What: Luxury industry faces dual challenge as aspirational consumers retreat and VIP clients express dissatisfaction with service quality and personalisation.

Why it is important: As the luxury market faces its first contraction since 2008, the focus on personalized experiences and customer intimacy represents a crucial strategy for maintaining growth and customer loyalty in an evolving market landscape.

The luxury industry is experiencing a significant transformation, with BCG's "True-Luxury Global Consumer Insight 2025" study revealing a second consecutive year of decline (-2% in both 2024 and 2025). This downturn is primarily driven by reduced Chinese consumption, diminishing interest from younger generations, and a notable retreat of aspirational consumers. The study highlights a dramatic shift in market composition, with aspirational consumers' share dropping from 74% in 2013 to 61% in 2024. Meanwhile, top-tier clients, representing just 0.1% of customers but spending over EUR 50,000 annually, have increased their market share from 12% to 23%. However, these valuable clients express growing dissatisfaction with current luxury experiences, citing issues with impersonal communications, lack of intimate shopping spaces, and insufficient recognition of their VIP status. The industry faces a critical challenge in balancing the needs of both customer segments while maintaining brand value and exclusivity.

Recent market data underscores the luxury industry's transformation throughout 2024-25. In February 2025, Bain-Altagamma reported the first contraction in personal luxury goods in 15 years, with the industry losing approximately 50 million customers while seeing top-tier clients account for 45% of purchases. This trend coincides with significant changes in consumer behavior, as March 2025 data shows 56% of luxury clients reporting dissatisfaction with their shopping experience. The industry's response has been varied, with some brands introducing products under $500 to retain aspirational consumers, while others focus on enhanced personalization through AI-driven solutions, as evidenced by July 2024 initiatives from major luxury groups.

Takeaways from Milan luxury conference: a dual challenge with aspirational customers and VICs