The Downfall of Luxury Goods

Graphic by Louden Johns

Margin has become one of the most important aspects of sales for many luxury brands. Especially as companies that have already gained a respected name or popularity in the past few decades spend more money marketing than on the actual product.  

Social media is an integral tool to gain consumers’ attention in today's world. Luxury brands partnering with influencers and celebrities to increase their sales. On the other hand, the average person doesn't have thousands to spend on accessories or clothes, which has led to the trend of finding dupes. 

Finding dupes or alternatives for luxury goods has also become extremely popular through social media, leading companies like Cartier to stop authenticating signature items. With the “dupe” becoming an almost replica, there is no point in attempting to find distinctions. 

Rationally, buyers could assume that the luxury goods market would be declining, but on the contrary, it is increasing in value. According to JP Morgan, this is attributed to the recent increases in demand in China and Europe. However, people continue to favor hard luxury items, such as jewelry or watches.  

In addition, luxury brands are also trying to sell products that would cost less to make; there has been a shift from leather, cashmere, and wool to blending in polyester and acrylics. The rise of athleisure and trends of logos has also allowed companies to increase their margin.

A sweatshirt with the same material makeup and cut is plastered with a logo and sold by brands for thousands of dollars. A 100% cotton sweatshirt costs around $30 to $60 without the logo, but it sells for $1,300 by Gucci and $1,150 by Dior. 

The rapidly changing nature of the fashion industry and the digital world has also led to infinite trends, making it difficult for luxury fashion brands to manage. Remember the Gucci logo belts that were everywhere in 2018? To accommodate the trends, many brands have found cost-cutting methods by finding less skilled labor and using cheaper materials, diminishing the quality of the products. 

Online shopping has made it increasingly easier for companies to hide behind endorsements and advertisements to gain sales. When shopping in person, any snags on the fabric or scratches on the designs are much easier to spot. However, perfectly edited pictures of products online make it much more enticing.

With sustainability as an important principle for younger consumers, luxury brands must be more cautious of their material sourcing for their fur coats and crocodile hide purses. But that means a hit to the profit margin.