Asia leads new growth opportunities for luxury companies
Though growth in the global luxury industry has slowed somewhat this year, the sector still remains resilient, especially in emerging markets like India and China, which are now driving new growth. That is according to a study from Simon-Kucher, which surveyed luxury consumers globally.
There has been a shift in demand from long-time luxury markets in Europe and the US to Asia in recent years. Part of the shift in demand has also been led by younger buyers with a different set of demands, including for sustainability and digital channels.
After several years of double-digit expansion, the luxury industry has entered a new phase of slower, but more selective growth. Though the sector is still doing moderately well in Europe and the US, India and China continue to lead spending increases. More mature markets like Europe and the US show stable but more cautious consumption.
Chinese consumers did not perceive price hikes within the last two years as strongly as other regions. In Europe, the US, and India, in contrast, consumers report feeling that prices have increased significantly. The survey shows over 60% of Indian, European, and American consumers felt prices increased.
One third of Americans reported feeling value for money had dropped amid these price increases, while Indian consumers reported little to no impact from price hikes. Luxury watches were an exception here, with few saying value for money had fallen in this category.
Marketing matters
The survey shows that consumers in China and India reported receiving more promotional communications from luxury brands. In fact, 59% of respondents in India (and 45% in China) said they receive promotional marketing frequently.
The survey shows that marketing campaigns in the luxury industry could be more effective. From 40% to 45% of Americans reported being unsatisfied with the frequency and personalization of communications, as well as with the effectiveness in driving engagement.
Tariffs and supply chains
China has likely faced the most trouble from US tariffs issued by the Trump administration this year. Despite the shakeup of business-as-usual, China has mostly been able to negotiate favorable outcomes, given their powerful position.
The tariffs have hit countries around the world and have affected a wide range of industries, including luxury. Simon-Kucher estimates that tariffs have impacted up to 39% of exports from Switzerland to the US and a total of 15% of goods from the European Union as a whole.
The trouble brought on by tariffs has partly exposed how some luxury brands have been overly reliant on single-origin models and long, margin-thin supply chains. The traditional strength of the luxury sector has focused on heritage, craftsmanship, and scarcity. These factors remain intact, but the structural economics beneath them are being rebalanced.
Paths forward
In order to address some of these issues, Simon-Kucher recommends really highlighting the story behind products in order to give more credibility and justify prices. The report urges brands to celebrate craftsmanship, innovation, and cultural collaboration.
Services, including loyalty programs and better digital outreach, will also be hugely important for luxury brands.
“Although your products remain the foundation of your brand, treat services as the next frontier of growth. Invest in direct-to-consumer experiences, experiential flagships, and exclusive after-sales programs to build differentiation and resilience,” says Camille Drumel, partner at Simon-Kucher.
“In digital channels, build service ecosystems, from personalized styling and private memberships to blockchain-based provenance tools that sustain trust, exclusivity, and long-term loyalty online.”
