The global personal luxury market grew 4% to $403 billion (€352 billion) in 2023, but it did so without any help from the Americas where revenues dropped 8% to $112 billion (€101 billion).
And during the first quarter of 2024, the global personal luxury market turned south, dropping between 1% to 3% according to Bain & Company’s latest report.
Bain notes that the top-tier luxury clientele continue to hold up, but they are steadily shifting spending toward luxury experiences and away from luxury goods. “Personal luxury brands are finding themselves in a moment of crisis, driven by macroeconomic pressures and waning consumer demand.”
A further sign of trouble comes from HSBC Global Research. It just cut its forecast for growth in the luxury market by nearly half, citing “negative sector news flow received during the summer.” HSBC also warned that 2024 could be one of the worst years in luxury over the last 20 years, with the absolute worst being 2020, off nearly 20% and 2009 down 8%.
Overall, high-net-worth (HNW) and ultra-high-net-worth (UHNW) consumers account for about 40% of total luxury spending. However, their share can be significantly higher in certain luxury categories and specific luxury brands.
Since the U.S. has the world’s largest population of HNW and UHNW individuals, the Affluent Consumer Research Company’s (ACRC) luxury tracking study gives luxury leaders a monthly update on how their prime target American customers view their current financial status and trends in how they spend their money.
The September 2024 survey results are in and it reveals affluent consumers (average household income $307k and net worth $2.3 million excluding primary household) are navigating an economic landscape defined by uncertainty. They are exercising financial prudence by carefully evaluating their spending on indulgences in luxury goods and experiences.
Luxury brands across the luxury goods and experiences sectors face a HNW/UHNW American consumer striving to find balance between indulgence and restraint. While still valuing high-quality experiences and products, the uncertain macroeconomic and geopolitical environment argues for discipline and moderation in spending.
And confirming HSBC’s caution, conditions on the ground have worsened over the last several months. HSBC called it a “cruel summer” in the luxury market and ACRC’s latest survey reveals just how cruel a summer it’s been.
Financial Status Positive, But Prudence Reins
Overall, affluent Americans display strong confidence in their ability to manage wealth, though they are cautious about macro-economic conditions. Nearly 40% believe the financial stability of the country is worse now than three months ago, while roughly half that number (21%) believe the country is better off. And 48% believe a recession is either here now (23%) or headed our way within the next six months.
The prospects for higher taxes on personal income and new taxes on wealth weigh heavily on their personal financial prospects and on a macro-level, they are very concerned about growing global conflict, political unrest and cybersecurity threats. For example, in the current contentious election cycle, some 51% are worried that political tumult could lead to protests and heightened civil unrest.
Looking forward, affluent consumers plan to focus on improving their health through increased physical activity and better food choices (49%), strengthening personal relationships with family and friends (47%) and making more time for self-care, hobbies, learning experiences and other activities that lead to personal growth, greater happiness and fulfillment (45%).
The overall mood among the n=261 affluents surveyed in September is financial prudence that prioritizes savings and investments over luxury spending.
Retreat From Luxury Spending
Over the summer, a significant share of affluents took a break from the luxury market. Back in June, only 9% of the roughly 400 affluents surveyed said they made no luxury goods, services, or experiences purchases in the past twelve months.
The share of luxury no-shows nearly doubled in September with 17% saying they’d made no luxury purchases over the past twelve months and virtually the same percentage said they expect to make no luxury purchases in the next twelve month. Of note: the respondents in both the June and September surveys had virtually identical income and wealth profiles.
Also notable in the September survey is a significantly greater share of luxury consumers plan to spend less on luxury in the coming year (28%) than plan to spend more (16%) And the number who expect to spend a “lot less” is twice as large as those who plan to spend a “lot more,” 10% and 5% respectively.
0f course, what people say they are going to do and what they actually do frequently differs, but the results of the latest ACRC survey are flashing warning signals that things might get worse in the luxury market before they get better.
Shift Toward Conscientious Consumption
In the current economic climate, affluent consumers are taking a more measured approach to luxury spending. While the aspirational middle-class once fueled growth for luxury brands, today’s HNW and UHNW individuals are becoming increasingly conscientious about where their money goes.
Historically, luxury brands like those led by LVMH built their business model around creating desire among the masses by positioning their products as scarce, exclusive, and crafted with mastery. These attributes were often aimed at the aspirational middle-class, which sought to own a piece of the luxury lifestyle.
However, in today’s environment, affluent consumers are evolving beyond materialism and are becoming far more discerning about the products they purchase. They are shifting their focus away from luxury goods as a status symbol and instead considering how their purchases impact the wider world. For instance, sustainability and ethical consumption have emerged as major factors influencing purchasing decisions.
As highlighted by the September 2024 survey, American affluents are now weighing the environmental and social impact of their spending more heavily. This shift in focus, from indulgence for its own sake to conscientious consumption, presents a significant challenge for luxury brands, which must adapt to retain these high-value customers.
Selective Indulgences
This evolving mindset is also evident in the categories they are planning to purchase. Topping the list of categories luxury consumers intend to indulge in over the next three months are gourmet food (51%), luxury brand hotel/resort experiences (46%) and luxury brand beauty or skincare (37%).
Relatively low on the purchase intention scale are luxury jewelry (22%), timepieces (16%) and private jet travel (8%), though premium cabin airline seating (36%) and luxury brand cruise/yacht experiences (21%) are higher on their purchase intention list now than back in June.
Other categories that hold moderate appeal over the next three months included luxury brand apparel, fashion accessories, fine wine, craft spirits and interior home renovation.
From Mass-Market Aspirations To Responsible Luxury
Today’s affluent consumers have moved beyond simply acquiring luxury for status. They seek purchases that resonate with their personal values and contribute to the greater good. For instance, rather than splurging indiscriminately, many affluent consumers are focusing on fewer, more thoughtful purchases that emphasize sustainability and long-term value over short-term gratification.
Luxury brands that once capitalized on widespread desire for exclusivity must now pivot to address a market where conscientiousness and ethical consumption drive purchasing behavior. As noted in the survey, consumers increasingly prioritize savings and investments, while their luxury spending is focused on products and experiences that align with personal goals and global responsibility.
Managing Against Mounting Headwinds
In the beginning of the year, luxury industry insiders expected 2024 to be a challenging year and that is just how it is turning out. Among the 200 luxury industry executives surveyed for Unity Marketing’s State of Luxury report, a majority (50%) believed the industry was entering a period of slower growth and more than one-fourth (27%) saw mounting troubles on the horizon.
Luxury insiders foresaw the participation of less-affluent HENRY (high-earners-not-rich-yet) consumers eroding under pressure from inflation and a tightening economy. That concern proved real as the year has progressed, but now even the top-tier consumers are holding on tight when it comes to luxury indulgences.
Luxury insiders also felt growing competitive pressure from more players vying for the same or fewer customers and brand loyalty slipping among current customers. That view has also proved prescient.
The future of the luxury market as we close 2024 and enter 2025 is undeniably complex, marked by an interplay of economic, political and consumer-driven challenges. Yet, within this complexity lies opportunity.
Strategic Shift
The luxury industry finds itself at a crossroads. Adapting to the evolving demands of affluent consumers, while continuing to prioritize consumer engagement and trust, will be crucial for maintaining relevance in a complex and competitive market.
Luxury brands can no longer rely solely on traditional luxury markers like craftsmanship and exclusivity. Instead, they must now deliver products and experiences that align with the broader concerns of today’s affluent consumers.
This evolving consumer mindset forces luxury brands to rethink their value propositions. What once worked – crafting an aura of scarcity and exclusivity – may no longer be enough in a market where affluent buyers are increasingly concerned about the sustainability of their purchases and the social impact of their wealth.
Brands that fail to address these new concerns risk losing relevance among a client base that has the financial power to be selective about where they spend their money.
For luxury brands, the key to navigating these turbulent times will be to focus on quality and innovation, but also to embrace change in ways that resonate with the values of today’s affluent consumers. This includes making strategic investments in sustainability initiatives, digital innovation, and other consumer-driven areas.
The path forward for luxury brands will be challenging, but those that adapt to these shifts in consumer values and behavior will be better positioned for long-term success.
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We can help you navigate the mounting headwinds in the luxury market. Our mission is to build stronger relationships between luxury brands and HNW consumers.
We find unique actionable insights for a wide range of luxury categories, including automotive, real estate, private jets, and retailers. Our goal is to provide you with new information that reduces your risks and takes advantage of market opportunities.
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