The future of luxury: new report taps US and Chinese clients

The global luxury industry has officially moved past its explosive post-pandemic “super-cycle” and become a market that is fundamentally “shrinking and splintering” according to a recent report by McKinsey and Business of Fashion (BoF).

“The State of Fashion: Face to Face with Luxury Clients” is based on a survey of more than 2,000 clients and dozens of interviews across the US and China. It reports how the sector is navigating a multi-year transition toward normalised growth, projected at a more modest 4 to 6 percent annually through 2030.

The industry’s recent strategy of aggressive pricing — with average luxury retail prices spiking a staggering 61 percent between 2019 and 2025 — has backfired by alienating the traditional aspirational shopper. “Luxury brands spent the last few years prioritising clients least affected by economic headwinds, and in doing so, lost touch with everyone else,” comments BoF founder and CEO Imran Amed.

The real battleground for the sector’s future lies in the distinct, diverging behaviours of its two most powerful geographic anchors: the United States and China. While both nations are leading the luxury comeback, they are doing so under entirely different rules of engagement.

The retail landscape: store inspiration vs. store fatigue

One of the most glaring divides between American and Chinese luxury clients is how they view and interact with the physical retail footprint. While in Mainland China, the physical boutique remains an immersive space, the American luxury shopper is experiencing major brick-and-mortar fatigue.

Across all spending tiers, Chinese consumers rank the brick-and-mortar store as their number-one source of shopping inspiration. Luxury houses have responded by aggressively investing in high-performance “experience hubs” across major Chinese cities, transforming traditional storefronts into hyper-localised, sensory spaces that blend art, community and hospitality.

In the US, pushy sales tactics, transactional environments and rigid entry queues have actively put consumers off in-person shopping. American clients are demanding friction-free, seamless digital integration and a softer, relationship-first approach when they do choose to cross a boutique’s threshold.

“A store has to do many things at once. We have clients who come three times in a week and others who visit once a year. They want to look around and discover; they also want privacy and discretion,” explains Bruno Pavlovsky, president of Chanel’s fashion division, in the report.

Brand loyalty and the demand for experience

The modern luxury client worldwide is looking for far more than just a beautifully crafted status symbol. When given additional disposable income, nearly 30 percent of clients in both markets stated they would prioritise travel and wellness over material goods. However, how they define brand value diverges sharply by region. While American buyers are heavily viewing luxury through the lens of investment, Chinese clients, historically driven by overt logos and status indicators, are shifting rapidly toward self-expression and subcultural alignment.

Facing domestic economic shifts, US luxury consumers gravitate toward timeless, heritage-backed items that retain value, causing a massive surge in the secondary luxury market. Both established and aspirational Chinese buyers now prioritise an emotional connection with a brand over its heritage, logo recognition or even pure craftsmanship. They are looking for “creator energy” and brands that resonate with their personal values.

The digital frontier: quiet tech and AI adoption

Technology is no longer a gimmick in the luxury space; it is the invisible engine driving client retention. Interestingly, both US and Chinese established luxury clients are heavily relying on artificial intelligence to dictate their shopping journeys.

According to the data, 46 percent of established luxury clients across both markets utilise AI for design inspiration and trend discovery, and 54 percent leverage it to evaluate brands. In highly technical categories like hard luxury (watches and fine jewellery), that figure climbs to 57 percent.

Outlook

For luxury executives, the path forward requires unlocking the massive 70 billion to 90 billion US dollar pool of underserved “established” luxury clients — those spending between 5,000 and 50,000 US dollars annually. To win them over, fashion houses must abandon the illusion of artificial scarcity and marketing-driven waitlists. The future of luxury belongs to the brands that can deliver authentic emotional resonance in Beijing while perfecting seamless, low-friction clienteling in New York.

Across markets, brands are well served to keep in mind that luxury sales worldwide are driven by four factors: desirability, exclusivity, luxury experiences and discovery, which moves beyond brand-owned channels.