Fashion and luxury

The luxury players who will sustain margin will be the ones that rebuild value beyond price, by anchoring desirability in quality, experience and circularity, rather than just volume.

Challenges and opportunities arise at three levels:

Brand: Most luxury brands struggle to maintain desirability across generations and spending tiers. Those who succeed do so by gaining margin advantage, by narrowing their positioning to a few core dimensions, resetting the value equation for top-tier clients, and encoding their brand DNA for AI-driven discovery and recommendations.

Experience: Next-generation buyers expect seamless recognition and service across all touchpoints, yet the current in-store and online experiences continue to underdeliver. Leaders in luxury will need to unify client data and circular commerce, industrialize AI-powered clienteling, and turn stores into experiential nodes within a digital ecosystem.

Technology: Fragmented legacy systems block AI, dynamic pricing, and circular models needed to protect margin. To solve it, organizations must deploy unified digital cores, prioritize high-ROI AI use-cases like sourcing and authentication, and make digital product passports (DPPs) customer-facing to enable seamless resale..

After a decade of superior performance, luxury growth is stalling, as pricing, footprint expansion, and aspirational reach are losing momentum:

• Luxury outpaced the broader economy via price hikes and market consolidation among dominant players.

• Economic profit is declining, with most growth driven by price rather than volume.

• Demand is polarizing: top-tier customers now account for nearly a quarter of global spend, while the aspirational middle has pulled back toward savings, wellness, and second-hand.

For most of the past decade, luxury brands grew by raising prices rather than deepening the value that justifies them. As megabrands scaled across markets and categories, they inflated price signals as a proxy for desirability, without a corresponding investment in the craft, intimacy, and cultural relevance that make those prices feel earned. The correction is now visible in the numbers: margins are back to 2009 levels, enterprise value has evaporated, and the aspirational base that funded the expansion is quietly stepping back.

Next-generation leaders in luxury will align brand, experience, and technology to rebuild value around quality and intimacy, own circular commerce before third-party platforms do, and deploy unified digital cores that make client relationships defensible.

Scale came at the cost of meaning

The decoupling was structural. Brands kept charging more while delivering less of what actually drives loyalty among their most valuable clients, and both top-tier clients and younger cohorts noticed. The former pulled back from noise and irrelevance; the latter never bought the premise to begin with. Meanwhile, the categories gaining ground are precisely those where tangible value, durability and self-expression remain legible: jewelry, wellness, experiential. The market didn't turn: it corrected around a value proposition that had quietly hollowed out.

• Around 80% of luxury growth between 2019 and 2023 came from price increases, not volume growth.

• EBIT margins across selected personal luxury goods brands fell to 15–16% in 2025 — levels last seen in 2009, down from a peak of 21% in 2021–22 — resulting in an estimated €100 billion loss in total enterprise value in twelve months.

• About 80% of ultra-wealthy clients express dissatisfaction with ongoing price increases and cite craftsmanship and quality as what would make them spend more.

• Aspirational consumers' share of luxury spend fell from 74% in 2013 to 61% in 2024, with around 35% having reduced or stopped luxury purchases altogether, while the secondhand market is now worth $210B.

• Branded jewellery grew 8.3% annually versus 5.8% for luxury clothing, and the wellness market is forecast to reach $2.5 trillion by 2028 — both outpacing categories where price-led positioning has been most aggressive.

Margin follows desirability, and both are slipping

The decoupling of price from meaning was sustainable as long as confidence held, China grew, and aspirational consumers kept stretching. None of those conditions still apply. What looked like a pricing strategy has been exposed as a structural vulnerability: brands that anchored desirability to a price point rather than to something irreplaceable have no floor when that price point loses credibility.

The more urgent pressure comes from where the most resilient value pools are moving. Top-tier clients and younger high-spend cohorts — the two groups with the least price sensitivity and the longest lifetime value — are reallocating spend toward experiences, circular fashion and categories where quality is visible and verifiable. They are not leaving luxury. They are leaving brands that cannot demonstrate why the price is justified beyond the logo.

If brands fail to re-anchor desirability in quality and experience and to integrate resale and circular journeys into their own ecosystems, these clients will quietly reallocate spend and platforms will increasingly mediate how luxury is discovered, experienced and re-traded — on terms brands no longer control.

Read on to explore how Fashion and luxury organizations can align brand, experience, and technology to overcome these challenges.

The challenge: Fragmented brand DNA and accelerating creative cycles are eroding desirability across generations and tiers

Luxury is entering a reset where the old equation of "higher prices + more access + more visibility" no longer guarantees desirability. Megabrands expanded across markets, categories and audiences, stretching brand platforms across too many conflicting desirability levers. Meanwhile, creative cycles accelerated, narratives fragmented, and consistency weakened across regions, generations and spending tiers. Amongst the top 15 global luxury brands, 10 new CEOs were appointed 2019–2023. Out of these 15 global brands, 9 changed creative directors in the 12 months to September 2025, making it nearly impossible to maintain a coherent brand DNA.

Younger buyers increasingly interpret luxury through expertise, story, social value and circular practices, while top-tier clients expect intimacy and excellence rather than noise and scale. At the same time, resale platforms and emerging agentic commerce risk stripping brands of context, reducing them to interchangeable attributes, particularly if desirability is not clearly encoded and controlled. Brands struggle to define how they are perceived, compared and recommended—especially as resale platforms and AI-driven intermediaries reshape discovery.

• Only 35% of luxury brands report high desirability across all generations and spending tiers, even though 89% of executives say desirability is essential for long‑term growth

• Brands combining high desirability with strong operations — "Luxury Leaders" — represent just 22% but gain roughly 2.7 percentage points of revenue growth and 7.3 points of operating margin advantage over three years.

• About 80% of ultra‑wealthy clients express dissatisfaction with ongoing price increases and cite craftsmanship and quality as what would make them spend more. 

• 35% of aspirational consumers have reallocated their budget to savings, wellness and second-hand. 

• The second-hand market is expanding 3× faster than firsthand and is expected to reach up to $360B in 2030. It now represents 8% of sales, serving as a recruitment channel for 66% of buyers (80% of Gen Z).

Solutions to explore

Re‑anchor desirability on a focused value core 

Narrow brand positioning to a maximum of four desirability dimensions, instead of chasing all seven levers (exclusivity, quality and craftsmanship, heritage, social value, experience, innovation, and iconic status). Align creative direction, pricing logic and assortment to that core. For brands targeting younger buyers, focus on factors like social value, experience, quality/craftsmanship and innovation, which resonate most strongly with that demographic.

Elevate visible quality and intimacy for top‑tier clients 

Make craftsmanship and manufacturing transparency explicit through behind-the-scenes content, atelier access, and provenance storytelling tied to digital product passports; deploy human-led clienteling for Ultra-High-Net-Worth Individuals. Train dedicated advisors to use unified data to recognize Very Important Clients across channels, regions and years and eliminate mass marketing and irrelevant communication that top-tier clients cite as a key pain point.

Structure brand DNA and circular credentials as machine-readable data

Use digital product passports, structured metadata, and rich content APIs to encode brand story, provenance, craftsmanship and circular credentials in formats AI agents can interpret; structure brand-owned or partnered resale models so that secondhand becomes proof of long-term value rather than an off-brand grey zone, ensuring the brand is discovered and recommended with its full context

What should leaders do next?

Define the 3-4 desirability levers that the brand will own, and eliminate the rest from creative direction, marketing and assortment. Reset the value equation for top‑tier vs aspirational clients. Design a branded circular play (resale, repair, digital IDs) that encodes brand DNA for AI and reinforces desirability

The challenge: Product-centric models fail top-tier clients and younger buyers who expect recognition across every touchpoint

Luxury brands operate with experience models built for selling products, not orchestrating lifelong relationships. Flagship stores, e-commerce sites and hospitality extensions run as parallel worlds, leaving high-value clients to navigate inconsistent service, overcrowded environments and disjointed follow-ups. Luxury customers now benchmark brands against the best digital and service experiences anywhere, and more than half say their luxury journeys don't meet their expectations.

Younger buyers and top-tier clients are redirecting their spend to experiences, wellness and circular fashion, expecting brands to recognize them across every touchpoint. Yet many brands still treat resale platforms, hospitality concepts and digital communities as add-ons rather than core infrastructure, risking loss of control, data and the emotional connection to platforms and competitors.

• By 2026, Millennials and Gen Z are expected to account for approximately 75% of luxury buyers.  But less than half of the consumers under 40 report being fully satisfied with in‑store service, and even fewer with online luxury experiences

• About 36% of luxury customers believe the in‑store experience has worsened, citing inconsistent service and overcrowded stores

• More than 75% of Millennials now prefer to spend on experiences over products

• 55% of second hand luxury purchases happen via online multibrand resale platforms

• Top‑tier clients report overcommunication with irrelevant content, crowded stores without dedicated VIP spaces and weak recognition of their status across channels.

Solutions to explore

Build unified client data and circular commerce platforms 

Create a digital infrastructure that connects clienteling, authentication, resale and payments across all touchpoints, enabling brands to own the relationship and transaction, whether it happens in the flagship store, online or via a resale marketplace. When a client sells a handbag through the brand's resale channel, the transaction updates their unified profile, unlocks a personalized offer for a new piece, and feeds demand signals back into inventory planning—closing the loop between circular and primary commerce.

Industrialise human-plus-AI clienteling 

Equip advisors with unified client views across their purchase history, preferences, cross-category potential and resale behavior, and deliver "know-me" interactions in store and digitally, using platforms that consolidate messaging channels (WhatsApp, WeChat, SMS, email) and surface AI-driven recommendations based on real-time signals across all touchpoints. This enables personalised outreach at scale.

Redesign physical flagships as behavioral intelligence hubs

Turn stores into behavioral data hubs by capturing client interactions—product trials, dwell time, advisor conversations, event attendance—and feeding those signals in real time into the unified platform to trigger personalized digital follow-ups, inform inventory allocation, and enable cross-channel upsell and resale recommendations, instead of just treating in-store activity as isolated from digital and circular commerce.

What should leaders do next?

Invest in unified clienteling platforms, data and training for consistent recognition across channels. Define the role of resale and repair in the brand experience, then design integrated circular paths with clear CRM and inventory handoffs. Pilot behavioral data capture in flagship stores, whether it's about product trials, dwell time, conversations or events, and integrate signals into the unified platform for real-time follow-up and inventory decisions..

The challenge: Legacy systems block AI-driven pricing, authentication, and circular models at the moment margins are under peak pressure

Most luxury brands run on technology stacks assembled to support traditional retail, not to power AI-driven decision-making, omnichannel journeys or circular models at scale. Core systems for inventory, client data, e-commerce and resale are fragmented, making it hard to personalize at the individual level, orchestrate payments or prove product authenticity and enable one-click resale—while margin pressure from tariffs and rising costs forces brands to find new levers like AI-driven sourcing and dynamic pricing Legacy systems cannot deliver this.

Expectations are rising fast as generative AI, digital product passports and agentic commerce reshape how consumers discover, buy and re-trade luxury. Resale platforms are already profitable and scaling fast using AI for authentication and logistics, while AI-enabled wearables reshape discovery, pulling luxury further away from brand-controlled environments. The gap between what is technically possible and what legacy infrastructure can support is becoming a structural constraint on growth, margin protection and brand control.

• By 2030, around 30% of employee time across industries could be automated by generative AI, with roughly 40% of luxury work time in manufacturing, warehousing and logistics expected to be automatable; digitised sourcing using AI can unlock 8–12% reductions in product cost compared with transactional procurement baselines.

• AI search grew 4,700% between July 2024 and July 2025, with 53% of US consumers who used gen‑AI for search also used it to shop

• 70% of consumers want authentication as the top resale feature and 79% want digital product passports for handbags; concrete collaborations such as Chloé with Vestiaire Collective (>60% faster resale) and Poshmark with Coach (one-click resale via DPP) prove the model works, while resale platforms achieve profitability using AI for authentication and logistics.

• Prada's modular commerce platform, built from independent software components, enabled a checkout experience that was 60% faster and a 15% increase in completed checkouts, showing the direct impact of the architecture on conversion.

Solutions to explore

Build a unified digital core

Integrate cloud infrastructure, data and AI, applications and platforms into a single backbone for experience and operations across regions and channels, replacing siloed legacy systems that block real‑time personalisation, inventory visibility and payments orchestration.

Deploy AI where it directly protects margin and elevates experience

Prioritise use cases that deliver measurable impact, such as digitised sourcing, dynamic pricing, demand forecasting, AI-powered clienteling, and authentication. Fund them as strategic programmes with clear value metrics and cross-functional ownership, rather than scattered, IT-led pilots.

Make digital product passports customer‑facing value features

Launch DPP initiatives in priority categories (handbags, jewellery, watches) that enable one‑click resale, prove authenticity, provide care instructions and create new brand touchpoints when products are re‑traded, while building the data and process foundations for scaled circular commerce.

What leaders should do next

Assess tech architecture gaps across customer data, inventory, payments and channels. Select and scale a portfolio of high‑impact AI applications with cross‑functional ownership. Launch DPP pilots in flagship categories, then expand as governance and processes mature.

Luxury houses still hold the most defensible assets in consumer markets: craft, heritage, and client relationships built over decades. But aspirational volume is shrinking and top-tier clients are reallocating spend. The organisations that start rebuilding meaning, owning the full client journey, and integrating circular commerce into their ecosystems will capture the value pools that remain.

The houses pulling ahead are those that are rebuilding desirability around quality and intimacy, owning circular commerce before platforms define the terms, and running brand, experience, and technology as one system, before the distance from competitors becomes structural.

AREA 17 combines strategic consulting with hands‑on product development, working with luxury and fashion organizations to think, design, and build the platforms that:

Rebuild brand desirability through focused positioning and circular control — narrowing brand platforms to a few defensible dimensions, resetting the value equation for top-tier clients, and launching brand-owned resale that turns circular commerce into proof of long-term value.

Unify client relationships across physical, digital, and circular touchpoints — building platforms that connect clienteling, authentication, resale, and payments into a single system, enabling AI-powered recognition at scale and turning physical flagships into experiential nodes within the unified platform.

Deploy digital cores and AI where they protect margin and elevate experience — integrating cloud, data, AI, and payments into a single backbone, prioritizing high-ROI use cases like sourcing, dynamic pricing, and authentication, and making digital product passports into customer-facing features that enable seamless resale.

Contact us to explore how we can help

Sources

Accenture – Luxe Eternal Luxury Report

Bain & Company – Luxury in Transition: Securing Future Growth (2025)

BCG x Altagamma – True Luxury Global Consumer Insights 2025

BCG – Resale’s Next Chapter (Oct 2025)

BSPK – Global Luxury Retail Trends 2026

Deloitte – Global Powers of Luxury Goods 2026

McKinsey – The State of Fashion 2026

McKinsey – The State of Fashion: Luxury 2025

UniformMarket – Luxury Clothing Market Statistics