The year 2026 is shaping up to be a challenging one for the luxury goods industry. The sector’s outlook will be influenced by changing consumer habits, geopolitical crises affecting key markets, and the growing role of artificial intelligence in the way consumers discover luxury brands and interact with them. After two years of declining spending, analysts expect only slight growth this year. Whether this growth materialises will depend on the durability of the agreement concerning Iran, a rebound in consumer spending, and an improvement in the Chinese market. At the same time, the luxury industry will have to respond to a shift in consumer behaviour, as buyers move away from conspicuous displays of status towards products and services that offer real value, support wellbeing and provide unique experiences.
After two years of decline and stagnation in 2025, global spending on luxury goods is expected to return to modest growth in 2026, rising by 0–2 percent at constant exchange rates to around EUR 1.44–1.47 trillion, according to consulting firm Bain & Co. This forecast is based on a baseline scenario in which tensions in the Middle East ease, domestic demand remains stable, and the gradual recovery in China — visible since the end of last year in improving quarter-on-quarter data — continues. Bain assigns a 70 percent probability to this scenario. A more optimistic variant, to which the firm assigns a 20 percent probability, assumes growth of 4–6 percent, supported by lower geopolitical risks, stronger demand in China and renewed acceleration in the United States.
The United States remains one of the most important reference points for the sector. Spending on luxury goods and, to a lesser extent, on cosmetics is increasing, while revenues of US luxury brands rose by 10–15 percent year on year in the first quarter of 2026 at constant exchange rates. In China, the recovery remains cautious. Online sales of luxury goods increased by 25–35 percent year on year in the first quarter, supported by a shift in demand away from leather goods towards ready-to-wear clothing, as consumers increasingly invest in themselves rather than merely signalling status.
Europe remains the weakest link. The region is struggling with fatigue among local consumers, a 15–25 percent decline in customers from the Gulf states in the first quarter of 2026 due to the war, and fewer tourists from the United States. The strong euro is reducing the price advantage of shopping while travelling, and spending by foreign tourists fell by 20 percent in February. The luxury goods market is stabilising, but it is becoming increasingly differentiated by region and product category. In 2026, goods and services related to luxury experiences are clearly outperforming personal luxury goods in terms of consumer sentiment, with an advantage of 150 percent. This reflects the broader shift from owning things to consuming experiences.
Consumers in the United States and China will largely determine which brands become leaders in the luxury goods sector. According to the latest report by consulting firm McKinsey, the United States will remain the largest market by sales, while China will be among the fastest-growing markets through 2030. In both markets, an emotional connection with a brand has become one of the most important factors shaping its appeal, overtaking traditional luxury differentiators such as craftsmanship, brand heritage and exclusivity.
Consumers increasingly expect a brand to reflect their personality, values and aspirations, rather than merely communicate wealth or high social status. However, this need takes different forms depending on the market. In the United States, luxury buyers are increasingly turning to younger, ambitious brands that challenge market leaders, known as challenger brands. This is forcing established fashion houses to act more like disruptive brands: through campaigns more deeply rooted in culture, bolder creativity and the building of communities around shared values. In China, brands with a strong position and long history continue to hold an advantage, as consumers place particularly high value on trust, recognition and authority. Brand appeal there is built through visibility and highly personalised service, giving customers the feeling that the brand knows them, rather than simply trying to sell to them.
In both markets, craftsmanship and quality are now merely the entry requirements for the luxury category. Exclusivity is increasingly determined by recognition, access and unique experiences. In the United States, this may mean early access to products, limited editions or privileges resembling membership programmes. In China, greater importance is attached to tailor-made services, private boutique visits and relationships based on support from advisers. Importantly, many Chinese consumers now perceive challenger brands as more exclusive than traditional luxury houses.
At the same time, as McKinsey notes, artificial intelligence and the resale market are changing the way consumers discover luxury goods and engage with brands. Here, too, there are significant differences between markets. In the United States, AI is becoming an important source of inspiration and a factor influencing purchase consideration, especially among higher-spending customers. This means that brands must better optimise product information, reviews and the narrative around their offering so that they are visible in AI-based environments. The resale market, meanwhile, responds to the desire to find unique products, discover opportunities and build collections, increasing the influence of secondary-market platforms on which products gain the status of icons or investment-grade assets.
In China, artificial intelligence is used more functionally — primarily to assess product specifications and quality. However, it should complement, not replace, human contact and high-quality service. Trust also remains a key factor in the resale market, where authenticity, documented product provenance and seller credibility are essential conditions. For brands, closing these trust gaps may prove necessary before they can fully capture the potential of consumer engagement based on AI and resale.
Since the beginning of the year, shares of luxury companies have underperformed the broader market. The S&P Global Luxury Index, which includes 80 of the industry’s leading companies, has lost almost 7 percent. In Europe, the Stoxx Europe Luxury 10, which groups 10 leading companies operating in luxury fashion accessories, cosmetics, personal care products and premium cars, has fallen by 4.5 percent since the start of the year. With consumer spending still weak, affected by inflation and changing shopping preferences, the performance of these indices clearly shows the scale of pressure facing companies in the luxury goods sector. For investors, 2026 may be a year in which selective stock picking becomes crucial. Rather than taking a broad approach to the entire sector, the focus will be on companies capable of adapting to new conditions while maintaining pricing power and brand prestige.
