The market for personal luxury goods is expected to slow in 2024 for the first time since the 2009 Great Recession, with 50 million luxury consumers reportedly cutting back on purchases. A new report by Bain & Company indicates that many shoppers are either stepping away from designer goods or being priced out by rising costs.
According to Bain, only one-third of luxury brands are projected to end the year with positive growth, down from two-thirds last year. The shift highlights challenges facing the sector, which includes price increases without corresponding improvements in product innovation, service, or overall value.
Equity analyst Marie Driscoll emphasized the need for luxury brands to adapt to changing consumer expectations, particularly from Gen Z. She suggests that brands must find ways to continuously surprise and delight customers through innovation, unique offerings, and an enhanced shopping experience. “You need to constantly meet consumers at a new angle,” Driscoll explained, comparing stagnant luxury offerings to an overfamiliar indulgence like a “fabulous ice cream sundae.”
The report suggests that some luxury brands have fallen short in delivering on promises to consumers. Since 2019, significant price hikes have occurred without clear improvements in quality or appeal, which has contributed to consumer dissatisfaction.
Several major luxury firms, including LVMH (owner of Dior and Louis Vuitton), Burberry, and Kering (which owns YSL and Gucci), have missed revenue targets in 2024. LVMH, once Europe’s most valuable company, was overtaken by Novo Nordisk in September 2023. Rising prices, combined with competition from fast fashion and social media influencers, have also contributed to consumer fatigue, according to Michael Kors, the founder of his namesake brand.
While many luxury brands are facing challenges, Hermès has experienced continued growth, largely attributed to the exclusivity of its Birkin bag, which generates long waitlists and requires substantial spending to access. This exclusivity creates a sense of rarity and value that appeals to consumers.
The report also notes the significant role that the Chinese market has played in the luxury sector’s growth. However, in 2024, decreased consumer confidence in China has contributed to a slowdown in luxury spending. LVMH and Kering have reported declines in revenue, partly due to reduced spending in the region. The broader economic environment has led many consumers to prioritize other financial decisions over luxury purchases.
While the luxury sector is forecast to decline by 2% in 2024, there are signs of growth in other sectors such as travel, fine wine and dining, and automobiles. Analysts expect a gradual recovery in the luxury market by late 2025, particularly in regions like China, Europe, the U.S., and Japan, where favorable currency exchange rates may encourage spending.
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