Mass and prestige fashion brands have an opportunity to grow their consumer base with middle-income luxury shoppers trading down in 2025.

McKinsey & Co’s ‘The State of Luxury Fashion’ report suggests macroeconomic headwinds, shifting customer preferences and a deteriorating value proposition will all weigh on the global luxury sector in 2025.

The market experienced a period of “exceptional value creation” between 2019 and 2023, but as we step into 2025, it is expected to face a “significant slowdown that the report suggests has “hit even top brands hard”.

The report’s authors note that for the first time since 2016 (with 2020 and the height of the pandemic an exception), luxury value creation has declined.

It reads: “Several of the industry’s growth-driving engines have stalled. Macroeconomic headwinds — especially in the key China market, which grew

more than 18% annually from 2019 to 2023 — are weighing heavily on the sector.” 

McKinsey & Co predicts the luxury market’s growth in the years ahead will be slower, reaching between 1% and 3% annual global growth between 2024 and 2027.

Can mass fashion gain sales from luxury’s 2025 slowdown? 

Reduced disposable income will see decreased spend on luxury from aspirational customers in 2025 who have previously enjoyed trading up on certain fashion items. This is expected to have a greater impact on luxury footwear than luxury apparel. 

Luxury fashion will also see competition from the secondhand market as aspirational shoppers try to find more affordable ways to tap into select premium branded pieces. 

GlobalData’s retail analyst Neil Saunders sees the luxury fashion market’s shifting tide as an “opportunity” for mass and prestige brands to pick up custom from those trading down. 

He explains luxury had a fantastic time during the aftermath of the pandemic when consumers were flush with cash and getting back into the world. 

At that time the luxury market benefited from middle-income consumers trading up from their usual mass and prestige fashion brands.

So, the key question is whether those mass and prestige fashion brands can get these consumers back? 

Saunders points out the impact of inflation and economic tightening means the number of consumers involved in luxury is declining and thankfully for the mass fashion market, he says: “This is most noticeable among the middle-income brackets.” 

He adds: “This is one of the reasons why luxury is under pressure. It’s also why there’s an uneven performance by category, price level, and brand. Those more exposed to consumers with modest incomes are feeling the pinch.”

Saunders can see some potential for mass and prestige fashion brands to swoop in, however he remains cautious, stating: “These segments will not get all the gains as some shoppers are trimming volume”. 

The struggling luxury-mass fashion middle ground 

UK fashion retail conglomerate Frasers Group has spotted an opportunity to tap into the aspirational yet still affordable luxury fashion brand market in recent years. 

It increased its stake in luxury fashion brand Hugo Boss in July 2024 and purchased online luxury marketplace Matches Fashion in December 2023, however it did put it into administration three months later. 

More recently, Frasers Group made an offer to purchase struggling British luxury handbag brand Mulberry. Despite the offer being rejected, it suggested Frasers Group could see the potential of the lower end of the luxury fashion market. 

But, the key problem facing brands like Mulberry, which sit within the affordable luxury market bracket, is they are being impacted the most by the middle-income consumers’ financial squeeze. 

Capri Holdings, which owns luxury brands Versace, Jimmy Choo and Michael Kors, is another good example of this as it announced last summer that its revenue decreased 13.2% on a reported basis and 12.1% in constant currency for Q1 (ending 29 June 2024).

At the time the company’s chairman and CEO John D. Idol admitted he was disappointed with the results and blamed it on a “challenging global retail environment”.

Bain & Company partner and leader of Bain’s global Luxury Goods and Fashion practice Claudia D’Arpizio noted: “Many [luxury brands] are navigating a momentary crisis, driven by macroeconomic pressures and a polarised customer base.”

Which mass fashion brands could steal luxury market share in 2025? 

The real winners from the luxury market’s 2025 squeeze will be fashion brands that understand their consumers and offer quality as well as style. 

The winning brands do not need to be at the top end of the mass and prestige fashion market, but they do need to speak to aspirational shoppers who are currently struggling with finances. 

These brands should also dedicate some time and resources to making their offer attractive to middle income shoppers.

As Saunders highlights, the gains will not be automatic so “brands need to work really hard to convince consumers to spend”.

UK fashion brand Marks and Spencer was a real standout performer in 2024, which could put it in a strong position to steal some luxury brand market share in 2025. 

The retailer has already reported a robust performance for the 13 weeks to 28 December 2024 (Q3) with an industry expert crediting its new wider fashion appeal. 

GlobalData’s senior apparel analyst Pippa Stephens believes the retailer’s enhanced style credentials within clothing alongside its heightened appeal among a broader demographic of shopper has allowed it to maintain a strong growth momentum.

She noted its core clothing categories such as denim and knitwear outperformed in Q3, as consumers appreciated its quality and value for money when shopping for items they would get a lot of wear out of. During the festive period its partywear also grew, with a Sienna Miller collaboration likely contributing to this.

UK fashion retailer Next is another brand that could be in the running to benefit from luxury’s slowdown. 

It reported a full price sales rise of 6.0% in the nine weeks to 28 December. Its year-to-date figures show Next’s total full-price sales expanded by 5.6%, and its total online UK segment grew by 5.2%, while its online sales overseas increased by a robust 23.9%. 

GlobalData’s retail analyst Emily Salter told Just Style at the time: “Next has proven itself to be adept at adapting to changes in consumer demand over the past few years, so if this is the case, the investments it has made into its online and branded propositions in particular will continue to pay off.”