“They are the architects of their own problems,” Sherwood continues. “By making your products focus not so much on the tangible product, but on the intangible aspects of the brands: those attractive ads, the celebrities selling their products, the stores, the glossy ads, the slogans, the backstory of the heritage, all those things that are not really the product itself.”
In turn, they have created a huge gap between what consumers actually pay and the real value of the product. As these companies have increasingly gone after the ultra-wealthy, they have left a gap in the market that other brands, eager to capitalize on, are beginning to fill. “They know that prices at the top of luxury are too high to reflect true value,” Sherwood says. “But we’ve turned these notable silhouettes and styles into desirable items that a misled brand can take advantage of.”
Then recently the varnish started to crack even more. In March, Italian luxury brand Loro Piana was embroiled in a scandal after an investigation revealed that the material behind its $9,000 sweaters came from low-paid workers in Peru. Just a few months later, in July, Italian prosecutors alleged sweatshop-like conditions at factories supplying certain products for high-end brands like Dior and Armani. The revelations sparked outrage among consumers, many of whom had long relied on these brands to maintain the highest standards of craftsmanship and ethics.
In online forums like the r/subreddit bagonce-loyal customers expressed disappointment. For many, these scandals revealed that the luxury brands they idolized were not living up to their promises. Both Loro Piana and Dior have denied the allegations. However, The fashion business revealed that the Milan prosecutor said in a court document that they had found “an illegal practice so deep-rooted and proven (that it could) be considered part of a broader corporate policy aimed exclusively at increasing profits.” Neither company has been charged in connection with the investigation.
This reputational damage couldn’t have come at a worse time for luxury brands. Along with the rise of cheating culture, these scandals are forcing consumers to rethink their relationship with high-end products. If craftsmanship is no longer exceptional and ethical practices are questioned, what exactly are people paying for when purchasing luxury goods?
Rebuilding the dream
Recent sales figures underline the extent to which demand for luxury megabrands has fallen from its post-pandemic highs. In July, some of the industry’s biggest players reported disappointing revenue for the second consecutive quarter. LVMH, the world’s leading luxury conglomerate, missed sales estimates, while Gucci’s parent company Kering saw an 11% drop. Other major brands such as Richemont and Burberry also reported disappointing figures, with first quarter sales falling by a staggering 20%.
At the heart of luxury’s current struggles is the erosion of the very dream that once powered the industry. The disconnect between marketing mythology and production reality has left consumers disillusioned, meaning the days of blindly paying a premium for a logo may be at risk.
The democratization of information and consumer power through social media has played a huge role in this. Platforms like TikTok and Reddit are full of conversations that challenge the industry’s value proposition, which has made it much more difficult for luxury brands to control their narrative.
To regain their position, Brittany Steiger, senior retail and e-commerce analyst at Mintel, says they will have to focus on what once made them so desirable: authenticity, superior craftsmanship and a prestige narrative that feels simultaneously aspirational. and attainable. Some experts suggest that adopting more transparent practices and truly delivering on your ethical and quality promises could also be the way forward. Brands that fail to do so may become increasingly irrelevant in a world where high-quality dupes continue to gain ground.
It’s clear that the old luxury model has been altered and it’s no longer just about price. In the battle between heritage and value, consumers are asking more questions and luxury brands must have better answers. And if they don’t, there’s a whole industry on the sidelines that does.