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Companies should adjust prices and products to appeal to

younger

shoppers, Bain says

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Brands' strategy created vacuum in affordable luxury

segment

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Predicting market has become difficult due to volatility,

geopolitics

PARIS/MILAN, Nov 20 (Reuters) - The global luxury goods

industry is likely to sell 3% to 5% more next year after

stagnating in 2025, but years of aggressive price increases have

alienated customers, threatening long-term growth, Bain &

Company warned on Thursday.

Bain said next year's growth will be driven by continued

momentum in the United States, resilient local demand in Europe

and Japan, and progressively improving trends in China.

The consultancy, however, said persistent price hikes have

pushed high-end fashion brands out of reach for aspirational

buyers while leaving even ultra-wealthy clients feeling

"betrayed" - a strong reversal of the "elevation" strategy that

dominated the industry in recent years.

"You cannot target only the top customers. Because they are

also starting to really be upset and to feel betrayed in this

industry," said Bain partner Federica Levato, citing price hikes

at odds with a perceived lack of creativity.

"Some of the brands may have realized that they made

mistakes, but most of them think that they can fix the mistakes

with new creativity. So increasing the level of creativity at

the same price that they have today, in our belief, won't be

enough."

The luxury customer base has shrunk to around 340 million

people in 2025 from 400 million people in 2022 and looks set to

lose 20 to 30 million more clients, according to the study

produced with Italian luxury industry group Altagamma.

Even big spenders show signs of fatigue. While they now

account for roughly 46-47% of the €358 billion personal luxury

goods market, their spending has plateaued this year, the study

found.

The price push by most traditional luxury brands has

created "a complete void in the market" for companies offering

more affordable clothing, said Levato, many of which are

American.

In an early sign of what could become a wider industry

reckoning, Kering CEO Luca de Meo said in a memo seen by Reuters

this week that the group needed to rethink its pricing and

product range after years of increases.

The strategy also priced out younger shoppers, who despite

limited budgets have outsized cultural influence and shape the

spending decisions of older generations. "This industry really

walked away from Gen Z," Levato said.

The industry slowdown has resulted in mounting inventory, with

stock-to-revenue ratios up 3-4 percentage points versus 2019,

Levato said, recommending using outlet and off-price e-commerce

to clear excess product.

Handling excess inventory has become a headache in an industry

where many brands are wary of discount channels to protect their

image and destroying unsold products is banned under EU

sustainability rules.

Forecasting the trajectory of the global luxury industry has

become particularly challenging due to geopolitical uncertainty,

including the trade policies of U.S. President Donald Trump and

continued question marks over the fate of the Chinese economy.

Bain heavily slashed its initial 2025 outlook last May to a 2 to

5% fall in 2025, but on Thursday said the industry was set to

end the year largely flat.

Luxury shares have rallied in recent months, with the Stoxx

Luxury 10 index up 19% from its April lows, buoyed by

encouraging third-quarter earnings from LVMH, Burberry ( BBRYF ) and

Richemont signaling improved shopper sentiment, particularly in

China.