Luxury market growth will remain minimal until at least 2027: report

Diving overview:

The global luxury goods market is expected to grow by 1% to 3% annually from 2024 to 2027. A new report called “State of Luxury: Fashion” From McKinsey.
Geographically, the United States is expected to outpace the rest of the world from 2025 to 2027, with the luxury goods market expected to grow between 4% and 6%, while China’s market will grow between 3% and 6%. 5%, and China is expected to grow between 2% and 4%. % growth both in Europe and the rest of the world.
The combined luxury jewelry and leather goods category is expected to grow the most, growing from 4% to 6% between 2025 and 2027. Apparel, including ready-to-wear and footwear, is expected to grow between 2% and 4% over this period.

Dive Insight:

Personal luxury goods industry including fashion, According to the report, the combined leather goods and watches and jewelry categories grew by 5% annually from 2019 to 2023, and by 9% annually from 2021 to 2023.

Much of that growth was driven by rising prices, which rose an average of 4% annually across the industry. From 2019 to 2023, price increases accounted for 80% of growth in luxury goods, with prices for what McKinsey calls “leather goods and other iconic products” increasing by 50% to 100% over this period.

But as a whole Luxury sector will slow down in 2024executives cited in the report said they plan to drive future growth through volume increases rather than price increases in 2025.

Ultra-high-net-worth customers make up 2% to 4% of the luxury goods industry’s customer base, but account for 30% to 40% of the sector’s spending, according to the report. This demographic is projected to drive 65% to 80% of luxury goods growth from 2023 to 2027, with some caveats.

For example, the ultra-high-net-worth customers listed in the report expect to spend less on personal items and more on home décor and categories that combine travel and hospitality in the future. said. McKinsey said there is a “common sentiment among these customers that they have been ‘overspending’ since the pandemic.”

In terms of global growth in 2025, the fashion industry is expected to expand particularly strongly in Japan, the Middle East and India, with the latter expected to see the largest growth of 15% to 20% next year.

Overall, luxury customers indicated that they feel their in-store experience has deteriorated in recent years and want “more transparency in the sourcing and production of luxury brands.”

On the other hand, there is a movement “away from brand tradition and toward a personal vision.” The proportion of creative directors…can impact brand identity and performance in the long run,” McKinsey said. The report also noted that 10 new CEOs have been appointed at the world’s top 15 personal luxury brands in the past three years.

As companies overhauled their creative visions and executives, consumers wanted quick access to new styles and silhouettes.

“Faster trend cycles and instant access to branded content on social media have created a persistent demand for newness,” McKinsey said in a report. “Luxury brands have increasingly turned to collaborations, product ‘drops’ and brand ambassadors to meet the constant demand for novelty. However, these strategies can obscure a brand’s core identity and alienate it from its historical customer base. ”

According to McKinsey, a search for novelty and a desire for affordable items has driven some high-end customers to resale.

However, McKinsey reports that concerns “regarding authenticity and reliability in resale” still exist, with 20% of conversations being “buyers looking for a trusted platform that can guarantee the authenticity of used luxury goods.” It is said that it is being developed mainly around “.

According to the report, a further 25% of online customer conversations about luxury resale “relate to appreciating the uniqueness and history of used and vintage goods,” and 24% “relate to the affordability of used luxury goods.” and accessibility.”