January - February 2026 market overview: weather shocks, digital tensions and a luxury industry at a crossroads

The first two months of 2026 have confirmed what many industry observers had already sensed at the end of last year: retail and luxury are no longer navigating cyclical fluctuations, but structural transformations. From weather-disrupted winter sales in France to Spain’s accelerating tax free boom, from the sustainability imperative reshaping business models to the pricing recalibration triggered by creative resets, the market is being tested on multiple fronts.

Below, we bring together the most relevant signals shaping the competitive landscape at the start of the year.

Winter sales in France: a season out of sync

The 2026 winter sales season in France opened under particularly challenging conditions. Severe cold and snow warnings across 21 departments disrupted foot traffic at a moment when retailers were already struggling with a soft December and growing promotional fatigue.

Physical store revenues in December had already declined by -4.5% year-on-year, reflecting both unusually mild early-winter temperatures and the continued cannibalization effect of Black Friday. By early January, many retailers were entering the sales period with high inventory levels and limited pricing power.

Independent retailers appear particularly exposed. In January 2025, their revenues had already fallen -5.5% compared to January 2024, while large retail chains recorded a near-flat performance (-0.2%). With digital sales representing just 3-7% of turnover for many independents, the shift to online channels offers only partial mitigation during weather-related disruptions.

Consumer behavior data confirms a structural shift: 67% of French shoppers no longer wait specifically for official sales periods, instead reacting opportunistically to promotions throughout the year. While 64% still intend to shop during sales, the event-driven urgency that once characterized January discounting has clearly eroded.

Industry associations are now calling for a calendar revision, arguing that current sales periods are misaligned with seasonal purchasing patterns. The broader issue, however, goes beyond timing: it reflects a saturated promotional environment where price events have lost their scarcity value.

Luxury and planetary limits: from circularity to regeneration

If January highlighted short-term operational fragility, February brought attention back to long-term structural transformation, particularly sustainability.

The global luxury market reached €364 billion in 2024, yet its exposure to resource scarcity, ESG scrutiny and regulatory tightening is intensifying. Raw materials such as leather, gold and cashmere are under pressure, while frameworks like the CSRD and broader European Green Deal policies are raising compliance thresholds.

Recent analyses of sustainable luxury business models point to a widening adoption of circular economy strategies. While entry-level initiatives - such as recycling or energy recovery - remain common, more transformative approaches are gaining visibility:

• Repair is emerging as a strategic lever. Houses such as Hermès, Chanel and Cartier are strengthening after-sales services to extend product lifecycles.
• Upcycling and remanufacturing initiatives - seen at brands like Prada (Re-Nylon) - blend creativity and circularity.
• Secondary markets are accelerating: 65% of luxury consumers declare interest in purchasing second-hand products.

However, the most disruptive models are those that aim to reduce production volumes altogether, through made-to-order systems, limited runs and regenerative sourcing. Groups such as Kering are investing in regenerative agriculture, signaling a shift from “doing less harm” to generating measurable positive impact.

The central tension remains economic: luxury has historically relied on growth and expansion. Aligning value creation with planetary boundaries requires not incremental adjustments, but a redefinition of desirability itself.

Luxury beauty e-commerce: between algorithms and aura

Digital transformation in luxury beauty illustrates another paradox.

By 2026, e-commerce is projected to account for nearly one-third of global health and beauty sales, up from 20% in 2021. In France alone, beauty e-commerce revenues grew +41% between 2019 and 2024. Meanwhile, the premium cosmetics market is expected to reach $203.3 billion by 2033.

For French luxury maisons such as Chanel and Dior, this acceleration creates a philosophical dilemma: can algorithmic personalization replace artisanal expertise?

Data shows that 71% of consumers expect personalized interactions, and that shoppers receiving tailored recommendations are 75% more likely to purchase. Yet personalization in luxury is not merely about predictive analytics; it is traditionally rooted in human consultation, ritual and sensory experience.

Technologies such as AI skin diagnostics and augmented reality try-ons promise conversion boosts - Shopify reports conversion uplifts of up to +94% when 3D/AR content is integrated. However, leading brands are increasingly positioning technology as an augmentation tool rather than a substitute for human expertise.

The winning formula in early 2026 appears hybrid: digital convenience combined with curated scarcity and elevated in-store ritual. In a saturated algorithmic environment, human attention itself becomes a differentiator.

Madrid challenges the Paris–Milan axis in tax free luxury

Geographically, Europe’s luxury gravity is subtly shifting.

While Paris and Milan still dominate tax free luxury spending -each accounting for roughly 26% of the European total - Spain is rapidly consolidating its position as the continent’s third-largest market with an 18% share.

More striking is Spain’s recovery trajectory: tax free spending has reached 179% of 2019 levels, more than triple the European average recovery rate of 50%. Spain is also growing at +15%, nearly double the European average of +8%.

Madrid alone now accounts for 45% of national tax free spending, up from 38% in 2019, and posts a 14% CAGR (2019–2024), well above the 9% recorded in Paris and Milan.

A key driver is Latin American tourism, representing 33% of Spain’s total tax free spend, a share four times higher than in Italy. While average spend per South American tourist stands around €900, below the €1,500+ average of US visitors and far from the €6,000 average of Middle Eastern shoppers, high volumes compensate for lower ticket size.

Despite European tax free growth stabilizing at +1% in the first nine months, Spain’s structural tourism momentum - international visitor spending rose from €92 billion in 2019 to €107 billion in 2024, with further increases projected - positions Madrid and Barcelona as increasingly credible challengers to the traditional Paris–Milan axis.

The creative reset and luxury’s pricing reckoning

Finally, pricing strategy remains one of the most delicate topics of early 2026.

After four years largely driven by price increases, resistance has become visible. 72% of Gen Z luxury shoppers recently indicated they would prefer a lower-cost alternative over a heritage icon such as the Birkin, signaling generational pushback against perceived excess.

According to insights shared by Competitoor’s CEO Maurizio Catellani, handbag price increases moderated significantly in 2025, suggesting that the post-pandemic “price elevation era” is slowing.

Concrete examples illustrate recalibration:

• Burberry reduced average handbag prices by 12–18% year-on-year in the UK, while maintaining slight increases (1-4%) on core items such as the Kensington trench.
• Under new creative leadership, brands such as Celine introduced handbags at $2,100, notably below the now-rare sub-$3,000 threshold in luxury leather goods.

At the same time, runway pieces continue to stretch upper price tiers, evidence that segmentation, rather than blanket reductions, is the emerging strategy.

The arrival of multiple new creative directors across major houses presents a rare recalibration window. The key challenge is balance: maintaining aspirational positioning while reintroducing accessible entry points to rebuild volume and attract younger cohorts.

In 2026, pricing consistency, perceived quality and authentic creative value appear more critical than further upward adjustments.

A market redefining its coordinates

Taken together, the signals from January and February 2026 depict an industry in transition.

• Promotional fatigue is eroding the traditional sales calendar.
• Sustainability is shifting from compliance to business model transformation.
• Digital acceleration in beauty demands a redefinition of exclusivity.
• Madrid is emerging as a serious contender in European luxury geography.
• Pricing power is no longer infinite, and creative renewal is being tested against economic realism.

For market intelligence professionals, these are not isolated stories but interconnected dynamics. Weather shocks, consumer psychology, regulatory pressure, digital standardization and geopolitical tourism flows all intersect in shaping competitive positioning.

The months ahead will reveal whether brands can align creativity, accessibility, sustainability and profitability into a coherent strategy. What is already clear is that 2026 has begun not with incremental adjustments, but with structural questions that will define the next cycle of growth.