What: Global luxury market faces 5% decline in 2025 as consumer detachment grows, with 50 million fewer customers and rising pressure on brands' price-value propositions.

Why it is important: The significant loss of customers and growing emotional disconnect reveals a fundamental shift in luxury consumption patterns, challenging the industry's long-standing growth model and requiring brands to rebuild meaningful connections with consumers.

The luxury goods market is experiencing its most significant contraction since the 2008-2009 financial crisis, with Bain and Company projecting a decline of up to 5% in 2025. This downturn stems from multiple factors, including rising geopolitical tensions, currency fluctuations, and growing consumer disillusionment with the industry's offerings. Particularly concerning is the erosion of the traditional price-value relationship, with consumers questioning substantial price increases that have seen items like handbags double in cost without corresponding increases in creativity or perceived value. The market has lost approximately 50 million customers over the past two years, with total global luxury consumers dropping to 353 million. Brand engagement metrics paint a troubling picture, with related searches down by 40% and social media follower growth plummeting by 90%. The industry faces additional challenges from executive turnover, with creative director transitions taking up to a year to complete and new collections facing a 50% failure rate. This combination of factors is impacting profit margins, even among top performers, suggesting a fundamental reset in how luxury brands must approach their market positioning and customer relationships.

IADS Notes: The luxury industry's projected 5% decline in 2025 represents a culmination of trends observed throughout 2024-2025. In December 2024, the sector experienced a 2% decline to EUR 363 billion, losing approximately 50 million consumers over two years. This downturn coincides with significant shifts in consumer psychology, particularly evident in June 2024 when "luxury fatigue" emerged in China. The industry's challenges extend beyond market performance, as demonstrated by December 2024 data showing luxury brands introducing products under USD 500 to retain middle-class consumers. Leadership transitions have also played a crucial role, with March 2025 reports highlighting how excessive accessibility threatens brand exclusivity. The transformation is further evidenced by November 2024 data showing 67% of consumers seeking simpler lifestyles, while February 2025 revealed 68% increasing wellness-related spending, confirming the shift from traditional luxury goods to meaningful experiences.

Luxury lethargy sets in as the market braces for up to a 5% drop in 2025