The luxury market, a beacon of resilience, faces a pivotal moment amidst economic and geopolitical uncertainties. Despite its strength, the industry is not entirely sheltered from these global challenges, as highlighted by Bain & Company and Altagamma.
Global luxury spending is projected to remain stable at €1.44 trillion in 2025, but a slight dip of 1-3% is anticipated at current exchange rates. The Bain-Altagamma Luxury Goods Worldwide Market Study, presented in Milan, forecasts a positive trajectory extending into 2026.
Federica Levato, a senior partner at Bain & Company and co-author of the report, describes the outlook as "mildly positive." The third quarter exceeded expectations, and the fourth quarter is deemed critical.
"Experiences and emotions are now the driving forces of market growth," Levato explains. The study reveals a significant shift towards luxury experiences like hospitality cruises and fine dining, reshaping the industry landscape.
The study, titled "The Longevity Issue," emphasizes the need for brands to adapt and ensure the industry's longevity. "We're witnessing six generations engaging in this market," Levato says, "and serving such diverse customers with different needs is complex."
Personal luxury goods sales are expected to decrease by 2-3% in 2025, reaching €358 million, with a flat performance at constant exchange. While ultra-wealthy buyers sustain demand, aspirational consumers have scaled back, adding pressure to traditional luxury.
Bain and Altagamma envision three potential scenarios for 2025: a rebound with 2% growth or decline, a continued slip with a 2-5% decrease, or a demand dip of 5-9%. They project a 4-6% annual growth for personal luxury goods over the next decade, driven by an expanding consumer base and enduring demand.
Claudia D'Arpizio, a senior partner at Bain & Company and lead author of the study, states, "Luxury stands at a crossroads. Regional growth disparities, pricing pressures, and diverse consumer profiles test its core. Creativity is returning, but a broken price-value equation demands integrity and trust."
D'Arpizio continues, "This is luxury's moment of truth. It can rise through ethics, inclusivity, and authenticity, or retreat into elitism. Entertainment, emotion, and ethics are the new sources of value. The winners will balance profit with purpose, creativity, and conscience, turning recalibration into reinvention."
Overview by Category:
- Jewelry: Expected to expand by 4-6% this year, seen as an investment and gift item with real intrinsic value. The value of gold and gems is rising, and jewelers have successfully connected with customers, offering credible products at various price points.
- Eyewear: Continues to perform well, with expected growth of 2-4%, driven by design innovation and digital integration.
- Beauty: Stable, with fragrances leading as the most dynamic sub-category, while premium skincare and makeup face performance polarization.
- Watches: Marked by increased polarization, with high-end pieces thriving and tariffs fueling the resale market.
- Apparel: Steady, driven by strong performance from accessible players.
- Accessible Luxury Fashion: Rebounding, driven by brands engaging downtrading consumers and attracting value-conscious Gen Z shoppers.
Online channels are holding steady, while outlet stores outperform. Monobrand stores have reduced their total store surface, and U.S. department stores have cut around 10% of space since 2024.
Geographic Markets:
- China: Spending is expected to contract by 3-5% this year, but brands are seeing a soft restart. "Let's hope we've hit rock bottom and can restart growth," Levato says. Chinese customers are increasingly proud of local brands, especially in personal luxury categories.
- Japan: Market deceleration after a strong 2024 due to cooling tourism.
- Europe: A softening trend with a 1-3% dip in 2025 as tourism slows, impacted by a strong euro and geopolitical tensions.
- The Americas: Expected to remain stable or grow 2%, driven by renewed domestic demand in the U.S. and expanding luxury footprints in Mexico and Brazil.
- The Middle East: Stands out as luxury's brightest performer, with expected growth of 4-6%, fueled by strong tourism in Dubai and Abu Dhabi, and sustained demand in Saudi Arabia.
The Middle East, Latin America, Southeast Asia, India, and Africa combined represent a market value of around €45 billion in 2025, matching Mainland China's scale and showing future growth potential.
Luxury's consumer base continues to shrink, dropping to around 340 million in 2025 from 400 million in 2022. New customer acquisition for luxury brands has declined by 5% between 2024 and 2025.
Margins Under Pressure:
Luxury companies report margin pressures, with profitability dropping to 2009 levels due to higher operating costs and challenges sustaining revenue growth. Operating profit margins, which peaked at 23% in 2012, are expected to hit 15-16% in 2025. "Brands must prioritize performance discipline and AI-enabled efficiency to defend value without sacrificing desirability," Levato emphasizes.
This margin contraction has led to an estimated €100 billion loss in the industry's total enterprise value over the past 12 months. "Fixed costs are higher, so brands must optimize marketing spending and store operations to build a more efficient machine," Levato adds.
Accessilbe Luxury:
"Accessible luxury brands have revamped their strategies, capturing the attention of Gen Z and a broader audience with value-for-money offerings," Levato explains. "It's not about cheap entry to luxury but a price that reflects the value you receive."
She underscores that consumer demand remains strong, with 2024 and 2025 being flat years at constant exchange rates. "Given the external challenges, it's not a bad performance. However, some of these challenges are internally generated. The call to action is to embrace creativity, authenticity, and ethics to rebuild trust and the value-for-price equation."
Levato concludes, "Very wealthy customers feel their values are not reflected in the industry. They shift their spending to experiences and restaurants. Brands are diversifying into other categories, but will it be enough to win back aspirational customers?"
The luxury market's future is uncertain, but with creativity and adaptability, it can navigate these challenges and emerge stronger.
