“They are the architects of their own problems,” Sherwood continued. “By making it less about the tangible product and more about the intangible aspects of the brand – the sexy commercials, the celebrities endorsing your product, the stores, the commercials The flashiness, the slogans, the heritage storyline, all those things that are not really the product.”
In turn, they have created a large gap between what consumers actually pay and the true value of the product. As these companies increasingly pursue the super-rich, they have left a gap in the market that other brands, eager to capitalize, are starting to fill. “They know that the top price of luxury items is too high to reflect actual value,” Sherwood said. “But turned these remarkable shapes and styles into desirable pieces that a scam brand could use.”
Then, recently, the veneer started cracking even more. In March, Italian luxury brand Loro Piana was caught up in scandal after an investigation reveals the material behind its $9,000 sweaters is sourced from low-paid workers in Peru. Just a few months later, in July, Italian prosecutors alleged sweatshop-like conditions in factories supplying some products to luxury brands like Dior and Armani. These revelations have sparked outrage among consumers, many of whom have long trusted these brands to maintain the highest standards of workmanship and ethics.
Across online forums such as r/handbags subredditOnce loyal customers have expressed disappointment. For many, these scandals revealed that the luxury brands they idolized were not delivering on their promises. Both Loro Piana and Dior denied the allegations. However, Fashion business revealed that Milan’s prosecutor said in a court document that they had found “an entrenched and proven illegal practice [that it could] considered part of a broader business policy aimed at increasing profits.” Neither company has been charged in connection with the investigation.
Such reputational damage couldn’t come at a worse time for luxury brands. Along with the rise of scam culture, these scandals are forcing consumers to rethink their relationship with luxury goods. If craftsmanship is no longer the exception and ethical practices are being questioned, what exactly are people paying for when they buy luxury?
Rebuild your dream
Recent sales figures highlight how much demand for major brands has fallen from post-pandemic peaks. In July, some of the industry’s biggest companies reported disappointing revenue for the second straight quarter. LVMH, the world’s leading luxury group, missed sales estimates, while Gucci parent company Kering saw an 11% decline. Other major brands such as Richemont and Burberry also reported disappointing numbers, with first-quarter sales plummeting a staggering 20%.
At the heart of the luxury industry’s current struggles is the erosion of the very dreams that once fueled the industry. The disconnect between marketing myth and manufacturing reality has left consumers feeling disillusioned, meaning the days of blindly paying for logos could 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 filled with conversations that challenge the industry’s value proposition, which makes it much harder for luxury brands to control their narrative.
To regain their footing, Brittany Steiger, principal retail & e-commerce analyst at Mintel says they will need to focus on what once made them so desirable—authenticity, craftsmanship excellence and a story of prestige that is both aspirational and achievable. Some experts suggest that adopting more transparent practices and truly adhering to quality and ethics promises could also be the way forward. Brands that fail to do so may find themselves increasingly irrelevant in a world where high-quality counterfeits continue to prevail.
It’s clear that the old luxury model is broken 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 will be an entire industry on the sidelines doing it.
