Shifts in Luxury Spending: A Market Under Pressure

The global luxury goods market is experiencing significant changes, with a forecasted contraction for the second consecutive year. According to a study by Bain & Company, sales of personal luxury goods are expected to decline by 2% to $412 billion in 2025, marking the first two-year slowdown since the 2008-09 financial crisis. This downturn is attributed to wealthy consumers becoming increasingly selective, opting for more ethical and value-driven purchases rather than traditional luxury items.

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While the overall luxury market is facing challenges, the ultra-wealthy segment is shifting its spending habits. A separate report from Bain and Altagamma indicates that global spending in the luxury sector is projected to reach $1.66 trillion by the end of 2025, remaining steady despite a shrinking customer base. The affluent are now prioritizing high-end experiences—such as luxury cruises, fine dining, and private jet travel—over conventional luxury goods like cars and leather items. Notably, spending on luxury cruises has risen by 12%, while expenditures on private jets and yachts increased by 11%.

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The luxury market's stability is being tested by various economic and geopolitical factors. High tariffs, particularly on goods from Switzerland, are contributing to a burgeoning resale market, while the absence of standout products in categories like leather goods is hindering growth. Despite these challenges, jewelry and eyewear are experiencing growth, contrasting with declines in shoe sales, skincare, and makeup.

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Looking ahead, Bain forecasts a return to growth for the luxury market in 2026, with an expected increase of 3% to 5%. The personal luxury goods market is anticipated to stabilize at approximately €358 billion in 2025, down from €364 billion in 2024. Over the next decade, Bain predicts an annual growth rate of 4% to 6%, potentially reaching between €525 billion and €625 billion. This optimistic outlook is bolstered by a recovery in the U.S. market, which is compensating for weaker performance in Europe and China.

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Despite the positive projections, some industry experts caution that the luxury sector faces a "moment of truth." Claudia D'Arpizio, a leader at Bain, emphasized the need for the industry to embrace ethics, inclusivity, and authenticity rather than retreating into elitism. This sentiment reflects a growing concern that luxury brands must adapt to changing consumer values to remain relevant.

Luxury shoppers are turning up their noses over price hikes on high-end brands

• “This is luxury’s moment of truth: to rise through ethics, inclusivity, and authenticity, or retreat into elitism,” — Claudia D'Arpizio, Bain & Company

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• “It’s good news that, given the global uncertainties — turmoil, tariffs, geopolitical instability, wars, the macroeconomic environment and consumer confidence — this market is stable. This is a positive message, because it seems that customers have an appetite for luxury,” — Federica Levato, Bain & Company

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The luxury goods market is navigating a complex landscape characterized by shifting consumer preferences and external pressures. While the ultra-wealthy continue to invest in experiences, the traditional luxury sector faces challenges that may redefine its future. As the industry anticipates a potential recovery, the emphasis on ethical and inclusive practices will likely play a crucial role in shaping its trajectory.

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