What: The luxury industry enters a period of strategic recalibration in 2025, with BoF and McKinsey identifying five key imperatives for executives amid slowing growth and changing market dynamics, following a period of exceptional value creation.

Why it is important: The transformation reflects fundamental changes in consumer behaviour and market dynamics, requiring luxury brands to reimagine their approach to exclusivity, creativity, and customer relationships.

Following exceptional growth between 2019 and 2023, the luxury industry faces its first value creation decline since 2016. Growth engines have stalled, particularly in China, while client relationships become increasingly complex across age demographics. The sector's rapid expansion has led to overexposure and weakened its core promise of exclusivity and craftsmanship. With projected growth of 2-4% annually through 2027, industry leaders must focus on five strategic imperatives: conducting a strategic reset, restoring product excellence, rethinking customer engagement, bridging talent capability gaps, and futureproofing portfolios. Success will require balancing long-term investments with immediate market challenges, as brands navigate changing consumer preferences and the growing importance of experiences over products.

IADS Notes: The luxury industry faces a significant transformation in 2025. While Bain & Company projects 2-4% annual growth through 2027, the sector is grappling with changing consumer preferences and macroeconomic headwinds, particularly in China. The industry's self-inflicted challenges, including overexposure and weakened value propositions, necessitate a strategic reset focusing on product excellence, customer engagement, and talent development.

BoF’s State of Fashion on luxury

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