The luxury goods industry is currently experiencing a decline in sales as customers become increasingly dissatisfied with the high prices, which can hardly be justified by improvements in quality or design. Brands like Gucci and Dior have significantly increased the prices of basic products: A simple T-shirt from Dior now costs $1,000, while black Gucci loafers are priced at $990. However, this pricing strategy appears to be reaching its limits as consumers begin to question the added value of these purchases.

The fascination with luxury is based on the desire of many customers to stand out from the crowd and demonstrate status. Psychologists emphasize that many buyers of luxury items have emotional reasons – whether to signal their social position or to underscore their success. However, rising prices alone are not enough to maintain this illusion, as is now evident.

Current figures underscore the challenges.

The price increases in recent years have indeed led to higher gross margins for top brands: The Louis Vuitton parent company LVMH recorded an increase in gross margin of over two percentage points, and Cartier owner Richemont even saw an increase of seven points. However, many consumers now doubt whether these price premiums still correspond to the quality.

The prices were raised during the pandemic to meet strong demand," explains Luca Solca, an analyst at Bernstein. "But when customers have to pay more, they also expect innovation and exclusivity." Recent social media shows that customers are increasingly discussing luxury brands negatively, especially when it comes to production standards and value for money.

The weakening demand suggests that the luxury industry's strategy needs to be reconsidered if high prices are to be maintained.