This article is part of The Luxury Slowdown Survival Guide, a collection of articles that examines the recent industry downturn and the strategies brands may employ to come out of it unscathed.
There’s one thing on every luxury exec’s mind as we start 2025: when will the current downturn end?
2024 began on a note of optimism. The forecasts pointed to muted growth in the first half, followed by a gradual improvement. The reality was different: demand slumped halfway through the year, as leading luxury groups reported revenue declines. LVMH’s fashion group sales fell 5 per cent in the third quarter, while Kering’s dropped 16 per cent.
In November, management consultancy Bain and Italian luxury association Altagamma said the global luxury personal goods market was on track to shrink by 2 per cent at current exchange rates — revising down their forecast from May.
A range of scenarios are emerging for the year ahead. The best case is that global sales of personal luxury goods rise by 6 per cent, according to analysts. At worst, there could be a slight — circa 2 per cent — decline. Most believe it will sit somewhere in between, at around 3 per cent growth year-on-year. Where we end up depends on a number of macroeconomic factors, including consumer confidence in China, Trump tariffs and conflict in the Middle East. It also depends on how brands respond to shifting attitudes to luxury and consumption as a whole.
Below, we unpack the different scenarios that could impact demand for luxury sales in the year ahead, market by market.
TABLE OF CONTENTS
China
Despite various headwinds faced by brands in China in 2024, the country will continue to be a vital market for the luxury industry this year, writes Yiling Pan, editorial director of Vogue Business in China.
“What really happened to the Chinese luxury goods market in 2024 is a structural adjustment,” said Bvlgari CEO Jean-Christophe Babin, during a visit to Shanghai last September. There were systemic changes in the overall economy caused by supply and demand imbalances in several sectors, he pointed out, including consumer goods, real estate and new energy. This brought uncertainty.
“It’s important to recognise that the nation is not experiencing a decline in wealth,” Babin said. Rather, consumers perceived a decline in their personal financial standing, as both their property value and stock investments diminished for the first time in decades. For many Chinese consumers aged under 40, it’s likely the first time they’ve had to grapple with the idea that they may not have as much money this year as they did previously. “The current generation has become accustomed to constant growth,” Babin added. As a result, younger Chinese are saving more of their income, rather than splurging.
The Chinese government is aware of such mentality shifts, and has been working on reinstalling more confidence among consumers. Since September, the government has rolled out a series of economic stimuli to revive the financial markets. “During a meeting held in early December, they said that the main tasks of economic and social development would be successfully completed in 2024, which set the tone of the economic direction for 2025,” says Zhang Yi, chief analyst at Chinese research company iiMedia Research.
Experts are wary of relying too much on the stimulus packages for growth. Erwan Rambourg, global head of consumer and retail equity research at HSBC, notes that it can take multiple quarters to repair confidence. “What we’ve seen since Covid is a series of half-hearted efforts by the central government to kick-start the economy,” says Adam Knight, co-founder of consultancy Tong, which advises brands on how to navigate the Chinese market. “Within days of [Donald] Trump’s re-election, yet another stimulus package was announced — and it was certainly bigger than what we’d seen previously, but it still fell short of what a lot of people were hoping for.”
Most analysts agree that, while China is far from being out of the woods and sales forecasts remain gloomy in the very short term, its luxury market should at least stabilise in 2025. They do not believe that the reintroduction of the Trump administration tariffs will have a significant impact on luxury spending among Chinese consumers in 2025. “While tariffs may dampen overall economic sentiment, high-income Chinese consumers are unlikely to significantly reduce their luxury spending due to these measures,” says Alexis Bonhomme, founder and CEO of marketing and data company Trinity Asia.
What should be of greater concern for global luxury brands, he says, is the underlying shift in sentiment towards them from the Chinese consumer. Since the pandemic, Chinese consumers have been gravitating to understated, timeless pieces, reflecting a cultural preference for discretion. While a handful of brands, such as Loro Piana, Brunello Cucinelli and Ralph Lauren, have benefited from the trend, others, such as Gucci, have struggled. “This is expected to persist in 2025 as ‘quiet luxury’ continues to gain momentum,” says Bonhomme. Customers — especially Gen Z — are also embracing locally grown brands over international names in a bid to be more individualistic, adds Lisa Hooker, head of consumer markets at PWC.
This move has to some extent been exacerbated by the Chinese government’s crackdown on ostentatious displays of wealth (leading to so-called ‘luxury shaming’). “The government is pushing people to wear fewer things with exterior signs of status and luxury products,” says McKinsey partner Joëlle Grunberg, who leads the group’s US luxury division. But most agree that China is following a global trend. “As the luxury market has matured, it’s gotten quieter,” says Knight. “People don’t want to be as conspicuous about their consumption.” This has led to an increase in spend on travel experiences and hospitality instead.
All of this said, in the long term, economic growth and increasing personal wealth are still expected to drive demand in China — presenting an opportunity for brands that get their positioning right. Digital integration remains vital, says Bonhomme, with platforms like WeChat and Xiaohongshu central to discovery and engagement. The ongoing recovery of Chinese tourism could also boost luxury sales abroad.
Knight advises brands operating in China not to slash their marketing budgets, which would only deepen losses. “There are still significant pockets of opportunity in China — more so than you’ll find in many other places around the world.” Ultimately, he advises brands to be “humble” when it comes to China. “You need to appreciate that the magnitude of the Chinese market means that there’s huge variability and diversity. Don’t rest on your laurels or make assumptions.”
United States
Analysts are positive on the outlook for the US market, making it one of luxury’s key focuses for 2025. McKinsey’s Grunberg predicts a “significant uptick” in luxury sales in the region by the end of the second quarter, with both high-end and aspirational luxury customers expected to spend. “That’s a very positive note,” Grunberg says. “North America is the true, large opportunity for most brands,” says Pierre Dupreelle, managing director and partner at Boston Consulting Group (BCG).
The end of the 2024 election cycle, which resulted in a clear victory for Trump, has helped to release consumer spending, says Claudia D’Arpizio, senior partner at Bain Co. The American consumer is particularly resilient, HSBC’s Rambourg adds, and with the election in the rearview, has quickly moved on to the next chapter, regardless of whether or not they’re happy with the results. Holiday spending for the 2024 season seemed to prove that rule, with sales up 3.8 per cent year-on-year in the period between 1 November and 24 December, according to Mastercard.
Some even predict a potential windfall for various consumers in the US under a Trump administration. “The outlook in the US is positive, because Trump is expected to favour tax cuts and give people more money to spend on things they want to buy,” says Neil Saunders, managing director of retail at insights firm Globaldata.
But there’s still uncertainty ahead, thanks to Trump’s potential tariffs on foreign goods. Ninety-eight per cent of clothing and footwear purchased in the US was manufactured overseas in 2024, according to the American Apparel and Footwear Association, and brands that produce clothing in key manufacturing regions are likely to be affected if tariffs are enacted. The impact, of course, won’t be even.
“Luxury brands can probably cope with [tariffs] a lot better than non-luxury brands,” Saunders says. “[For non-luxury brands,] it could hurt profitability, send prices up and sap demand.” He acknowledges that much is still unknown about the tariffs, including when they would be enacted. “Not much is going to happen for some time,” he predicts, but it’s likely to dampen the outlook. “2025 is not really going to be a banner year in the US — it’s going to be a year of shifting and transitions.”
Uncertainty aside, look out for more luxury brands to land in the US in 2025. Rambourg says that there’s opportunity for luxury brands outside of leaders Louis Vuitton, Tiffany and Gucci to create more awareness in the US by opening stores. Moncler is set to open its biggest flagship in the world on New York’s Fifth Avenue, among other high-profile openings planned for the year. Brands should also be eyeing markets outside of New York and LA. He points to Austin as particularly fertile ground for luxury. “Austin always had the money, but they didn’t have the awareness,” he says.
Analysts predict more store openings across the country as brands invest in their own channels, and they’re going to find a greater volume of high spenders in the US than in other regions. “The US has a level of affluence outside of major cities — that’s unique,” says Dupreelle. “Especially post-Covid. That means you’re left with a lot of white space.”
Emerging markets
Dupreelle calls Japan a “true outlier”, with luxury growth rates of 15 to 35 per cent predicted next year. The weak yen has encouraged inbound tourism, strengthening power on top of an already strong luxury market with regional wealth, says Saunders. “Japan is a bright spot in a sea of slowdown,” he says.
On the ground in Japan, the retail mood is cheery and prosperous, with plenty of new luxury openings to draw in new guests, writes Vogue Business contributor Ashley Ogawa Clarke. Studio Nicholson and Kiko Kostadinov, respectively, opened inaugural Tokyo flagships, while veteran luxury players like Hermès and Balenciaga added to their Japanese store portfolios.
Many notable luxury hotel openings are also in the pipeline: Aman is planning its fourth Japanese hotel for 2027 in the ski resort of Niseko, while Rosewood will open its first resort in the region on the island of Miyakojima this year. The new Azabudai Hills development in Tokyo is a standout, and has become busier and busier since opening. It’s filled with tourists that come to see its many shops and exhibition spaces. Much of the main shopping areas across the capital, like Ginza and Omotesando, are equally buzzy, with foreign visitors still making the most of the weak yen.
But Japan’s peak may have passed, and attention is increasingly turning to the Middle East, where luxury investment is pouring into the Gulf region (Saudi Arabia, Bahrain, Qatar, Oman and Kuwait and the UAE), says Dupreelle. It is a youthful market and one that is becoming a global tourism destination, writes Vogue Business correspondent Sujata Assomull. This is a region that continues to shop, remaining relatively unaffected by the global slowdown. Like China, tastes are maturing and diversifying as customers who may have previously dressed in head-to-toe mega-luxury brand looks are now eyeing alternative labels; Farm Rio, Jacquemus and Zimmermann all opened stores in the region in 2024.
Miriam Abadi, founder of beauty platform Tru and well-known tastemaker, says: “There is no question that tastes are evolving in this region, which has very high purchasing power. The woman who used to wear full-on Dior or Chanel is moving away from that and opting for more unique, individual brands that stand out. This shift is driven by a desire for exclusivity — pieces that stand out at gatherings where everyone is familiar with mainstream collections. This evolution reflects a preference for distinctive, beautiful designs that resonate on a personal level.”
“The UAE is going to have very strong growth and will be the fastest-growing region in the Middle East. There’s still a lot of wealth in that region, and luxury is prioritised,” says Saunders. “Luxury is seen as valuable and stable there. There will be good growth.” Saunders adds that in the long term, this will be a leading luxury market as tourism climbs.
India, while still a nascent luxury market, is developing quickly and becoming “more significant”, says Saunders. This year, the Ambani wedding drew all eyes to the region, where an elaborate display of wealth caught luxury’s attention. It’s also the most populous country in the world, with 600 million citizens and a burgeoning middle class. “India is a stable and growing market,” says Deepika Gehani, luxury adviser and the co-founder of Genesis Luxury, a company that brought brands Armani, Coach and Ferragamo to India. “Besides the billionaires, it has a growing upper-middle class that is driving luxury consumption. The country’s cultural focus on celebrations and gifting presents ample opportunities for global luxury brands.”
D’Arpizio also flags Southeast Asia as an area ripe for brand investment. “A lot of areas that are interesting, that are growing in terms of the middle class with money coming in and developing the economy and infrastructure, are in Southeast Asia: Vietnam, Thailand and the Philippines.”
Is luxury entering a new era of globalisation, as fewer stones go unturned? “From one end, there’s a new wave of globalisation,” says D’Arpizio. “But we know there are tensions between the US and China that are creating friction. I don’t think we’ll see a more globalised industry, but rather a focused strategy on specific countries, and brands using this to grow at the same pace of the last decade. There’s risk from a political standpoint to interrupt a second wave of globalisation.”
Most experts agree that, while the picture will eventually improve, this current slowdown is a normalisation rather than a crisis. The market is rebalancing following the post-pandemic period, when revenge spending was in full swing and stimulus money spurred shopping, leading to double-digit growth across luxury. “Those conditions are not going to come back any time soon,” says Saunders. “The dynamics keeping the market soft will remain in place. As we come into 2026, or the latter end [of 2025], we’ll see some better numbers come through. But it’s not going to be a massive bounce back.”
He says a better comparison is 2019 (when the market grew by 4 per cent, per Bain). “What we’re talking about [in 2025] is an easing of growth, not a disaster. Luxury is holding up better than a lot of other parts of retail. It’s just that we’ve come from an era of stunning and stellar growth to an era that is a little more constrained and challenging.”
Management consultancy BCG predicts growth in some regions: Europe will remain the same, while North America has a cautious but more positive outlook. The strongest growth will be found in the Middle East. China, meanwhile, will see flat to very low single-digit growth. “The worst has passed,” says BCG’s Dupreelle.
HSBC’s projection for next year sits at around 4 per cent growth, linked to the belief that China will stabilise. “Not necessarily rebounding, but at least not getting worse sequentially quarter after quarter,” says Rambourg. “And in the US, there’s a lot of pent-up demand, and with the election now being behind us you can make a pretty bullish scenario there as well.”
Still, analysts agree that the global luxury market is unlikely to turn a corner until the second half of 2025, at the earliest.
“The macroeconomics are getting better [and] there’s more certainty, which should help with consumer sentiment, but I do think it might take time to settle,” says PWC’s Hooker. “There’s still some negative sentiment, still a bit of overbuying and still a little bit of normalisation to come. The first half could still be quite tricky and then hopefully it’ll improve.”
With additional reporting from Yiling Pan, editorial director of Vogue Business in China, Dubai-based correspondent Sujata Assomull and Japan-based contributor Ashley Ogawa Clarke.
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