The personal luxury goods market is expected to decline for the first time since the 2008 financial crisis, according to research.

• A report revealed on Wednesday that the personal luxury goods market is likely to experience its first decline since the Global Financial Crisis, excluding the Covid period.
• This year, luxury labels' earnings reports have shown common themes of global economic uncertainty and inflationary pressures.
• The Chinese market's declining demand has caused significant concern for the industry.

This year, the personal luxury goods market is predicted to experience its first slowdown since the Global Financial Crisis, due to macroeconomic uncertainty and a slowdown in China, according to Bain & Company's annual luxury report.

The demand for personal luxury goods, such as clothing, bags, jewelry, and cosmetics, has slowed down for the first time in 15 years, excluding the Covid-19 lockdown period, according to Wednesday's findings.

The report revealed that in 2024, high-end brands faced declining customer loyalty and rising costs, leading to a projected 2% contraction in the sector, with shoppers shunning these brands.

Despite modest growth in certain segments such as autos, travel, and fine wine, overall luxury spending is predicted to remain flat in 2024 at approximately 1.5 trillion euros ($1.59 billion).

China weakness weighs heavy

This year, luxury labels have consistently reported revenue misses due to global economic uncertainty and inflationary pressures, as seen in the earnings reports of brands such as , , and Gucci-owner.

The decline in demand from the Chinese market is a major concern for the sector, as the economy is still struggling to recover from the slowdown caused by the Covid-19 pandemic.

Despite being an outlier in the wider sectoral downturn, Cartier-owner reported a 1% fall in sales in the first half of its fiscal year, partly due to weakened demand from China.

Bain & Company observed that domestic spending decreased in Mainland China, leading to a sharp slowdown that worsened throughout the year.

The report suggests that a prolonged slump in the Chinese market may have a negative impact on the luxury sector in 2025, although it considers this possibility to be less likely. Instead, the report predicts that the sector will begin to recover in the second half of next year.

Despite any major economic headwinds, the luxury demand in Europe and the U.S. is expected to grow slightly next year, with Japan leading the way due to favorable currency exchange rates.

Pockets of growth

This year, the report highlighted positive developments in the luxury cars, hospitality, fine wines, and gourmet dining sectors, with each experiencing growth.

The demand for luxury travel has surged, as consumers are shifting their financial resources towards experiences, social gatherings, and wellness.

According to the report, there was an increase in demand for small personal items like eyewear and beauty products as shoppers chose to spend on "little luxuries" instead of larger purchases.

To retain their consumer base, especially the younger Gen-Z segment born between 1997 and 2012, luxury brands must do more to attract them.

In the last two years, 50 million luxury consumers have either voluntarily or involuntarily left the luxury goods market. This indicates that brands need to reassess their value propositions, according to Claudia D'Arpizio, partner at Bain & Company and author of the study.

In order to regain the trust of younger customers, brands must prioritize innovation and broaden their communication strategies. At the same time, they must maintain their relationships with their most valuable customers by surprising and delighting them, while also rediscovering the importance of personal interactions.