The invincibility myth trusted by global high-end goods brands has collapsed. The global luxury goods market is expected to shrink for a second straight year this year. It is the first time in 17 years since the global financial crisis triggered by the 2008 Lehman Brothers debacle.
While high-end goods brands, intoxicated by open-run mania, jacked up prices to the sky, 70 million consumers worldwide—more than Korea's population—turned their backs on them. The analysis is that people closed their wallets not because they lacked purchasing power, but because they were disgusted by the brands' brazen business tactics.
According to the 2025 global luxury market report released on the 21st (local time) by global consulting firm Bain & Company in partnership with the Italian high-end manufacturers' association Altagamma, the size of the global personal high-end goods market this year is tallied to reach 358 billion euros (about 609 trillion won). That is about a 2% decrease from last year's 364 billion euros (about 619 trillion won).
The report assessed this downturn as a structural crisis rather than a temporary correction. The high-end goods market contracted for two consecutive years when the global financial crisis peaked from 2008 to 2009. Since then, excluding the pandemic period, it has posted explosive growth every year.
But this year it again received a report card of negative growth for two consecutive years. It is a signal that the consumption bubble formed on the back of the massive liquidity released into the market right after the pandemic has completely burst. Bain & Company said, "It has been confirmed that the revenge spending that continued through 2023 was essentially a bubble," and diagnosed, "The luxury goods market is not merely in a correction phase but in a painful process of finding its footing after a bubble burst." In particular, as consumer sentiment froze, weak earnings at major groups such as LVMH (Louis Vuitton Moët Hennessy) and Kering have continued. LVMH's sales in the first half of this year fell 4% from a year earlier, and operating profit dropped 15%. Kering's first-half sales declined 16%.
The prevailing analysis is that brands brought the cooling of the high-end goods market upon themselves. The report said, "Consumers rebelled against outrageous price tags attached to ordinary products and the successive hikes." There was also an assessment that although high-end brands raised handbag prices multiple times a year citing rising raw material costs, their design and quality innovations did not keep pace.
In particular, the sales decline was steepest in bags and shoes, which represent high-end goods. Bags and shoes are the items for which high-end brands raised prices most aggressively. Claudia D'Arpizio, a Bain & Company partner, told the AP, "Consumers already have enough bags in their closets," and asked rhetorically, "If what's in the store now is the same as what you bought a few years ago but the price is double, who would open their wallet?"
A clear shift in consumer perception is also apparent. Flaunting expensive items for its own sake has begun to be seen as tacky. Partner D'Arpizio said, "It's not at a catastrophic level, but consumers are moving toward more rational and ethical values," and added, "On social media (SNS), the voices of younger generations asking, 'Is it ethical to buy this item at this price?' are growing louder."
According to this report, over the past two years, about 60 million to 70 million consumers have exited the global high-end goods market. The overall consumer base plunged about 18%, from 400 million to 330 million. The 70 million who disappeared are 1.4 times larger than Korea's entire population (about 51 million).
Most of those who left are Generation Z (born from the mid-1990s to the early 2000s) and the middle class. They were previously called "aspirational consumers" and helped fuel the explosive growth of the high-end goods market.
However, instead of capturing aspirational consumers, major high-end brands pursued VIP marketing focused on ultra-high-net-worth individuals with assets of 30 million euros (about 51 billion won) or more. There are estimated to be about 400,000 ultra-high-net-worth individuals worldwide. Including their families, the figure is around 1.5 million. High-end brands judged that if they secured these super-rich clients, they would be unshaken even in a downturn.
But the purchasing power of a small wealthy group could not fill the void of 70 million aspirational consumers. Partner D'Arpizio said, "While brands strengthened pricing policies and services only for the wealthy, aspirational consumers felt alienated and left," adding, "Severe polarization is playing out even in the high-end goods market, effectively hollowing out the middle."
By region, high-end brands particularly struggled in Asia this year. The China market is expected to shrink to 42 billion euros (about 71 trillion won) this year, with sales plunging 8%. Despite stimulus measures pushed by the Chinese government, consumer sentiment froze solid due to the prolonged real estate crisis and rising youth unemployment. Chinese shoppers, once big spenders in the global luxury market, are now cutting back even on domestic consumption.
Japan, which enjoyed a boom as tourists flocked in due to the yen's decline against the U.S. dollar, also turned down. Japan is likewise estimated to retreat 8% this year, shrinking to a market size of 31 billion euros (about 53 trillion won). With volatility in the yen rising and major high-end brands sharply raising their Japan retail prices, the rationale for buying in Japan has disappeared.
The United States, the world's largest consumer market, is expected to stay at the same level as last year, 101 billion euros. While spending by the topmost wealthy held up thanks to a buoyant stock market, it failed to stem the outflow of the middle class suffering from inflation. The possibility of strengthened protectionism and changes in tariff policy since President Donald Trump took office is another factor weighing on sentiment.
The Middle East, by contrast, was the only one to smile. With billionaires flocking to Dubai, it is expected to post 4% to 6% growth from a year earlier, reaching 23 billion euros (about 39 trillion won). The report analyzed that solid purchasing power based on oil capital supported the market despite heightened geopolitical tensions.
Bain & Company offered cautious optimism that the luxury industry, which has struggled for two consecutive years through this year, will recover gradually starting next year. According to the report, the global high-end goods market is expected to rebound about 3% to 5% next year, recovering to a scale of 365 billion to 375 billion euros. However, it attached the premise that the strength in U.S. financial markets will continue and China's economy will enter a recovery phase.
Partner D'Arpizio said, "The reckless price hikes over the past few years were a dangerous gamble that broke trust between brands and consumers," and added, "High-end brands now need to rethink 'who we exist for as consumers.'" She continued, "Consumers want brand experiences that allow them to realize their values beyond mere ownership of goods," and emphasized, "To win back the lost 70 million, reasonable pricing policies and creative innovation must come first."