Luxury spending enters worst year since Great Recession

Diving overview:

The personal luxury goods market is In the midst of the first economic slowdown since the Great RecessionExcluding the COVID-19 pandemic, according to the Luxury Goods Report released last week by Bain & Company in partnership with Italian luxury goods manufacturing trade group Altagamma. This corresponds to an erosion of 2% compared to 2023 at current exchange rates.
Global luxury spending is expected to grow between -1% and 1% year-on-year in 2024 as consumers cut back on discretionary purchases, reaching an estimated €1.5 trillion (approximately €1.6 trillion) in 2024. It is expected to reach $1 billion.
The report notes that despite “the growth focus on experience-based luxury goods,” the overall luxury customer base is facing “continued economic uncertainty, rising prices and customer dissatisfaction, particularly among younger generations.” “With a decline in the economy,” he said.

Dive Insight:

The decline in luxury spending is particularly pronounced for Gen Z, whose support for luxury brands continues to decline, with the number of luxury customers declining by “about 50 million over the past two years,” according to the report. It is said that there is.

At the same time, the report’s authors said top luxury goods customers are increasing their share of consumption in this sector.

“Despite macroeconomic uncertainty, luxury spending has shown remarkable stability this year, driven primarily by consumer desire for luxury experiences,” Bain & Company Claudia Dalpizio, Partner and Head of Global Fashion & Luxury Practice, said in the report.

Dalpizio said the shrinking luxury consumer market meant it was time for brands to rethink what value they were delivering, focusing on personalization and learning how to leverage technology at scale. He added that this should serve as a signal.

“To win back customers, especially younger customers, brands need to be creative in taking the lead and broadening the conversation,” Dalpizio said. “At the same time, we must keep our top customers front and center, surprising and delighting them while rediscovering the one-on-one relationship.”

Categories that performed well in 2024 included beauty, particularly fragrances, as consumers were attracted to “little luxuries.” Luxury eyewear gained momentum and jewelry flourished, especially in the US market.

The report said consumer downtrade and selectivity slowed the market for new watches, leather goods and footwear, but small leather goods and luxury entry-level items remained of interest to Gen Z customers.

While high-end brick-and-mortar stores are “suffering from a sharp decline in foot traffic,” outlet stores are doing well, something Bain attributes to consumers’ pursuit of value.

Meanwhile, online luxury shopping is “on the verge of normalization after some post-pandemic fluctuations.” The report said successful luxury brands have the potential to drive foot traffic back to physical stores “by offering a differentiated value proposition and increasing in-store engagement.”

The second-hand channel is growing, especially in the areas of jewellery, traditional apparel and leather.

Regionally, the United States, Mexico and Brazil showed positive signs, while Canada struggled due to a lack of tourists from China. Meanwhile, Europe, excluding the UK and Scandinavia, is starting to normalize with sustained tourist growth, and the report states that “the situation is changing across the Middle East as regional tensions impact tourist inflows. “It’s different.”

In Japan, momentum has slowed, although the region continues to drive global growth in luxury goods. China experienced a sharp economic slowdown due to a decline in domestic spending.

The report says Latin America, India, Southeast Asia and Africa could collectively add more than 50 million upper-middle class luxury consumers by 2030.

Looking ahead, Bain said the luxury goods market is expected to improve slightly in 2025, with a long-term positive trajectory not likely to materialize until 2030.

Federica Levato, partner at Bain & Company, head of fashion and luxury for Europe, Middle East and Africa, and co-author of the report, says that luxury brands will continue to embrace personalization. , said they needed to rediscover their unique brand value. Experience and technology are key, especially when it comes to AI.

“To ensure future growth, brands need to rethink the luxury equation, reestablish creativity and blend old and new strategies,” said Lebat.