Luxury market & AI: five signals that the luxury industry is entering a new cycle

For more than a decade, the luxury industry benefited from exceptional momentum. Strong global demand, rapid international expansion and sustained consumer appetite fuelled years of continuous growth. Today, the market remains remarkably resilient, but the conditions that supported this expansion are changing. Recent analyses published by Bain & Company, Altagamma, BNP Paribas and Euromonitor all point in the same direction. Luxury is not entering a period of decline. It is entering a new cycle, characterised by slower growth, greater selectivity and profound changes in the way consumers discover, evaluate and ultimately choose brands.

Growth is slowing, but the market remains exceptionally strong

The global luxury market is expected to reach around €1.44 trillion in 2025, confirming the sector's remarkable scale. However, after years of exceptional expansion, growth has slowed considerably. Depending on the category, 2025 is expected to remain broadly stable, with a gradual recovery forecast for 2026 and long-term annual growth returning to a more moderate pace of around 3%. This does not signal the end of luxury. Rather, it marks the transition from an era driven by market expansion to one where sustainable growth will increasingly depend on strategic differentiation, stronger brand equity and the ability to create lasting value rather than simply benefiting from favourable market conditions.

Performance is becoming increasingly polarised

Another trend is becoming impossible to ignore: not all luxury brands are evolving at the same pace. According to Bain & Company, approximately 35% of luxury consumers reduced their spending during 2024 and 2025. At the same time, the strongest global brands continue to consolidate their leadership, while many mid-sized players face slower growth and increasing competitive pressure. Luxury is therefore becoming a market driven less by volume than by concentration. Value creation is increasingly captured by brands with the strongest positioning, the clearest identity and the greatest ability to justify premium pricing. The gap between market leaders and the rest of the industry is widening.

Experience is becoming more valuable than ownership

Consumer demand is evolving alongside the market itself. Research from Euromonitor highlights the growing importance of hospitality, premium services and immersive experiences within the luxury ecosystem. While product categories remain essential, consumers are increasingly directing their spending towards experiences that create emotion, memories and personal transformation. Luxury is gradually shifting from ownership to experience, meaning that the perceived value of a brand is no longer determined solely by what it sells, but by the quality of the relationship it builds with its clients and the emotions it is capable of creating over time.

Artificial intelligence is quietly transforming customer journeys

Perhaps the most underestimated transformation is taking place before the purchase even begins. According to industry analyses from KPMG, Bain & Company and several leading technology research firms, discovery is progressively moving from traditional search engines towards conversational AI. Consumers increasingly ask questions instead of typing keywords, expecting direct recommendations rather than long lists of links. As AI-generated answers become more prominent, some digital environments are already reporting organic traffic declines of up to 50%. The search journey is progressively becoming a recommendation journey, fundamentally changing how brands compete for visibility.

The new competition is to be recommended

This evolution fundamentally changes the rules of competition. Consumers are no longer comparing dozens of search results before making a decision. Increasingly, they receive only one, two or three recommendations generated by conversational AI systems. In this environment, visibility is no longer simply about ranking highly on a search engine. It is about becoming one of the few brands an artificial intelligence considers sufficiently credible, authoritative and relevant to recommend. Reputation, editorial authority, media presence and strategic positioning therefore influence not only public perception, but also the way AI models interpret, synthesise and present brands to future customers.

Our perspective

Luxury is entering a fundamentally different competitive landscape. Growth is becoming more selective, competition more qualitative, customer journeys increasingly conversational and artificial intelligence is emerging as a new gatekeeper between brands and consumers. At KALEA Communications, we believe this is precisely where communication strategies must evolve. Visibility can no longer be limited to search engines, media coverage or social platforms alone. Brands must also understand how they are interpreted, synthesised and recommended by generative AI, because this new layer of visibility will increasingly shape consumer perception and commercial performance.

The strategic question is therefore no longer simply "How do we create desirability?" It is becoming "How do we become the brand an AI chooses to recommend?"

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