The global luxury market is set to grow at a slower pace, with annual expansion of 2-4 percent between 2025 and 2027. Leather goods and jewellery are expected to lead growth at 4-6 percent annually, while top-spending clients will drive up to 80 percent of market expansion.
After an exceptional period of value creation from 2019 to 2023 – fuelled by soaring demand and strategic price increases – luxury brands are now facing a slowdown. Economic headwinds, particularly in China, and a shifting consumer landscape have created new challenges. Younger clients seek fresh engagement without alienating older buyers and experiential luxury is competing with traditional goods for consumer spending.
However, luxury’s struggles are not purely external. Overexposure and rapid expansion have diluted the industry’s core values of exclusivity, craftsmanship and creativity. Price hikes were not matched by sufficient product innovation, weakening brand desirability. As a result, growth will be more moderate in the coming years, with sector recovery expected by late 2025 or 2026. While emerging markets such as India and the Middle East present opportunities, China and Europe will see single-digit growth and the US remains a relatively strong market.
To navigate this transformation, luxury leaders must take a long-term view rather than relying on short-term fixes. Here are five strategic imperatives for the industry:
North America remains the dominant hub for high-net-worth individuals, seeing a 5.2% rise in HNWIs, reinforcing its leadership position.
1. Conduct a Strategic Reset
- Refocus on core values and high-priority clients to strengthen brand differentiation.
- Leverage synergies within large groups to drive efficiency and growth.
2. Restore Product Excellence
- Invest in iconic, high-quality designs that reinforce brand prestige.
- Strengthen supply chain stability to uphold craftsmanship and exclusivity.
3. Rethink Customer Engagement
- Offer exclusive, meaningful experiences beyond just products.
- Use AI and data to enhance personalisation and client relationships.
4. Bridge the Talent Gap
- Attract and retain top talent across all business functions, not just creative roles.
- Evolve corporate culture and professionalise key operations such as digital, data, and supply chain management.
5. Futureproof the Portfolio
- Assess market opportunities in adjacent categories like hospitality and travel.
- Pursue strategic acquisitions to enhance resilience in a consolidating industry.
The luxury sector is at a turning point. Brands that prioritise craftsmanship, innovation and strategic investments will maintain long-term relevance. Those that fail to evolve risk losing market share and consumer trust for years to come.
Sources: The Business of Fashion