Luxury goods market reflects changing demands, economic realities

Wealthy people often enjoy luxury lifestyles, enjoying the finer things in life including investment in appreciating assets, while aspirational consumers may stretch their budgets to taste some of the high life.

But younger generations are carving out their own paths in many areas of life and that includes how wealthy millennials and Gen Zs select luxury purchases, that may contrast with the older Gen X and Boomer generations.

A new report from Bain & Company reveals how the global luxury goods sector is being forced to adapt to changing tastes, while enjoying a resurgence of some evergreen tenets of luxury living such as travel, and a buoyant U.S. holiday season in the last quarter of 2023.

Gourmet food and fine dining also remain as favorites within a luxury lifestyle, while immersive experiences are growing in popularity. Smaller, intimate luxury cruises are also favored and growth in the private jets and yachts market is consistent.

Fine art is less appealing amid lower availability and economic uncertainty, and while investment-led purchases of jewelry are rising although watches are less in demand. Makeup, fragrances, and eyewear are all seen as small indulgences and remain in demand from aspirational consumers.

The report also reveals that Gen X and Boomer consumers continue to enjoy their accrued wealth with spending on luxury goods, while Gen Z and Millennials are delaying spending.

All of this means that luxury goods brands are facing challenging conditions that will require focus on attracting the right consumers.

“As a narrative of resurgence and resilience emerges, luxury brands must rethink the way they build their value proposition to prioritize trust and connection with consumers,” said Claudia D’Arpizio, a Bain & Company partner and leader of Bain’s global Luxury Goods and Fashion practice, the lead author of the study. “Many are navigating a momentary crisis, driven by macroeconomic pressures and a polarized customer base. This presents a unique moment to define a new way forward for their brands, fostering a more personal connection with their customers. Purpose and love will be the north star for brands that thrive in this increasingly competitive market landscape.”