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 reported in partnership with Italian luxury goods industry association Altagamma.
The report cautions that €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.
The analysis underlines the luxury industry’s long-standing resilience.
Bain urges the industry to respond to present disruptions by 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.
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%.
Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished
