Luxury Sector Loses 50 Million Customers Amid Exclusivity Struggle

The luxury sector is grappling with a significant challenge as it lost around 50 million customers last year, marking a 3% dip in early 2025. The industry, valued at €1.5 trillion ($1.7 trillion) in 2024, is now facing a contraction in personal luxury goods, which fell from €369 billion in 2023 to €364 billion in 2024. This is the first contraction in 15 years, excluding the pandemic.

Luxury brands have historically sought to broaden their appeal, particularly during the COVID-19 pandemic, by introducing entry-level items like streetwear, sneakers, and beauty products. However, this strategy has led to an "overcorrection," with brands relying too heavily on iconic designs and experiences, reducing their pace of innovation. This has caused consumers to question the value of their purchases, leading to a significant loss of customers, particularly among younger generations, and a drop in customer advocacy.

The luxury sector is now trying to reconcile its need for exclusivity with the younger generation's desire to share and express their identity online. This is a challenging task, as younger consumers are known for their propensity to post online, making it difficult for luxury brands to maintain their elusive image. Luxury has always been about showing off, but the focus has shifted from wealth and accomplishments to personality, aesthetics, and quality of life.

Social media has provided a significant boost to luxury consumption, as it allows for sharing with a larger audience, creating more customers and augmenting communication strategies. However, luxury brands must now find a way to maintain their exclusivity while leveraging the power of social media. This is a delicate balance, as the gap between winners and losers in the luxury sector is growing, with market leaders continuing to charge ahead while the bottom 20% to 30% of the sector report a reduction in growth.

In conclusion, the luxury sector is facing a significant challenge as it lost around 50 million customers last year and is struggling to reconcile its need for exclusivity with the younger generation's desire to share and express their identity online. Luxury brands must now innovate to maintain relevance, exclusivity, and emotional connection in the social media era.