Some luxury players have faced a tough few years, such as Gucci owner Kering, which has seen sales fall amid ebbing demand in China. Meanwhile, competitors like Prada have flourished with more traction than ever. Still others, such as French Birkin maker Hermés, have stayed resilient despite the market signaling a weak appetite for high-end goods. 

In short, it’s hard to pin down one common theme impacting all luxury majors. 

Against this backdrop, 2025 could be the year that key markets shift beyond Chinese reliance, and the trend of “quiet luxury,” wherein luxury goods are understated rather than flashy, leads to unexpected consequences. 

As inflation slows and demand shows early signs of recovery, Bank of America’s analysts, led by Ashley Wallace, see a few trends emerge this year. 

“We think that like the game of snakes and ladders, 2025 will see many ups and downs for the luxury sector,” the analysts said. 

Is luxury its own problem?

Luxury’s downturn was preceded by a period of strong sales growth benefiting small and big players as home-bound pandemic-time shoppers splurged to their heart’s desire. 

As cycles typically go, it seemed predictable that the high will eventually lead to a low. 

But Bank of America analysts question whether the problem is linked to the sector itself rather than waxing and waning demand. 

“There is growing risk that ‘cyclicality’ is slightly more structural, especially if China is a more prolonged recovery or there is a lack of creative newness and brand engagement to drive cultural relevance,” analysts said in the Thursday note.

One issue observed across luxury is the drop in volumes, which means growth is driven more by price hikes. That could change this year as volumes return to becoming the focus, especially as costs associated with supply chain factors start cooling. 

So far, customers have swallowed most of the price increases, but they’re reaching their limit, pushing luxury companies to find other ways to grow.  

Companies, including Kering and others, lost €50 billion in market value last year, down 6% from a year earlier. Some 50 million customers globally have also turned away from luxury as it’s no longer appealing like it once used to be.

As the dynamics shift within luxury, companies are increasingly turning to social media. Last year, ahead of the 2024 Paris Olympics, LVMH amped up its campaigns via social platforms for greater visibility.  

“Social media, and especially Instagram, has been a key enabler of this mass adoption of luxury goods,” Bank of America analysts said, adding that the number of followers for key luxury brands on Instagram had increased six-fold since 2015. 

At the heart of demand

Americans have had their phases with luxury shopping, with a dip in demand for luxury leather goods last year. But this group will become more important in 2025 as brands see early signs of recovery, according to Bank of America.

Take Richemont, the company that owns Cartier and Van Cleef & Arpels. In the company’s third-quarter earnings, the U.S. was part of the best-performing region (“the Americas”). Middle East & Africa, and Europe contributed significantly to Richemont’s better-than-expected sales for the final three months of 2024. 

China, which has not entirely picked up on luxury spending, might remain flat through 2025.

The bank anticipates lower demand from Japan and the EU this year. Growth in the Euro area will be snail-paced, especially as some of its biggest members struggle to jumpstart their economies. Tourists from China might help nudge some of the spending up this year—but it’ll be a tricky balance for Europe given that tourism may not be booming.

“Since 2023, European luxury spend has been supported by outperformance of tourism. However, this has recently faded and looks set to be a headwind on 2025 revenue growth,” Bank of America analysts said. 

It’s also unclear just how much potential tariffs by incoming President Donald Trump would hurt luxury majors, many of whom are based in Europe.      

Rethinking quiet luxury

Quiet luxury emerged as the subtle counterpart to overt or “loud” luxury, which made a statement about every high-end product people owned. It became viral on TikTok and a feature of shows like “Succession,” turning brands like Miu Miu (owned by Prada) and Brunello Cucinelli into fan favorites. 

But quiet luxury’s main selling factor has also made it easy to replicate, flooding the market with cheaper copies of the branded accessory. 

“An environment with no logo also lowers barriers to entry and fuels copycat or dupes, in our view,” Bank of America analysts said. Since luxury’s appeal hinges on brand recognition and desirability, other niche labels have also turned to subtle branding to rise to popularity. 

So the sector’s big names need to make themselves unique again, they may need to go beyond quiet luxury.

“Dupe culture has always been around in luxury, however quiet luxury where the ‘top style’ is a beige cashmere jumper with wide grey pants made it even more attractive to try to get that ‘look’ for less, by shopping at COS/Uniqlo or J Crew instead,” the note said.