Key Takeaways
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Luxury sales slowed in 2024 and 2025 as economic headwinds in China and pullbacks by aspirational consumers reduced demand for high-end brands, pressuring revenue and profitability.
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Significant post-pandemic price increases, inconsistent product quality and weak customer experience — including in-store and digital channels — eroded exclusivity and brand loyalty.
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Sustainable growth requires restoring product excellence, leveraging technology for personalized service and focusing on core high-margin offerings while targeting emerging markets such as India and the Middle East.
There is an old maxim that the luxury market is recession proof. In the real world, no market is recession proof – recession-resistant might be a better term. But after a long run of outsized growth for many years, including quick rebounds after the 2008 financial crisis and 2020 pandemic, the high-end space has experienced a slowdown. This slowdown, which started in 2024 and continued in 2025, has been driven by many factors.
Backdrop
Let’s start with what fueled growth for the luxury market prior to 2024. There were two main drivers – China and the aspirational customer. The aspirational customer, part of a growing upper middle class with increasing resources, had an appetite for luxury items. The luxury market also benefited from rapid economic growth in China (pre-2020) – a surging demographic developed an appreciation for brand heritage and quality.
This great run started to wane and, with some notable exceptions such as Hermes, a pronounced slowdown in luxury sales took place in 2024 and 2025. Luxury bellwethers such as LVMH and Kering have reported declining sales and profit over the past two years. Saks Global, the parent company of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, recently filed for bankruptcy. According to management consulting firm Bain & Company, there are significantly fewer active global luxury shoppers today vs three years ago. What happened?
The Decline
We will set aside a discussion about what went wrong at Saks for another day, but as it relates to the high-end market, the things that fueled growth started to work against it. Economic headwinds in China and shifting consumer spending habits caused a significant decline in luxury purchases. Significant price increases post pandemic by many luxury companies caused the aspirational customer to pull back. And product quality and service were not keeping up with increasing prices. Based on recent surveys related to the luxury consumer –
- 70% are not happy with their in-store experience.
- 38% are dissatisfied with customer relationship management.
- 75% believe that the online shopping experience across different luxury brands is too similar, lacking a unique touch.
In an attempt to extend reach, luxury companies weakened the promise of exclusivity, creativity and craftsmanship. The luxury market will rebound but for these companies to have sustained growth again, they will need a reset.
The Needed Reset
Among things that should be addressed:
- Restoring product and service excellence
This includes focusing less on price increases and more on product quality and distinctiveness. Customers increasingly demand that high prices are matched with exceptional, consistent quality across all touchpoints, from the in-store experience to digital platforms. Consider a focus on quiet luxury. This trend toward timeless products and understated sophistication over flashy branding is experiencing a surge in popularity. - Improving the experience – and using technology
More people would rather spend on a luxury experience than a luxury product these days, but improving the experience, as defined here, is more about the shopping experience. Over 85% of luxury shoppers are willing to pay more for exceptional service and a memorable experience. This can translate to a significant price premium.
The luxury market has developed a reputation in recent years of being behind the curve when it comes to technology. But if a company wants to stay ahead of the competition, it needs to embrace technology. In the luxury sector, more than others, the personal touch is very important. With this in mind, technology should be used as a tool to improve the shopping experience. Better customer data analysis will also help these companies adjust to the changing behavior of customers in real time and help personalize the experience. - Focusing on your core – doing what you do best
It’s easy for companies to forget this – the luxury market is no exception. Growth doesn’t necessarily need to come from extending reach. Roughly 40% of luxury sales come from the top 2% of customers, making catering to this segment crucial. Focusing on core products (and better profit margin items) reinforces brand identity and avoids damage that may be caused by irrelevant brand extensions. While acquisitions will always play a large role in growth, a recent increase in luxury divestitures shows a renewed focus on core products.
Opportunity Calls
A great opportunity has presented itself for luxury companies to fill the void created by those who have alienated customers with inferior quality and lackluster service. And there are expanding geographic opportunities as well. While the Americas remain a stable luxury market and China may see a rebound, India and the Middle East are rapidly emerging as top-tier, high growth luxury markets driven by rising wealth.
While a strategic shift will require creativity and execution, the first step is acknowledging the issues that resulted in the slowdown in the first place. Embracing the above steps with help the luxury market get back to its growing ways.
Contact Us
If you have any questions, please contact your PKF O’Connor Davies client service team or:
Gabe Lengua, CPA
Partner
Consumer Goods Practice Leader
glengua@pkfod.com