique positioning towards their customers. "Although demand is easing in the short term, the luxury sector has consistently demonstrated an extraordinary resilience – buoyed by a growing global consumer base and deeply rooted emotional drivers," Claudia D'Arpizio, Bain & Company senior partner and global head of the firm's Fashion and Luxury practice, said. "Across generations, drivers linked with self-reward, status, personal identity, and the celebration of achievements will continue to drive engagement, reinforcing and building the lasting relevance of luxury within its consumers' lives." Federica Levato, Bain & Company senior partner and leader of the firm's Fashion & Luxury practice in EMEA, added: "As the industry faces an increasingly complex global landscape, luxury brands are entering a pivotal new chapter – one that demands sharper focus, greater cultural relevance, and growth rooted in purpose. At the heart of this transformation is a redefinition of value and meaning that resonates across all generations – with those shaping luxury today, and those who will define it tomorrow." Personal luxury goods likely set for a 'continued slip' With the personal luxury goods segment still confronting a deceleration this year despite the resilience of the industry, Bain maps out three possible scenarios for market this year. On what the report sees as the likeliest projection, of a "Continued Slip", it envisages a further, moderate decline for the market and a full-year contraction of between 2% and 5%. A more optimistic scenario, for an "In-year Rebound" – one that is not considered overly likely by Bain– would see 2025 end with the market somewhere between 2% smaller and 2% larger. On the report's most severe scenario, for a "Demand Dip", also not seen as the most likely, personal luxury goods would endure a prolonged downturn, with the market shrinking by 5% to 9%. Experiential goods lead the field as some segments outperform Despite the weaker outlook for luxury goods, some important luxury segments continue to outperform, the report highlights. In the first quarter of 2025, experiential luxury notably continued to outpace its tangible counterpart. Luxury hospitality remained especially buoyant in Q1, fueled by rising hotel occupancy rates and extended stays, reflecting consumers' appetite for personalized experiences. Luxury cruises, meanwhile, sustained interest in immersive, slower travel on smaller vessels, while private jets and yachts enjoyed solid order backlogs and growing charter demand. Gourmet food and fine dining capitalized on curated, restaurant-style offerings at home. But not all categories were spared setbacks. Fine wines and spirits suffered stagnating demand. Car sales became increasingly polarized, with the ultra-luxury segment thriving as aspirational segments faltered. The fine arts market began the year sluggishly, though signs of normalization have since emerged. The high-end furniture market showed early stabilization, thanks in part to the contract channel (mostly within the hospitality and residential segment). Polarization and divergence mark market evolution As luxury businesses grapple with the new uncertainties, Bain notes a widening performance gap between leaders and laggards in the industry. In the first quarter, this gap – measured by relative revenue growth of brands – widened to 1.5 times the size versus Q1, 2024. Top performing brands' growth rates remained steady versus last year, while a smaller group of laggards lost momentum. This divergence in performance is one important facet of growing polarization in the luxury industry also manifested by varied performance between geographies and in important generational shifts, Bain's report highlights. The global geography of luxury presents a complex landscape. Both the US and mainland China, two of the most important luxury markets, are undergoing a period of softened demand due to current economic turbulence. Tariff-induced volatility is affecting the US market and consumers' willingness to spend. In China, the country's key middle-class markets are in "wait-and-see" mode. Despite this, the report points to glimmers of hope for the medium-to-longer term, with American consumers signaling appetite for accessible luxury while high-spending customers remain resilient. Meanwhile, in China, consumer interest for 'new' local luxury brands is progressively picking up (although still small in absolute terms), while "essentials products" are outperforming the market average, and an outdoor craze is driving growth for experiences. In both Europe and Japan, markets are impacted by weakening tourism, but local demand is partly offsetting the decline. Europe is seeing continuing interest in jewelry and ready-to-wear clothing, particularly in destination markets and for value-driven formats. In Japan, limited editions and beauty products are driving momentum. Conversely, luxury markets in the Middle East, Latin America, and parts of Southeast Asia remain robust. Countries such as the UAE, Mexico, and Indonesia are benefiting from strong local demand as well as new tourist inflows. Generational complexities unfold amid age-driven trends Demographic divergence in consumer behavior across age groups amid softening luxury spending is another critical trend, the report observes. "Generation Z" is split between a perceived need for self-expression and a desire for conformity. These young consumers are seeking creativity, excitement, and emotional re-engagement. Millennials are, meanwhile, more cautious due to financial pressures but still responding to fresh brand engagement. Older consumers are prioritizing meaningful experiences over goods. Overall, engagement with brands across demographics has declined since 2022: brand-related searches are down for more than 40% of the brands, social media follower growth has plummeted 90%, and engagement rates are off by 40% –largely due to price fatigue and stagnant creativity, Bain concludes. In turn, brands have begun to pursue efforts to nurture consumers' desire through new, experiential formats, category diversification, "beyond product" experiences, and increasingly through a new wave of creative change. Within the personal luxury goods market, divergence is also apparent in varying performance across categories, the report notes. Jewelry, apparel, and eyewear remain strong, with positive performance for "uber-luxury" items, as well as in the aspirational segment. The fragrances market is benefiting from "premiumization", while the skincare market is holding steady but the makeup segment lags. Watches, leather goods, and footwear are facing headwinds unless backed by true innovation, the report says. Even if the price points continue growing by 2 to 3% on average, brands are subtly reinforcing entry-price strategies to broaden their appeal without eroding brand equity, with winning cases underpinned by combination of true newness and a unique brand point of view, Bain notes. Competition intensifies while channels evolve Amid these extensive shifts in global luxury, competitive forces are also changing fast, the report finds. Traditional brands, stuck in diluted identities and lookalike aesthetics targeting the same consumer pools, are losing ground to more agile, culturally-rooted luxury rivals. These insurgent brands are blending authenticity with modern strategy. In the West, newer players are gaining traction with strong value propositions and more accessible pricing, presenting a real opportunity for brands capable of redefining relevance in today's fragmenting market. Retail is also being reimagined. The multi-brand channel, long valued for discovery and curation by luxury brands, is under mounting pressure. Despite continued consumer interest, over 70% of luxury brands are pulling back volume from these retail platforms amid their financial struggles. To remain vital, multi-brand players must evolve – deepening customer engagement, supporting emerging brands, and delivering standout service across the journey, the report recommends. Profitability remains under pressure Profitability across the overall luxury industry remains under pressure. Despite the revenue peaks seen between 2018 and 2021, margins (defined by earnings before interest and tax, EBIT) have consistently lagged. From 2021 on, margins either stagnated or declined, even among top performers, highlighting the need for a more disciplined focus on performance improvement by the industry's players to sustain short-term results while enabling longer-term strategic investments. To guarantee future profitability and operational resilience for luxury businesses, technology – especially the use of AI – along with advanced clienteling, supply chain modernization, marketing technology, and more sophisticated pricing analytics, will be essential levers, Bain advises. Expanding markets map the road ahead Despite short-term volatility for the luxury industry at present, its long-term fundamentals and prospects remain strong, today's report concludes. Over the next five years, more than 300 million new consumers – over half of these in Generation Z or Generation Alpha – are expected to enter the market. Rising global incomes, generational wealth transfers, and a projected 20% increase in the number of high-net-worth individuals will further expand the pool of potential luxury buyers, Bain notes. But it cautions that realizing the potential growth of this expanding market will require action from the industry's players. Brands will need to rethink how they engage younger consumers, avoid over-reliance on top spenders, and build emotional connections that go beyond transactional loyalty. Claudia D'Arpizio commented: "To navigate today's uncertainty, brands must anchor themselves in their core strengths – prioritizing quality, creativity, and authenticity. Deepening consumer relationships is essential, shifting away from push marketing toward seamless, customer-centric experiences across every touchpoint." Federica Levato added: "At the heart of this shift lies a more fundamental question: who are we as a brand, and what do we stand for? Answering this with clarity and conviction will be critical for any brand aiming not just to endure, but to lead in this new era of transformation." Media contactsTo arrange an interview or for any questions, please contact:Orsola Randi (Milan) – Email: Gary Duncan (London) – Email: Pinkney (Boston) – Email: Lee (Singapore) – Email: About Bain & CompanyBain & Company is a global consultancy that helps the world's most ambitious change makers define the future. Across 65 cities in 40 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition, and redefine industries. We complement our tailored, integrated expertise with a vibrant ecosystem of digital innovators to deliver better, faster, and more enduring outcomes. Our 10-year commitment to invest more than $1 billion in pro bono services brings our talent, expertise, and insight to organizations tackling today's urgent challenges in education, racial equity, social justice, economic development, and the environment. We earned a gold rating from EcoVadis, the leading platform for environmental, social, and ethical performance ratings for global supply chains, putting us in the top 2% of all companies. Since our founding in 1973, we have measured our success by the success of our clients, and we proudly maintain the highest level of client advocacy in the industry. View original content to download multimedia: SOURCE Bain & Company
Bloomberg
18 hours ago
- Business
- Bloomberg
Luxury Really Isn't as Bad as the Market Says
The luxury industry faces another lost year, according to a new report from Bain & Co. and Altagamma, the Italian luxury association. But investors are being too gloomy on top-end goods. For those prepared to take a long-term view, there may be ways to benefit from the bling bloodbath. Sales of personal luxury goods are expected to have fallen between 2% and 4%, excluding currency movements, in the first quarter of 2025, according to Bain. This was before the turmoil in global bond and equity markets unleashed by Donald Trump's tariff onslaught. The second quarter may be even more painful.
