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, an Italian luxury goods industry association, reports.
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, the 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, the 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 stabilise 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.
