The global luxury market is facing a significant shift as affluent consumers actively turn away from high-end brands, driven by what they perceive as unjustified price increases and a lack of innovation. A new semiannual report from the Bain & Co. consultancy, released for the Altagamma association, reveals that the personal luxury goods sector is on track for its second consecutive annual decline, a situation not seen since the 2008-09 global financial crisis.
A Market in Contraction
According to the study, sales of personal luxury items, including apparel, footwear, and handbags, are expected to contract by 2% this year. The market is forecast to shrink to 358 billion euros (£302 billion), down from 364 billion euros in 2024. This follows a post-pandemic rebound in 2023, which saw sales hit 369 billion euros, a peak that Bain analysts now characterise as a 'bubble'. Despite the recent dips, the market remains approximately 25% larger than it was in 2019, before the pandemic caused a dramatic sales collapse.
The Consumer Backlash and Polarisation
Claudia D'Arpizio, a Bain partner and co-author of the study, explained that this is not a simple case of customers having less money. Instead, well-heeled shoppers are consciously trading down to more accessible brands in search of better value and more ethical propositions. The research indicates that inflated prices and a creativity crisis have cost luxury brands a staggering 60 to 70 million customers over the last two years, reducing the overall customer base by around 18% to 330 million people, who now exhibit far less brand loyalty.
The categories suffering the most, such as footwear and handbags, are precisely those where price hikes have been the most severe. D'Arpizio noted that many customers already have ample collections and see little reason to purchase new, identical items at significantly higher costs.
Regional Variations and Future Outlook
The market slowdown is not uniform across the globe. The US market is forecast to be flat this year at around 101 billion euros, while Europe is under pressure and expected to contract slightly to 108 billion euros. More pronounced slowdowns of up to 8% are anticipated in Mainland China and Japan, bringing their markets to 42 billion euros and 31 billion euros, respectively. The Middle East stands out as the sole growth region, expected to expand by 4% to 6% to 23 billion euros, largely powered by Dubai's retail appeal.
Looking ahead, Bain projects a potential rebound of 3% to 5% in 2026, which would bring the market to between 365 billion and 375 billion euros. This forecast hinges on anticipated growth in the US, backed by strong financial markets, and a recovery in the Chinese market.
A Dangerous Strategy and a Call for Change
The report highlights a period of extreme polarisation within the luxury world, mirroring trends seen in politics. The ultra-high-net-worth individuals, those with personal wealth exceeding 30 million euros, have proven to be the most resilient. This group, numbering about 400,000 people and extending to 1.5 million when including family members, has maintained its purchasing power.
However, this focus on the super-wealthy has come at a cost. D'Arpizio stated that the ongoing polarisation is not helping overall luxury consumption, as the majority of customers have felt alienated. Brands have concentrated too heavily on this tiny elite, not only with price elevation but also with customer experiences designed for the few, not the many.
She described the strategy of relentless price hiking as very dangerous, creating a significant misalignment between price and perceived value. Furthermore, social media is amplifying ethical questions about the justification for such high prices. D'Arpizio concluded that brands must urgently decide which customers they want to serve and reestablish themselves as purveyors of self-actualisation and social improvement, the very ideals that powered the luxury market's growth in recent decades.
