Sales of personal luxury goods are expected to drop 2% this year, marking one of the biggest declines recorded since the Great Recession. Regardless of economic fluctuations, the luxury goods market has consistently regained its footing over the years, even with issues like the pandemic occurring in between. The market is expected to recover this time as well, however, the slowdown is evident.
The luxury sales forecast for 2024 was provided by Bain & Company, and it predicted that by the end of the year, the market will remain flat year-on-year at constant exchange rates and shrink by 2% at current exchange rates to €363 billion ($386 billion), which puts it lower slightly lower than the estimates Bain presented in May.
Luxury Good Sales Expected to Drop 2% This Year
We are witnessing the weakest year for the luxury market, with estimates suggesting that the market lost 50 million consumers this year. This has been equated to be the first slowdown in the market since the Great Recession—barring the COVID-19 pandemic period. The market will either remain flat or shrink in 2024 when compared to the previous year.
The luxury industry’s decline has been linked to the issues faced in China, as the region is home to some of the prime consumers of these luxury goods. The country is experiencing a 20% year-on-year decline in spending as a result of economic factors and government regulations. Despite the boom in production in categories such as EVs, the economic gains have not sufficiently spread through the country or countered the overall economic situation.
With the tariffs suggested by the incoming U.S. government, Chinese purchasing power could be affected further, adding to the decline in patronage for brands within the U.S. According to predictions, it is unlike that the market in China will recover in any substantial way before the second half of 2025.
The Global Luxury Sales Decline in 2024 Goes Beyond Just a Decline in China’s Patronage
It’s true that there has been a rapid slowdown in China and Korea, but regions like Japan, southern Europe, and the U.S. are still avid buyers. Despite the regions balancing out the numbers, the overall approach to luxury goods and their perceived value has changed recently.
Luxury personal goods refer to an elaborate range of products from top-end cosmetics to bags and shoes. These products are, by nature, targeted towards a small number of buyers who can afford to pay an extravagant amount to showcase the brand in their daily lives. The more exclusive a launch is, the higher its price. The higher the price, the more out of reach it is for a potential customer.
Vogue Business suggests that the drop in sales of luxury goods is also a result of the change in business strategy. Earlier, brands still targeted the upper-class population as they were most likely to be regular customers, however, these brands did not ignore the middle class. The middle section of the population saw these luxury products as aspirational and saved to invest in some choice items, increasing the scope of sales the brand could make.
Now, luxury brands are shrinking their already limited customer base by increasing the prices of their goods and making them entirely unattainable for the everyday consumer. To sustain such a strategy, brands need to ensure that their limited but expensive products sell out every time.
The luxury industry is declining in more ways than one, with its brand identity no longer holding the same power and presence it once did. Customers are also focused elsewhere with uncertainty caused by the economic situation being enough to delay their purchases. Especially among Gen Z buyers, luxury goods have lost their shine.
It’s Not All Bad News for the Luxury Personal Goods Market
Despite the downward luxury sales forecast for 2024, consumers haven’t entirely turned away from the brand as some categories are faring better than others. Beauty products and the eyewear category have managed to reinvent themselves and stay relevant as “small indulgences.” Jewelry proved to be the most reliable category of goods, but shoes and watch sales have remained unimpressive.
The report by Bain & Company suggests that despite the disappointing luxury sales forecast for 2024, the market can be expected to face a slightly improving context throughout 2025 unless the macroeconomic factors change rapidly in the meantime. Brands that want to remain relevant will have to rework their strategy and be creative with the experience they can offer to young consumers without losing the loyalty of long-term customers.
