Luxury Sector Faces First decline in Decades, Forcing Model Redefinition
PARIS – The luxury goods market is experiencing a significant shift, marked by its first sustained decline in decades, prompting industry leaders to reassess long-held strategies. After benefiting from uninterrupted growth for thirty years – a fivefold increase in market size – the sector is now grappling with a contraction, with a 1% dip recorded between 2023 and 2024 and a projected 2-5% drop this year. This downturn, unlike previous crises like the 2008 subprime crisis or the 2020 COVID-19 pandemic, is endogenous, stemming from internal market dynamics.
A key indicator of this change is a loss of 50 million customers between 2022 and 2024. This decline coincides with rising prices and decreasing sales volumes, leading some consumers to reconsider luxury purchases amidst growing geopolitical and macroeconomic instability. Both China and the United States, traditionally the sector’s primary growth drivers, are currently facing economic headwinds. Moreover, the industry is finding limited opportunities for expansion into new geographic markets, effectively exhausting readily available “Eldorados.”
While not a complete collapse, this slowdown necessitates a fundamental re-evaluation of the luxury economic model.Experts emphasize the need to move beyond traditional approaches and embrace ”new inspirations.” A critical focus must be placed on reactivating customer acquisition, notably targeting infrequent luxury buyers and cultivating interest among younger generations.
Industry observers agree that innovation in offerings and services is paramount, but caution against diluting brand exclusivity. “The equation will not be easy to solve,” one source noted, ”but market players have a lot of assets to reinvent the model.” The challenge lies in adapting to a new reality where sustained, effortless growth is no longer guaranteed, and proactive reinvention is essential for future success.