What: Luxury industry faces worst year since 2007-09 as market polarisation and changing consumer behaviour drive 2% projected decline in 2024.

Why it is important: The luxury market's performance reflects fundamental shifts in consumer behaviour and economic confidence, potentially previewing wider retail industry challenges and economic trends.

The luxury industry is experiencing its most challenging year since the 2007-09 recession, with a projected 2% decline in sales for 2024. While ultra-wealthy consumers continue robust spending on items like yachts and jets, the aspirational luxury market has contracted significantly, losing approximately 50 million consumers over the past two years. This polarisation reflects broader economic uncertainties, with even affluent consumers showing increased caution in discretionary spending. The shift is particularly evident in changing demographics, with luxury brands increasingly featuring older consumers in advertising as younger shoppers turn away from traditional luxury goods. The beauty sector remains a rare bright spot, following the "lipstick index" theory that suggests increased purchases of small luxury items often precede economic downturns.

IADS Notes: The luxury industry's current downturn reflects significant structural changes in the market. December 2024 data shows global luxury sales declining by 2%, with the industry losing 50 million consumers over two years. This trend is evidenced by October 2024 reports of LVMH's 5% drop in fashion and leather goods sales. In response, luxury brands are adapting their strategies, with December 2024 seeing an increase in products priced under $500 to retain middle-class consumers. While most markets struggle, July 2024 data highlights Japan as a bright spot, benefiting from a weak yen and strong tourist spending. This aligns with Bain & Company's November 2024 forecast of the first significant luxury market slowdown since the Great Recession. These developments suggest a fundamental shift in luxury consumption patterns, with implications extending beyond the sector to broader economic indicators.

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