The global luxury goods market is facing a rare contraction, with sales of personal luxury items forecasted to drop by 2% in 2024, marking one of the sector’s weakest years on record. Consultancy Bain & Company’s latest report attributes the decline to economic pressures and steep price hikes, which have contributed to a shrinking customer base and softened demand.

According to Bain, the luxury market lost approximately 50 million consumers over the past two years, a sharp drop from its previous 400 million customer base. This decline has largely been driven by rising prices, especially as luxury brands repositioned their products within higher price brackets. Bain estimates a 20-22% slump in luxury sales in China, once a powerhouse market for high-end goods, now experiencing sluggish demand amid economic uncertainty.“This is the first time we’re seeing a drop in the personal luxury goods sector since the 2008-09 crisis, barring the pandemic,” said Bain partner Federica Levato. The report may raise concerns among investors that the sector’s downturn could endure longer than expected, impacting key players like LVMH and Kering.

Follow THE FUTURE on LinkedIn, Facebook, Instagram, X and Telegram

The forecast reveals a shift in luxury consumer behaviour, particularly among younger shoppers, who have scaled back on purchases amid global economic headwinds, from geopolitical tensions to China’s economic challenges. Levato noted that while luxury spending on experiences like travel and dining remains strong, demand for physical luxury goods is expected to remain flat through the holiday season at constant exchange rates.

Strategies to Drive Future Growth

The report highlights that growth prospects for 2025 will depend significantly on brands’ strategic choices, particularly regarding pricing. Bain anticipates that global sales could rise modestly, between 0% and 4%, driven by European and American markets. China, however, is only expected to regain momentum in the latter half of 2025.

In another telling trend, the outlet channel—offering discounted luxury items—has outperformed the wider luxury market, reflecting a shift towards value-seeking among luxury buyers. Levato suggests that easing interest rates and potential tax cuts in the U.S. under Donald Trump’s leadership could lift consumer confidence and spending stateside.

The Shift to Experiential Luxury

While personal luxury goods are seeing a slowdown, Bain reports that luxury spending on experiences, such as upscale hospitality and dining, is on the rise, highlighting a potential shift in consumer preferences toward experience-driven purchases.