Name: The Self-Inflicted Downfall of Luxury Brands
Uploaded: 2025-03-05T13:20:10.000Z
Duration: 10 min 50 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

This is Chanel's Medium 2.55 Leather Flatback.

Basic passive voice

In 2019, it was priced at $5,800, but in 2025, they're selling it for $10,800.

Now, before we jump to the obvious, it's not just because of inflation.

You think I brought you all the way to Fifth Avenue to talk about inflation?

Luxury brands like Chanel, Kering, and LVMH used to have it all in the bag, raising prices annually and still seeing huge demand in sales.

But in 2025, they're clutching their pearls and feeling an emptiness in their designer wallets.

The luxury industry lost 50 million consumers in the past two years, and only one-third of the luxury goods industry is actually growing.

But with at least 58 million households around the world making over $1 million in 2023, there are plenty of people who can afford these products.

I sifted through years of luxury brand sales data and product price histories, researched the global luxury market, and spoke with a fashion industry expert to find out.

What I learned is that there's not a simple ironed-out answer, but there are a few reasons why these luxury brands are falling, most of which were completely avoidable.

Okay, we all know supply and demand, right?

As supply goes up, demand goes down, and typically so do prices and vice versa.

But historically, luxury goods turn that equation on its head.

This is Thorstein Veblen, an American economist who invented what's known as the Veblen goods curve.

His curve shows that as prices increase, demand increases.

And that sounds delusional, but in the world of luxury handbags and fashion, it's right on the money.

See, Veblen goods consumers appreciate the high price.

Instead of a detraction, it's seen as a worthwhile premium to ensure that the goods are rare and high quality.

And luxury fashion sales, aka any wearable luxury goods, have been steadily increasing for the most part with just a few speed bumps that you might've heard of, the 2008 recession and COVID.

But after that initial COVID slowdown, everything picked right back up.

Analysts chalk this up to revenge spending, which usually happens after a major economic event.

First, COVID happened and consumer spending declined.

Then household savings went up over time.

And lastly, with the economy recovering and a whole lot of disposable income saved up, not to mention a whole lot of trauma and boredom, consumers were buying willy-nilly, aka revenge spending.

As a result of that spending, the demand for these goods rebounded in 2021 and then soared.

There was that whole, nobody can leave their houses.

And usually what people did was they bought stuff online.

And this time luxury goods did behave like you'd expect on a typical supply and demand curve.

When demand shot up, retailers raised their prices.

But after demand stabilized in 2021, there was an unprecedented increase in the price of luxury fashion.

So being put off by this, consumers slowed their spending in the U.S.

and another essential luxury market, China.

There are several factors at play here, all of which help explain why the luxury brand market looks so torn up today.

First, coming out of COVID, consumer spending habits changed.

In the U.S., young consumers led the charge in buying secondhand goods.

And that movement, although tough to attribute to just one thing, was likely a combo of a shift to sustainable fashion, cheaper clothes, and sometimes higher quality, aka vintage.

In 2023, the secondhand luxury market hit $47 billion, up 4% from 2022, largely thanks to Gen Z.

Second, this generational shift is global, with Chinese consumers spending less on popular luxury brands.

As Business Insider reports, young Chinese consumers are opting for local, niche, and independent luxury firms that offer unique and authentic products.

And third, shifting cultural norms encouraged by the Chinese government stymied the luxury market.

Luxury shaming is rampant in China as the government cracks down on flashy luxury billboard ads and bans luxury influencers from its social media platforms, all in an effort to steer the Chinese people back to a more communist, low-consumption society.

But all of this is a result of the biggest problem plaguing luxury brands today, and it's a problem that luxury brands created for themselves.

So we touched on this before, but just to add some gritty detail, luxury brands usually raise prices at double the rate of inflation annually.

So pre-pandemic, when inflation bounced around 2%, luxury brands increased their prices by about 5% to 7% every year.

However, from 2019 to 2024, average prices of luxury goods increased by 61% in the US.

In 2019, it sold for $995 in the US, but from then to 2024, it surged 66% to $1,650.

Yeah, that'll keep you warm in the winter, earning your money.

In bag world, the cost of Prada's popular

Galleria Saffiano bag increased 111%, and Chanel's medium 2.55 leather flat bag that I mentioned earlier went from about $5,800 to $10,800, an 86% increase.

And usually, when you increase prices so dramatically, it has to do with, you know, innovation or boosted quality, neither of which happened for these brands.

They've released many new products, but when you think of the brand, you probably think of that classic LV monogram design, you know, the brown with the LVs everywhere, you know the one.

Now here's the Neverfull bag from 2007, the Pochette Métis from 2013, the Multi-Pochette Accessoire from 2019, and an iPhone 16 Pro Max case from 2024.

The more you want to tell people that you have made it, the more likely you are to want to wear a logo somewhere that says, I have arrived.

And this isn't to say that LV didn't release other products outside their monogram line, but over time, that extreme logo loudness from Louis Vuitton and others likely brought on some, as Michael Kors called it during New York Fashion Week, brand fatigue.

Of course, the counterfeit market also didn't really help the situation.

However, these brands putting out the same iconic designs for many years is one thing, but combining that with a dip in quality, well, that's a good way to tank your brand value.

The lining, stitching, they were not aligned.

This is definitely a quality control miss by Rolex.

The first glance, it's too much plastic finish on it.

Chanel, Michael Kors, Louis Vuitton, these brands and more under-delivered on their promises of high quality, innovation, and craftsmanship.

And when Gen Z caught wind that innovation and quality were taking a faux leather backseat to insane price gouging, they looked elsewhere.

They also took their money to smaller, more boutique brands and stores.

For example, Mercari, a Japan-based secondhand fashion seller app is in a seemingly never-ending growth pattern.

In 2023, just under 70% of Mercari's around $6.4 billion of gross merchandise value came from the United States.

But even some brands that sell new products are picking up steam.

Take the Row, founded by Mary-Kate and Ashley Olsen.

You know the ones, you heard that right, in 2008.

According to Mean Boulevard, the Row's boom in popularity comes from its dedication to quality, practicality, and quiet fashion with no flashy logos and an emphasis on minimalism.

Prada also dipped into this small fashion business surge with its own sister brand called Miu Miu, which helped the company's sales grow 18% in Q3 of 2024.

If you have a Miu Miu, like it can be a basic cardigan, and if it's got the little Miu Miu logo, that has a lot of pull right now.

Miu Miu, founded in 1992, has always targeted younger consumers as a trendy and affordable Prada alternative.

But now, it's really paying off for Prada Group.

And Miu Miu is just one of the brands revolutionizing the fashion industry.

For the rest, we've created a list of 10 small, high-grossing fashion brands that are stealing the market share away from the big players.

In this list, you'll find out who these brands are and how they've built lucrative, cult-like followings without traditional luxury brand marketing tactics.

So, if you wanna know where the fashion industry is going and how these trendy brands are winning over customers, check out the link in our description.

So yeah, smaller brands are cleaning up right now, but that doesn't mean all the luxury giants are down for the count.

Hermès' 2024 was very different from its competitors.

The French company earned over $12 billion in the first three quarters of 2024, and that's up 14% from 2023.

And they grew 7% in Asia, excluding Japan.