Over the past two years, the luxury industry's customer base has contracted by approximately 50 million consumers, shrinking from 400 million to around 350 million by the end of 2024. Younger shoppers, particularly Generation Z, show declining brand advocacy and question whether premium pricing aligns with product quality.
According to Bain & Company's Luxury in Transition: Securing Future Growth report, the global luxury market contracted slightly in 2024, with overall spending declining 1–3% to €1.48 trillion. The personal luxury goods segment—spanning apparel, watches, and leather goods—saw its first real-term slowdown in 15 years (excluding the pandemic), dropping 2% to €363 billion. This recalibration reflects macroeconomic pressures, shifting consumer priorities, and a stark divide between thriving and stagnating regional markets.
Key Drivers of the Slowdown
- Price Sensitivity: Over 80% of past luxury growth relied on price hikes, but aspirational consumers now resist further increases. Bain notes that 50 million customers exited the luxury market from 2022–2024, with 40% of shoppers criticizing brands as “overpriced”.
- China’s Decline: Mainland China’s luxury spending plummeted 20–22% in 2024 due to weakened consumer confidence and a resurgence in overseas tourism. Only 5% of brands saw growth there, as shoppers favored understated designs and secondhand platforms.
- Experiential Shift: Luxury experiences (travel, dining, wellness) grew 5%, outpacing goods. The hospitality sector surged 4% to €242 billion, fueled by high-net-worth demand for exclusive itineraries and wellness tourism.
Japan Thrives, Europe Holds Steady, Americas Mixed
- Japan: Became the fastest-growing market (+12–13%), driven by favorable exchange rates and tourist inflows. Tax-free luxury spending soared, though local consumption softened post-price hikes.
- Europe: Growth of 3–4% was buoyed by tourism, with southern Europe (Italy, Spain) outperforming the UK and Germany. Tax-free sales to Chinese tourists in Europe rose 40% year-over-year.
- Americas: The U.S. showed resilience (+4–6% projected through 2027), while Latin America (Mexico, Brazil) emerged as bright spots. Canada struggled amid reduced Chinese tourism.
Category Performance: Beauty and Outlets Shine
- Beauty & Eyewear: Fragrances and niche skincare drove 3–5% growth, while eyewear surged on creative designs and premiumization.
- Outlets Over Full-Price: Value-seeking shoppers propelled outlet sales (+0–3%), contrasting with declines in monobrand stores (-1–4%) and online channels.
- Secondhand Boom: The resale market grew 7% to €48 billion, with jewelry and heritage pieces leading. Platforms like Vestiaire Collective became gateways for aspirational buyers.
Customer Base Contraction and Generational Shifts
The luxury market lost 50 million customers globally since 2022, shrinking to 350 million. While “very important clients” (VICs) now drive 45% of sales (up from 35% in 2021), their satisfaction has dipped due to transactional experiences. Younger generations diverged:
- China/SE Asia: Gen Z prioritized quality and personalization.
- West/Japan: Gen Z engagement cooled, with 25–30% lower Net Promoter Scores vs. millennials.
Strategic Imperatives for Recovery
Bain and McKinsey urge brands to:
- Refocus on Quality: Invest in iconic products, as Hermès does with waitlisted bags, and align supply chains with sustainability mandates.
- Leverage Tech and AI: Enhance personalization via AR try-ons (which cut returns by 25%) and blockchain for transparency.
- Reignite Experiential Retail: Transform stores into cultural hubs, akin to Miu Miu’s pop-ups, while optimizing omnichannel strategies.
- Target Emerging Markets: Latin America, India, and Southeast Asia are projected to add 50 million upper-middle-class consumers by 2030.
Outlook: Cautious Optimism Post-2025
Bain forecasts a 0–4% rebound in personal luxury goods for 2025, contingent on China’s recovery and U.S. stability. Long-term, the sector is poised to reach €2–2.5 trillion by 2030, driven by experiential spending and tech integration.
As Claudia D’Arpizio, Bain report lead, states:
“The post-elevation era demands a return to luxury’s roots—creativity, storytelling, and flawless execution.”
Read full report findings here: https://www.bain.com/insights/luxury-in-transition-securing-future-growth/
