In the ever-evolving landscape of luxury, 2025 is shaping up to be a defining moment. As the post-pandemic spending frenzy cools and global economic challenges intensify, luxury brands are being forced to rethink their strategies. Kearney’s latest Global Luxury Industry Outlook (kearney.com) offers a compelling analysis of the state of the market, highlighting both headwinds and emerging opportunities. The message is clear: while growth is slowing, strategic innovation can ensure continued success.
The New Luxury Landscape: Slower Growth, Higher Expectations
According to Kearney’s report, the global luxury market is projected to grow at a modest 1–3% annually through 2027. Inflationary pressures in key markets like China, the U.S., and Europe have dampened spending, while consumer priorities are shifting. Once-reliable categories such as ready-to-wear, leather goods, and timepieces are under pressure, as customers demand more than just prestige—they want authenticity, craftsmanship, and transparency.
At the same time, the luxury market is becoming more demographically and culturally diverse. Millennials and Gen Z now account for the lion’s share of luxury sales, with younger buyers entering the market earlier than previous generations. Ultra-high-net-worth individuals (UHNWIs) remain a key pillar of stability, but aspirational consumers are being squeezed out by relentless price hikes.
photo: @Dolce & Gabbana / Achille Lauro at the Sanremo Festival 2025 in Dolce&Gabbana
Price Hikes and Consumer Pushback
Luxury brands have relied on price increases to maintain exclusivity, but Kearney’s analysis warns that this strategy is reaching a tipping point. Some iconic handbags have doubled in price since 2019, leading to a staggering loss of 50 million luxury consumers over the past two years.
This pricing strategy is fueling the rapid expansion of the global resale market—now valued at $35 billion—and driving demand for high-quality dupes and counterfeits. Emerging luxury players like The Frankie Shop and Shushu/Tong are capitalizing on the vacuum left by heritage brands, offering stylish alternatives at a fraction of the cost.
Reimagining the In-Store Experience
Despite the rise of digital commerce, physical retail remains vital for luxury brands. Kearney’s research highlights that three-quarters of luxury shoppers still plan to visit stores as frequently as before. The challenge is making these visits meaningful.
To stay relevant, luxury brands must transform retail spaces into immersive environments. Personalization, digital enhancements, and VIP services will be key differentiators. Brands that succeed in creating exclusive, sensory-driven experiences will retain customer loyalty even in a challenging economic climate.
photo: @The Ritz-Carlton Rabat, Dar Es Salam
Longevity: The Next Luxury Status Symbol
One of the most intriguing insights from Kearney’s report is the growing intersection between luxury and wellness. The global wellness economy is set to exceed $7 trillion by 2025, and affluent consumers are increasingly prioritizing longevity and vitality. From high-end retreats in Blue Zones to Michelin-starred plant-based fine dining, longevity-focused luxury is becoming a powerful status symbol.
Brands that integrate longevity into their offerings—whether through skincare innovations, wellness travel, or performance optimization services—stand to gain a competitive edge. This is not just about selling a product; it’s about offering a transformative lifestyle.
Efficiency and Innovation: The Path Forward
Rising costs, labor shortages, and regulatory pressures are forcing luxury brands to rethink operations. Kearney highlights the importance of AI-driven supply chain optimization, modular product designs, and sustainable materials in maintaining both margins and quality.
Additionally, digital transformation is no longer optional. From AI-powered personalization to immersive technologies like AR and VR, brands must bridge the gap between online and offline experiences. Emerging markets such as India, the Middle East, and Africa present new expansion opportunities, while a renewed focus on craftsmanship and storytelling can reinforce brand equity.
The Future of Luxury: Adapt or Fade
Luxury brands can no longer rely solely on legacy appeal. Kearney’s Global Luxury Industry Outlook underscores the need for a delicate balance between exclusivity and accessibility, tradition and innovation. Winning strategies will prioritize price-value alignment, reimagined retail experiences, and diversification into high-growth sectors like wellness.
The luxury market may be cooling, but for brands willing to adapt, the opportunities are hotter than ever.
