At Milan Fashion Week earlier this year, Alessandro Sartori, artistic director of luxury menswear brand Jegna, launched a collection inspired by “A family closet,” Emphasize the sentimental value of clothing passed down from grandfather to grandson. the idea Reminder to Zegna customers that they can have Their clothes are mended indefinitely. It’s also a sign that when style outlasts fashion, a product can maintain its relevance for decades. This longevity offers an alternative to overconsumption and overproduction, which deplete natural resources, stress supply chains and cause environmental damage.
However, initiatives like Zegna’s, while important, do not fundamentally change the business model of large luxury brands, which is still built around developing primary markets. Since the 1990s, revenue has come from Personal luxury goods quadrupledAccording to Bain & Company. exist Geneva Luxury Innovation Summit Earlier this month, panelists discussed launching more entry-level watches to help revive sales. But the pursuit of endless growth poses a dual threat to luxury brands. It weakens the promise of rarity while making environmental sustainability more difficult to achieve.
Sales growth breaks promise of rarity
Most large personal goods luxury goods companies, including industry leader LVMH, including Givenchy and Guerlain, have been grappling with a prolonged downturn since 2023. Questioning the appeal of luxury goodssome estimates suggest losses 50 million customers Between 2022 and 2024. The industry’s problems are deeper than cyclical weakness. Large luxury goods face three interrelated pitfalls: rarity, authenticity and perceived value.
The business model developed with the rise of LVMH in the late 1980s helped luxury goods become a global industry. But it also encouraged the democratization of marketing, making brands everywhere and everywhere. The retail footprint continues to expand, products are ubiquitous online, and boutiques and customer experiences become standardized across markets. At the same time, steep price increases in recent years have not always been matched by improvements in quality or functionality that customers can easily discern. The result is growing skepticism about the intrinsic value and value for money of luxury goods.
Consumers are also becoming increasingly aware of the seriousness of artificial scarcity. Until recently, Brands may burn through unsold inventory Rather than finding ways to recycle, this approach is incompatible with the enduring value that luxury goods claim. For three decades, the industry’s drive for scale has risked commoditizing luxury to the point of being almost banal.
The watch industry provides a contrast. Independent manufacturers such as MB&F and De Bethune are bucking the trend by building their appeal around unique design, exceptional creativity and limited production. Audemars Piguet also maintains a strong profile outside the major luxury groups. These businesses suggest that customers at the top end of the market may respond more to a clear promise of differentiation than to the launch of another product.
Population growth makes environmental sustainability more difficult
The second issue is the environmental cost of a growth model that relies on selling more new products. Research purposeful luxuryMy book examines six areas of sustainability among the world’s 100 largest luxury goods companies, identifying the gaps between the industry’s sustainability commitments and the transformation needed to achieve them.
Of the 18 major luxury brands, 8 (44%) reported relative targets for reducing Scope 3 greenhouse gas emissions. These emissions occur throughout the company’s value chain, including its suppliers and the use and disposal of related products. They account for the majority of total emissions for many brands. Relative targets measure emissions in terms of units of output or other business metrics, allowing emissions to increase as production expands. Of the 10 brands in the sample with absolute Scope 3 emissions reduction targets, only 4 expect to achieve these targets within the specified timeframe.
The study also found that sustainability reports still attach great importance to environmental, social and governance (ESG) disclosures. 95% of the review content focused on ESG topics, while only 5% dealt with transformation through circularity and innovation.
How much money are luxury brands actually investing in this transformation? Because companies are typically not required to disclose sustainability spending in a standardized way, it can be difficult to determine the full picture.
However, Moncler stands out for its transparency, topping the Dow Jones Best Sustainability Index for the seventh consecutive year in 2026. The company has made sustainability a key component of its corporate reporting, outlining its efforts to integrate environmental and social considerations into its operations. This commitment is worth considering alongside marketing and sales spend, which accounts for 37.3% of revenue 2024. This comparison raises a broader question about how luxury brands balance the resources devoted to promoting their products with those invested in changing the way they are made and sold. Across the industry, the overall posture is around compliance and reputational risk management for sustainability, rather than focusing on innovation and transformation to adapt to changing times.
This approach could threaten the long-term legitimacy of luxury goods. Climate change is increasing pressure on natural systems and resources, while access to essentials such as food and water remains a growing concern in many parts of the world. Luxury goods depend on society’s continued acceptance of the production and consumption of goods that are by definition redundant. Brands that fail to consider their environmental and social impacts risk damaging the legitimacy on which their business relies.
A new definition of brand growth and social success
To win back consumers, luxury brands will need to combine environmental sustainability with a new commitment to rarity, while rethinking some of the business practices that defined the industry before its expansion in the late 1980s. The goal should be to build a model that combines craftsmanship and uniqueness with new forms of creativity, revenue and customer value.
Before the industry scaled up, luxury goods were usually produced on demand rather than speculatively produced for inventory. Customers have to wait to make a purchase, and this delay may reinforce the feeling that the item is made just for them. Haute couture remains a powerful expression of the relationship between time, craftsmanship and perceived value. However, brands must be careful to avoid waiting lists based on opaque criteria, which has unfortunately become the norm today. Technologies such as artificial intelligence can help predict supply and demand to reduce wait times.
The same principle applies to marketing and retail. Before the era of always-on events and ubiquitous influencers, brands relied more on selective events, performances and sponsorships to build reputation. Today, a more selective approach can free up resources for research and development, including new materials, repairable products and circular design. ID Genève Watches, a young brand backed by Leonardo DiCaprio, provides an example of building a business around circular principles and innovative management of the product life cycle. Its approach illustrates how brands can compete on values as sustainability becomes part of their creative identity.
Brands can also rethink the relationship between sales, pricing and profitability. They might make up for lost primary sales by raising prices for wealthier customers, simply Limited effect About profit margins. The longer-lasting opportunity is to generate revenue throughout the life of the product through repairs, refurbishments, upgrades and resales, rather than relying almost entirely on the first transaction. Shifting to circularity requires rethinking the way products are designed from the start.
For affluent customers beyond the ultra-rich, luxury brands can capture a larger share of the expanding second-hand market and experiment with rental or sharing models. These methods can help collectors monetize valuable products that sit unused, from watches to handbags to cars. Here, luxury brands will use their outsized influence to redefine the meaning of success from outright ownership to Rights of use.
A renewed emphasis on meaning will help brands reshape that narrative, especially among younger customers. Many people look for opportunities to learn, develop new skills, and connect with ideas and communities. Chinese brands provide an example of how luxury and lifestyle businesses can build relationships that go beyond transactions. To Summer supports public engagement with Chinese art through curated events and exhibitions, while NIO’s community of 2,000 professional and personal development peers points to the importance of integrating meaning and purpose beyond consumption in the next luxury value proposition. Such initiatives alone will not create a more sustainable business model. But they point to a broader proposition, which is that brands can create value through culture, knowledge and community, as well as through the products they sell.
The way out of the luxury downturn is not to increase sales but to restore the exclusivity that made luxury goods desirable in the first place by focusing on rarity, innovation and meaning. Increased sales lead to devaluation of luxury goods and have a negative impact on the environment. As prices for new products continue to climb, innovation needs to come from new materials and circular models to prevent luxury from becoming an industry defined entirely by inequality.
Stéphane JG Girod is Professor of Strategy at IMD and leads the Luxury 2050 initiative. he is Luxury with purpose: a strategy manual for sustainable development of the luxury industry Co-author of the book Honest Luxury: What the Rise of Chinese Luxury Brands Has Changed the World…and What It Hasn’t.
