The Luxury Slowdown and the Price Fatigue Reset

Introduction

For years, luxury brands grew by raising prices faster than almost any other consumer business could. The strategy, often called elevation, worked while wealthy buyers kept paying and aspirational shoppers stretched to join them. It has now run into a limit: the number of people buying luxury has fallen, and the industry is learning how much price fatigue costs.

Bain & Company and Altagamma estimated that luxury consumers fell from about 400 million in 2022 to about 340 million in 2025, that new customer acquisition declined by 5% between 2024 and 2025, and that the personal luxury goods market fell to about €358 billion from €364 billion, according to FashionUnited's report on the November 2025 study. This article explains how price-led growth shrank the customer base, where demand is weak and where it holds, what the path back to growth looks like and what it means for bankers.

Aspirational Luxury Customer

A shopper who buys luxury occasionally, often an entry-price item such as a small leather good, fragrance or a first handbag, rather than regularly across categories. Aspirational buyers are the largest group of luxury customers by number and the most sensitive to price, so they are the first to leave when prices rise faster than incomes.

The market's history shows how strong the run was and how it ended. Personal luxury goods grew at about 5% a year from 2019 to 2024, according to the Altagamma-Bain spring 2026 market study, before declining for two years in a row.

Much of the growth after the pandemic came from price increases rather than more buyers. That flattered revenue while the base of customers narrowed. Bain partner Federica Levato told Reuters that brands cannot target only their top customers, and Reuters reported that big spenders, who account for roughly 46% to 47% of the market, had stopped increasing their spending too.

Elevation Strategy

A luxury brand strategy of moving the whole range up-market: raising prices, especially on entry-level products, narrowing distribution and focusing marketing on the wealthiest clients. It raises margins and exclusivity, but it reduces the number of customers who can afford the brand.

Elevation made sense while demand was strong. Raising the price of an entry handbag or a small leather good lifted average selling prices across the range, and cutting back wholesale accounts gave brands more control over how and where they were sold. The cost was paid by aspirational buyers, who found the first step into the brand moved out of reach, and Reuters reported Bain's view that even very wealthy clients felt let down by repeated increases. How far a brand can push price before losing buyers is the question at the heart of brand equity, pricing power and price elasticity.

How luxury pricing works, and why scarcity is part of what buyers pay for, is explained in how the luxury industry works: scarcity and price.

The slowdown is uneven by region, category and brand. Bain-Altagamma's spring study described a market of three speeds: the Americas accelerating, Asia-Pacific recovering, and Europe and the Middle East holding back.

China and tourism

China remains the main drag for many houses. LVMH's fashion and leather goods sales fell 5% on an organic basis in the third quarter of 2026, after weaker demand in China, while the group grew 1% organically, with good growth in the United States, Europe and Japan, according to LVMH's third-quarter release. Europe's luxury market also depends on tourist spending, which makes it sensitive to travel flows and exchange rates.

Chinese demand is changing in kind as well as size. Bain-Altagamma described a recovery under way in China, led by digital sales, which it estimated grew 25% to 35% in the first quarter of 2026, and a shift in what Chinese consumers value: from full-price to pre-owned goods, from overt logos to cultural belonging and from leather goods toward refined ready-to-wear. Brands built on visible status and logo-heavy leather goods are the most exposed to that shift.

The United States

The Americas are the main source of growth. Bain-Altagamma reported that US spending on personal luxury goods was improving across both soft and hard luxury, that spending by upper-middle-class customers was growing about twice as fast as spending by the affluent, and that US-native luxury brands grew 10% to 15% on average between the first quarters of 2025 and 2026. For European houses, that makes the US both the most important market and the one where local competitors are gaining ground.

Jewelry, experiences and resale

Some categories are growing. Bain-Altagamma identified jewelry as the growth leader, and LVMH's watches and jewelry division grew 6% organically in the third quarter of 2026. Kering's jewelry houses grew 11% on a comparable basis in the same quarter. Spending is also moving toward luxury experiences, such as hospitality, fine dining and cruises, which Bain estimated were growing faster than personal luxury goods. The spring study also found that about half of shoppers consider resale before buying new, a sign that buyers are scrutinizing value even at the top of the market, the same instinct that drives the mix shifts described in premiumization and trade-down in consumer demand.

Bain-Altagamma's spring study projected personal luxury goods growth of 2% to 4% at constant exchange rates in 2026, to between €365 billion and €373 billion, in its realistic scenario. That was lower than the 3% to 5% it had forecast in November 2025, after a weak first quarter shaped by geopolitical tension, an energy shock and low US consumer confidence.

The scenarios turn on factors outside any brand's control, chiefly Chinese demand, travel flows and conflict in the Middle East, which is why luxury forecasts are best read as ranges. Even the better case would return the market only to roughly its long-run pace of about 5% to 6% a year, rather than recovering the lost ground quickly.

Brand resets

For individual houses, recovery depends on a reset: creative renewal, a more credible price ladder and fewer, better stores. Kering is a clear example. Gucci's revenue fell 6% on a comparable basis in the third quarter of 2026, with directly operated retail down 9%, and Kering said traffic was the main constraint while conversion and average price improved. Kering also closed a net 105 stores in the first nine months of 2026 and planned at least 125 net closures for the year. Chief executive Luca de Meo called Gucci's recovery the group's defining priority.

The slowdown has changed how bankers analyze luxury businesses. In diligence, they split revenue into price and volume, track customer counts and new-customer acquisition, measure exposure to Chinese and tourist spending, and check whether growth is coming from a few hero products or the whole range. A brand that has kept adding customers through the slowdown has proved something a price-led brand has not.

Valuations follow. Investors pay for durable growth, so houses that kept growing volume, especially in jewelry, are valued on their ability to keep doing so, while brands in turnaround trade on the credibility of their reset; how these factors feed multiples is explained in what drives consumer valuation multiples. The slowdown also creates M&A opportunities: struggling brands become targets for groups with the patience to rebuild them, and family owners facing a weaker market reconsider succession and sales, the dynamics covered in apparel and luxury M&A: families, brands and IP. For coverage bankers, the practical point is that luxury's next phase will reward brands that can grow their customer base again, not just their prices.