What: Global luxury market faces significant transformation as spending projected to decline 2% in 2024, driven by changing consumer preferences and geographic consumption patterns.

Why it is important: The transformation indicates a structural change in luxury consumption, forcing brands to reconsider their strategies across pricing, product mix, and market positioning while adapting to new geographic and demographic realities.

The luxury industry is experiencing a pivotal shift as global sales of personal luxury goods are expected to decline by 2% in 2024, marking the first significant downturn since the Great Recession. This change reflects both cyclical and structural transformations in the market, with price increases of 54% since 2019 affecting consumer behavior. The industry's traditional growth engines of globalization and democratization are showing signs of strain, particularly in China, where changing consumer attitudes and government policies are reshaping luxury consumption patterns. High-end brands are responding differently to these challenges: some, like Hermès and Brunello Cucinelli, maintain their exclusive positioning with continued growth, while others expand their accessible luxury offerings. The divergence in performance between ultra-luxury and accessible luxury segments highlights the complex balancing act brands face in maintaining exclusivity while seeking growth.

IADS Notes: The projected 2% decline in luxury spending for 2024 reflects a fundamental shift in the industry's dynamics. As reported by Bain & Company in November 2024, this decline marks a significant transformation in consumer priorities, particularly towards experiences rather than products. This shift has prompted strategic responses from luxury brands, with many introducing products priced under USD 500 to retain middle-class consumers, as observed in December 2024. The Chinese market, traditionally a key driver of luxury growth, is showing notable changes in consumption patterns, with March 2024 data indicating increased interest in second-hand and resale markets. These changes have significantly impacted major luxury groups, as evidenced by LVMH's 5% decline in fashion and leather goods sales reported in October 2024. The transformation is particularly pronounced in China, where June 2024 reports showed growing "luxury fatigue" and a shift towards more discreet consumption patterns, suggesting a longer-term restructuring of the global luxury market rather than a temporary slowdown.

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