The Luxury Reset: Why AI Is Becoming the New Storefront

After two years of slowing demand, the global luxury industry may be entering a new phase of growth. But unlike previous cycles driven by affluent shoppers splurging on handbags and watches, the next chapter could be shaped as much by artificial intelligence as by rising incomes.

According to a new report by Boston Consulting Group (BCG) and Altagamma, the global personal luxury goods market is expected to grow 2-5% in FY26, with annual growth accelerating to 4-7% by 2029. The recovery, the report argues, will come from a broader consumer base, stronger customer retention and increasing domestic spending.

For India, the findings reflect a shift already visible across premium retail. Luxury buyers are becoming younger, more digitally native and increasingly selective about what they purchase. Instead of buying products primarily as status symbols, consumers are placing greater emphasis on craftsmanship, longevity and personal fulfilment.

"India's luxury market is evolving beyond aspiration to appreciation. Consumers are becoming more intentional in their purchases, placing greater emphasis on quality, craftsmanship and lasting value. At the same time, AI is becoming an integral part of the purchase journey," said Abheek Singhi, Managing Director and Senior Partner at BCG India.

The report suggests that AI is rapidly becoming the first point of interaction between luxury brands and consumers. Nearly 90% of luxury consumers now use AI or generative AI tools every week, while 79% use AI to research, compare and evaluate luxury products or experiences before making a purchase.

That marks a significant shift for an industry that has traditionally relied on boutique experiences, personal relationships and exclusivity to influence buying decisions. Today, consumers are increasingly consulting AI assistants before stepping into a store, forcing luxury brands to rethink how they market products and engage customers online.

Yet the industry appears underprepared. The report notes that around 60% of fashion and luxury companies remain at emerging or stagnating levels of AI maturity, suggesting many brands risk falling behind as consumer behaviour changes faster than their digital capabilities.

The findings also come at a time when the global luxury industry is recalibrating after a post-pandemic boom gave way to weaker demand in key markets such as China. Rather than depending on a handful of high-spending customers, brands are increasingly looking to build deeper relationships with a wider set of consumers and expand into adjacent categories such as wellness, hospitality and lifestyle.

"After a period of reset, luxury is back on track, but on a healthier and more balanced foundation. The next growth cycle will be driven by a more balanced consumer pyramid, deeper client relationships, broader lifestyle spending and local wealth," said Filippo Bianchi, Managing Director and Senior Partner at BCG and Global Head of Luxury.

For India, where luxury penetration remains relatively low compared with mature markets, the combination of rising wealth, digital adoption and AI-enabled discovery could offer brands a longer runway for growth. The challenge, however, will be maintaining the exclusivity that defines luxury while adapting to a shopping journey increasingly influenced by algorithms rather than sales associates.