Personal luxury goods spending slows down

Global luxury consumers have progressively reduced their spending on luxury goods in light of a highly uncertain macroeconomic environment and the sustained price increases that have occurred over the past two years. The combination of these factors led to the personal luxury goods market entering a slowdown for the first time since the Great Recession (excluding the Covid period), with an estimated 2% contraction year-on-year, taking into account current exchange rates. This contraction-majorly relevant for Generation Z, whose ‘advocacy’ towards luxury brands continues to decline-has led to a reduction in the luxury customer base of around 50 million over the past two years. At the same time, more high-end consumers are continuing to increase their relevance in the sector, although they are beginning to perceive less exclusivity.

‘Despite macroeconomic complexities, luxury spending has remained remarkably stable, driven by consumers‘ desire for premium experiences,’ said Claudia D’Arpizio, Senior Partner and Global Head of Fashion & Luxury at Bain & Company. ‘However, the loss of 50 million consumers in the last two years signals that brands need to review their value propositions. In order to win back customers, particularly younger ones, it is necessary to focus on creativity and broaden conversations. At the same time, brands will need to continue to focus on their top customers, surprising them with human and personalised interactions. For all customers, it will be crucial to focus on personalisation, using technology to achieve scale.”

Less appeal for leather goods and shoes

The beauty sector continues to perform well, especially in the fragrance segment, which captures the spending of those who want to indulge in ‘little indulgences.’ At the same time, the eyewear sector is also experiencing a positive momentum, with high-end brands on the rise and consumers increasingly attracted by the increased creativity on offer.

Jewellery is maintaining a good growth rate, especially driven by the high-end jewellery segment, and the particularly positive performance of the US market.

In contrast, watches, leather goods and footwear are slowing down, with consumers becoming more selective in their purchases and progressively shifting towards cheaper alternatives, although small leather accessories and entry-level items continue to be of interest to Generation Z. The second-hand market is also gaining ground, with particular interest in jewellery, and clothes and leather goods from a vintage perspective.

Distribution: outlets outperform shops

Although traffic in physical shops is generally in marked decline, the outlet channel is outperforming expectations, driven by consumers’ search for better value for money. Digital channels, meanwhile, are entering a phase of normalisation after the pandemic peaks and subsequent slowdown.

Geographical dynamics

The United States shows a gradual improvement in growth rates. Japan is confirmed as the growth leader in the global luxury market, thanks to favourable exchange rates and an increase in tourist spending throughout 2024. On the contrary, in China, the market has gone through a period of substantial decline, due to weak consumer confidence and the increase in Chinese tourist flows to Japan, Europe, and to a lesser extent to other Asian countries. The Old Continent is experiencing a period of solid but normalising growth, fuelled mainly by the influx of tourists to the cities and resorts of southern Europe. Emerging markets – Latin America, India, South-East Asia and Africa – represent new, potential growth areas.

The Future

According to Federica Levato, Senior Partner and EMEA Leader Fashion & Luxury at Bain & Company, ‘It will be crucial to rediscover the true essence of the brand and, at the same time, embrace the founding pillars on which luxury has always been based: craftsmanship, creativity, personalisation of the shopping experience and the intimate relationship with the consumer, leveraging technological tools, such as artificial intelligence, to ensure perfect execution.