What are the major changes we should expect in luxury for 2025?

 

The debate over whether luxury goods justify their premium price tags has long been a point of contention.

 

Some argue that luxury brands offer higher quality and longevity, while others believe the price premium is primarily for branding, without any substantial differences in quality.

 

This divide often stems from varying demographic views on spending and the perceived value for money that luxury goods provide.

 

These perceptions are subjective and shaped by economic, sociological, and cultural factors. Attitudes toward luxury spending differ across income brackets, such as the middle class, upper-middle class, wealthy, and high-net-worth individuals (HNWIs), and between generations.

 

The generational divide in spending behaviours is growing more pronounced. Younger generations—Gen X, Millennials, and Gen Z—exhibit very different attitudes and purchasing habits compared to Baby Boomers.

 

As we look ahead to 2025, we can expect these differences to become even more pronounced, as economic pressures, technological advancements, and shifting values continue.

 

Luxury trends 2025

 

 

 

The role of generational differences

 

We have already talked about the role of generational differences in shaping a new appreciation for luxury. We have also talked about technology as an extension of luxury.

 

Tracking spending patterns across various demographic groups is complex.

 

No single metric can comprehensively account for the vast range of purchasing behaviours observed in luxury consumers. Research firms often categorise buyers based on income, lifestyle, and spending habits.

 

However, this approach tends to overlook groups who engage in luxury purchases for impulse buying, social or cultural influence, or as a form of self-reward.

 

In response, at NorthStar’s luxury report, we adopt a broader categorisation, recognising six key spending clusters:

 

  • Ultra and High Net Worth Individuals (HNWIs)
  • Affluent Consumers
  • Aspirational Consumers
  • Digital Natives
  • Experiential and Luxury Seekers.

This segmentation provides a more holistic view of luxury spending, influenced by economic, sociological, and cultural factors.

 

Baby Boomers (1946–1964) hold the most disposable income, followed by Generation X (1965–1980), Millennials (1981–1996), and Generation Z (1997–2012). However, the “Great Wealth Transfer” is set to dramatically reshape the luxury market in the coming years.

 

Luxury, slow luxury brands, and SMEs must develop strategies to anticipate shifts in 2025 and beyond.

 

Baby Boomers and the Silent Generation are expected to transfer an estimated GBP 65 trillion to younger generations, significantly increasing the wealth of Millennials and Gen X. This wealth transfer will drive a major transformation in luxury spending behaviours.

 

Digital Communication and generations

 

 

Motivators Behind Luxury Spending

 

The motivations for luxury spending differ significantly between generations, and these differences will only grow in importance as we approach 2025.

 

Gen X, for instance, is more value-conscious. This generation balances luxury purchases with practical considerations such as saving for retirement and supporting families.

 

Although Gen Xers have adapted well to digital technologies, they are more sceptical of trends and prioritise quality over brand names. Still, many are also part of the “Experiential and Luxury Seekers” segment, indicating that emotional and societal factors play a role in their luxury purchases.

 

Gen Z, on the other hand, is still in its early stages of wealth accumulation. Due to their decreased purchase power, this generation tends to be cautious with spending.

 

Gen Z’s purchasing decisions are influenced heavily by sustainability, authenticity, and ethical practices, with many favouring brands that align with these values.

 

Interestingly, Gen Z is driving a massive shift in the second-hand luxury market, especially in the United States.

 

According to ThredUp’s 2024 report, second-hand luxury sales could grow by 127% by 2025.

Such a drive connects directly with Gen Z’s preference for sustainable and affordable luxury options.

 

Lastly, digital media are also important. While Baby Boomers are still largely traditional consumers of advertising and news, Gen Z is inherently digital-first, spending a significant portion of their lives online.

 

This generational divide is already reshaping how luxury brands communicate with consumers and will only deepen by 2025 as digital and immersive experiences become central to luxury consumption.

 

What to Expect for 2025

 

As we look towards 2025, several key trends are set to reshape the luxury market.

 

  1. Experiential Luxury: Millennials and Gen Z are shifting from material goods to experiences. Luxury brands are focusing on personalised, exclusive events, custom products, and digital-first experiences. By 2025, 40% of luxury spending will go toward experiences (digital more than ever).
  2. Sustainability and Ethical Practices: Gen Z is pushing for more sustainable and ethical practices from luxury brands. Demand for sustainability is rising, with 70% of Gen Z willing to pay more for eco-friendly products. Luxury brands are embracing circular economy practices like upcycling, second-hand sales, and sustainable sourcing.
  3. Digital Integration: The luxury industry is going digital, with e-commerce and digital engagement vital for survival by 2025. Brands will offer personalised experiences, virtual fittings, and AR shopping to meet the demand for seamless online interactions. The share of luxury sales online will account for 30% of total sales by 2025, up from 12% in 2019.
  4. Luxury for the Mass Affluent: As Baby Boomers pass on their wealth, we will see the rise of a more diverse luxury consumer base. Luxury brands will focus more on the upper-middle class, not just ultra-wealthy individuals, with offerings that cater to aspirational consumers. 60% of luxury purchases by 2025 will come from consumers with annual incomes of $100,000 onward, indicating that brands are adapting to an audience that seeks status but at more accessible price points.

 

Shifting Attitudes and Behaviors

 

In the past, luxury brands primarily targeted high-net-worth individuals (HNWIs) and the ultra-wealthy. However, as generational shifts become more pronounced, this strategy is changing. Experts in the luxury industry, including c-suite leaders, have observed that marketing strategies now focus more on the upper-middle class, with a greater emphasis on projecting status rather than solely offering elite products. 

 

Burberry is an example of a brand adjusting its strategy. After experiencing declining sales, it recognized that its previous approach, which targeted a narrow luxury market, was ineffective. To address this, Burberry is reintroducing new brand codes and focusing on creating an inclusive and diverse brand experience that resonates with a wider audience.

 

As consumer behaviours continue to evolve, luxury brands must remain agile. The need for digital engagement, sustainability, and meaningful brand interactions will be even more pressing by 2025.

 

Brands that fail to align with the values of younger consumers, particularly Millennials and Gen Z, may find themselves struggling to remain relevant.

 

As luxury brands adjust to these changing dynamics, they must remain agile and responsive. Understanding the nuanced motivations of today’s consumers and offering tailored experiences will be key to thriving in the competitive and fast-changing luxury market.

 

Brands that successfully tap into these trends will be well-positioned for success as we approach 2025 and beyond.

Download the full report

Facebook
X
LinkedIn
FOLLOW US
NorthStar on LinkedIn
CONTACT

NorthStar Consulting UK
Office 211
73 Holloway Road
London
N7 8JZ

info@northstar-consulting.co.uk

NorthStar-Consulting