The luxury jewelry market is set to outpace the broader luxury industry, fueled by a “younger and more diverse customer base” increasingly drawn to branded jewelry, according to a new report titled The State of Fashion Luxury. The study, co-authored by consulting firm McKinsey & Company and the Business of Fashion publication, predicts the jewelry sector will grow by 4% to 6% annually over the next two years, making it one of the most resilient categories in luxury, alongside leather goods.
This growth will be driven by rising demand from ultra-high-net-worth individuals and continued investments by luxury brands in technology and craftsmanship. However, the report highlights uncertainties, such as the impact of lab-grown diamonds on the natural gemstone market and whether engagement ring sales will recover post-pandemic.
In contrast, the luxury watch market faces a more modest outlook, with growth projected at 2% to 4% between 2025 and 2027. The “Big Three” watchmakers—Rolex, Patek Philippe, and Audemars Piguet—are expected to expand production and increase availability through multibrand retailers. Yet, traditional watches face growing competition from smartwatches and sport watches, while the cooling pre-owned market could further pressure prices.
The report also casts doubt on the luxury sector’s ability to sustain its recent growth rates. From 2019 to 2023, the industry grew at an average of 5% annually, with a remarkable 9% surge between 2021 and 2023. However, much of this growth was driven by price increases rather than higher sales volumes, alongside strong demand from Chinese consumers. With China’s economy slowing and shoppers becoming resistant to frequent price hikes, the report warns that luxury brands must rethink their strategies.
“As demand surged, brands raised prices but failed to adapt their creative strategies and supply chains to meet new scale requirements,” the report states. “This weakened their core value proposition and ultimately broke their promise to customers.”
To address these challenges, the report advises luxury brands to focus on quality, craftsmanship, and innovation. They must also improve customer communication and recruit fresh talent. Notably, the in-store experience has declined, with one-third of aspirational customers surveyed saying it has worsened. One U.S. luxury shopper quoted in the report shared a disappointing experience: “I came in looking to purchase a watch. My adviser was not knowledgeable about the timepiece, couldn’t find a strap, and gave me the wrong info. Horrible.”
The report concludes that the industry should use the current slowdown as an opportunity to reflect and recalibrate. “Luxury leaders must play the long game rather than relying on quick fixes,” it states. “Now is the time to take bold risks, rebuild connections with clients, and invest in critical areas of the business—even if the returns may not be immediate.”
By focusing on these priorities, luxury brands can navigate the evolving market and secure their future success.
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