Obscene Prices, Declining Quality: Luxury Is in a Death Spiral

 

Opinion

Guest Essay

Obscene Prices, Declining Quality: Luxury Is in a Death Spiral

Dec. 19, 2024

By Katharine K. Zarrella

Ms. Zarrella is a longtime fashion editor and lecturer.

https://www.nytimes.com/2024/12/19/opinion/vuitton-chanel-burberry-lvmh-hermes.html

 

The holiday shopping season is hitting its apex. And do you know what I, a longtime fashion editor, will not be buying my loved ones this year? Big-name luxury fashion. I’d sooner set my eyebrows on fire.

 

Why am I betraying the industry to which I’ve dedicated the better part of the past 20 years of my life, you might wonder? Let me tell you a story.

 

When, for the fall 2023 season, Marc Jacobs reissued the runway-show version of his Kiki boots — a sought-after, supple-leather style that I’d been lusting after since their 2016 debut — I found a way to squeeze them into my budget. I’d had a tumultuous few months, and I figured I’d treat myself to something I’d treasure forever. Something that would last.

 

They did not. The right heel cap fell off after a handful of wears, revealing a flimsy plastic cavern. I got it replaced, only to have a four-inch platform base snap off like a rotting tree limb days later. Timber! Two passers-by heaved me up, and I limped home, barefoot. In February, I demanded a refund, which I promptly put toward much-needed physical therapy.

 

My experience sums up everything that’s gone wrong with what once served as semiotic shorthand for the good life. In recent years, luxury of all kinds has become obscenely, disgracefully, inconceivably costly. And the price hikes we’ve seen are steeper than what inflation would dictate. What’s worse? As costs climb, quality hasn’t. In fact, it’s largely declined.

 

“Luxury is in chaos,” said Gill Linton, a fashion and marketing expert and a co-founder of luxury vintage platform Byronesque.

 

I’d go a step further. Luxury is in a death spiral. After a decade of nearly unfettered growth, the sector is bombing across the globe. Analysts point to less-affluent buyers reining in their spending and slowing demand in China. I believe there’s another culprit: a growing realization that many luxury houses have broken the principles that made them so successful. These hoity-toity brands, which cheapened their essence and eviscerated their desirability with down-market celebrity partnerships, licensing deals and influencer advertising, have no one to blame but themselves.

 

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This started at the source of so many modern woes: social media. For those not glued to TikTok or “The Kardashians,” social media, helped along by reality TV, has instigated a frenetic game of one-upmanship in which top social-media content makers aim to project wealth while outdoing themselves and their competition. This means flaunting luxury goods in posts that are then spread widely by algorithms. Kyle Richards, a cast member of “The Real Housewives of Beverly Hills,” has become infamous for hitting the gym with a difficult-to-get Hermès Birkin bag — which costs anywhere from five figures to hundreds of thousands — dangling from her arm.

 

At the same time, the rich were getting richer — and more people were joining them. According to Swiss bank UBS, there were 7.64 million millionaires in the United States in 2000. By 2023, we saw that number nearly triple.

 

For those who aren’t comfortably in the millionaire class, technology offers a solution. The exploding popularity of financing apps such as Klarna and Afterpay — online lending services that allow users to break payments up into installments — has ushered in a whole new era of buy now, pay later. It’s stigma-free layaway for nearly any item. Nobody has to know, and you get the product upfront.

 

Suddenly, brands accustomed to catering to a select few found themselves pursued by a surfeit of less discerning customers — some literally children — seeking a status boost for their social media profiles. Meanwhile, the platforms continue to both stoke class anxieties and offer a seemingly unlimited amount of data on what to want next. Confronted by hordes, companies tried preserving their images the one way they knew how: jacking up prices. In doing so, they followed the longstanding Veblen goods principle. Derived from the economist Thorstein Veblen’s “The Theory of the Leisure Class,” written in 1899, it states that demand for luxury goods will actually increase as their prices increase, because such hikes thin the herds and make scarce goods that much more desirable.

 

Which prices have skyrocketed? The better question is which haven’t.

 

From October 2019 to April 2024, the cost of Prada’s popular Galleria Saffiano bag increased 111 percent. In the same period, the cost of Louis Vuitton’s canvas Speedy bag doubled, and Gucci’s Marmont small matelassé shoulder bag went up by 75 percent. Chanel is particularly notorious: Its iconic medium 2.55 leather flap bag, which cost $5,800 in 2019, will now set you back $10,800 — and is increasingly the subject of quality complaints.

 

What about that perfect exotic backdrop to show off your new goods? A thousand bucks for a night in a normal hotel room, once unheard-of, is surprisingly common. Rooms at the sought-after Amangiri resort in Utah started at around $1,800 a night in 2018. Now they start at $3,509. Jaclyn Sienna India, the founder of a travel and lifestyle company that caters to individuals and families with a minimum net worth of $100 million, notes that the prix fixe menu at the exclusive Ibiza restaurant Sublimotion was about $1,675 a head in 2022. Today, she said, it’s $2,380.

 

Under the Veblen goods principle, shoppers should view luxury brands’ higher prices as a sign that the goods are precious and hard to obtain. The problem is that neither of those is the case.

 

Luxury has become nearly ubiquitous. Open Instagram, and everyone has a Louis Vuitton Speedy or a Chanel Boy Bag or some other instantly recognizable four-figure-plus purse from a mainstream luxury label. Some of that comes from the rise of resale (people disposing of their used luxury wares, usually at deep discounts) or dupes (similar-looking copies that trade for far less). And a growing number are superfakes — highly convincing counterfeits that seemingly offer similar quality for a fraction of the cost.

 

On top of all of this, some luxury purveyors also began expanding their product categories and selling overstock via off-price outlets. Boutiques that were once decadent salons offering fittings to clients when they sipped champagne are now tourist destinations for the rich and the upper middle class, trading in wallets and key chains, which, despite their comical price tags, are among the cheapest options. We are mere minutes away from a Chanel- and Gucci-packed outlet store popping up in a midtier strip mall near you.

 

For a while, it worked. After the pandemic, newly minted millionaires were eager to spend and show off. The Chanels and Vuittons jacked up prices “so the ‘wrong’ people stop buying,” said Erez Yoeli, a research scientist at M.I.T.’s Sloan School of Management. But part “of the pressure in the marketplace comes from the fact that you do have to be legitimately better,” he said. “And if you’re not, you’re going to suffer the consequences.”

 

They weren’t better. Ms. India found that service at many top-tier hotels nose-dived during the pandemic, partly from staffing shortages, and has yet to recover. And how about those $10,000 handbags? Taleen Akopyan, who with her husband has worked as a cobbler and a leather restoration expert for the past four decades, said her business has shifted from bags that are 50 years old and still in good shape to brand-new Chanels, Louis Vuittons and Guccis that need help after a few wears. “There’s definitely a quality deterioration across the board,” she said.

 

It had to end. By many measures, the luxury market is in free-fall.

 

LVMH and Kering, which owns brands including Gucci, Balenciaga and Yves Saint Laurent, reported losses this year. Same goes for Burberry; Richemont, which owns Alaïa, Cartier and Chloé; and Capri Holdings, owner of Michael Kors, Versace and Jimmy Choo. A fall study from the management consulting company Bain predicted that 2024 would be the first year of luxury slowdown since the 2008 financial crisis (excluding the pandemic). Certainly the luxury sector tends to be one of the first hit by a slowing economy. But many of the reasons for today’s problems the companies brought on themselves.

 

Some brands are responding by dropping prices, which risks turning a luxury label into a line that’s carried by outlet malls and desired by virtually no one. Investors shouldn’t have lauded Burberry’s new C.E.O., Joshua Schulman, when in November he announced that among other adjustments, the brand would be reducing the prices of its handbags.

 

Perhaps the most egregious sign of the problem is the fact that luxury goods are winding up on the shelves of discount outlet stores. Dumping excess product in less-than-glamorous locations can be so destructive to a brand’s perception that some companies used to set excess product on fire to avoid such a fate. And yet, according to Bain, at the end of 2023, that’s exactly where about 13 percent of all luxury goods were purchased, compared with 5 percent a decade earlier.

 

Some brands are trying to hold the line. In a July interview, LVMH’s chief financial officer, Jean-Jacques Guiony, implied that price increases won’t “end just because the aspirational customers are a little under pressure.” Fun fact: LVMH’s fashion and leather-goods sales did a 5 percent belly flop in 2024’s third quarter. So perhaps pressure isn’t so much the problem as subpar, overpriced goods, like the $2,816 Christian Dior bags that were discovered to have been made in an Italian sweatshop for around $57.

 

What happened to these once-prestigious bastions of craftsmanship and fabulousness? The eponymous founder of Louis Vuitton was born into a family of artisans in 1821 and dedicated his life to studying and perfecting trunk making. Chanel was founded by Coco Chanel in the early 20th century and brilliantly designed sporty wares for women that freed them from corsets. Christian Dior invented the New Look in 1947, an immaculately designed, hyperfeminine silhouette that was a return to belle epoque glamour after the austerity of World War II. These brands and their peers long upheld the traditions and standards of their founders — until they didn’t. When short-term bottom lines matter more than history and heritage, corners get cut, the soul gets snuffed out, and the product becomes trash in a fancy box.

 

An exception is Hermès. The company has raised the cost of its Birkin 30 bag in Togo leather just 15 percent from 2019 to 2024, taking it from $10,900 to $12,500. That said, many claim you may have to spend a great amount on other Hermès items to “earn” the privilege of buying one.

 

Like my sad Kiki boots, much of old-school luxury — the kind that was so glamorous, lush and exquisite that everyone understood it, many craved it and few could have it — is beyond repair. Once-revered establishments that prided themselves on craftsmanship, service and cultivating a discerning and loyal customer base have become mass-marketing machines that are about as elegant and exclusive as the Times Square M&M’s store.

 

Today, instant gratification, profit and appearances are more desirable than substance, depth or intrinsic worth. And while the decline of “luxury” might not seem like the end of the world (especially with so many apocalypse-adjacent events unfolding), its fall represents a deeper decay that’s gnawing at so much of our existence — from education, media and literature to interpersonal relationships and quality of life.

 

But back to shopping. Now is the perfect time to seek skilled, independent craftspeople and designers who remain uncompromised by the luxury conglomerates’ production quotas and politics.

 

If something is obviously awful and obscenely expensive, don’t buy it. Don’t tout it on Instagram. Tell the manager you know it was mid. I certainly won’t be dipping my toes into any Marc Jacobs platforms again. One bruised tailbone was terrible enough. I’ll happily tell you all about it.

 

Katharine K. Zarrella is a longtime fashion editor, critic and lecturer.