From Riches to Rags Has The Global Luxury Market Lost Its Sparkle

The £1 trillion-a-year luxury goods industry is facing unprecedented challenges as sales slump across major markets. Recent figures from industry giant LVMH reveal a concerning pattern, with fashion and leather goods revenue dropping 5% in the first quarter of 2025 – marking the third consecutive quarterly decline outside pandemic conditions.

The ripple effects are being felt across the sector. Kering’s market capitalisation has plummeted by nearly 50% over the past year, primarily due to Gucci’s 25% sales decline. British luxury brand Burberry continues to struggle despite high-profile fashion shows, whilst Versace’s recent sale to Prada Group at €1.25 billion represented almost half its initial valuation.

The Swiss watch industry is showing similar stress signals, with February exports falling 8.2% year-on-year to 1.98 billion Swiss francs. The diamond trade faces additional pressure from Donald Trump’s 10% import tariffs, significantly impacting an $82 billion industry heavily dependent on US consumption.

Chinese market weakness remains a critical factor, with LVMH reporting an 11% revenue decline in Asia (excluding Japan) during Q1 2025. The world’s largest luxury market continues to grapple with slow economic growth and a persistent housing crisis, dampening consumer confidence.

Price sensitivity has emerged as a major concern, with luxury goods prices soaring 65% since 2019. Brands like Chanel and Prada have doubled prices on popular items, testing consumer tolerance. The situation is further complicated by ethical concerns, with recent investigations revealing significant disparities between production costs and retail prices.

The sector faces additional headwinds from changing consumer behaviour, particularly among younger demographics. The rise of #underconsumptioncore on social media platforms reflects growing resistance to traditional luxury consumption patterns, while sustainable and second-hand alternatives gain traction.

The emergence of new e-commerce brands offering similar quality at lower price points presents a fresh challenge to established luxury houses. Companies like Eleventy, Aurélien, and Luca Faloni are capturing market share by maintaining quality while eliminating traditional retail overheads.