Luxury brands move to restore exclusivity after slowdown

ISLAMABAD: After a sharp cooling in recent years, the global luxury industry is trying to regain its appeal by combining a renewed focus on core values with fresh ways of reaching customers.

The sector's recent financial results have underlined the scale of the shift. LVMH and Kering both recorded lower profits last year, while Burberry posted a loss for its 2024-25 financial year. The downturn has been driven by several factors, including weaker demand in China, more cautious spending by aspirational buyers and concerns over product quality.

Eric Briones, cofounder of the Paris School of Luxury and author of a recent book on the industry's transformation, said the market had been lifted by a burst of spending after the pandemic. He said that surge then put pressure on the traditional production model associated with luxury goods.

"Following the Covid pandemic the luxury market was boosted by binge buying"

Briones said the industry's artisanal system struggled under that demand and pointed to recent outsourcing scandals in Italy. He also said some brands raised prices by as much as 50% after the pandemic without corresponding improvements in quality, and in some cases quality fell.

Exclusivity under pressure

A central part of luxury branding is the idea that products are crafted from premium materials by skilled workers using traditional techniques, naturally keeping output limited. But as demand grew after Covid, both prices and production volumes climbed.

Christophe Cais, chief executive of CXG, a consultancy advising premium and luxury brands on customer experience, said the balance between exclusivity and scale had become a basic challenge for the sector. "How many bags can you sell globally without becoming overexposed? Exclusivity is desirable and at the same time you want sales volume, so at what point does volume undermine exclusivity?" he asked.

According to Bain & Company, the luxury market lost 20 million clients between 2024 and 2025 after shedding another 50 million over the previous two years.

Groups reshape portfolios

Analysts said the period of rapid economic and geographic expansion by major luxury groups is now giving way to consolidation and pruning. Lea Hubsch of Kearney said companies were in a phase of refocusing and trying to make their brand portfolios more coherent, which could mean reducing exposure to labels that do not fit closely with a group's identity or finding new partners for them.

LVMH, the world's biggest luxury group, recently sold US label Marc Jacobs after owning it for three decades. In January, it also sold DFS duty free operations in China. Kering, which is going through a broader restructuring, sold its beauty division to L'Oreal for €4 billion. Versace bought fellow Italian fashion house Prada last year for €1.25 billion.

More transactions could follow. Giorgio Armani stated in his will that he wanted his fashion house eventually to join a luxury group such as LVMH or L'Oreal.

Back to basics and new experiences

Kering's new chief executive, Luca de Meo, said in presenting the group's turnaround strategy last month that consolidation was ahead for the industry. He also signalled a return to fundamentals, including better quality and efforts to rebuild the desirability of Gucci, which suffered from overexposure linked to streetwear.

Analysts also said the industry is responding to a growing preference for experiences, while seeking to benefit from the wellness trend through customer service designed to match luxury hotels.

"Desire has shifted to 'experiences': beauty, hospitality, transformative luxury"