The luxury market has lost some fifty million customers in two years, mostly those who were reaching up toward it without quite affording it. By raising its prices to look rare, it drove away the base that made its volume, just as an awkward question keeps returning: what are you really buying when a bag costs two thousand euros and is made for fifty? And ultimately, who is luxury for: the rich, or those who claim to be?
1 The customer pushed out
It all begins with a departure.
The bleeding
Fifty million fewer customers
Between 2022 and 2025, the luxury customer base fell from about 400 to 340 million people, some fifty million customers lost, mostly aspirational buyers and Generation Z. The personal-luxury market slipped from €369 billion in 2023 to €358 in 2025, its first contraction outside Covid in fifteen years. Bain & Company puts it bluntly: these customers feel "betrayed," and "the industry has walked away from Gen Z."
Customer base
400 → 340 M
customers between 2022 and 2025 (Bain & Company).
Active buyers
60 → 45%
of the potential base, a sharp decline.
The base it abandoned
It is not the very wealthy who leave, but those who made up the numbers. And it is precisely that base which gives luxury its volume and much of its revenue. By driving it away, luxury ate into what feeds it.
2 The Covid party
To understand the hangover, replay the party.
The euphoria
When forced savings supercharged luxury
After the 2020 crash, the market rebounded from €217 to €353 billion in two years. The drivers: the forced savings of lockdowns, up to $2.1 trillion in excess in the United States alone; the urge for revenge; spending diverted from blocked travel toward objects; the wealth effect of euphoric markets; and the early arrival of the young, who alone accounted for all of 2022's growth. Bernard Arnault became the world's richest man, LVMH the first European company worth $500 billion.
Luxury market
€217 → €353 bn
from 2020 to 2022 (Bain & Company).
US excess savings
≈ $2.1 tn
at the mid-2021 peak (San Francisco Fed).
Demand that no longer looked at price
As long as money was abundant and travel was closed, luxury could get away with anything. Demand stopped reading the price tag. That indifference to price would become a trap.
3 The price drug
From the party, luxury drew a dangerous lesson.
The strategy
Raise prices rather than sell more
Between 60 and 80% of luxury's growth from 2019 to 2023 came from price increases, not volume. In Europe, luxury prices climbed 52% since 2019, twice general inflation; the Chanel Classic bag nearly doubled. The houses chose price over numbers, convinced that scarcity justified everything. An "elevation strategy" that worked, as long as the money flowed.
Growth from price
60-80%
of the 2019-2023 rise, not from volume (Bain, McKinsey).
Luxury prices in Europe
+52%
since 2019, twice general inflation (HSBC).
Price without quality
Analysts note it: prices jumped "without any notable improvement in quality to justify them." The same thing was sold for more. That is where the promise began to chip.
4 The elastic snaps
Then the spring gave way.
The reversal
Savings spent, elasticity restored
By early 2024, excess savings were consumed and travel returned to capture spending. Demand, sensitive to price at last, fell back: the first contraction in personal luxury outside Covid in fifteen years. And the houses diverged: Hermès (+9%, a 41% margin) and Cartier held firm, carried by the very wealthy, while Gucci dropped 10% and pushed Kering into a net loss, Burberry fell 17%, and LVMH's fashion and leather goods spent the year in the red.
Gucci in 2025
−10%
in sales, and a net loss for the Kering group.
Hermès in 2025
+9%
to €16 bn, with a 41% margin.
Two luxuries split apart
On one side, hard luxury, jewelry and ultra-exclusive houses serving the truly rich, which holds. On the other, "soft" luxury, fashion and leather goods, which depended on the aspirational, and which slips. The customer divide becomes a margin divide.
5 The €53 bag
Why this anger from the customer? Because they saw the other side.
The gap
Fifty-three euros to make, two thousand six hundred to sell
In 2024 and 2025, the Milan court placed workshops linked to major houses under administration. The figures filed in the case are staggering: a Dior bag made for 53 euros, sold for 2,600; an Armani made for 93 euros, sold for 1,800; at Loro Piana, workers paid 4 euros an hour, 90 hours a week, in workshops near Milan "negligently fueled" by the brand. Yet the "Made in Italy" label requires only the last substantial transformation to take place in Italy.
Dior bag
€53 → €2,600
subcontracting cost versus retail price (Milan court, 2024).
Loro Piana workshop
€4/hr
for workers, up to 90 hours a week (Milan court, 2025).
The nuance that matters
These amounts are subcontracting prices, not the full cost, and judicial administration is a supervisory measure for failure to control, not a criminal conviction; all these houses exited it after corrective action. But the damage was done: the public had glimpsed the workshop behind the window.
6 Burn to preserve
And there is worse than the hidden workshop: the bonfire.
Scarcity at any cost
Destroying unsold goods so they never existed
So that no unsold item leaks to the sales rack or the grey market and damages scarcity, luxury long destroyed its surplus. In 2018, Burberry admitted burning £28.6 million of products in a single year, more than £90 million over five years, before backing down under the outcry. Richemont, for its part, bought back €481 million of unsold watches to pull them from the market and dismantle them. Burning the new to protect the price.
Burberry, one year
£28.6 M
of unsold goods destroyed, admitted in 2018 before stopping.
Destroy rather than reuse
×20
more CO2 emissions (ADEME).
The dissonance
Here is the moral scandal: citizens are asked to reuse, repair, cut their energy footprint, while new goods are burned to keep a price up. The European Union estimates that 4 to 9% of unsold textiles are destroyed without ever being worn, some 5.6 million tonnes of CO2 a year, nearly Sweden's net emissions. France was the first to ban this destruction; the European Union bans it for large companies from 19 July 2026. The law is finally catching up with the practice.
7 The promise and the doubt
Exploited workshop, burned stock: the promise wavers.
Authenticity in question
Pay for the exceptional, doubt the product
In 2025, Chinese factories flooded social media claiming to make luxury bags and inviting buyers to order direct. For the major houses, it is false: the Birkin really is made in France, and many of these videos in fact sell counterfeits. But the suspicion takes hold. It feeds the culture of "dupes," those 100- or 300-euro copies of a 3,000-euro bag, and the resale market, which has grown from 32 to nearly 50 billion dollars, where a generation openly buys the imitation.
What you are really paying for
To be fair: for the major houses, production remains overwhelmingly European, and illegal labor stays a minority. But when the customer no longer knows whether they are paying for the work, the label or prestige alone, the magic dissolves. And that dissolution can be measured: 90% of consumers now find the experience identical from one brand to the next. Scarcity sells poorly when you can sense it being manufactured.
8 The Veblen good and the pyramid
To grasp the trap, a little economics helps.
The mechanism
The good whose demand rises with its price
Luxury is the textbook "Veblen good," named after the economist Thorstein Veblen: a good whose demand rises as its price climbs, because the high price is precisely the status signal being sought. But this mechanism rests on a pyramid. At the top, a handful of the very wealthy supply prestige; at the base, a crowd of aspirational buyers supplies volume and money. Luxury is thus sold for the rich, but it lives by those who claim to be.
The trap of the pyramid
①
The top supplies prestige. The truly wealthy ensure desirability and resilience, but they are few.
②
The base supplies the money. Aspirational buyers, those reaching toward a status, make up the volume and much of the revenue.
③
Luxury sawed off its base. By raising prices to look rarer, it pushed away those who kept it alive. Protected scarcity destroyed the demand that made it profitable.
For the rich, by those who claim to be
This is the heart of the paradox. Luxury presents itself as the preserve of the wealthy, but its economics depend on those who aspire to become so. To bite that hand is to confuse the set with the engine.
9 Win back or retreat
What remains is to know where luxury goes.
The two roads
Win back the base, or retreat to the top
Bain expects a rebound of 3 to 5% in 2026, but a fragile one. And one strategic question settles the future: should luxury win back the aspirational base, at the risk of diluting scarcity, or retreat to the very wealthy, sturdier but fewer, and who feel betrayed too?
Three roads
①
Win back. Return to fairer prices, put quality and creativity back at the core, re-engage the young. Volume, but the risk of becoming ordinary.
②
Retreat. Concentrate on the top, the ultra-exclusive, the bespoke. Resilience, but a market that shrinks and plateaus.
③
Refound the promise. The path Bain sums up as "rise through ethics, authenticity and inclusion, or retreat into elitism." Hold the price through real value, not through the signal alone.
The compass
For the investor: a sector that diverges, Hermès on one side, the aspirational houses on the other, with margins back to their 2009 level. For the citizen: an industry that will have to choose between selling a status and offering a value. For the real question is not the price of the bag, but what you are really buying, and which clientele it is meant for.
Reference: abbreviations & acronyms used (€bn, CO2, AGEC, ESPR).