The global luxury industry is entering an era of pronounced turbulence, with structural, cultural, and economic headwinds converging to reshape one of the world’s most resilient markets. According to Bain & Company’s latest study with Altagamma, the Italian luxury goods association, 2025 may mark the beginning of the sector’s most complex and challenging chapter in more than 15 years.

Despite signs of strength late in 2024, including a surge in tax-free spending in Europe and decreased volatility in the US, the industry’s early momentum has stalled. Personal luxury goods fell to €364 billion ($417 billion) last year, down 1% at current exchange rates, with further contraction of 1%-3% projected for Q1 2025. This downturn suggests the first genuine slowdown for the sector since the global financial crisis, excluding the shock of the COVID-19 pandemic.

The report emphasized that beyond economic tremors, a more nuanced cultural shift is unfolding. Luxury’s core proposition, long predicated on scarcity, craftsmanship, and status, is being reevaluated by younger consumers, especially Gen Z, who are increasingly skeptical of pricing structures and brand narratives.

“Although demand is easing in the short term, the luxury sector has consistently demonstrated an extraordinary resilience—buoyed by a growing global consumer base and deeply rooted emotional drivers,” said Claudia D’Arpizio, Bain & Company Senior Partner and global head of the firm’s Fashion and Luxury practice. “Across generations, drivers linked with self-reward, status, personal identity, and the celebration of achievements will continue to drive engagement, reinforcing and building the lasting relevance of luxury within its consumers’ lives.”

Luxury’s creative, operational, and retail engines are also under strain. Bain’s analysis pointed to growing pressure across multibrand channels that are facing financial stress and losing share as brands retract volume. Creative leadership continues to rotate, innovation pipelines are cooling, and global supply chains are increasingly vulnerable to geopolitical disruption and heightened regulatory oversight.

Federica Levato, Bain & Company Senior Partner and EMEA leader of the Fashion and Luxury practice, noted that “as the industry faces an increasingly complex global landscape, luxury brands are entering a pivotal new chapter—one that demands sharper focus, greater cultural relevance, and growth rooted in purpose. At the heart of this transformation is a redefinition of value and meaning that resonates across all generations—with those shaping luxury today and those who will define it tomorrow.”

Multiple Scenarios, One Reality: Slowing Growth

For the personal luxury goods sector, Bain outlines three potential scenarios for 2025:

• A “continued slip,” viewed as the most likely outcome, would see the market shrink by 2%-5% year over year.
• A “demand dip,” seen as the most severe but less probable, would result in a deeper contraction of 5%-9%.
• A “in-year rebound” could bring modest growth or stabilization, ranging from -2% to +2%, though Bain considers this unlikely under current conditions.

Even so, not all segments are faltering. Experiential luxury—including hospitality, gourmet dining, cruises, and bespoke travel—continues to outperform. Private aviation and yachting remain buoyant, bolstered by long order backlogs and rising charter interest. Luxury interiors have also stabilized, especially in the contract segment.

The report also charted an increasingly polarized consumer landscape. Engagement levels are down across all demographics, particularly among younger audiences. More than 40% of brands have seen search interest fall, social media follower growth has dropped by 90%, and engagement rates are down by 40%.

While Gen Z is drawn to emotional re-engagement and creativity, their loyalty remains elusive. Millennials are cautious, citing financial pressures. Older generations are shifting preference toward experiential luxury and emotional meaning over physical goods.

Performance also varies by geography. The US and China are experiencing cooling demand due to macroeconomic pressures and consumer caution. In contrast, markets in Latin America, the Middle East, and Southeast Asia—including Mexico, the UAE, and Indonesia—are thriving due to strong local consumption and tourism inflows.

Strategy for a New Era: Reconnection and Relevance

To safeguard future performance, Bain emphasized the need for luxury brands to reanchor their strategies in creativity, product integrity, and cultural resonance, while also investing in the pillars that support long-term resilience, including but not limited to advanced clienteling, AI integration, pricing analytics, and modernized supply chains.

In looking to the horizon, the report remained cautiously optimistic. Over 300 million new consumers—more than half from Gen Z or A—are expected to enter the luxury market over the next five years. Global income growth and a projected 20% rise in high-net-worth individuals will further expand the market opportunity.

D’Arpizio concluded, saying that “to navigate today’s uncertainty, brands must anchor themselves in their core strengths—prioritizing quality, creativity, and authenticity. Deepening consumer relationships is essential, shifting away from push marketing toward seamless, customer-centric experiences across every touchpoint.”

Levato added that “at the heart of this shift lies a more fundamental question: Who are we as a brand, and what do we stand for? Answering this with clarity and conviction will be critical for any brand aiming not just to endure, but to lead in this new era of transformation.”