By Andrea Figueras
Luxury companies are set to experience this year their most far-reaching disruptions and biggest potential setbacks in at least 15 years, according to a report by Bain & Company in partnership with Italian luxury-goods industry association Altagamma.
“Worldwide luxury spending, historically sensitive to uncertainty, is coming under intensified pressure,” the report said. Economic upheavals, geopolitical and trade tensions as well as currency fluctuations and financial market volatility have hurt the confidence of high-luxury shoppers.
“Turbulence may be luxury’s new baseline for an extended period,” the report said, noting that the industry faces its first slowdown since the global financial crisis of 2008, excluding the temporary hit caused by the pandemic.
Divergence among brands is set to continue. The industry is polarized between the names that have managed to keep growing and those that are facing more difficulties. The former have a more affluent clientele that has continued to splurge on luxury goods, while the latter target less wealthy consumers, who have cut back on their luxury purchases due to the global economic situation.
The sector also faces geographical differences. Its two key markets, the U.S. and China, are experiencing soft demand on the back of the current economic turmoil. Europe and Japan are affected by weakening tourism, but local demand is partly offsetting the decline. Other markets such as the Middle East, Latin America, and parts of Southeast Asia remain robust.
Coupled with waning demand, luxury brands are struggling to appeal to younger generations, notable Generation Z customers.
“The industry’s innovation engine appears to be losing momentum and appeal, while the creative leadership that is vital to the sector is under strain and rotating across brands,” according to the report.
A number of high-end labels have recently renewed their creative directions. Brands such as Dior, Balenciaga, Gucci, Chanel, Givenchy and Valentino have replaced their creative heads to lure consumers back.
Over the next five years, more than 300 million new consumers–more than half of these in Generation Z or Generation Alpha–are expected to enter the luxury market. For brands to capitalize on this growing clientele, they will need to rethink how to engage younger consumers, avoid over-reliance on high spenders and create emotional connections that go beyond a mere transaction.
Given the current difficult juncture, Bain & Co urges brands to differentiate their identities, keeping product quality at the core and thoughtful pricing after years of steep price hikes.
“Although demand is easing in the short term, the luxury sector has consistently demonstrated an extraordinary resilience,” Claudia D’Arpizio, Bain & Co senior partner and global head of the firm’s fashion and luxury practice, said.
Write to Andrea Figueras at [email protected]
(END) Dow Jones Newswires
06-19-25 1010ET
