Luxury brands have witnessed three decades of unprecedented growth. In April 2023, LVMH, home to the likes of Givenchy and Guerlain, even briefly became Europe’s most valuable company.
Since then, most luxury giants have lost momentum. Estée Lauder’s stock price has shed 35% since the start of 2024 . Hermès has lost 34% so far this year, and shares in Richemont, owner of Cartier and Chloé, have yo-yoed and are now down 15%.
Luxury’s troubles are not cyclical; they are structural. The hard truth is this: The playbook that made luxury successful is becoming its handicap.
Why?
The contemporary luxury model has run out of road
First, luxury is suffering from an innovation recession. Brands increasingly rely on heritage and iconic products rather than creating the next generation of desirable goods. The Hermès Birkin bag, for example, was created in 1984. In 2023, Bernstein estimated that with the Kelly bag, another 1977 icon and a rebrand of a bag invented in the 1930s, these two models accounted for more than 13% of the brand’s annual revenue. The question is: Can one endlessly thrive on products that were created for our ancestors?
Second, luxury created a reputational recession. Post-COVID price increases far outpaced any increase in functional value. With societies increasingly polarized economically, and stricken by repetitive inflationary costs, the sector has lost 70 million consumers between 2022 and 2025, according to Bain’s estimate . Meanwhile, there is only so much that billionaires want to buy. In fact, the super wealthy are more interested in buying one-of-a-kind experiences, say, a house on the most pristine coast in the world, that reduce other billionaires’ ability to buy them, than “artificially rare” luxury products.
Third, technological disruption is accelerating. In sectors such as automobiles, innovative Chinese players like NIO and Yangwang are redefining what premium products look like and experiences mean. In China, they have already challenged even the likes of Lamborghini and Mercedes-Benz.
Most importantly, luxury has become a commodity. Since the ascent of LVMH in the early 1990s, the industry has followed a common playbook built on mass- marketing intensity, standardized retail experiences, global scale, and industrialized, sometimes even offshored, supply chains. Brands increasingly hide abundance behind stories of scarcity and have never emphasized craftmanship so much in their communication. Paradoxically, the world has never counted so many billionaires, and yet, the number of historic fashion houses showing haute couture in Paris had dwindled to three this past July, out of the eight present in 1990 and still alive today. Houses that once sold style now sell logos. Houses that once produced two collections a year now produce six.
In the pursuit of growth, luxury has become less rare.
The result is a loss of creativity, differentiation, and internal dynamism. In March this year, Jing Daily reported that luxury brands are hemorrhaging talent because employees no longer see where they can contribute beyond optimizing a model that has reached its limits. A culture of perfection trumps one of excellence.
Environmental degradation and social polarization make change unavoidable
Luxury’s expansion has also carried environmental and social costs. Across sectors, growth has been accompanied by rising emissions, resource consumption, biodiversity loss, and supply chain controversies.
In my new book, Purposeful Luxury , I establish that most luxury companies have made genuine ESG (environmental, social, and governance) progress. An overwhelming majority of the largest companies are on track to become carbon neutral by 2030 on scope 1, direct emissions produced by internal operations, and scope 2, indirect emissions produced by the energy a company buys outside.
But on scope 3, 95% of their emissions come from outside the company, that is, from their supply chain and/or customer base, and only four companies out of the largest 18 have set absolute reduction targets and are on track to achieve them. My research shows only 25% of the top 100 companies have a chief sustainability officer who sits in the top management team. Patchy data reporting suggests that brands continue to invest three times as much in marketing and selling as in innovation for sustainability. All this suggests that sustainability remains largely a compliance and reputational exercise, not a source of strategic innovation.
This matters because luxury’s social license to operate cannot be taken for granted. In a world shaped by climate disruption, social polarization, and limited resources, consumers and societies are increasingly beginning to question business models built around excess and inequality.
What if sustainability restored desirability?
Luxury’s crisis is often framed as a marketing, pricing, or macroeconomic problem. But is it really?
I would argue the deeper issue is that the industry’s dominant growth model has reached its limits. The same practices that fueled three decades of expansion have damaged the environment, weakened innovation, eroded rarity, reduced employee engagement, and dented legitimacy.
The solution is not a better version of today’s model; it’s a different model altogether that returns to pre-1990 practices and invents new ones for the twenty-first century.
Brands should produce more on demand and less for stock; this is the haute couture model that once applied across the board. AI can dramatically improve forecasting, reducing waste while restoring genuine scarcity. Luxury should also return to selling more wearable and glamorous products that customers actually want, rather than manufacturing excess inventory and destroying what remains unsold.
Repair, refurbishment, and upgrading services should move to the center of the luxury value proposition, opening up new revenue opportunities. But for these models to deliver real environmental gains, brands will need shorter supply chains and more localized networks to limit transportation impacts.
Most importantly, brands should redirect resources from marketing toward innovation. That means investment in new materials, regenerative systems, circular business models, and advanced technologies that would create entirely new categories of luxury products and experiences.
These changes would do more than reduce environmental impacts; they would rebuild competitive advantage. Regenerative materials, local craftsmanship, short supply chains, and made-on-demand production create scarcity that is difficult to replicate. Unlike the artificial marketing-driven scarcity customers see today, these practices generate authentic differentiation.
The same logic applies to ownership. Luxury companies could develop platforms that enable sharing, renting, and recirculating collectors’ products that currently sit unused in garages and safes. These platforms would expand access while creating new revenue streams and reducing the need for constant volume growth.
As we’ve already established, sustainability is also a talent strategy. Reinventing materials, production systems, and circular ecosystems is a lot more inspiring for luxury employees than endlessly optimizing marketing campaigns around heritage products. The same innovation agenda that restores legitimacy externally can restore meaning to the industry’s talent internally.
Ultimately, the practices required to make luxury sustainable are the very same practices that can make it luxurious again.
The industry’s largest players remain far from this vision. But a growing number of younger brands both in Europe (Acne Studios, ID Genève Watches) and China (Songtsam, Wuyong) are already moving in this direction. In the years ahead, the winners will not be those that market luxury best. They will be those that reinvent it. Courageous and purposeful owners and leaders will be the ones making the difference between brands that die and those that thrive.
