The luxury market is “normalising, not declining structurally”, with brands now focused less on scale and speed, and more on “creative clarity and consumer engagement,” Kearney says in the report.
The global luxury sector is shifting to a period of stabilisation instead of a decline, Kearney’s 2026 Global Luxury Industry Outlook said.
It forecasts global luxury market growth of 2-4 per cent in 2026, while the US, Europe and China will be key to maintaining demand.
Growth is likely to remain fragile in Europe as brands tackle rising retail rents, regulatory pressures and cautious consumer spending.
As brands address slower growth, shifting consumer expectations and continued economic uncertainty, the report expects performance to vary significantly across regions, product categories and consumer groups.
Last year marked ‘a year of recalibration’ for the luxury industry, following a period of aggressive price increases, operational restructuring and creative change across major luxury houses.
The United States, Europe and China are the key regions in maintaining global luxury demand in 2026, continuing to provide the “scale, infrastructure, and client concentration that anchor global luxury demand”. However, that each market is evolving differently, the American global management consulting firm observed.
Growth is likely to remain fragile in Europe as brands tackle rising retail rents, regulatory pressures and cautious consumer spending. Aspirational consumers in the continent are increasingly delaying or trading down on purchases, while high-net-worth clients remain active.
In China, the luxury market has stabilised following volatility in 2024, yet is unlikely to return to the double-digit growth reported in previous years. Spending is concentrated among wealthier consumers, while categories tied to experiences and jewellery continue to perform strongly.
The US market continues to be influenced by what Kearney described as a ‘K-shaped dynamic’, in which affluent consumers continue spending while aspirational shoppers become more selective. US consumers of luxury products across income groups are becoming increasingly sensitive to unbalance between price and quality, the report stated.
Meanwhile, Japan, Southeast Asia and the Middle East markets are expected to outperform this year. Southeast Asia is seeing rising demand from younger affluent consumers entering luxury for the first time.
Handbags proved a strong category, with prices rising by as much as 10 per cent over recent cycles, outpacing apparel and footwear prices which declined by 5-7 per cent.
Kearney found that the top 2 per cent of luxury consumers now account for almost half of total industry spending, while aspirational consumers are becoming increasingly selective about when and where they engage with luxury brands.
Seventy-three per cent of respondents said price increases had caused them to pull back on luxury spending, while 36 per cent said they were buying less often or feeling less excited about luxury overall and 63 per cent still defined luxury primarily through quality and craftsmanship.
Kearney described artificial intelligence (AI) as becoming part of the ‘core element’ of the luxury goods infrastructure, embedded across forecasting, design, supply chains, customer service and personalisation.
Nine-tenths of luxury fashion executives believe AI-driven personalisation is becoming essential for brands, while 60 per cent of consumers are expected to use AI shopping agents in 2026.
“2026 will not reward scale or speed alone—but clarity, discipline, and relevance sustained over time,” the outlook added.
Fibre2Fashion News Desk (DS)