Luxury has always been an industry defined by reinvention. But this year, the reinvention is happening at the very heart of the industry. At Altagamma’s “Osservatorio Altagamma” event, held just yesterday in Milan, Bain & Company presented the Worldwide Luxury Market Monitor 2025, revealing a sector stabilizing after a turbulent year, resetting its foundations, and preparing for a rebound that looks both promising and profoundly different from the cycle that preceded it.
The industry enters 2026 with an expected 3%–5% growth outlook, marking a return to expansion after a year Bain describes as “flat in constant currency”. Behind that optimism sits a reshaped global market, shifting consumer expectations, and a long overdue reckoning with the industry’s self-inflicted pressure points, from runaway price elevation to a shrinking customer base.
The luxury sector is ready for its next chapter. But the story begins with a hard look at 2025.
Slow but steady stabilization
Bain paints a complex picture: the sector stabilized this year, with personal luxury goods sales reaching €358 billion, slightly below 2024’s €364 billion but essentially flat in constant currency. Beneath that stability, however, the year exposed meaningful strains. Category performance diverged; jewellery, eyewear, and fragrances held firm, while leather goods and shoes, long the engines of luxury profitability, softened under the weight of price fatigue and consumer caution.
Regionally, the market split in two. The Middle East remained the strongest global performer, buoyed by powerful tourism flows and resilient domestic spending. The Americas held steady thanks to high-end consumers, while China, though weak early in the year, showed progressive improvement toward its end. Europe delivered modest growth, weighed down by France and Germany but consistently lifted by international tourism. Latin America and broader Asia also posted strong momentum.
This rebalancing year now sets the stage for what Bain describes as a broad-based revival in 2026. Growth is expected across all major regions, led by the Middle East, a resurgent North America powered by booming U.S. outbound tourism, and China’s continued recovery in consumer sentiment. Tourism emerges as the industry’s defining catalyst, from rising U.S. travel spend to Middle Eastern inflows and accelerating Asian regional tourism.
Profitability is also forecast to strengthen, with luxury industry EBITDA projected to rise around 5%, signaling a healthier, more diversified demand base as the luxury sector enters its next chapter.
When elevation backfires
For years, luxury’s ascent was fueled by price elevation: fewer products, higher margins, and a laser focus on top clients. But Bain’s report signals that this strategy is simply not working any more. The global luxury customer base has shrunk from 400 million in 2022 to 340 million in 2025 and may lose another 20–30 million consumers in the future. Even big spenders show signs of fatigue. While they now account for roughly 46-47% of the €358 billion personal luxury goods market, their spending has plateaued in 2025 as they are experiencing what Bain partner Federica Levato called a sense of being “betrayed.” Prices soared. Creativity didn’t. And in luxury, perception is everything.
In addition, entry-level shoppers—the aspirational clients who carried luxury through past cycles—have been pushed out of the market, the direct result of years of aggressive price increases that placed even “accessible luxury” well beyond reach.
The industry is beginning to recognize the consequences. Kering CEO, Luca de Meo recently told employees in an internal memo that the group must rethink its pricing and product strategy after years of increases, a rare acknowledgement from inside a major luxury house and an early signal that the sector’s elevation playbook has reached its limits. His comments reflect a broader realization: the gap between what brands are charging and what consumers perceive as meaningful value has widened too far.
Yet many brands still believe they can correct course simply by injecting “more creativity” into their assortments while keeping prices high. Bain’s analysis suggests otherwise. Consumers are signaling that creativity without recalibrated pricing is no longer enough.
A market with a missing middle
Years of price elevation and shrinking accessibility have created a structural shift in the industry, a widening gap between luxury’s top-tier clientele and the aspirational consumers who once fueled its growth. This shift has resulted in what Bain identifies as a “void in the market,” a space between high luxury price points and mainstream fashion increasingly filled by American brands offering more accessible alternatives.
At the same time, the slowdown has exposed mounting operational pressures. Stock-to-revenue ratios are now 3–4 percentage points higher than in 2019, forcing brands to lean more heavily on outlets and off-price e-commerce. These channels remain uncomfortable territory for an image-driven sector that must clear excess inventory without destroying product, a practice prohibited under EU sustainability rules.
And then comes Gen Z, a demographic luxury cannot afford to overlook yet has inadvertently alienated. Despite limited spending power, their cultural influence shapes the buying decisions of older generations. “The industry walked away from Gen Z,” Levato said, highlighting one of the most consequential strategic missteps of the post-Covid era.
The reset that could renew luxury
The Worldwide Luxury Market Monitor 2025 makes one thing clear: luxury is not returning to its old ways. The sector may have stabilized, but it has not emerged unchanged. The exhaustion of the price-elevation cycle, combined with shifting consumer expectations, a shrinking customer base, and widening regional disparities, is forcing a fundamental rethink of what luxury should stand for.
What comes next is a need to restore value, credibility, and connection. The dynamics shaping 2025 have revealed the limits of an era defined by exclusivity through price alone. In its place, a more balanced and culturally attuned model is beginning to take shape; one where creativity must be matched with accessibility, and where desirability is earned and not assumed.
If brands embrace this reset, the 2026 revival could mark the beginning of a more resilient, more relevant chapter for the global luxury sector.
