Crises in the Luxury market – overview and solutions. Article of Eleonora de Gray, Editor-in-Chief of RUNWAY MAGAZINE. Photo Courtesy: LVMH / Dior / Louis Vuitton / Givenchy / Guerlain.

Introduction

The global luxury market is facing unprecedented challenges as economic uncertainties, particularly in China (there are also Europe and the United States), disrupt traditional consumer behaviors and impact major industry players. LVMH, the world’s leading luxury goods conglomerate, and its CEO, Bernard Arnault, have experienced significant setbacks due to these shifts.

LVMH reported a 10% (according to different reports, including Bloomberg, the percentage is uncertain, it varies from 10-20% in losses) decline in global sales since the beginning of 2024. This downturn fell short of analysts’ expectations, who had anticipated stable or slightly increased revenues. Handbags and leather goods, accounting for about 75% of Louis Vuitton’s revenue, are experiencing stalled sales. This slowdown is a significant contributor to the group’s overall decline.

Significant Wealth Fluctuations: Bernard Arnault experienced a $13 billion decrease in his net worth in a single day, attributed to investor concerns over China’s slow economic recovery and underwhelming stimulus measures. Market Reactions: Shares of LVMH dropped by as much as 7% following disappointing reactions to China’s recovery plan announcements. The decline in stock value directly impacted Arnault’s wealth, given his approximately 48% ownership stake in LVMH. Ranking Among the World’s Richest: Arnault’s wealth has been volatile, causing shifts in his position on the Bloomberg Billionaires Index. These fluctuations highlight the vulnerability of luxury markets to economic changes in key regions.

Emergence of the “Dupe Economy”: In China, a crucial market for luxury brands, there’s a notable shift among consumers towards purchasing high-quality replicas or “dupes” of luxury goods. The shift towards dupes and more affordable products worldwide is affecting global luxury sales. Luxury brands are facing reduced demand, leading to stock price declines and revenue shortfalls.

Let’s see why, shall we?

Definition of Luxury

Luxury is a multifaceted concept that transcends mere functionality or necessity. It embodies the highest levels of quality, exclusivity, and craftsmanship. Luxury items and experiences are characterized by their exceptional materials, meticulous attention to detail, and the superior skill involved in their creation. They often carry a sense of heritage and tradition, evoking prestige and status for both the producer and the consumer. Luxury satisfies not only practical needs but also emotional desires, offering a sense of indulgence, distinction, and personal fulfillment.

The roots of the modern luxury market can be traced back to Europe’s rich history of artistry and craftsmanship. During various periods, countries like France, Italy, Germany, the Netherlands, and the United Kingdom became epicenters of luxury due to their advancements in artisanal work, trade, and cultural patronage.

European history is deeply entwined with luxury. In 17th-century France, King Louis XIV championed luxury as a statement of power, establishing manufactories for tapestries and porcelain. Italy’s Renaissance saw wealthy patrons like the Medicis elevate leatherwork, jewelry, and glass from Murano, later leading to brands like Gucci and Bulgari. Germany excelled in precision with Meissen porcelain and watchmaking in Glashütte. The Netherlands’ Golden Age brought wealth through trade, fostering fine art and jewelry. In the UK, Savile Row’s bespoke tailoring and brands like Rolls-Royce redefined British elegance.

The love for artisanal work and the pursuit of excellence have been the driving forces behind the luxury market’s evolution. These historical foundations have shaped the values and standards of the modern luxury industry, emphasizing quality, exclusivity, and heritage. Understanding this background provides insight into the current dynamics of the luxury market and its ongoing challenges and transformations.

Formation of LVMH by Bernard Arnault

The modern luxury industry has been shaped by Bernard Arnault, a visionary entrepreneur who transformed a collection of individual artisans and luxury brands into the world’s largest luxury conglomerate – LVMH Moët Hennessy Louis Vuitton SE (LVMH). This chapter explores the origins of LVMH, detailing how Arnault’s strategic acumen and innovative vision led to the formation of a powerhouse that redefined luxury business models.

In 1987, luxury giants Moët Hennessy (a champagne and cognac leader) and Louis Vuitton (known for high-end luggage) merged to form LVMH, aiming to expand their luxury market influence. Bernard Arnault joined as a neutral investor, acquiring a 24% stake to stabilize the merger. Through strategic stock acquisitions, Arnault rapidly increased his control, securing 43.5% of shares and 35% of voting rights by 1989. Overcoming internal resistance, he was appointed Chairman and CEO, solidifying his leadership and transforming LVMH into the world’s largest luxury conglomerate.

Bernard Arnault’s vision for LVMH reshaped the luxury industry by establishing a conglomerate model where multiple brands could thrive under one umbrella while preserving their distinct identities. His strategy centered on bringing together fashion, jewelry, wines, spirits, and perfumes, allowing each brand to leverage LVMH’s global scale in production and marketing while remaining true to its heritage. Through a decentralized approach, brands maintained creative independence and artisanal craftsmanship, ensuring their legacy.

Arnault also pioneered luxury’s global expansion, with a keen focus on emerging markets in Asia and the Americas and by introducing flagship stores to enhance customer experiences. His commitment to innovation, from adopting technology to hiring top creative talent, solidified LVMH as a leader in setting standards for quality, brand integrity, and customer engagement, inspiring the creation of other luxury groups like Kering and Richemont.

Erosion of Excellence: Shifting Standards in LVMH’s Flagship Brands

In recent years, luxury brands under LVMH, particularly Louis Vuitton and Dior, have faced significant shifts in their approach to quality standards and craftsmanship—once core pillars of their brand identities. Historically, LVMH’s luxury powerhouses maintained a relentless focus on exceptional materials and artisanal skills, which cemented their status as icons of quality and justified the high price.

For Dior, this shift became apparent with revelations about production practices that included outsourcing to cheap manufacturers, including instances of items allegedly made by illegal, non-qualified workers at drastically reduced costs. Reports and law suits indicate that the iconic Dior bag, a symbol of elegance and high-quality craftsmanship, was produced under these conditions for as little as $57—a fraction of its final retail price $2780. This practice not only raised ethical concerns but also cast doubts over the authenticity of luxury craftsmanship Dior customers have come to expect.

Louis Vuitton, although still prominent in the luxury space, faces similar criticisms as it explores ways to streamline production. With growing demand and a need to stay competitive, questions have arisen about whether the brand is also compromising on its commitment to traditional craftsmanship in favor of mass-production efficiency. Loyal consumers and industry experts express concern that LVMH’s emphasis on quality and exclusivity may be diminishing as business goals shift towards profit maximization.

These trends have sparked debates within the luxury community about what truly defines a luxury brand in today’s market. With an apparent move away from artisanal tradition and superior quality, brands like Dior and Louis Vuitton risk alienating long-time customers who value these qualities. As LVMH’s flagship brands, the choices they make could have lasting impacts on the company’s reputation and may reshape consumer perceptions of luxury.

Narrowing Horizons: Louis Vuitton’s Shift from Global Appeal to Cultural Specificity

Since Pharrell Williams took over as creative director of Louis Vuitton’s men’s line, the brand has shifted its focus to a distinctly race-oriented aesthetic, emphasizing a specific cultural perspective that diverges from the brand’s historically global appeal. This new direction has stirred controversy, as it leans heavily into one cultural identity, which critics argue narrows Louis Vuitton’s once-inclusive image. The brand’s marketing, along with its product designs, has honed in on a demographic segment that some feel is at odds with Louis Vuitton’s broader, internationally recognized style.

For Louis Vuitton’s primary customer base in regions like China, this recent focus has proven problematic. Many customers report feeling alienated, unable to see themselves represented in the brand’s promotions or product lines.

This misalignment highlights a disconnect between the creative direction of the men’s line and the preferences of its international audience. By centering campaigns and products on a singular cultural narrative, Louis Vuitton already weakened its global customer relationships and diluting the universal appeal that has long distinguished the brand.

As Louis Vuitton continues down this path, questions arise about the sustainability of this approach for a globally recognized luxury house. If the brand continues to cater to one cultural lens at the expense of its diverse client base, it could face challenges in maintaining its status as a leading international brand.

Luxury’s Blind Spot: Louis Vuitton’s Risky Romance with Exotic Skins

Pharrell Williams’ creative direction for Louis Vuitton has sparked further debate as he openly promotes products featuring exotic skins and furs, showing little concern for ecological responsibility in an era marked by environmental crises. In contrast to the luxury industry’s growing emphasis on sustainable practices, Williams’ choices have drawn criticism for appearing out of touch with evolving consumer expectations for ethical sourcing and ecological awareness. The focus on crocodile and fur items clashes with the broader shift in luxury fashion toward sustainable, cruelty-free materials, placing Louis Vuitton at odds with an industry-wide movement.

This disregard for ecological concerns also risks alienating a new generation of luxury consumers who prioritize environmental stewardship and are increasingly vocal about holding brands accountable. As consumers gravitate toward brands aligning with eco-conscious values, Louis Vuitton’s direction under Williams may diminish its appeal among environmentally aware customers. The brand’s decision to prominently showcase exotic skins could ultimately reflect poorly on its reputation, creating a perception that Louis Vuitton is lagging in ethical responsibility.

The Dark Side of Luxury: Shadow Marketing Tactics at Guerlain

Guerlain, a prestigious name in cosmetics under LVMH, at the beginning of this year faced backlash over its newly launched “Quantum” cream, which has stirred controversy in France, United States and Asia. Marketed as an innovative product, the cream carries a staggering price tag of 600 euros, justified by Guerlain’s claims of exclusive natural ingredients and cutting-edge formulation. However, investigations revealed that the core ingredients used in the cream are widely available on the European market at a fraction of the cost, estimated at around 15 euros. This price discrepancy, based on inflated and misleading claims, has drawn sharp criticism from both consumers and industry experts.

This episode has cast a shadow over LVMH’s marketing practices, exposing a potential pattern of misrepresentation in luxury product promotion. Guerlain’s “Quantum” cream controversy has shaken consumer trust, as many now question the authenticity of high-priced luxury products marketed as rare or exclusive. In an industry where transparency and brand reputation are paramount, LVMH’s association with such tactics could harm its standing with discerning customers who demand honest value from their luxury investments.

Legacy Lost: Givenchy’s Stray from Luxury Heritage

In recent years, luxury brand Givenchy has veered away from its heritage, discarding the historical significance and identity that once defined it. Since the passing of founder Hubert de Givenchy, the house—once synonymous with elegance and refined designs for icons like Audrey Hepburn—has taken a drastic turn. Today, Givenchy’s offerings include distressed tank tops with holes, garments far removed from the brand’s original image of sophistication and grace. This pivot away from the founder’s vision has left a void where timeless elegance once stood.

The brand’s recent direction, embracing what some describe as “toxic waste” fashion, prioritizes fleeting trends over the preservation of a luxury legacy. Rather than honoring its heritage, Givenchy seems to have abandoned the values and aesthetic that made it iconic. This shift raises important questions for the luxury industry about the relevance of heritage and whether today’s luxury brands can thrive while disregarding their storied pasts.

The Fall of True Luxury: LVMH’s Betrayal of Heritage and Craftsmanship

Once the benchmark of global luxury, brands like Louis Vuitton, Dior, and Givenchy have drifted from their foundations, now embodying a hollow version of luxury that seems to prioritize profit over substance. Gone are the days when these brands offered accessible elegance alongside quality. Today, they demand astronomical prices for basic items—cotton dresses with recycled public-domain designs, wallets priced as luxury handbags, and leather goods whose finishes are surpassed by independent craftsmen at a fraction of the cost.

The shift has narrowed their customer base to the ultra-wealthy, effectively alienating loyal clients who once found value in these brands. Customer service has similarly deteriorated, with boutique lines stretching down the street, and staff unable or unwilling to assist with basic inquiries.

The response from LVMH has been a defiant silence, brushing off critics, journalists, and even silencing dissent through aggressive illegal maneuvers against media coverage, demanding removal of the content and opinions. The once-celebrated luxury shopping experience, characterized by personalization and exclusivity, now resembles a rushed, impersonal transaction.

“Exclusive” events cater only to select celebrities or influencers, leaving genuine buyers feeling disregarded and disenfranchised. This neglect of inclusive market engagement, paired with visibly inflated prices and diminishing quality, has stripped these brands of their previous prestige.

As a result, the public has lost interest. Once revered symbols of craftsmanship and elegance, these brands are increasingly seen as purveyors of “fake luxury,” trading heritage for hype and abandoning the very principles that earned them loyalty and respect.

Solution – A Path to Redemption: Restoring True Luxury through Craftsmanship, Integrity, and Inclusivity

The luxury industry stands at a crossroads, and it’s clear that a path to redemption lies in revisiting values that once defined authentic luxury: craftsmanship, transparency, and respect for the consumer. Brands like Louis Vuitton, Dior, Givenchy and many others must embrace the artistry, genuine creativity, and customer connection that elevated them to icons. The solution is not external; it begins internally by rejecting exploitative practices and prioritizing true artisanship over inflated hype.

Brands like Hermès and Chanel have sustained their prestige without compromising on quality or community, demonstrating that luxury is not in sky-high prices but in creating a lasting, valued experience. For example, while some current luxury experiences organized by LVMH charge exorbitant amounts—a simple café seat with picnic food to view an event (Olympic Games Opening) can cost $10,000—this price is not “pocket money” for the majority; it’s the cost a family could live on for two months.

Pricing transparency and inclusivity are key steps toward reconnecting with a broader market. A reasonable pricing structure that reflects craftsmanship over marketing hype would allow luxury brands to bridge the gap between exclusivity and accessibility. Today’s consumers, especially the younger generation, value quality and authenticity over name recognition alone. A tiered range of products, with prices spanning from 100 to 100,000 euros, would empower a wider audience to invest in and cherish these products, redefining luxury as something both attainable and exceptional.

True luxury marketing must also cast aside shadowy tactics and manufactured hype. Instead, brands should embrace creative, inclusive campaigns, as seen with Chanel’s immersive public exhibitions and L’Oreal’s widely attended product launch fashion show at the Paris Opera this fashion week. Events like these strengthen customer relationships, open doors to the general public, and invite authentic engagement. At the same time, a respect for ecology—eschewing exotic skins and championing responsible production—would align with the values of an eco-conscious consumer base. Transparency and openness in dealings with media and the public are paramount; addressing criticism with understanding and qualified responses would foster a positive image rather than tarnishing it.

Equally important is a shift in exclusivity practices. Today’s luxury events often cater to a niche of so-called “stars” or influencers whose reputations sometimes teeter on the edge of scandal. These types of exclusivity—attaching luxury brands to influencers involved in criminal or illegal activities, from money laundering to drug distribution—undermine the brands’ reputations, alienating discerning customers who seek genuine prestige, not hollow affiliations. True luxury marketing must cast off these shadowy tactics, halt the aggressive legal efforts aimed at silencing media and public opinion, and instead embrace open communication. Brands would benefit from putting qualified representatives at the forefront of public relations to address criticism thoughtfully and, if necessary, apologize.

Ultimately, transparency, inclusivity, and responsible pricing are essential steps to rebuild trust and renew brand allure. An inclusive pricing structure—ranging from accessible items for hundreds of euros to exclusive pieces at higher price points—would reconnect brands with consumers seeking quality over ostentatious branding. The public’s turn toward “dupe” products reflects a shift: people now seek high-quality items from independent artisans and designers, not because they are knock-offs but because they genuinely meet the demand for craftsmanship and style. Without significant change, consumers will continue looking outside traditional luxury brands for products that embody true luxury values, no logos necessary.

Luxury brands have the power to restore their standing by re-committing to their core values and evolving alongside their customers. The world is still hungry for real craftsmanship, timeless design, and authentic experiences, yet if these values are not upheld, consumers will continue to seek high-quality alternatives beyond these brands, reshaping the luxury landscape with or without them.