How Should the $350bn Luxury Industry Regain Relevance?
The industry’s role in global culture is less secure.
In 2025, the luxury industry is suffering as a result of performance legitimacy. Post-pandemic savings and accelerating wealth inequality have masked a growing dissonance between aspirational consumers and the luxury businesses that sell to them.
The disproportionately high impact of inflation on middle-income consumers, the rise of dupe culture and resale, as well as increasing expenditure on aesthetics and travel, has shifted value perceptions and spending habits amongst middle-income consumers. Some companies, like Telfar, Khaite, and Our Legacy, are maintaining their relevance to these cohorts by reflecting consumer preferences and lifestyles in their product and pricing strategies, and fostering genuine community connection.
Only a tiny cohort of companies with the most enduring resale values, primarily Hermès, Chanel, and The Row, are effectively shoring up their cultural position and customer strategies to protect their relevance in the eyes of an increasingly selective and uninterested 1%. Now, the most business-critical shift for the industry to appreciate is that the rich are no longer spending widely enough across multiple brands to sustain its desired growth rates.
As the luxury industry faces a lean forecast of 1–2% growth in 2025, in Matter’s first Intelligence Opinion we break down what really matters most to luxury consumers, rich and aspirational, and how brands can best reconnect with either or both cohorts.
Matter Intelligence Opinions comprehensively analyse the commercial and cultural forces transforming the industry’s relationship to its customers. In the first iteration, Matter assesses how the luxury industry lost its relevance, the strategies navigating the downturn best, and the tactical opportunities available to restore the connection between brands and their communities. Informed by proprietary data and unique insight from our community of global experts, the Opinion concludes with Matter’s 5 Focus Points for 2025.
In today’s post, we’re synthesising our findings on the macro-economic context, cultural shifts, and consumer behaviour faced by the industry.
Download How Should the $350 Billion Luxury Goods Industry Regain its Relevance?
Chapter 1: Macroeconomic Context
Aspirational consumers are facing headwinds globally, while the rich are getting richer. But HNW customers are no longer spending significantly enough across multiple brands to sustain the industry’s growth.
Financial pressure on middle-income aspirational luxury consumers will intensify or be perceived to intensify before it eases in key markets including the U.S., China and Europe.
In 2024, 80% of the luxury industry’s growth stemmed from price increases. The resulting performance legitimacy obscured a dangerous inflection point and diminishing relevance.
Between 2022 to 2027 the global cohort of UHNWIs is forecast to grow 5%.
However, higher pricing strategies have made luxury brands reliant on a comparatively tiny cohort of consumers. Competition for these consumers is intensifying.
Perceptions of exclusivity and cultural value are narrowing around the few luxury brands which retain their value in resale markets and have avoided overexposure.
For the majority of brands, the rich are not spending enough to justify pricing aspirational luxury consumers out, who are responsible for 50% of industry revenues.
Chanel and Hermès are retaining resale value more effectively than Louis Vuitton, Dior, and Prada in 2024. 90% of the 20 biggest publicly owned luxury brands showed declines in stock value.
Price increases have prompted greater consumer scrutiny into product value, while supply chain scandals have exposed the fallacy of much of luxury’s craftsmanship myth-making.
Previous slowdowns, the result of cyclical global macro-economics, created soft demand for 12–18 months. China’s structural issues still may extend this slowdown.
The U.S. is expected to be the primary engine of the industry’s modest growth (1–2%) in 2025.
What Matters: U.S. economic and trade policy will exacerbate both aspirational consumer headwinds and income polarisation. Yet it remains the land of opportunity for the luxury industry. Intensely dampened consumer confidence in China is prompting a shift in consumption attitudes and tastes, away from casual luxury towards investment pieces, experiences, and China-born creativity. There is no “new China,” in terms of markets – India lacks the retail infrastructure needed to scale operations quickly. Europe is flat at no-growth. Elsewhere, the teeth of the middle-income trap are sharper due to protectionism and ageing populations. More positively, the GCC represents a comparatively significant opportunity for brands willing to invest focus as well as resources. Southeast Asia is buoyant but nascent.
Chapter 2: Cultural Shifts
The industry is over-exposed culturally and commercially due to UGC and an arms-race in brand and paid marketing. Short-form video apps have effectively ended brand image control. Price increases have hastened the rise of ‘dupe culture’ and invited critical expertise into pre-purchase value assessments.
Combined, this has eroded consumer belief in luxury’s exclusivity and impacted its product’s desirability. “The challenge that all brands are facing is we’re reaching this extreme state of mono-culture,” Justin Moran, Paper Magazine’s editor-in-chief, tells Matter.
Only 30% of aspirational luxury consumers say they are likely to choose logo-centric products, despite the popularity of producing these styles.
The status of run-of-the-factory “luxury” items has been negatively impacted by low barriers to entry via cheaply produced, brand-sanctioned alternatives of true luxury products.
“These days, [...] we prefer signs that are harder to fake. Taking a photo with a Birkin? Easy. Maintaining your yuppie deluxe lifestyle with two kids and a mortgage? A little harder. Think caseless iPhones, 10.30am fitness classes, not having roommates” — Edmond Lau.
68% of respondents were unhappy about the volume of sponsored content on social media platforms in 2024.
Trust in ambassadors has plummeted: 87% of consumers believe it’s likely that influencers don’t use the products they advertise, 37% trust celebrity endorsements as authentic.
TikTok and other short-form video apps like YouTube Shorts, Douyin, and Xiaohongshu invited billions of consumers into facets of luxury brands previously inaccessible to them.
A study found that 64% of Gen Z respondents have used TikTok as a search engine. Videos with the hashtag #GRWM have been viewed more than 325 billion times and counting.
Accusations of poor quality have been levelled at a number of major luxury brands by members of the general public whose videos have gained millions of views.
The most liked search result for Chanel on TikTok is Bethenny Frankel’s unverified accusation the brand refused her entry into an appointment-only-store due to “elitism.”
33% of U.S. adults intentionally bought a dupe. 50% say they buy for the savings, while 17% say even if they could afford the genuine luxury product, dupes are “a great alternative”.
What Matters: For the economic global elite, the industry is too over-exposed to retain widespread cultural cachet or credibility. UGC hastened the rise of dupe culture and the widespread adoption of resale across price points. Combined, they have overwhelmed new luxury goods’ value propositions in the minds of many W.E.I.R.D. (Western, Educated, Industrialized, Rich, and Democratic) consumers. In middle income economies however, brands’ roles as status signifiers are less impacted.
The result? Relevance for the apex of the industry with highly-selective but price-insensitive elites, and broader relevance in new markets where the scale of the opportunity will remain significantly smaller for decades.
Chapter 3: Consumer Behaviour
Today, travel, beauty, and aesthetics – all manner of transformational identity-driven expenditure – sit higher in many consumer cohort’s spending priorities than personal luxury goods. Indeed, for both HNWIs and ALCs, purchase motivations and the channels they transact in are evolving. Styling trends have overtaken product trends. The once monolithic ‘It’ products no longer exist. The elite are increasingly only willing to invest more to get more, sending brands’ clienteling strategies into over-drive, while aspirational consumers are trading down. Resale’s superior cultural credibility among influential cohorts is now creating competition for new-season styles.
The purchasing power of Gen Z is varied and anxiety-ridden. With wages failing to rise with inflation, this generation “have grown up in a time when work doesn’t pay.”
Younger consumers today are orienting around culture and identity expenditure rather than aspiring to archival material possessions. This is vibe-driven, not product-driven, expenditure.
Gen Z are more interested in self-narration than material possession: 69% agreed that “the luxury brands I wear express something about me.”
25% of Gen Z consumers shop at Temu, Shein, TikTok Shop, and AliExpress at least once a week, while 44% of Gen Z make at least one purchase on Shein monthly.
The once-monolithic hot product has been replaced by styling aesthetics like “quiet luxury” or “old money”, which don’t orbit around a specific item, but rather a set of vibes or moods.
In 2021, the global market for merch was valued at $10.2 billion. By 2026, it is forecast to grow to $13.2 billion.
“(顶尖) ‘Dǐng nán is trending among male customers. It translates to ‘top guy.’ A male consumer passionate about style, and digging out the coolest archival things.”— Bohan Qiu
Resale is a major route into luxury brands. The RealReal’s top 5 most-searched brands of 2024 in order were: Louis Vuitton, Chanel, Prada, Gucci and Loewe.
In 2024, the prices of Hermès’ second-hand products continued to grow, while Louis Vuitton and Dior experienced a decline, according to Bernstein Research.
“I’m seeing a significant ramp up of super, super, super VIP CRM programmes from every brand at every show.”— Bohan Qiu
What Matters: Younger cohorts seek vibes and aesthetics over ‘It’ products while the elite are only willing to invest more to get more. In the ‘Information Age’ the power of storytelling as an elite purchase driver is diminishing, increasing UHNWI expectations around additional perks related to top-tier investment in products. For aspirational luxury consumers in the U.S., in the absence of dramatic policy shifts, the shopping-down trend will continue. Resale’s growth and increasing cultural relevance and positive associations are one of the most significant shifts in consumer behaviour in the past decade.
Conclusion: Action Required, Irrelevance is a Risk
Luxury brands should objectively assess what their products’ relevance to consumers is built upon in today’s market and in preparation for the future. With shifting mores around inequality, and more informed and connected consumers, the industry’s role in global culture is less secure. Social media has dispelled the myths the modern industry relies on: that items produced in the millions are exclusive, that logos and high prices denote quality, and that others will consistently be impressed by either.
Despite sensitivity around pricing, it is the relevance-to-cost ratio not value-to-cost ratio that matters most to consumers. With the right cultural and emotional context, HNWIs and ALCs will both spring for elevated versions of goods or services across price ranges and categories. Their cost threshold: affordability in that exact moment. Their purchase motivations: more personal than societal.
In “advanced economies”, polarising wealth inequality has pushed consumer cohorts’ purchasing behaviour out of the central sweet spot from which luxury houses made such significant revenues. Status signalling has become more nuanced in luxury’s core-markets. The growth potential of the markets where luxury’s traditional value proposition still holds, and its run-of-factory products still have sway, is insufficient to offset slowing performance in the U.S., China, and Europe.
In an interconnected culturesphere that puts a premium on authentic communication, brands must now connect to disparate consumer groups, with vastly different economic realities and purchasing behaviours – concurrently. The ability to craft effective messaging for each, in full view of the other, without negatively impacting its offering to either, is the next tightrope for the industry to traverse.
Much of the future forecasting today is rooted in analysis of how AI will transform our industry. No doubt, LLMs will elevate customer service and decrease operational costs. We also expect that GANs will soon be responsible for a huge proportion of content creation. But the adoption of AI will not regain industry relevance alone. The industry must reframe its value proposition in contemporary terms. Operationally, AI is transformative. But it is no silver bullet culturally.
The attrition rate we expect to see in brands that rely on increasingly outdated associations of ‘exclusivity’, ‘quality’, and ‘social status’, is alarmingly high. The likelihood of supply chain shocks and tariff-induced pricing challenges equally so. Authentic, defensible brand authority – in culture, craftsman- ship, creativity, whatever – and a genuine transferral of value are the foundation of successful brand strategies today.
Download How Should the $350 Billion Luxury Goods Industry Regain its Relevance?