Global Luxury Industry Expected to Recover Slowly in 2026 After Years of Weak Sales

The global luxury industry is expected to recover slowly in 2026 after facing weak sales over the past few years. The prediction comes from The State of Fashion Report by The Business of Fashion (BoF) and McKinsey & Company. Luxury brands are expected to grow by 4 to 6 per cent a year until 2030. However, this growth will be slower than in previous years, when the industry recorded high single digit annual growth.

The US and China are expected to be the biggest drivers of luxury market growth. The US has the world’s largest luxury market, worth around USD 130 billion, and it is expected to grow by up to 5 per cent a year until 2030.

Meanwhile, China’s luxury market is worth more than USD 60 billion and is expected to recover strongly, with annual growth of around 6 per cent.

However, luxury brands may still find it difficult to boost sales, as the pandemic changed the way customers shop for luxury products. Buyers are now more careful about which brands and products they spend their money on, as many people prefer spending on travel and experiences instead of luxury fashion.

Inflation has also reduced spending on expensive products such as designer handbags. During the luxury boom, many brands increased their prices sharply without adding enough new features or innovation. This disappointed many customers who were ready to buy luxury products for the first time.

After the post-pandemic shopping boom ended, many brands focused mainly on ultra-rich customers. As a result, they ignored entry level and middle income luxury buyers. Many of these customers have stopped visiting luxury stores because they no longer feel valued.

The report says brands need to reconnect with buyers to achieve long term growth. In both China and the United States, customers now want stronger emotional connections with luxury brands.

Buyers increasingly prefer brands that match their personality, lifestyle and values, while a brand’s long history is becoming less important than before.

Chinese consumers often buy luxury products to show their social status and express their identity.

In the US, customers are more likely to buy luxury products as a personal reward. Chinese consumers, meanwhile, are increasingly choosing newer or challenger brands that better reflect who they are.

Chinese customers continue to trust established luxury brands, including both local and international names. At the same time, many customers have become aware of brands creating artificial shortages to make products appear more exclusive.

In China, personalised service is now the biggest reason why customers choose one luxury brand over another. In the US, customers place greater value on early access to products and loyalty rewards than on long waiting lists.

Although relatively few luxury shoppers buy online in China, many are willing to spend thousands of dollars in physical stores. Stores continue to play a key role in attracting first time aspirational luxury buyers. Meanwhile, many customers in the United States are unhappy with their shopping experience, with pushy sales staff and long queues being among the most common complaints.

Nowadays, more luxury buyers are using AI while shopping. US shoppers mainly use AI to generate ideas and inspiration before making a purchase.

Entry level luxury buyers in China use AI throughout their shopping journey, from discovering products to making purchasing decisions.

The market for second hand luxury goods is also growing. A new group of high spending customers in the US is increasingly buying pre-owned luxury products.

Many shoppers enjoy finding rare luxury items through resale platforms, rather than simply looking for lower prices. The report says brands must improve the customer experience, build stronger emotional connections and offer better value if they want to return to stronger growth.