a, Richemont and the Swatch Group), HSBC Global Investment Research expects luxury retail growth to slow to 2.7 per cent, down from seven per cent in Q2. Anne-Laure Bismuth, HSBC’s head of luxury and sporting goods, said, “We had turned more cautious on the sector in early September, because of all the news about the situation in China deteriorating and the tough comparison basis in the US. During our pre-close discussions with the companies, we realised that conditions were worse than we had initially anticipated, prompting us to lower our estimates across the board, with Richemont being the sole exception.” HSBC predicts that Richemont’s Q3 organic sales will grow 13 per cent year on year. Broader socioeconomic factors have contributed to luxury retail’s decline. The Middle East conflict, for example, has affected tourism sales and increased shipping costs. But retail experts and strategists point to a larger problem. Simply put, luxury purchases no longer have a real “feel-good” quality, especially for aspirational shoppers. What is driving luxury’s slowdown? Neil Saunders, managing director at GlobalData, told Inside Retail that several factors are contributing to luxury’s weakness. “The first is sluggish growth in China which has, traditionally, been a huge engine of advancement for the top-end brands,” said Saunders. “The Chinese consumer is now more cautious and is also edging away from overt shows of wealth, which favours quieter brands. All of this is very unhelpful.” He also pointed to growing financial constraints among middle-income consumers. These shoppers may not buy high-end luxury frequently, but their occasional purchases account for a sizable part of the market. Many now find luxury too expensive and have shifted to premium labels, putting significant pressure on luxury sales growth. “The luxury labels don’t really want to respond by reducing prices as this undermines their status, so they’ve suffered customer erosion instead,” noted Saunders. Luxury shoppers have also become more discerning, even at the highest income levels. Saunders explained, “Brands that are flashy and loud have fallen somewhat out of favour as consumers look to more refined luxury and products that have longevity. This has dampened the frequency of spending to a degree, which is another factor in the slowdown.” Marie Driscoll, a chartered financial analyst and professor at Parsons, The New School, and the Fashion Institute of Technology, also points to the slowdown among Chinese luxury shoppers. She identifies a lacklustre shopping experience as another factor in the sector’s decline. “For much of the current century, aggregate luxury industry growth was propelled by the expanding Chinese luxury shopper, mirroring the growing wealth of the Chinese population,” said Driscoll. “Many houses became over-reliant on this secular trend, but Covid halted Chinese expansion, and it still remains muted six years later, as reflected in LVMH’s recent Q3 sales report. “While US demand remains vibrant, the loss of the Chinese and subsequently the Russian and more recently the Middle East has put focus on the US, where the luxury industry is exhibiting mid-single-digit growth, which largely reflects price increases and strong jewellery demand.” She added that the K-shaped economy has constrained discretionary spending among aspirational shoppers in the US, with stubborn food inflation and higher gas prices reducing disposable income. But economic pressures are only part of the problem. Driscoll said aspirational shoppers have little motivation to spend their hard-earned money on uninspired luxury designs marketed to them repeatedly. “What today’s luxury shopper wants is value, meaning, service and experience,” said Driscoll. “Brand values that reflect one’s own, be it sustainability, uber quality, social causes. Meaning that via clarity, originality and relevant brand experiences, from hospitality to activations and collaborations; service that is impeccable, attentive and personal, and experience that broadens a luxury purchase to a cultural event or creates community is imperative.” How retailers can reconnect with luxury shoppers Barney Stacher, CEO of consultancy Retail OCD, told Inside Retail that the key to winning back luxury shoppers, especially aspirational ones, is an enjoyable retail experience. “‘Happy is the new rich’. To me, that captures a question luxury brands increasingly need to answer: ‘Does this truly make me happier, or make my life better?’” said Stacher. In an uncertain world, shoppers are reconsidering what feels valuable and worth paying for. A beautiful object can certainly qualify, but efficiency, enjoyment and memorability also help shoppers justify the expense. Stacher said, “Brands need to examine the distance between the prices they charge and the distinction they deliver. Repeated price increases raise expectations for craftsmanship, originality, service and recognition. A higher price tag cannot carry that entire promise.” He added that the definition of a luxurious purchase is broadening. A luxury handbag now competes with a memorable trip or the comfort of keeping money available for emergencies. “For someone who already owns plenty, another possession may have to work harder to earn its place.” Looking ahead to Q4 and 2027, Stacher advised retailers to rebuild reasons to buy: distinctive products, credible pricing, meaningful entry points and service that makes people feel recognised. “The question is no longer simply, ‘Can I afford this?’” said Stacher. “It is, ‘What will this actually add to my life?’ Luxury earns its place when the pleasure of owning it lasts longer than the excitement of buying it.” Further reading: Why luxury’s new status symbol goes beyond the product