MILAN — Trade wars, geopolitical tensions and the volatility of financial markets on a global scale are impacting luxury spending and the personal luxury goods segment is seeing the first slowdown in 15 years, excluding the COVID-19 pandemic, according to the spring 2025 Luxury Goods Worldwide Market study presented by Bain and Altagamma on Thursday in Milan.

According to the report, the luxury industry registered a 1 percent decrease in 2024 turnover to 364 billion euros, compared with 369 billion euros in 2023.

For 2025, the study sees three potential scenarios unfolding: an in-year rebound with a market growth in 2025 on 2024 of between a 2 percent decrease and a 2 percent increase, with a 20 percent probability of occurrence; a continued slip with a decrease of between 2 and 5 percent, with a 60 percent probability of occurrence, and a demand dip of between and 5 and 9 percent, with a 20 percent probability of occurrence.

Despite the slowdown, Matteo Lunelli, president of Altagamma, said the industry “between 2019 and 2024 registered a total growth of around 28 percent so we are significantly above pre-pandemic levels.”

Also, he pointed to the growth of markets such as the Middle East, Latin America and South East Asia, “which show a remarkable dynamism.” On top of this, the expectation of 300 million new potential consumers in the next five years “confirms the solidity of the fundamentals of this segment in the long-term.”

The compound annual growth rate rose 6 percent in the 1996 to 2019 period, and was up 5 percent in the 2019 to 2024 period. Macroeconomic pressures and price fatigue weighed on consumer demand in the first quarter of 2024, which saw a decline of between 1 and 3 percent compared with the same period in 2023.

There is a strong  polarization between the performances of different brands, said Claudia D’Arpizio, global head fashion luxury at consultancy Bain & Co. and coauthor of the study. “The strategies set in motion over the last years have resulted in sharp consumer alienation due to high price increases (45 to 50 percent of responders) and limited creativity injection (25 to 30 percent),” she said. “Brands have started efforts to nurture desire through heightened experiential formats, and continued categories diversification, experiences that go beyond the product and a wave of creative change,” although the latter has turned off some consumers.

Asked about these changes, D’Arpizio said a creative designer is “one of the assets of a brand, they work in a team, they give direction, but brands need strategies, clarity, marketing, creativity alone is not enough. It’s an important tool when aligned with the brand values to recreate the magic, but it’s not fair to rely only on the creative designer” for success.

Federica Levato, partner at Bain & Co. and coauthor of the study, said “companies may fail but brands never die and it’s a mistake when a creative director wants to [become more important than] the brand.”

The industry has lost around 50 million consumers, the result of the crisis of department stores and e-tailers, and the increased scrutiny over the pipeline have created “a perfect storm,” said D’Arpizio. “Experiential goods continue to outpace tangibles.” Also, she highlighted that “the difference between wealthy and poor is the biggest risk, associated to social injustice. Being a big and recognizable brand in China now is not that positive as ostentation is shunned.”

Markets Around the World

In the first quarter, mainland China remained under pressure, the U.S. was still negative, and Europe and Japan slowed down, said Levato. “After the war between Israel and Iran broke, there’s been a wave of cancellations of trips into Europe over the past few days for fear of terrorist attacks.”

U.S. and China are “twin giants with parallel pains, bruised but not broken by pressured consumption,” said Levato.

The U.S. is facing monthly swings with tariffs-induced volatility impacting consumers’ willingness to spend, and while China has had six consecutive quarters of negative growth, it is still above pre-pandemic levels with an additional market value of around 15 billion euros in 2024 compared with 2019. However, now the middle class in China is “lost,” said Levato.

There are some bright signals on the horizon with high-spending customers still resilient in the U.S. and accessible luxury brands and outlets gaining traction.

In China, new local luxury brands are emerging.

In Europe, ready-to-wear and jewelry are top categories, and ethically priced items are outperforming.

In Japan, limited editions are helping to maintain brand heat, as are beauty and jewelry. There is a growing interest in secondhand jewelry.

Levato said the United Arab Emirates are “still roaring,” fueled by hyper tourism, positive momentum in Qatar and Bahrain, and unmatched growth promises in Saudi Arabia, while Kuwait is on a more cautious path. In Latin America, which is showing widening footprint, Mexico is outperforming, followed by Brazil. In South East Asia, Singapore and Indonesia are leading growth, followed by Vietnam and the Philippines while Thailand is more polarized.

Categories

Jewelry, eyewear and apparel are keeping momentum as high-low is a driver of resiliency. The sale of fragrances is growing, skin care is flat and makeup is decreasing. Between 25 and 30 percent of brands are reinforcing entry prices, said D’Arpizio.

Watches, leather goods and footwear continue to decline and traction is only led by newness in creativity. “The cross-generational reshape of the value system and the brands’ value proposition weakening lead to a white space for new entrants,” contended D’Arpizio.

There is growing addressable wealth with around 20 percent growth in the number of high-net-worth individuals, who are growing at the fastest pace, according to the study. The average income growth worldwide will stand at between 3 and 4 percent. The study urges brands to refocus on basics, such as lasting, creative and high-quality products; to foster relationships and favor reach over push, expanding toward untapped audiences, and to deliver flawlessly customer-centric experiences.