As the market for personal luxury goods emerges from a prolonged period of recalibration, growth hinges on fostering innovation and engagement with core consumers across the globe.

The luxury sector is facing a “challenging” and “somewhat unprecedented” environment, Prada Group chairman Patrizio Bertelli said—causing even once-hot brands like the company’s namesake label to lose momentum. Luxury companies for the most part view the current downturn as a cyclical blip in an otherwise robust industry. But the prolonged slump is revealing structural challenges—namely, heavier reliance on American and Chinese consumers, as well as a tendency to lean on price hikes rather than innovation to drive sales.

Luxury brands are grappling with downturns in the US and China, the largest markets for personal luxury goods, and will have to seize opportunities for growth from new markets and product innovation.

Chanel purchases Paris property at 42 Avenue Montaigne: The French designer snapped up the building one block from the Champs-Élysées as luxury competitors race to claim prime real estate.

Luxury brands are buying up premium real estate: Kering, LVMH, and Prada are spending big to acquire flagship properties on prime retail corridors.

As the dust settles on luxury’s big post-pandemic rebound, high-end brands will have to become savvier and more flexible to meet evolving consumer demands.

The personal luxury goods sector is riding a wave of high demand in the US and China, buoyed by wealthier consumers who are relatively immune to the impact of price increases. But brands will need to appeal to the rising Gen Z consumer, as well as strengthen loyalty among their most important customers.