The global luxury market is undergoing a profound transformation in 2024. While the post-pandemic boom propelled luxury into an era of unprecedented growth, this year marks a recalibration, where nuanced dynamics such as regional variations, evolving consumer preferences, and macroeconomic pressures take center stage. The Bain-Altagamma 23rd Luxury Goods Worldwide Market Study paints a vivid picture of this evolving landscape, underscoring challenges and opportunities for luxury brands.

Despite a forecasted contraction of 2% at current exchange rates, the market remains robust, valued at €363 billion ($380 billion) for the year. This slight downturn is less an indication of decline and more a reflection of normalization following the rapid recovery of 2021-2023. Furthermore, the ultra-high-end segment continues to flourish, even as accessible luxury faces headwinds. In this rebalanced environment, consumer demand is driven by sustainability, experiential offerings, and the growing influence of technology. This article delves deeply into the key insights from the Bain-Altagamma report, offering a granular analysis of how luxury brands can navigate this reimagined landscape and sustain growth amid changing dynamics.

Market Dynamics: Polarization, Regional Nuances, and Profitability

The luxury market in 2024 is defined by stark polarization. Ultra-luxury categories—driven by bespoke offerings and high-net-worth individuals (HNWIs)—are thriving, while accessible luxury experiences are a notable contraction. This divergence highlights an increasingly segmented consumer base, where exclusivity and uniqueness dictate spending patterns.

“The increasing polarization in the luxury market can be attributed, on one side, to the remarkable resilience of HNWIs and ultra-high-net-worth individuals (UHNWIs), who remain relatively unaffected by economic downturns and inflation,” Senior Partner in Bain & Company's Luxury Goods and Fashion Practices, Federica Levato, tells BeautyMatter. “Despite recent macroeconomic turbulence, their purchasing power has remained stable or even grown, enabling continued spending on high-value items with little constraint,” she continues.

Key Insights:

• Ultra-Luxury Growth: The ultra-luxury segment grew by 13-15% in 2024, bolstered by demand for artisanal craftsmanship, limited-edition releases, and one-of-a-kind experiences.
• Accessible Luxury Decline: Categories such as entry-level handbags and small leather goods contracted by 6-8% as middle-class consumers shifted toward value-for-money alternatives.
• Profitability Resilience: Despite a dip in overall sales, profit margins across the industry remain strong, driven by high average unit revenues (AURs) in ultra-luxury segments.

Regionally, Europe has emerged as a stronghold for the luxury market, benefiting from robust tourist spending and favorable exchange rates. Japan has also proven resilient, buoyed by affluent domestic demand and a weakened yen attracting international tourists. However, China—the primary growth engine for years—faces slower recovery due to local competition and changing consumer habits.

“The affirmation of investment-driven purchases, coupled with preference for hyper-quality and timeless pieces, has further fueled the growth of the ultra-luxury segment across all consumer cohorts,” Levato says. “Conversely, economic uncertainty has significantly impacted aspirational consumers, leading them to cut discretionary spending and shift toward lower-priced items, directly affecting accessible luxury brands. This decline in spending was further accelerated by the recent proliferation of insurgent players, offering attractive, more affordable alternatives to traditional luxury purchases.”

For executives, the message is clear. Precision targeting is essential. Brands should lean into the strengths of ultra-luxury categories, double down on experiential retail in places like Europe and Japan, and innovate to address the evolving preferences of especially Chinese consumers.

Experiential Luxury: The New Growth Frontier

The shift from material possessions to meaningful experiences continues to reshape the luxury landscape. Experiential luxury—including travel, hospitality, dining, and wellness—outpaces product categories, reflecting a broader cultural pivot towards the intangible.

Data Highlights:

• Luxury Hospitality: This sector grew by 4-6% in 2024, with revenue now 18% higher than pre-pandemic levels. Exclusive offerings such as private villas and personalized concierge services are in high demand.
• Luxury Cruises: The segment expanded by 30-32% as affluent travelers seek adventure-focused, eco-conscious itineraries.
• Private Dining Clubs: Experiencing high single-digit growth, these spaces blend gastronomy with art and design, creating multisensory experiences.

This trend is driven primarily by millennials and Gen Z consumers, who prioritize experiences that reflect their values, such as wellness retreats or eco-friendly luxury travel, and even second-hand luxury. “The second-hand luxury market recently emerged as a key gateway to luxury for younger audiences, offering more affordable options at a time when customers are prioritizing value-for-money purchases,” adds Levato. Social media, itself, has further amplified the desirability of these experiences, turning them into aspirational benchmarks.

“It also serves as a platform to access unique, bespoke pieces that double as investments and personal statements, allowing individuals to express their identity through rare finds unavailable elsewhere. Luxury brands are increasingly taking ownership of this space, either by launching their own resale programs or ensuring they remain part of the conversation and retain control over their brand narrative on pre-owned platforms,” says Levato.

For brands, diversifying into experiential luxury is not merely an option but a necessity. Those already embedded in this segment, such as luxury hotel operators, must continuously innovate. Conversely, product-centric brands can leverage collaborations, offering curated experiences—such as immersive brand events or travel packages—to extend their reach into this high-growth category.

Sustainability as a Competitive Imperative

Sustainability has evolved from a marketing buzzword into a critical driver of consumer loyalty and brand differentiation. The Bain-Altagamma study underscores the growing importance of eco-conscious practices across luxury categories.

Key Data Points:

• Sustainable Sales Growth: Products with sustainable attributes grew by 15% in 2024, outpacing the overall market.
• Circular Economy: Pre-owned luxury and rental platforms saw an 8-10% rise in sales, reflecting heightened consumer interest in circular business models.
• Low-Carbon Innovations: Private jet manufacturers are integrating biofuels, while luxury automakers are debuting electric vehicle lines with advanced eco-technologies.

Luxury consumers, particularly millennials and Gen Z, demand transparency and accountability. They seek brands that actively reduce their environmental impact, whether through supply chain optimization, sustainable sourcing, or investment in green technologies. This has caused a slight contraction in the luxury sector. “To maintain profitability in a challenging economic climate, luxury brands should address key performance improvement challenges across the value chain, from optimizing sourcing and re-engineering store concepts to streamlining operations through tech-enabled processes,” Levato opines. “Finally, leveraging the power of technology will be essential to drive cost optimization and enhance efficiency, ensuring brands remain agile and profitable despite economic headwinds,” she continues.

For executives, embedding sustainability into every aspect of the business—from design to distribution—is crucial. This includes offering refillable packaging, adopting renewable energy in manufacturing, and promoting resale programs to extend product lifecycles.

Technology: Shaping the Future of Luxury

Technology continues to redefine luxury, acting as both an enabler of innovation and a tool for personalization. The digital evolution of luxury is evident in the rise of virtual boutiques, AI-driven customer insights, and omnichannel integration.

Technological Advancements:

• AI-Driven Personalization: Luxury brands are leveraging AI to deliver bespoke recommendations and tailored shopping experiences, with many reporting a 20% increase in customer engagement through these tools.
• Digital Sales Channels: E-commerce now accounts for 22% of global luxury sales, with omnichannel strategies ensuring seamless transitions between online and offline touchpoints.
• Virtual and Augmented Reality: Virtual showrooms, try-ons, and immersive experiences are becoming standard, particularly for tech-savvy Gen Z consumers.

Technology also plays a vital role in operational efficiency, helping brands optimize inventory, reduce costs, and improve sustainability metrics. By adopting predictive analytics and AI, luxury companies can anticipate market shifts, refine their offerings, and maintain competitive agility.

Generational Shifts: The Rise of Purpose-Driven Luxury

The changing preferences of Gen Z and millennial consumers are reshaping the luxury market. While these younger cohorts drive innovation, they also challenge traditional notions of exclusivity, demanding inclusivity, sustainability, and cultural relevance. “To rebuild loyalty and relevance among younger consumers, traditional luxury brands must focus on rebuilding strong emotional connections by expanding their narrative into areas that resonate with this demographic, such as sports, entertainment, and culture,” Levato says.

Generational Spending Patterns:

• Gen Z:  This segment accounts for 20% of luxury consumers and prioritizes second-hand goods, sustainable practices, and unique, value-driven experiences.
• Millennials: The sector represents 40% of the market and prefer hybrid models that combine premium quality with affordability, such as subscription services or resale platforms.
• Boomers: While their influence has waned slightly, they still account for 35% of luxury spending, particularly in high-end travel and classic categories like fine jewelry.

“Aligning with shifting purchasing dynamics and preference is key;  brands should engage customers across multiple touchpoints and contexts, diversifying their offerings to seamless and immersive experiences. Finally, regaining trust requires a careful balance of creativity with traditional luxury pillars —craftsmanship, heritage, and exclusivity—ensuring authenticity while staying attuned to customer expectations,” adds Levato.

Luxury brands must balance these generational demands, innovating to attract younger audiences while maintaining authenticity for their established customer base.

The Bain-Altagamma 2024 Market Study paints a complex but opportunity-rich picture of the luxury industry. While challenges such as regional volatility and evolving consumer expectations create headwinds, they also open doors for innovation and differentiation.

To succeed, luxury brands must adopt a dual approach: doubling down on ultra-luxury offerings and experiential categories while embedding sustainability and technology into their core operations. By understanding the nuances of generational shifts, leveraging AI for hyper-personalization, and addressing the growing demand for inclusivity and sustainability, brands can position themselves for enduring success in this dynamic landscape.