Report

Fashion and luxury

01 The State of the Market
02 Rebuilding Desirability With Intention
03 Making the Client Relationship a Unified, Circular System
04 Building the Infrastructure That Makes Circularity and AI Possible
05 Conclusion

The State of the Market

An industry of dreams, caught by reality

A decade of record growth, expansion across every market, prices rising without pause. Luxury seemed untouchable. Yet it carries a contradiction that is becoming increasingly difficult to ignore: nearly 80% of growth between 2019 and 2023 came from price increases, not volume. Margins have retreated from their 2022 peak to 2009 levels, and the major houses lost 100 billion euros in valuation in twelve months. The break is structural, not cyclical.

A desirability under strain

The major houses grew by raising prices rather than deepening what justifies them. Craftsmanship, intimacy, and cultural relevance — the real foundations of desirability — gave way to volume and overexposure. The retreat was visible in behavior long before the numbers confirmed it: 35% of aspirational consumers have reduced or stopped their purchases.

The market is not collapsing. It is reorienting toward categories where value remains tangible and verifiable: jewelry, wellness, experiential. The secondhand market, meanwhile, is growing three times faster than the primary market and already represents 210 billion dollars.

This retreat is not only economic. Between 2019 and 2023, 10 of the 15 largest houses globally changed chief executive, and 9 changed creative director between 2024 and 2025. In a sector where heritage is at the core of value, this rotation weakens brand expression at the worst possible moment.

AI agents and resale platforms now mediate discovery and recommendation

A brand whose identity is not encoded in structured data will be reduced to interchangeable attributes — discovered without context, recommended without a history.

Three recurring failures stand out across the sector: desirability spread across too many dimensions without a defensible position, client journeys that fail to deliver on the promise of recognition and intimacy, and legacy infrastructure blocking AI, circularity, and dynamic pricing at the moment when margin pressure is at its highest.

At AREA 17, we approach these challenges as a unified system across three levels: the brand and its positioning in the industry, the user experience across channels, and the technological and organizational foundations that make it possible.

Rebuilding Desirability With Intention

Desirability has eroded in step with rising prices. Only 35% of houses maintain strong engagement across generations and spending levels. Among those that combine desirability with operational excellence — 22% of the sector — the advantage is measurable: 2.7 additional points of growth and 7.3 additional points of margin over three years.

Seven levers structure desirability: exclusivity, quality and craftsmanship, heritage, social value, experience, innovation, iconic status. Activating all of them at once means defending none.

80% of ultra-high-net-worth individuals cite craftsmanship as what would lead them to spend more — a lever many houses have moved away from. Hermès, which preserved it, posted operating margins of 40% in 2024 while the broader market contracted by 2 points. Younger buyers read luxury differently: social value, experience, and circular practices matter more than the logo. They seek objects whose value is visible, easy to articulate, and difficult to replicate. The rise of upcycling is the clearest signal — a market valued at nearly 10 billion dollars in 2024, with projected annual growth above 9% through 2034.

A further risk is emerging. AI agents are reconfiguring discovery and recommendation. Brand identity can no longer rest on editorial storytelling or art direction alone.

It must be encoded in structured data — product metadata, digital passports, agent-readable content — so that the house's story survives algorithmic mediation.

Key takeaway

The houses that succeed do so by making deliberate choices. They choose three to four coherent and defensible levers rather than trying to cover everything. They place craftsmanship back at the center of their value proposition, make circularity a full offering in its own right, and encode their DNA in structured data readable by AI agents, so their story and their desirability survive algorithmic mediation.

Making the Client Relationship a Unified, Circular System

75% of Millennials prefer spending on experiences over products. Yet 36% of luxury clients feel the in-store experience has deteriorated, and fewer than half of those under 40 report being fully satisfied — even fewer for the online experience.

The current model is built to sell products, not to orchestrate relationships: flagships, e-commerce, and hospitality offerings operate in parallel, leaving the most valuable clients to navigate disconnected experiences.

More than half of luxury secondhand purchases happen through multi-brand platforms — and resale is already the first point of contact with luxury houses for 66% of buyers overall, rising to 80% among Gen Z. This channel largely escapes the houses. Some are beginning to reclaim it: Chloé cut its resale turnaround time in half through Vestiaire Collective; Coach launched one-click resale via digital product passport with Poshmark.

Resale can become the first connection between a house and a new generation of buyers — not merely a secondary transaction.

Key takeaway

The houses that succeed integrate resale, clienteling, and payments into a unified system. They make circularity a driver of the client relationship, not a transaction that escapes the brand, and not simply a sustainability obligation

Building the Infrastructure That Makes Circularity and AI Possible

The luxury industry is caught between two forces. On one side, resale platforms — already profitable — are accelerating, using AI for authentication and logistics. On the other, new AI commerce intermediaries are capturing a growing share of discovery and payments: in the United States, 53% of consumers who searched for a product via AI then purchased it without leaving the platform.

Faced with these two forces, houses have a choice: accept intermediation or build their own infrastructure to reclaim control of discovery, resale, and the client relationship.

The technology infrastructure of luxury houses was built to manage catalogs and inventory — not to power AI, orchestrate circular journeys, or personalize experience at individual scale.

When client data, inventory, e-commerce, and resale are fragmented, real-time recognition, dynamic pricing, and authentication become impossible.

Yet AI applied to sourcing can generate cost reductions of 8 to 12%. Prada's modular platform demonstrates what is possible: a 60% faster purchasing process and 15% more completed transactions.

Beyond operations, 70% of consumers cite authentication as the primary feature they expect from resale, and nearly 80% want digital product passports for handbags.

Infrastructure that cannot meet these expectations does not only lose transactions but also the control of the relationship.

Key takeaway

The luxury houses building lasting advantages unify client data, inventory, and resale infrastructure within a modular architecture. They prioritize high-ROI AI use cases such as sourcing and dynamic pricing. They make digital product passports a client feature, not a compliance tool: authentication, one-click resale, traceability.

Conclusion

Luxury houses still hold the most defensible assets in the market: craftsmanship, heritage, and client relationships built over decades. But desirability has eroded and high-spending clients are allocating their budgets elsewhere. The houses that succeed will be those that rebuilt a value proposition that justifies the price and integrated circularity and client knowledge into their own ecosystem through adapted, modular infrastructure.

At AREA 17, we combine strategy and craft to help luxury and fashion houses:

Restore a singular and defensible brand identity — by choosing desirability levers with intention, placing craftsmanship back at the center of the value proposition, and encoding brand DNA so it survives algorithmic mediation.

Integrate resale, clienteling, and payments into a unified system — making circularity a driver of the client relationship and secondhand a point of entry into the brand.

Modernize infrastructure to reclaim control of discovery, resale, and the client relationship — by unifying data, prioritizing high-ROI AI use cases, and making digital product passports client features.

Facing these challenges? We'd love to talk.