Editor’s Note
This article highlights a pivotal forecast for the global luxury sector, indicating a potential downturn in 2024. The data underscores the market’s sensitivity to broader economic pressures and shifting consumer behavior.
The luxury industry is about to endure a difficult year. According to a fashion business report, Bain & Company, in collaboration with the Italian luxury goods association Fondazione Altagamma, released a luxury research report forecasting that global luxury spending in 2024 will be nearly €1.5 trillion, representing a change between a 1% decline and 1% growth compared to last year.
Within this, the global personal luxury goods market is expected to decline by 2% at real exchange rates to €363 billion. Bain partner Federica Levato stated that, excluding the pandemic period, this marks the first decline in the personal luxury goods industry since the 2008 financial crisis, hitting a historic low.
This trend is particularly pronounced among the younger Gen Z, whose enthusiasm for luxury brands continues to wane. While the share of luxury spending by high-net-worth individuals has increased, they are also gradually losing the sense of exclusivity they once derived from luxury brands.
The tightening market is leading to a polarization in brand performance. The report predicts that only about one-third of luxury brands will achieve positive growth in 2024, compared to about two-thirds last year. Against the backdrop of slowing growth and increasing profit pressure, brands urgently need to develop clear strategies and execution plans regarding pricing, creativity, and brand value.
In terms of regional markets, China, once the mainstay of the global luxury market, has now become a drag on growth for global luxury brands.
The sharp slowdown in the Chinese market is primarily due to weak consumer confidence and the outflow of Chinese tourists to neighboring regions and Europe, reducing domestic spending. Market conditions have continued to deteriorate since the beginning of the year.
Japan continues to lead global luxury growth, expected to grow by 12% to 13%, though it has also experienced a slowdown. In the first half of 2024, luxury consumption in Japan surged due to favorable exchange rates and a related boom in tourism spending. However, momentum has recently slowed as brands adjusted prices in Japan and the currency advantage diminished. In other parts of Asia-Pacific, the South Korean market also faces challenges.
The US market is expected to be flat or decline by 1%, showing signs of quarterly recovery, but consumer confidence remains volatile, and foot traffic in major cities has also declined. The European market is expected to grow by 3% to 4%, with Southern Europe remaining robust driven by first-tier cities and tourist destinations, but other European markets show significant divergence. The Middle East market has been affected by geopolitical tensions impacting tourist inflows.
As luxury brands have limited success in satisfying consumer experiences, spending is shifting towards travel experiences and social activities, with a preference for personal care and experiences beneficial to physical and mental well-being over tangible goods. Experiential goods, especially yachts, cars, and private jets, are attracting strong interest from high-net-worth consumers.
Consumer preferences for luxury categories are shifting towards smaller luxury items, with beauty and eyewear performing notably well, both expected to grow by 3% to 5%. Within the beauty category, fragrances are particularly strong. As a cash cow for brands, their relatively lower price point compared to leather goods and ready-to-wear allows consumers to experience the emotional value provided by luxury brands, making consumers increasingly inclined towards this “small but beautiful” indulgence in the current market environment. The eyewear market is also performing positively, with creative luxury eyewear and high-end professional eyewear brands attracting a large number of consumers.
The jewelry market is performing relatively well, expected to be flat to up 2%, with high-end jewelry and the US market showing positive performance. In contrast, demand for watches, leather goods, and footwear has slowed, with consumers turning to more economical choices and becoming more selective in their purchases. Small leather goods and entry-level items still appeal to the younger Gen Z.
As consumers seek value for money, the luxury secondary market is accelerating its development, and the outlet channel is performing excellently. Some consumers are downgrading from full-price shopping to outlet channels, while outlets are increasingly becoming the preferred channel for consumers entering luxury consumption.
Most physical full-price luxury stores face pressure from declining foot traffic, and the online market, after post-pandemic fluctuations, has also entered a phase of normalized slowdown. Against the backdrop of consumers increasingly seeking immersive, personalized, and specially curated brand experiences, how to attract customers back to stores through differentiated store design and in-store interactions has become a challenge for brands.
It is expected that the luxury market environment will improve slightly throughout 2025, but this largely depends on the macroeconomic developments in key regions. By 2030, as the addressable consumer base continues to expand, the market may embark on a long-term positive trajectory. Emerging markets, including Latin America, India, Southeast Asia, and Africa, are expected to add over 50 million new luxury consumers by 2030.
However, passive waiting will not restore prosperity to the luxury industry. Bain believes the industry has reached a point where change is imperative.
Bain suggests that to win back luxury consumers, especially younger ones, brands need to prioritize creativity and expand dialogue with consumers. The luxury industry requires a new wave of creativity-driven initiatives, integrating creative vision, brand DNA, and luxury value to regain consumer trust. Simultaneously, brands must place their top clients at the center, surprising and delighting them, while re-emphasizing one-on-one, humanized interactions.
Currently, this has almost become a market consensus: the reduction in luxury spending by Chinese consumers is not solely due to macroeconomic factors and weak consumer confidence. The maturation and rationalization of their understanding of luxury are also significant reasons for the expected 20% plunge in China’s luxury market in 2024.
Judging from feedback on domestic social media, the “demystification” of luxury has become a popular narrative. After a decade-long learning process spanning from luxury beauty to small leather goods, then to handbags, ready-to-wear, and high-end watches and jewelry, Chinese consumers’ understanding of luxury has rapidly matured. Their knowledge of different luxury brand positioning and backgrounds has rapidly increased with the help of social media like Xiaohongshu. Their evolution speed may have surpassed that of Western consumers, completing in a decade what took consumers in Western markets several decades.
For more pragmatic and savvy Chinese consumers, excessively high prices have become a major obstacle to purchasing luxury goods. On one hand, macroeconomic factors have tightened consumers’ luxury budgets. On the other hand, Chinese consumers’ sharp information-gathering abilities have given them a better understanding of global pricing levels, making price differentials increasingly transparent. Consumers would rather wait for their next outbound duty-free shopping trip than consume in the local market. Furthermore, the business model of driving growth through hasty price increases while product innovation lags has led consumers to reject the excessive premiums charged by luxury brands.
In addition, the homogenization of luxury brands is evident, reflected in both product creativity and brand strategy. In terms of creative vision, luxury brands have failed to achieve deep emotional resonance with young people or meet their urgent spiritual needs, causing them to turn to other experiences and alternative consumption substitutes. People find that many inexpensive consumer goods can provide equal or even greater pleasure. The indiscriminate replication of fashion trends by luxury brands has led to significant product homogenization, losing the appeal of creativity itself and blurring brand identity.
In marketing, the methods luxury brands rely on for brand building—celebrities and social media—are also largely similar. In the context of a creativity deficit, consumers rely solely on price to differentiate luxury positioning, leaving only a few ultra-high-positioning brands and a handful of brands with novel positioning as winners.
But even these top individual luxury brands are beginning to face severe pressure. The growth of luxury over the past decade has significantly increased ownership rates. The popularization process of luxury has reduced its sense of scarcity, leading to a decline in social value.
While Hermès has temporarily outperformed its peers overall, its performance in China has still declined severely. Growth in the Asian market, including China, lags far behind other markets, recording only a 1% increase to €1.584 billion in the third quarter.
The reason Miu Miu has been able to stand out is essentially a victory of creativity. Prada and Miu Miu have long maintained high creative standards without blindly following market trends, enabling Miu Miu to sustain accelerated growth against the trend this year—89% in Q1, 95% in Q2, and breaking through to 105% in Q3, achieving 15 consecutive quarters of high growth.
In the past two months, major luxury brands have introduced new strategies, made concentrated adjustments to management and creative personnel, more pragmatically adjusted sales channels, and begun cost-cutting to improve profitability. Burberry’s current CEO, Joshua Schulman, updated the company’s strategy yesterday, focusing on brand classics and the outerwear category, lowering leather goods prices, and optimizing wholesale and outlet channels.
These actions prove the market is in a period of concentrated adjustment, but so far, they seem insufficient to directly address the root cause of luxury weakness: the lack of innovation momentum. While creative talent often feels uninspired during pessimistic times, disruptive innovation often emerges from moments of extreme pain.
