The outlook could worsen if the sector is hit by the tariffs promised by Donald Trump, Euronews reports.
"This could be a nightmare if implemented. European brands could end up being super expensive in an already expensive environment," said Claudia D'Arpizio, co-author of the study for Italian luxury goods manufacturers association Altagamma.
Trump has promised tariffs of up to 20 percent on imports, saying it would create factory jobs, shrink the federal deficit and lower food prices.
While the study did not address the potential impact of tariffs, D'Arpizio said the impact on European luxury goods manufacturers would depend on how tariffs are implemented on the category, if at all. She noted that a shortage of U.S. substitutes for luxury goods could result in an exemption. any negative impact could also be offset by a shift of production to the U.S. or by increased sales to U.S. tourists in Europe.
The United States is the second largest luxury goods market after Europe, accounting for about €100 billion ($106 billion), or almost one-third of all global sales of high-end clothing, leather goods and footwear.
Luxury-goods sales are forecast to fall 2 percent to 363 billion euros ($385 billion) next year from an estimated 369 billion euros in 2024 due to sharp price increases imposed by brands and global turmoil, Bain said.
The sector recovered quickly from the COVID-19 pandemic, exceeding 2019 sales by 2022, largely thanks to delayed spending that was postponed due to the market lock-in. Even a modest decline next year will leave the market 28% higher than it was in 2019 and two-and-a-half times the lows of the Great Recession in 2008.
Social and political turmoil, including wars and a series of national elections, have eroded consumer confidence, D'Arpizio said. In addition, brands' strategy of increasing prices while focusing on more "fine luxury," which often lacks novelty, "has had a strong negative impact on the willingness to buy," even among affluent consumers, she said.
The creativity crisis is also turning off Gen Z buyers, many of whom are now in their 20s, according to the study.
The result is that the luxury goods market has shrunk by 50 million customers to an estimated 250-360 million as the luxury base shrinks for the first time. | BGNES
