Recent studies have uncovered both good news and not-so-encouraging indications for the global luxury industry. The good news is that the sector is projected to return to growth after a difficult 2025. But more dishearteningly, it looks unlikely to be a roaring recovery.

According to management consultancy firm Bain & Company, sales of luxury goods worldwide are likely to increase by 3% to 5% next year. This looks set to be fuelled by buoyant US and Chinese markets, with demand also remaining resilient in Europe and Japan.

Nonetheless, Bain has warned that recent price hikes have deterred even many traditionally loyal customers from buying. It is a situation that threatens to even further sour as dauntingly high tariffs imposed by the Trump administration take effect. However, there are still some reasons to adopt a relatively upbeat perspective.

Can the luxury sector stomach upcoming financial blows?

In recent years, a flurry of price increases has left the luxury sector feeling even more “exclusive” than before. Bain has blamed this trend for the industry’s faltering financial performance, as aspirational buyers are now effectively being priced out of the high-end fashion market.

Brands are falling back on their ultra-wealthy clients, but they will likely struggle to sustain this strategy over the longer term. In the words of Bain partner Federica Levato: “You cannot target only the top customers. Because they are also starting to really be upset and to feel betrayed in this industry.”

She further explained: “Some of the brands may have realised that they made mistakes, but most of them think that they can fix the mistakes with new creativity.” It’s not a pivot that Levato believes is likely to work out unless married with reduced prices.

Some worrying trends emerging in the luxury customer base

In 2022, the number of luxury buyers stood at 400 million. By 2025, it had fallen to about 340 million. That tally is on course to decline by a further 20 to 30 million, according to Bain research undertaken with the Italian prestige industry body Altagamma.

“This industry really walked away from Gen Z,” Levato added, despite younger shoppers’ cultural influence far outstripping their budgetary power. Many goods have been literally left on the shelf, with stock-to-revenue ratios now 3-4 percentage points higher compared to 2019.

Challenges are lurking, but silver linings also await

Some parts of the luxury field are definitely in better health than others. The global fashion industry will soon see even tougher financial headwinds, according to nearly half of its leaders questioned for the State of Fashion 2026 report by McKinsey & Co. and The Business of Fashion (BoF).

Nonetheless, in the same report, 31% of surveyed shoppers said they were willing to “splurge on fashion if it is the right product.” This could open up opportunities for purveyors of wearable tech, such as smartwatches and smart glasses. If your brand is preparing to release some new prestige products of its own come 2026, our luxury digital agency in London can help you get the word out.

Enquire to our creative and strategic experts today, to learn more about how we can help your brand deliver digital excellence throughout the coming year and beyond.

Sources:

• https://uk.fashionnetwork.com/news/Luxury-sector-to-revive-in-2026-but-price-hikes-leave-shoppers-betrayed-bain-says,1784787.html
• https://www.luxurydaily.com/fashion-prepares-for-a-challenging-year-ahead-bof-mckinsey/