Is The Luxury Industry Facing An Identity Crisis?

Forbes

5 days ago

The shares of LVMH, Louis Vuitton's parent company, are down 15% since the start of 2025.
The luxury industry is on the verge of a necessary reset. LVMH's profits dropped 15% in the first half of 2025, with organic growth down 3%, and nearly all divisions reported flat or negative performance. As for Gucci-owned luxury group Kering, this year has been even worse: revenue is down 18% for Q2 with Gucci's sales plummeting by 25% and overall sales in Asia and Japan down as much as 29% in the first half of the year. Declining growth in the fashion division and the Asia-Japan geography seems to be a common denominator for both luxury groups, but these results signal a downturn that is persistent and increasingly difficult to dismiss, likely hinting at a deeper issue.
Since 2021, luxury groups have focused on hyper-scaling growth, gaining market share and reach. They began turning heritage houses into mega brands with mass appeal. What these groups are now facing is not just the result of tariffs, inflation and geopolitical uncertainty. It is not a temporary dip in demand, but a clear sign calling for a reset. Luxury's biggest players have spent the past several years chasing scale, mass visibility, and short-lived cultural relevance — and are now facing the consequences.
In this race for popularity and relevance, many lost the essence of what made them desirable in the first place: exclusivity, intimacy, and craftsmanship. Overexposure should not be part of a luxury brand's strategy. Hermès presents a striking contrast: while LMVH and Kering sales dipped, the most valuable and profitable luxury brand in the world saw its revenues rise 9% to 3.9 billion in Q2, with growth across regions, thanks to a very loyal customer base and exceptionally strong brand equity.
Third Bridge analyst Yanmei Tang commented on the brand's performance: 'Hermès has consistently focused on scarcity, craftsmanship and brand equity, rather than chasing aggressive volume growth. Its approach appears well-suited to a market where high-end consumers are becoming more selective and emotionally connected to brands.' This scarcity approach means that unlike competitors, Hermès is not focused on store expansion nor product extension, which has always been what differentiates it from other brands. Its approach is deliberately restrained, with an intentional approach to marketing, focused on craftsmanship and storytelling rather than celebrity-infused campaigns or branded pop-up cafés.
Compare that to Gucci. Once a highly popular brand amongst younger consumers across the globe, the Italian brand leaned heavily into hype and cultural moments. But what happens when the hype fades? Gucci is now facing a sharp decline in sales and consumer loyalty, struggling to regain relevance. The lesson is clear: overexposure and trend-chasing might bring short-term attention, but they rarely build long-term equity.
Even brands currently riding high — like Miu Miu, one of 2025's most popular brands — should be cautious. Virality is not a strategy. While relevance can spark a moment, only authenticity can sustain a brand. Ultimately, today's luxury consumers are evolving. They are more selective, less trend-driven, and increasingly value emotional connection and long-term worth. They don't just want a product — especially if it comes with a significant price tag. They are looking to indulge, or invest, into something timeless, valuable and built to endure while making them feel special now and in years to come. This means focusing on craft, storytelling and exclusivity, and resisting the pull of aspirational appeal and mass visibility.
Now is the time for luxury brands to return to their roots: focus on intention, intimacy and craftsmanship. Storytelling, through marketing, should honor a brand's legacy and values while driving desirability. What makes a luxury brand authentic if it is focused on trends, mass visibility and marketing activations often void of true meaning? What is really happening is that consumer sentiment towards luxury brands is changing: a growing fatigue and declining interest in spending more and more money for little novelty or something that feels like an investment with long-term value.