The global luxury industry is expected to edge back toward growth this year after an extended slowdown, but the rebound is likely to be gradual rather than a return to the boom conditions of the last decade. That is the central conclusion of the latest State of Fashion report from The Business of Fashion (BoF) and McKinsey & Company, which forecasts the sector will expand at a muted 4% to 6% annually through 2030 well below the high single-digit growth rates that once defined luxury’s rise.
The report suggests that the next chapter of expansion will be concentrated, with China and the United States contributing the largest share of momentum. The US, now estimated to be a roughly $130 billion market and the world’s biggest, is projected to grow by up to 5% per year through 2030. China’s high-end market, valued around $60 billion, is expected to regain pace and outgrow other regions, potentially expanding by as much as 6% annually.
Yet the report argues that growth will be harder to earn than it was during the post-pandemic surge. As the spending frenzy faded, luxury customers reassessed priorities and became more selective about where they spend. Experiences particularly travel are increasingly taking precedence over product purchases, while inflation has reduced appetite for discretionary fashion buys, including handbags.
The study also points to a credibility issue created during the boom years: widespread price hikes at major houses, often not matched by clear product innovation, left many shoppers feeling that value had deteriorated. In response to volatile trading, brands shifted focus toward ultra-wealthy clients who are less exposed to economic pressure. But the report says this pivot came at a cost: many brands failed to keep aspirational and mid-tier customers engaged, giving them fewer reasons to return to stores despite these buyers forming a crucial base for volume and brand heat.
In both China and the US, emotional connection has become the most important driver of luxury purchasing decisions. As shoppers become choosier, they gravitate to brands that feel personally relevant and aligned with their tastes and values, while heritage alone is losing influence.
The dynamics differ by market. Chinese consumers often use luxury as a form of outward expression, while US shoppers tilt more toward self-reward and shared values. In the US, 68% of luxury customers say challenger brands reflect who they are better than legacy houses. In China, 69% say legacy brands global and domestic still best represent their identity.
The report also notes growing scepticism toward artificial scarcity. In China, bespoke service has become the top marker of exclusivity; in the US, early access and loyalty benefits are more persuasive than waitlists.
Retail execution remains pivotal. Physical stores strongly influence Chinese shoppers across segments, particularly entry-level customers. In the US, by contrast, poor in-store experiences pushy selling and long queues are cited as major deterrents.
Finally, the global luxury industry is seeing rising use of AI and resale. More US shoppers use AI for inspiration than Chinese shoppers, while China’s entry-level consumers are highly engaged with AI across discovery and decision-making. Resale is also gaining importance, especially among high-spending US clients drawn as much by “the thrill of the hunt” as by savings.
