Luxury Market 2024: Growth, Crisis, and Adapting to New Consumer Demands

In 2024, the luxury market is at a pivotal moment, with global sales expected to reach €1.6 trillion by year’s end despite headwinds. While some brands have sustained growth, particularly in established luxury sectors, others are grappling with declines in discretionary spending and economic uncertainty in major markets. UBS and Bain & Company’s latest insights illuminate how brands are adapting to this dual reality through creative strategies that prioritize exclusive experiences, younger consumers, and omnichannel innovation.

Olafur Eliasson, 2014, Fondation Louis Vuitton

Global Luxury Landscape: Geographic Shifts and Economic Pressures

The luxury market’s performance varies significantly across regions. Japan has emerged as a shining star, seeing substantial growth thanks to a boom in luxury tourism. Visitors are flocking to Japan for a blend of cultural richness and luxury shopping, with the weakened yen amplifying Japan's appeal. UBS reports that Japan’s favorable currency environment has turned it into a shopping mecca, drawing tourists from high-spending markets, particularly the U.S., who seek a blend of high-end products and cultural experiences. Bain also notes that post-Covid "revenge travel" is fueling luxury tourism as consumers seek unique, memorable experiences after years of restricted travel.

In contrast, China’s luxury sector faces economic challenges. While previously a growth engine, China now grapples with weakened consumer confidence, a “luxury shame” effect that tempers conspicuous spending, and slower economic growth. This downturn reflects broader economic issues, including inflation and the lasting effects of Covid, which have redefined consumer priorities. The U.S. luxury market is similarly seeing more cautious spending, particularly in middle-income segments, as economic pressures and rising interest rates make luxury purchases less accessible.

Core Luxury Segments: Jewelry and Watches Shine, Fashion Faces Challenges

Luxury jewelry and watches have outperformed other categories, showing resilience in both the high-end and aspirational markets. Jewelry, in particular, has attracted consumers across demographics due to its perceived value retention. UBS notes that jewelry sales have increased among both ultra-high-net-worth individuals and aspirational buyers seeking long-term value. For some, jewelry purchases align with investment-focused mindsets amid economic volatility, making it a segment with strong future potential.

However, fashion, especially ready-to-wear, has encountered more turbulence. Bain highlights a deceleration in sales growth for apparel as younger consumers increasingly seek secondhand or rental options, reflecting both budget constraints and a desire for sustainable consumption. While fast fashion has continued to grow, luxury brands are being pushed to consider how they will attract younger generations whose tastes lean towards minimalism, sustainability, and utility.

The Rise of Experiential Luxury: A New Definition of Value

Experiential luxury has transformed the industry by shifting consumer focus from products alone to immersive brand interactions. UBS and Bain both report a rise in demand for high-value experiences—exclusive events, personal travel, culinary tours, and private exhibitions—that allow brands to deepen their relationships with top clients. Bain calls this shift part of the “experience economy,” where brands are moving beyond products to create memory-rich encounters that resonate emotionally.

This trend is most evident in sectors like hospitality and private aviation. Private yacht charters, exclusive travel packages, and luxury dining experiences are increasingly viewed as essential to luxury consumers. With Gen X and Baby Boomer high-net-worth individuals leading this demand, brands are aligning their offerings with this shift, creating bespoke, once-in-a-lifetime experiences that maintain exclusivity and cater to personalized preferences. As Bain notes, “Today’s luxury customer isn’t just purchasing a product; they’re buying a unique experience, one that tells a story they want to be part of.”

Capturing the Next Generation: Strategies for Gen Z and Millennials

Gen Z and Millennial consumers present a unique challenge to luxury brands as they redefine the meaning of luxury. Financially constrained by economic pressures, younger consumers are selective about where and how they spend on luxury items. Bain reports a growing interest among these generations in “small luxuries” such as fragrances, high-end beauty products, and accessories—items that offer a taste of luxury at a more accessible price point.

To reach younger audiences, brands are leaning into digital and experiential marketing channels, from interactive social media campaigns to collaborations with popular sports and gaming brands. Bain notes that partnerships in sports like Formula 1, padel, and the Paris 2024 Olympics are gaining traction as a way to reach Gen Z, particularly as these consumers are drawn to brand affiliations that represent active, lifestyle-driven values. UBS also emphasizes that younger consumers expect a seamless online experience that mirrors the luxury and personalization of in-store shopping, driving brands to invest in digital innovations like AR experiences, exclusive online-only collections, and interactive virtual events.

In addition, sustainability remains a crucial factor in winning over younger consumers. UBS’s research shows that these generations favor brands committed to environmental responsibility, prompting luxury companies to incorporate sustainable practices into their production lines. From eco-friendly sourcing to transparent supply chains, brands that actively demonstrate environmental consciousness are better positioned to capture the loyalty of Gen Z and Millennials.

The Challenge of E-commerce and Digital Transformation in Luxury

As digital channels continue to transform retail, luxury brands face the challenge of creating online experiences that uphold the exclusivity and refinement associated with in-store shopping. E-commerce in the luxury space has skyrocketed, particularly post-Covid, but brands are finding that maintaining an elite, personalized feel in online environments is no small task. Bain underscores the importance of hybrid retail strategies, where digital and physical touchpoints converge to create cohesive consumer journeys.

Omnichannel initiatives are helping to bridge the gap between online convenience and the premium feel of in-store experiences. Brands are leveraging advanced CRM tools, virtual fittings, live streaming from flagship stores, and personalized mobile apps to mimic the high-touch service that luxury consumers expect. UBS points out that luxury brands with strong digital presence and a seamless customer journey are experiencing higher retention rates among digitally savvy younger consumers.

Moreover, the rise of Web3 and metaverse platforms has introduced new opportunities for brand engagement, particularly with younger consumers. From virtual stores and NFT collectibles to metaverse-based fashion shows, luxury brands are testing immersive digital experiences to appeal to an audience increasingly comfortable in virtual spaces. Brands such as Gucci, Balenciaga, and Louis Vuitton are at the forefront of this trend, experimenting with innovative digital engagements that mirror the allure of their physical counterparts.

Resilience Through Agility and Human-Centric Strategies

UBS and Bain agree that agility is key to navigating the volatile luxury landscape. Luxury brands are encouraged to balance financial optimization with strategic investments in consumer loyalty programs, digital transformation, and sustainable initiatives. Bain advises brands to focus on stock optimization and adaptable pricing models to manage economic pressures without compromising brand integrity. UBS highlights that the resilience of luxury brands depends on building human-centric connections that transcend economic cycles. Purpose-driven initiatives that resonate with consumers’ personal values—be it sustainability, inclusivity, or heritage—are likely to strengthen brand loyalty.

Brands such as Hermès and Chanel have maintained relevance by upholding values that extend beyond commercial goals, appealing to consumers who seek more than just products. The reports indicate that luxury consumers, particularly post-pandemic, desire authenticity, transparency, and brands with a story. UBS suggests that luxury companies focusing on loyalty programs, purpose-led campaigns, and tailored consumer experiences will be better positioned to weather economic instability.

Conclusion: Redefining Luxury in a Transformative Era

In 2024, luxury brands are balancing growth and crisis, harnessing innovation and agility to thrive in an unpredictable market. By catering to both ultra-wealthy and aspirational consumers, brands are reimagining the luxury experience, not just as a status symbol but as a personal journey. As UBS and Bain suggest, the brands that successfully adapt to these shifts will be those that embrace human-centric strategies, deliver digital excellence, and resonate authentically with diverse generations of consumers.

As we look ahead, luxury is not only about enduring high quality but about building meaningful, experience-rich relationships with customers. This paradigm shift opens up new opportunities for brands to stay relevant, innovative, and resilient in a market shaped by constant evolution. The luxury landscape of 2024 is a testament to the industry’s ability to adapt, transform, and redefine value for a new era of consumers.