What: The luxury industry faces its deepest identity crisis since 2008 as major groups like LVMH and Kering report significant sales declines while Hermès thrives through exclusivity-focused strategy.

Why it is important: The contrasting performance between mass-market focused brands and those maintaining exclusivity demonstrates how the luxury sector must recalibrate its approach to growth and brand value preservation.

The luxury industry is experiencing a profound transformation, evidenced by LVMH's 15% profit drop and Kering's 18% revenue decline in early 2025. This downturn reflects deeper structural issues beyond economic challenges, as brands grapple with the consequences of aggressive expansion strategies. The contrast between struggling mass-market oriented brands and the success of exclusivity-focused houses like Hermès, which saw 9% growth, highlights a critical industry divide. The shift in consumer sentiment, particularly among younger demographics, suggests a growing fatigue with overexposed luxury brands and a return to values of craftsmanship and authenticity. This transformation is forcing luxury groups to reevaluate their strategies, balancing growth ambitions with brand equity preservation. The industry's challenge lies not in temporary market fluctuations but in rediscovering the essence of luxury: exclusivity, intimacy, and enduring value.

IADS Notes: Recent market data underscores the luxury sector's transformation throughout 2024-2025. In February 2025, Bain-Altagamma reported the first contraction in personal luxury goods in 15 years, with the industry losing approximately 50 million customers. March 2025 revealed how successful brands like Hermès maintained their allure through controlled distribution, while others struggled with overexposure. This trend coincided with a significant shift in consumer behaviour, as December 2024 data showed luxury brands introducing products under $500 to retain middle-class consumers The transformation is particularly evident in China, where June 2024 reports showed growing "luxury fatigue" and a shift towards more discreet consumption patterns.

Is the luxury industry facing an identity crisis?