In 1996, I bought a Chanel handbag for £800. Was I rich? No. Could I afford it? Yes, despite my salary at the time being £15,000 a year. Today, the same handbag would cost me £8,500. Am I rich? Still no. Could I afford it? Also no. My salary may have risen in the intervening years, but not as sharply as designer bags have. Then again, when a designer coat routinely costs £4,000, a dress £2,500 and a T-shirt £600, perhaps paying £8,500 for a handbag doesn't seem so steep by comparison.
Saying that, if people were queuing up to buy these exalted items, the £1.26 trillion luxury-goods industry wouldn't be in so much trouble. But from Birmingham to Beijing, the story is the same: save for a few stellar performers, sales are in the doldrums.
Read on for a stitch-by-stitch analysis of the factors giving luxury labels a kicking.
Eye-watering price hikes
Anyone who routinely browses the rails at Valentino, Dior or Gucci will have observed how steeply prices have risen, particularly post-Covid. Where once a designer handbag was vaguely affordable with some judicious saving, now it's out of reach for all but the 0.1 per cent. Ask any luxury brand why prices have risen so sharply and as an answer you'll receive a litany of justifications that run from Brexit through to spiralling manufacturing charges (labour, raw materials, transport and currency movement have all increased in cost).
A shorter answer? Because they can. While exorbitant prices might seem like the most obvious reason for sales to have stalled, some luxury CEOs would beg to differ. Major fashion brands have hiked prices by an average of 33 per cent since 2019, but this hasn't stopped Chanel (the second largest high-end label after Louis Vuitton) reporting a sales growth of 16 per cent last year to £15 billion.
Coco Chanel adjusting a model's dress, 1962
If it's simplistic to equate price hikes with falling sales, it's more accurate to describe a two-tier system whereby brands at the very top of the pyramid - Hermès, Chanel, Loro Piana, Brunello Cucinelli and The Row - actually benefit from price hikes. Luxury-goods analyst Luca Solca estimates that, for the majority of high-end brands, the top five per cent of their clients make up more than 40 per cent of sales. Ultra-high net worth individuals will always need something to spend their money on and crave ‘best of the best' products, which have a cachet that is only magnified by other people's inability to afford them.
It's why the smartest luxury brands create rare or limited-edition products: their prices generate those all-important talking points that cut through the noise on social media, ultimately driving sales. Case in point: the Millionaire Speedy, Louis Vuitton's $1 million handbag, released at the end of last year. Hermès's limited-edition Birkins are another example. While a new Birkin bag costs from £9,000 up to an eye-watering £150,000, ultra-rare iterations go for much more: in 2022, the auction house Sotheby's sold a Neige Faubourg Birkin for a record-breaking £235,000.
Confusion at the top
Christian Dior passed away in 1957, Coco Chanel in 1971 and Yves Saint Laurent in 2008. As founders, each was synonymous with their respective label. In 2024, of the big legacy brands, only Giorgio Armani and Miuccia Prada remain as founders/designers. By contrast, their peers appear to be engaged in a never-ending game of musical chairs.
A hard act to follow: designer Alexander McQueen in 2006
One of luxury's biggest challenges is succession. Take Chanel: in safe hands for 36 years under the leadership of Karl Lagerfeld, it is still casting around for a new creative director after his successor, Virginie Viard, exited in June. Valentino (who retired in 2008) recently replaced Pierpaolo Piccioli with Alessandro Michele, who headed Gucci between 2015 and 2023, and was himself replaced by Sabato De Sarno. Sarah Burton, creative director of Alexander McQueen since its founder died in 2010, was replaced after 13 years by Seán McGirr, and may or may not resurface at Givenchy. Peter Hawkings, meanwhile, lasted less than a year as head of Tom Ford, while rumours continue to swirl that Daniel Lee, formerly of Bottega Veneta, may soon exit Burberry due to ailing sales.
While everyone loves a rumour (‘Who'll get Chanel?' is the fashion industry's favourite parlour game), customers don't always respond well to change. Rather than breathing fresh life into a label, too much change can weaken brand perception. When customers are spending four figures, they like to know what they're buying into. Under Alessandro Michele, Gucci had a strong, distinctive identity and buoyant sales. By contrast, Sabato de Sarno's version is perceived as lacklustre, which has so far been reflected in sales. Legacy brands are under extreme pressure to produce results, but even the most talented designers take time to bed in. Firing them after a few seasons benefits no one.
Creativity locked down
British fashion colleges churn out creative designers in disproportionately high numbers. So where is the next Galliano or McQueen? Answer: probably toiling away under the restrictive edicts of an international design house owned by Kering, Richemont or LVMH, the industry's biggest players who function as a powerful oligopoly, between them owning most of the luxury labels you've ever heard of.
A Hermès Faubourg Birkin was sold by Sotheby's in 2022 for a record £235,000
So much control do these three exert over the industry that it's harder than ever for new talent to break through. Launching your own label takes deep pockets, and scaling it up requires investment beyond the reach of most. Little wonder the dream now for many design graduates is not to see their name above the door, but to secure a position at a storied luxury brand.
Once installed, however, they're unlikely to get to flex their creative muscles. In troubled times, brands are less likely to take risks and more inclined to focus on tried-and-tested formulas for what sells. Unfortunately, this can make for unexciting ideas that are derivative or recycled - ironically, at a time when luxury has never needed creativity more.
Sustainability not on the agenda
For an industry built on change, luxury brands can be freakishly slow to adapt to it - and never more so than when it comes to sustainability.
The Miu Miu micro-mini is one of the brand's bestsellers
‘Luxury fashion is dominated by five companies who control 80 per cent of the market,' says Sarah Crawley, co-founder of social-first creative agency The Good Influence. ‘They've been too slow to innovate, too greedy when it comes to the bottom line and have ridden the wave of the last few years, missing the changing consumer tide that's happening underneath. Resale, rental and repair is where the future lies, yet they've largely ignored this. I wouldn't be surprised if the likes of resale sites Vestiaire Collective and Hurr are now firmly on their acquisition agenda to give them access to this rapidly growing sector within luxury fashion.'
Crawley believes the luxury brands that continue to lead in this space are those with sustainability at their core, citing Stella McCartney as a prime example: in 2009 her Falabella bag, made entirely from plant-based materials, set a new industry standard.
Exposed by the court of TikTok
One of the positive things about TikTok is how effectively it pulls back the curtain, its 1.6 billion active users functioning as the ultimate hive mind. Luxury fashion thrives non smoke and mirrors: oblique pricing structures and obscure manufacturing processes have long been its lifeblood.
Twenty years ago, it wasn't common knowledge that luxury retailers tend to mark up items by approximately three times. Now, these and other facts are openly debated on TikTok, Reddit and myriad fashion blogs, with younger customers in particular more likely to question the status quo. This year, an investigation by Milanese prosecutors found that Dior and Armani were exploiting foreign labour, with Dior paying suppliers €53 to produce a handbag it sells for €2,600. The story spread on TikTok, as did reports that Hermès gatekeeps its bags, only selling them to customers with ‘sufficient purchase history'.
So, however assiduously luxury brands try to protect their image, the court of TikTok will speak truth (and occasionally untruth) to power. Yes, it can be overzealous (everyone's a fashion critic, regardless of knowledge or qualification), but luxury brands shouldn't merely use the platform to advertise: they should also track what's being said about them - and pay heed.
Hit by a nosedive in Chinese sales
For those unaware of China's importance to the global luxury economy, a brief crib sheet: in 2019, Chinese consumers accounted for a third of global luxury spending. In 2024, they account for less than a quarter.
A weakened property sector, a high level of personal debt and record levels of unemployment have all contrived to rob label-loving Chinese consumers of their spending power. Earlier this year, Kering saw £7 billion taken off its market value after sales fell by nearly 20 per cent, caused by plummeting demand in Asia for its trophy brand Gucci.
No incentives for sensa138 overseas visitors
By contrast, the UK's biggest problem, according to many luxury retailers, is that it's the only large European country not to offer overseas visitors tax-free shopping - an allowance dropped by the previous government in January 2021. The British Fashion Council claims that, while tourism in London's West End has recovered to pre-Covid levels, income generated is still 15 per cent less than it was then. In France during the same period, it has increased threefold. ‘It's hitting us hard,' says one British designer who didn't want to be named, because they're currently fighting for their label's survival. Even the high street is suffering. Kurt Geiger boss Neil Clifford said earlier this month: ‘International tourists, whether it be Middle Eastern or American travellers, are spending less time in London.'
Stars and sinkers
The biggest losers are Gucci (where sales are down 18 per cent), Saint Laurent (down nine per cent) and Balenciaga (down six per cent), with parent company Kering announcing a revenue drop of 11 per cent and an eight per cent share slump. LVMH also announced lacklustre sales, with revenues falling by one per cent and shares sliding by five per cent. In the UK, Burberry has issued profit warnings, while Mulberry sales are down by four per cent.
The biggest winner is Miu Miu, ‘little sister' brand of Prada (also performing well) and its slew of ‘must-haves' (recent hits: £600 knickers and £900 micro-miniskirts). Its distinctive looks went viral on social media, driving sales across the brand. In July, Prada Group announced that Miu Miu's first-half retail sales had risen by 93 per cent year on year.
LVMH-owned Loewe is also thriving. Overseen by Northern Irish designer Jonathan Anderson, like Miu Miu it's had a slew of hits this summer. According to the fashion shopping platform Lyst's quarterly trend report The Lyst Index, between April and June Loewe overtook Miu Miu as the ‘most covetable' brand in the world: no surprise to anyone who's been on a beach recently and seen just how many women were toting its £450 basket bags. Anderson is that rare beast who excels not only at product design but at marketing, too. As well as sponsoring this year's Met Gala, costuming the Challengers film and dressing stars like Zendaya, the designer created further talking points through the innovative casting for Loewe's advertising campaigns, which have starred Daniel Craig and Maggie Smith. Richemont-owned Alaïa is also doing well, despite having significantly less marketing budget than Miu Miu or Loewe.
What all three have in common is desirable products at their heart, coupled with a clear brand identity. If there is a formula for selling luxury, it would appear to be this: strong product + strong brand identity = sales.
If only it were that simple.
Saying that, if people were queuing up to buy these exalted items, the £1.26 trillion luxury-goods industry wouldn't be in so much trouble. But from Birmingham to Beijing, the story is the same: save for a few stellar performers, sales are in the doldrums.
Read on for a stitch-by-stitch analysis of the factors giving luxury labels a kicking.
Eye-watering price hikes
Anyone who routinely browses the rails at Valentino, Dior or Gucci will have observed how steeply prices have risen, particularly post-Covid. Where once a designer handbag was vaguely affordable with some judicious saving, now it's out of reach for all but the 0.1 per cent. Ask any luxury brand why prices have risen so sharply and as an answer you'll receive a litany of justifications that run from Brexit through to spiralling manufacturing charges (labour, raw materials, transport and currency movement have all increased in cost).
A shorter answer? Because they can. While exorbitant prices might seem like the most obvious reason for sales to have stalled, some luxury CEOs would beg to differ. Major fashion brands have hiked prices by an average of 33 per cent since 2019, but this hasn't stopped Chanel (the second largest high-end label after Louis Vuitton) reporting a sales growth of 16 per cent last year to £15 billion.
Coco Chanel adjusting a model's dress, 1962
If it's simplistic to equate price hikes with falling sales, it's more accurate to describe a two-tier system whereby brands at the very top of the pyramid - Hermès, Chanel, Loro Piana, Brunello Cucinelli and The Row - actually benefit from price hikes. Luxury-goods analyst Luca Solca estimates that, for the majority of high-end brands, the top five per cent of their clients make up more than 40 per cent of sales. Ultra-high net worth individuals will always need something to spend their money on and crave ‘best of the best' products, which have a cachet that is only magnified by other people's inability to afford them.
It's why the smartest luxury brands create rare or limited-edition products: their prices generate those all-important talking points that cut through the noise on social media, ultimately driving sales. Case in point: the Millionaire Speedy, Louis Vuitton's $1 million handbag, released at the end of last year. Hermès's limited-edition Birkins are another example. While a new Birkin bag costs from £9,000 up to an eye-watering £150,000, ultra-rare iterations go for much more: in 2022, the auction house Sotheby's sold a Neige Faubourg Birkin for a record-breaking £235,000.
Confusion at the top
Christian Dior passed away in 1957, Coco Chanel in 1971 and Yves Saint Laurent in 2008. As founders, each was synonymous with their respective label. In 2024, of the big legacy brands, only Giorgio Armani and Miuccia Prada remain as founders/designers. By contrast, their peers appear to be engaged in a never-ending game of musical chairs.
A hard act to follow: designer Alexander McQueen in 2006
One of luxury's biggest challenges is succession. Take Chanel: in safe hands for 36 years under the leadership of Karl Lagerfeld, it is still casting around for a new creative director after his successor, Virginie Viard, exited in June. Valentino (who retired in 2008) recently replaced Pierpaolo Piccioli with Alessandro Michele, who headed Gucci between 2015 and 2023, and was himself replaced by Sabato De Sarno. Sarah Burton, creative director of Alexander McQueen since its founder died in 2010, was replaced after 13 years by Seán McGirr, and may or may not resurface at Givenchy. Peter Hawkings, meanwhile, lasted less than a year as head of Tom Ford, while rumours continue to swirl that Daniel Lee, formerly of Bottega Veneta, may soon exit Burberry due to ailing sales.
While everyone loves a rumour (‘Who'll get Chanel?' is the fashion industry's favourite parlour game), customers don't always respond well to change. Rather than breathing fresh life into a label, too much change can weaken brand perception. When customers are spending four figures, they like to know what they're buying into. Under Alessandro Michele, Gucci had a strong, distinctive identity and buoyant sales. By contrast, Sabato de Sarno's version is perceived as lacklustre, which has so far been reflected in sales. Legacy brands are under extreme pressure to produce results, but even the most talented designers take time to bed in. Firing them after a few seasons benefits no one.
Creativity locked down
British fashion colleges churn out creative designers in disproportionately high numbers. So where is the next Galliano or McQueen? Answer: probably toiling away under the restrictive edicts of an international design house owned by Kering, Richemont or LVMH, the industry's biggest players who function as a powerful oligopoly, between them owning most of the luxury labels you've ever heard of.
A Hermès Faubourg Birkin was sold by Sotheby's in 2022 for a record £235,000
So much control do these three exert over the industry that it's harder than ever for new talent to break through. Launching your own label takes deep pockets, and scaling it up requires investment beyond the reach of most. Little wonder the dream now for many design graduates is not to see their name above the door, but to secure a position at a storied luxury brand.
Once installed, however, they're unlikely to get to flex their creative muscles. In troubled times, brands are less likely to take risks and more inclined to focus on tried-and-tested formulas for what sells. Unfortunately, this can make for unexciting ideas that are derivative or recycled - ironically, at a time when luxury has never needed creativity more.
Sustainability not on the agenda
For an industry built on change, luxury brands can be freakishly slow to adapt to it - and never more so than when it comes to sustainability.
The Miu Miu micro-mini is one of the brand's bestsellers
‘Luxury fashion is dominated by five companies who control 80 per cent of the market,' says Sarah Crawley, co-founder of social-first creative agency The Good Influence. ‘They've been too slow to innovate, too greedy when it comes to the bottom line and have ridden the wave of the last few years, missing the changing consumer tide that's happening underneath. Resale, rental and repair is where the future lies, yet they've largely ignored this. I wouldn't be surprised if the likes of resale sites Vestiaire Collective and Hurr are now firmly on their acquisition agenda to give them access to this rapidly growing sector within luxury fashion.'
Crawley believes the luxury brands that continue to lead in this space are those with sustainability at their core, citing Stella McCartney as a prime example: in 2009 her Falabella bag, made entirely from plant-based materials, set a new industry standard.
Exposed by the court of TikTok
One of the positive things about TikTok is how effectively it pulls back the curtain, its 1.6 billion active users functioning as the ultimate hive mind. Luxury fashion thrives non smoke and mirrors: oblique pricing structures and obscure manufacturing processes have long been its lifeblood.
Twenty years ago, it wasn't common knowledge that luxury retailers tend to mark up items by approximately three times. Now, these and other facts are openly debated on TikTok, Reddit and myriad fashion blogs, with younger customers in particular more likely to question the status quo. This year, an investigation by Milanese prosecutors found that Dior and Armani were exploiting foreign labour, with Dior paying suppliers €53 to produce a handbag it sells for €2,600. The story spread on TikTok, as did reports that Hermès gatekeeps its bags, only selling them to customers with ‘sufficient purchase history'.
So, however assiduously luxury brands try to protect their image, the court of TikTok will speak truth (and occasionally untruth) to power. Yes, it can be overzealous (everyone's a fashion critic, regardless of knowledge or qualification), but luxury brands shouldn't merely use the platform to advertise: they should also track what's being said about them - and pay heed.
Hit by a nosedive in Chinese sales
For those unaware of China's importance to the global luxury economy, a brief crib sheet: in 2019, Chinese consumers accounted for a third of global luxury spending. In 2024, they account for less than a quarter.
A weakened property sector, a high level of personal debt and record levels of unemployment have all contrived to rob label-loving Chinese consumers of their spending power. Earlier this year, Kering saw £7 billion taken off its market value after sales fell by nearly 20 per cent, caused by plummeting demand in Asia for its trophy brand Gucci.
No incentives for sensa138 overseas visitors
By contrast, the UK's biggest problem, according to many luxury retailers, is that it's the only large European country not to offer overseas visitors tax-free shopping - an allowance dropped by the previous government in January 2021. The British Fashion Council claims that, while tourism in London's West End has recovered to pre-Covid levels, income generated is still 15 per cent less than it was then. In France during the same period, it has increased threefold. ‘It's hitting us hard,' says one British designer who didn't want to be named, because they're currently fighting for their label's survival. Even the high street is suffering. Kurt Geiger boss Neil Clifford said earlier this month: ‘International tourists, whether it be Middle Eastern or American travellers, are spending less time in London.'
Stars and sinkers
The biggest losers are Gucci (where sales are down 18 per cent), Saint Laurent (down nine per cent) and Balenciaga (down six per cent), with parent company Kering announcing a revenue drop of 11 per cent and an eight per cent share slump. LVMH also announced lacklustre sales, with revenues falling by one per cent and shares sliding by five per cent. In the UK, Burberry has issued profit warnings, while Mulberry sales are down by four per cent.
The biggest winner is Miu Miu, ‘little sister' brand of Prada (also performing well) and its slew of ‘must-haves' (recent hits: £600 knickers and £900 micro-miniskirts). Its distinctive looks went viral on social media, driving sales across the brand. In July, Prada Group announced that Miu Miu's first-half retail sales had risen by 93 per cent year on year.
LVMH-owned Loewe is also thriving. Overseen by Northern Irish designer Jonathan Anderson, like Miu Miu it's had a slew of hits this summer. According to the fashion shopping platform Lyst's quarterly trend report The Lyst Index, between April and June Loewe overtook Miu Miu as the ‘most covetable' brand in the world: no surprise to anyone who's been on a beach recently and seen just how many women were toting its £450 basket bags. Anderson is that rare beast who excels not only at product design but at marketing, too. As well as sponsoring this year's Met Gala, costuming the Challengers film and dressing stars like Zendaya, the designer created further talking points through the innovative casting for Loewe's advertising campaigns, which have starred Daniel Craig and Maggie Smith. Richemont-owned Alaïa is also doing well, despite having significantly less marketing budget than Miu Miu or Loewe.
What all three have in common is desirable products at their heart, coupled with a clear brand identity. If there is a formula for selling luxury, it would appear to be this: strong product + strong brand identity = sales.
If only it were that simple.
