The luxury industry is shifting its focus from top spenders to a broader consumer base as the global personal luxury goods market shows signs of recovery. According to consultancy Bain & Company, demand in the US has exceeded expectations, despite ongoing geopolitical tensions in the Middle East.
- “America is growing more than expected and China is recovering faster than expected,” Levato noted, highlighting the shifting dynamics in luxury spending across different regions.
Luxury industry: Market Recovery and Sales Projections
In Bain’s latest update to its annual luxury market outlook, the consultancy revised its base-case scenario, now predicting a 2 per cent to 4 per cent rise in personal luxury sales for the year. This marks a slight adjustment from their previous forecast of a 3 per cent to 5 per cent increase, which was issued prior to the outbreak of the ongoing US-Israeli conflict over Iran.
Valued at €358 billion (approximately $406 billion) in 2025, the personal luxury goods market has experienced contraction over the past two years. Although it shrank by 2 per cent at current exchange rates in 2025, it managed a marginal increase of 1 per cent when evaluated in constant currencies.
Shifts in Consumer Preferences
Bain’s study, conducted in collaboration with the Italian luxury industry group Altagamma, indicates that experiences are outpacing tangible goods in the luxury sector. Francesca Levato, a Bain partner, acknowledged the growing uncertainty on macroeconomic and socio-political fronts but affirmed that consumer interest remains robust. “We see growing uncertainty and turmoil at the macroeconomic and socio-political levels, but the market is there,” she told Reuters.
Geographically, the US has shown surprising growth, driven by domestic brands and the spending habits of younger consumers. This positive momentum is somewhat offset by a slowdown in the Middle East and Europe, although China is beginning to recover, with growth primarily seen in ready-to-wear products rather than leather goods.
“America is growing more than expected and China is recovering faster than expected,” Levato noted, highlighting the shifting dynamics in luxury spending across different regions.
Impact of Tourism and Consumer Behaviour
Europe has faced challenges due to a decline in tourist flows, although signs of stabilisation began to emerge in May. As the industry adapts to these changes, Levato pointed out the critical need to expand the consumer base, which has significantly contracted since 2022.
The luxury sector has lost around 70 million consumers since 2022 as brands increased prices and concentrated efforts on the top 1 per cent of spenders. “The industry should refuel the growth of the consumer base rather than focus only on the top 1 per cent,” Levato emphasised, urging brands to rethink their strategies.
Artificial Intelligence and Second-Hand Markets
As the luxury industry evolves, artificial intelligence is playing a pivotal role in transforming how consumers interact with brands. Levato noted that approximately half of luxury consumers now utilise AI for making purchases, using technology for product discovery and comparison.
The rise of the second-hand market is also notable, with half of luxury shoppers reportedly consulting this market prior to making new purchases. This trend reflects a growing consumer preference for sustainability and value, further encouraging the industry to broaden its appeal.
Future Outlook for the Luxury Sector
As the luxury market continues to adapt, the focus is increasingly on inclusivity and accessibility. Brands are recognising the need to engage a wider audience rather than relying solely on high-net-worth individuals. This shift may ultimately redefine how luxury is perceived and experienced.
With the potential for growth in various regions and the integration of technology into the shopping experience, the luxury industry stands at a crossroads. The ability to pivot towards a more diverse consumer base could be key to sustaining momentum in a changing economic landscape.
