Luxury prices in Europe are as much as 61% higher than they were five years ago, yet global luxury spending contracted by 1% to 3% in 2025 at current exchange rates, totaling €1.44 trillion globally, according to Bain & Company. The 61% higher luxury prices in Europe and the 1% to 3% contraction in global luxury spending indicate a market in flux, where escalating costs are not translating into increased consumer outlay, prompting a re-evaluation of value among affluent buyers. The trend suggests that the traditional premium pricing model faces increasing resistance, leading to a contraction in the overall market.
Traditional luxury brands continue to implement aggressive price increases, but affluent consumers are reducing overall spending and actively shifting towards more value-driven alternatives. Sales of personal luxury goods, a core segment of the market, are forecast to total €358 billion in 2025, representing a 2% erosion from 2024, according to Bain & Company. This erosion, following a decline from €369 billion in 2023 to €364 billion in 2024 for global personal luxury goods sales, as reported by Business of Fashion, underscores a broader reduction in high-end purchases.
Traditional luxury brands clinging to aggressive price hikes are on a collision course with a new generation of affluent consumers, a dynamic evident in consumers reducing overall spending and shifting towards more value-driven alternatives. These consumers are increasingly prioritizing value and accessibility over inflated brand prestige. The reasons for reduced luxury spending by affluent consumers in 2026 appear rooted in this fundamental re-evaluation of worth, rather than a mere reduction in overall purchasing power. The market's future belongs to brands that can deliver perceived value and quality without prohibitive price tags.
The prevailing thesis suggests that traditional luxury brands' aggressive price hikes are backfiring, driving affluent consumers away from high-end purchases towards accessible luxury and the resale market. The shift of affluent consumers away from high-end purchases towards accessible luxury and the resale market is reshaping the luxury landscape, forcing established players to rethink their market positioning. The market is not uniformly contracting; rather, it indicates a significant shift in consumer preference towards more attainable luxury items, suggesting a redefinition of 'luxury' itself rather than a complete abandonment of the category.
