OP-ED: THE OTHER REASON WHY LUXURY FASHION SALES ARE TANKING

Luxury fashion sales are in the doldrums. It seems that no one, with the exception of several brands that cater to the truly rich, has been spared. Sales for mass market luxury brands – and it is time that we started talking about “mass market luxury fashion” as a market category – like Gucci and Burberry are dropping by double digits every quarter. Even Dior and Chanel have not been spared.

The most common reason that is given for this state of affairs is that luxury brands have hiked up prices too much too fast. This is true. Another one is that quality at the mass market luxury brands has been also consistently going down across the board. Also true. In a stunning turn of events, a couple of normally tight-lipped luxury fashion executives have acknowledged this publicly. “The price increase? It is the ultimate failure of our work,” said Andrea Guerra, Prada’s CEO.

Following common economic terminology, in every business there is a supply side and a demand side. The supply side concentrates on producers and the demand side on consumers. The reasons for the luxury market downturn given above are supply side reasons. But there is a demand side cause as to why sales are tanking, which no fashion executive will ever acknowledge. For years luxury brands have stoked consumer desire by shoving their goods down the consuming public’s throat. They have put their wares on every celebrity conceivable. They have turned fashion shows into ostentatious influencer circus. They have made sure that luxury fashion has become an indispensable status symbol, putting considerable psychic pressure on the consuming masses to keep up. They filled the masses with envy at the influencer and celebrity lifestyle, flying them for free to exotic locales, wining and dining them, and gifting them free stuff, which they all put up on their social media for the world to see and to envy – hate watching, hate following, and hate reading is now a common pastime.

And then these luxury brands turned around and treated the consuming masses with disdain by jacking up prices at the speed of light (It is worth noting that Hermés, the only true luxury big brand left, and one that caters to the truly rich, has raised prices much more gradually than the likes of Chanel, Dior, and Bottega Veneta), by making customers wait in lines in front of their flagship stores, by opening VIP-only shops, and by telling people that they cannot have whatever “limited edition” stuff they dangled in front of them.

Make no mistake, luxury industry executives despise the mass consumer whom they see as uncouth and unsophisticated, and deep down the consumer feels it. The current turning away is not a merely cyclical shift – to be sure the Chinese economy is suffering, but the American is doing well. There is something more structural happening, a consumer revolt. Much ink has been spilled about “value proposition” being off when it comes to luxury fashion. But it’s more than that; the mass market consumer would continue to buy low-grade, premium mediocre luxury if they could afford it. But they no longer can, and what they are angry about is that they have been priced out of the status symbol race.

But that does not mean that the race has been called off. Because current consumers are also the most entitled one in the history of humanity, they have not given up on status display; they have simply found other solutions. There are fakes to be bought on the streets of every major tourist destination. And there are now also dupes, fakes that are virtually identical to the real luxury goods (whatever “real” means in the world of diminished quality – I don’t know about you, but every Louis Vuitton bag looks fake to me now.). And because the mass market luxury industry has shown such disdain for its customers, they no longer care nor feel any sense of shame about touting their faux luxury purchases. And why would they? This is their revenge on the industry that has treated them with contempt.

The mass market luxury fashion industry is now stuck. Simply lowering prices would make it look just like any other consumer good, which runs counter to the entire image of the industry that is built on the notion of exclusivity and on the laws governing Veblenian goods. Even so, some brands, like Yves Saint Laurent, began to quietly roll back some prices. Others, like Burberry, will shift into mid-market segment a la Coach and Michael Kors, and will quietly move tons of merchandise to outlet stores. Yet others, because they cannot increase revenue, will seek to cut costs – Gucci recently announced that it will shift down to three shows a year.

Nor can these brands, who have been putting an astounding amount of effort into pampering their VICs, can afford to stop doing so now. And as these VICs and influencers continue to share their glamorous lives for all the world to envy, this puts luxury brands into another Catch-22. How long the damage that these brands have wrought, by stoking demand for their goods with one hand and by preventing the mass consumer from having them with another, will last is anyone’s guess, but last it will.