The luxury crisis rocking the fashion world

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IMRAN AMED: This is probably the most severe crisis that I’ve seen in the luxury side of the fashion industry since the Great Recession.

The template business model and approach that the luxury industry has been using for the last decade or so is running out of steam.

So you have this slowdown happening in China. On top of that, you have a wider slowdown amongst aspirational luxury customers who were gorging on luxury products during the pandemic.

And on top of all that, Bob, you and I spoke last time about the creative side of the industry just losing a little bit of its magic.

And so I think what’s exciting about a time like this is it forces companies to innovate.

BOB SAFIAN: That’s Imran Amed, the founder and editor-in-chief of The Business of Fashion. Since Imran was last on Rapid Response, the fashion industry has seen unprecedented price hikes, CEO turnovers, sustainability back-pedaling, and more — culminating in what Imran is calling a full-blown luxury crisis. Imran and I explore the biggest stories in fashion today, and what the industry should do this year to turn over a new leaf. Imran takes us inside the boardroom of global brands as they respond to the looming threat of tariffs, find a competitive advantage with AI, and attempt to finally crack into the thriving Indian market. Whether you’re entrenched in fashion news or maybe just window shopping, Imran offers lessons that apply to any industry about when it’s time to scrap the system and start from scratch. I’m Bob Safian, and this is Rapid Response.

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SAFIAN: I’m Bob Safian. I’m here with Imran Amed, founder and editor-in-chief of the Business of Fashion. Imran, great to see you.

AMED: Likewise, Bob.

Copy LinkIs the fashion industry at a point of reckoning?

SAFIAN: When you were on the show a few months ago, you talked about how the fashion business was in need of a makeover. And since then, I’ve seen this burst of turnover among label designers, also among CEOs at Gucci, Burberry, Givenchy. Is this the reckoning that you saw coming? Is this just sort of standard turnover for the industry? It seems dramatic from an outsider’s perspective. What’s going on?

AMED: It’s pretty unprecedented, this level of turnover. I have never seen this volume of change in the leadership of big fashion companies. And as you pointed out, it’s not just on the creative side, which is what I think the mainstream culture tends to follow. It’s also on the business side. And is it a reckoning? Yeah, I think a lot of companies are coming to the end of their relationships with some of the people that have been leading those companies. New names are coming to the fore. Some of the names that are emerging in the top roles on the creative side are mostly new to the mainstream public, although they may be somewhat well known to fashion insiders. But yeah, this is a pretty unprecedented level of change.

SAFIAN: The new leaders, the new wave that’s coming in — is there anything that connects them?

AMED: Is there a new theme? Is there a new direction? Well, sadly, I don’t think there’s a sense that the people coming up in some of these roles are from a new template. In fact, a lot of the industry has been kind of shocked to see that the same kind of demographic, usually a white man, is taking the top job at a lot of these big companies.

And that’s something that I think a lot of people in our industry are really wondering about because it’s not like there’s a shortage of talented female designers in the fashion industry. There are, and for an industry that primarily targets itself at women, even for menswear, women are the primary buyers because they’re often buying for their partners. So, no, sadly, I’d say probably the names might be new, but the template that the industry is drawing upon is quite consistent with what we’ve seen in the past.

SAFIAN: And the new business leaders, are they offering the promise of any new business creativity, or are the challenges you see in this business not a lot fresher yet? 

AMED: Well, probably the most interesting and exciting new business appointment was made two years ago now, and that was when Chanel appointed Leena Nair as their new CEO. Lena came from outside the fashion industry. She was a top executive at Unilever, but not only was she outside of fashion, she came from the HR or people’s side of the business.

That was quite an exciting new appointment. She was the first woman of color to be appointed to one of these really big top jobs. We are seeing a lot more women come through on the business side. The former CEO of Miu Miu, Benedetta Petruzzo, was recently named to a new, very senior role at Dior.

So we are seeing women come through on the business side, but it’s on the creative side where I think there’s a bigger gap. And the reason I found Lena’s appointment so interesting was because it showed that someone was thinking about the value of the outsider’s perspective in our industry.

Most of the executives you see rising into these top jobs have grown up in the fashion industry.

SAFIAN: You’ve said that we’re in a luxury crisis, and it sounds like it’s part design and part business. Do you feel like there’s progress in this crisis? I mean, I know you’ve also talked about the death of extravagance, which is maybe more cultural than just what the industry itself can do.

AMED: This is probably the most severe crisis that I’ve seen in the luxury side of the fashion industry since the Great Recession of 2008-2009, after the collapse of the global financial system when everything almost fell apart everywhere.

The reason I think some people are calling this a crisis is because it seems like we’ve reached a point, Bob, where the template business model and approach that the luxury industry has been using for the last decade or so are running out of steam. And that is driven by a number of different factors.

First and foremost, the industry has highly relied on the growth of the Chinese market to propel the luxury industry to new heights. Anyone who’s been following the Chinese economy knows there’s a consumer confidence crisis happening there, linked to a wider real estate crisis.

So the Chinese customer spending has slowed down significantly. A lot of brands have caught themselves being overstored and overdistributed in a market that’s slowing down. So you have this slowdown happening in China. On top of that, you have a wider slowdown amongst aspirational luxury customers who were gorging on luxury products during the pandemic because they couldn’t spend on travel, dining, and all the other things they wanted to do.

That’s another thing that slowed things down. And then finally, I do think there is more of an internal existential crisis around how customers are responding to the current luxury template. There are questions around ethics and sustainability, with a couple of big luxury brands, Dior and Armani, involved in serious investigations by the Italian authorities around the supply chains of their products in Italy. Some customers are questioning if a bag only costs 50 or 100 euros to create, it’s being made under conditions that don’t seem to be entirely consistent with the dream these luxury brands are selling.

This is really calling into question the value customers see in those products. There is this whole question around the price hikes. Brands were able to increase their prices by 80 percent, and they’ve reached a limit now. They can’t increase their prices anymore.

In fact, some of them are going to really start to think about their whole pricing architecture and if it’s out of whack. So there are so many things happening all at the same time, and a CEO at the top of a big luxury house right now is grappling with a bunch of things. And on top of all that, Bob, you and I spoke last time about the creative side of the industry, just losing a little bit of its magic.

A lot of it has become templatized and commoditized. And so I think what’s exciting about a time like this is it forces companies to innovate because the market isn’t growing super fast anymore. In order to grow and succeed, you have to take market share from someone else.

To take market share from someone else, you have to offer something different and special in the market. And there’s a couple of brands doing that. I mean, if you look at the performance of Miu Miu, which is part of the Prada group, that brand has been growing at 90 percent or 100 percent year on year, which is extraordinary in the current market environment.

Then you have other brands like Brunello Cucinelli and Hermes, which are consistently growing at a good pace because they’re creating products that have this timeless luxury, highly qualitative element to them. You can’t succeed doing things the same way you’ve done over the past 10 years.

Copy LinkIndustry fears of Donald Trump’s tariffs

SAFIAN: You do a big annual gathering of global fashion and luxury and tech leaders at your Business of Fashion Voices event. The latest one took place just after Donald Trump’s re-election as U.S. president, it was that week, right? What was the mood and reaction like among the attendees?

AMED: The thing about Voices is it’s a genuinely global event. So we had about 200 people there from something like 25 different countries.

But of course, as it was an industry gathering, there was a lot of hand-wringing around what the return of Donald Trump is going to mean for the industry.

The one thing that’s most concerning for the industry is the threat of increasing tariffs by 20 percent, and obviously, for an industry that operates with a global supply chain, price increases brought on by tariffs can impact the American customer in the world’s most important consumer economy. That’s a big concern for people.

SAFIAN: Do you see the leaders, fashion, and retail leaders, making changes, preparing, gearing up, or are they waiting? And I guess the other question is, is it different for a fast fashion brand versus a luxury brand, or is it across the board? I think it’s across the board, and the luxury brands are already grappling with this whole issue around pricing, trying to rethink their pricing architecture.

AMED: Customers everywhere, whether they’re on the more high street side of the market or shopping more regularly on the luxury side, one thing that’s consistent for everybody is we’ve been through a period of extremely high inflation.

And although inflation may have slowed down, the prices that we’re all paying for everything versus two or three years ago are 20 to 25 percent higher. That’s impacted the way people think about where they spend their money.

Copy LinkThe untapped potential of the Indian market

SAFIAN: Luxury customers, just because they have a lot of money, doesn’t mean they don’t care about value. Nobody likes being taken for a ride. One of the trends you talked about at Voices was India, with India’s economy poised to keep soaring, but most of the popular brands are domestic. It sounds like potential opportunity there for global luxury and retail brands, but they’re struggling.

AMED: As long as I can remember, the industry has been talking about whether India is the next China. They were looking for that next big propeller of growth. If you’d asked me this question five years ago, or even three years ago, I would have said there’s still a lot that needs to be established and proven for India to take its position as one of the very big markets in the world. But I think we’re at a tipping point right now.

We are genuinely at an inflection point. Some of it is driven by sheer demographics, the growth of the middle class market there.

India is the fastest-growing major economy in the world and is soon to be the third-largest economy. A lot of the challenges the industry has faced, up until now around retail infrastructure, around bureaucracy, around local cultural norms, all still exist but are starting to change.

There are new airports opening, new infrastructure in terms of retail opportunities.

Access to broadband and mobile internet is ubiquitous in India now. So, like, all of the factors that have made it hard for brands to penetrate the market are changing. The one thing that brands have to contend with, whether they’re luxury or mass market, is the very vibrant local fashion industry in India.

The way people dress in India is more of a cultural fusion. If you walk the streets of Shanghai, most people wear Western clothes. If you walk the streets of Delhi or Bombay, people are wearing a mixture of Western handbags or shoes with traditional kurtas or the clothes Indian people have been wearing for decades, thousands of years. Trying to figure out where you fit into the Indian customer’s lifestyle is what a lot of brands are contending with. There is a lot of local competition, so the Indian market is on the precipice of something big, but it’s not going to be easy.

SAFIAN: It sounds like the challenge is both style culturally and how business operates in India, which has not necessarily been cracked by the fashion industry from outside.

AMED: The right talent, Indian local talent, can empower those leaders to help make decisions that are right for that market.

SAFIAN: Imran’s right, while many companies have spent years focusing on the business challenges that prevent a successful go-to-market strategy in India, it’s equally the cultural challenges that will be critical for brands in the coming years. Facing those cultural challenges will require taking risks and embracing a whole new approach — a recipe that’s certainly daunting for some leaders but necessary as we see India becoming more of an economic force on the world stage.

After the break, Imran shares why brands should realign their focus to a thriving yet overlooked demographic — the so-called ‘silver spenders’ and how many designers are onboarding AI into their creative process. Stay with us.

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SAFIAN: Before the break, Imran Amed, founder, and editor-in-chief of The Business of Fashion took us inside today’s luxury crisis and how the fashion industry is trying to rediscover some creative magic. Now, Imran explores why challenger brands like On and Skims are threatening sportswear juggernauts, and why when it comes to sustainability, the fashion industry is great at talking the talk but not walking the walk. Let’s jump back in.

Copy LinkA declining level of urgency around sustainability in the industry

Another topic I wanted to ask you about that a lot of business people are talking about right now is sustainability. I’m curious about how much conversation there was at Voices about that. I mean, the fashion industry has often talked a good game when it comes to climate initiatives, but as Business of Fashion has reported, big brands consistently fall short, focusing on buzzy things that get attention rather than delivering against decarbonization targets. Do you see that changing anytime soon?

AMED: I’m sad to say that I just don’t see the level of urgency among the leaders in the industry to really make the necessary change. If you ask an industry to police itself and make decisions on how it should operate when it comes to things around what’s good for greater society or the world at large, these companies are making decisions based on what’s good for them. What’s good for them isn’t necessarily what’s good for the planet. The result of that is we’re going to require really serious regulation from governments around the world. The EU is taking a leadership role in this in terms of laying down serious rules around how you can dispose of excess products and operate your supply chains.

Without that kind of regulation, Bob, I just don’t see the change happening. Probably one of the most alarming or surprising things that came out of our annual report, the State of Fashion, which we publish every year with McKinsey, was that every year we survey hundreds of senior executives in our industry around the world on the top issues on their agenda. This year, sustainability continued to fall down their priority list. I understand why that’s happening because I just gave you a litany of things these executives are having to grapple with, but as a result, this year, sustainability fell off.

I think it fell from 29 percent thinking it was a top issue down to 18 percent. The level of urgency on this issue that we need for the industry to take action is just not there.

Copy LinkThe rise of the silver spenders

SAFIAN: At Voices, one of the opportunities I saw that you talked about was the rise of what you call silver spenders, the population over 50. Are brands beginning to pivot towards silver spenders? Should they?

AMED: If you think about the established markets, they’re all heavily aging populations.

There’s an opportunity with older customers that the industry has really overlooked. This is an industry that has constantly prized youth. There’s been an obsession in recent years with the millennial customer, with the Gen Z customer. What our silver spenders theme from the State of Fashion was trying to say is that there’s an overlooked demographic of people, many of whom have high levels of disposable income.

They don’t have to support their children anymore, their lifestyles are changing, and thinking about what those customers need is imperative for brands that want to continue to be successful in markets in East Asia, Western Europe, and North America. I had a really interesting conversation with the actress Michelle Yeoh on this topic earlier this year.

She has been named a brand ambassador for Balenciaga and Bottega Veneta, two of the biggest brands in the Kering group. One of the reasons they picked Michelle is she speaks to a whole different audience demographic. So yes, some brands are beginning to realize that, as Michelle said to me, your life doesn’t end at 50. She proved to the world that when she won her Oscar for “Everything Everywhere All at Once” at age 62, she’s still getting started. Now, she’s one of the stars of “Wicked,” which is ripping up the box office worldwide, you know?

So I think there’s this growing notion and understanding that this idea of aging customers as being boring and staid and uninterested in fashion is incorrect. Michelle can wear anything and look amazing, and she’s an incredible ambassador and role model for lots of women who still want to feel and look fabulous. Create things that are suitable for me as well.

Copy LinkChallenger brands redefining sportswear

SAFIAN: One of the speakers at your Voices event was the co-founder of the athletic shoe brand On, David Allemann, and On is part of a cohort of these newer brands that really scaled significantly in 2024 while Nike and Adidas sort of stalled a little bit. Do you think that trend’s going to persist in 2025? Are there things that you learned about On’s strategy that might continue to make things challenging for those big players?

AMED: Yeah. We had a theme in our report around challenger brands and the success of challenger brands, particularly in the sportswear category. I would also include Skims in that category, and we had David Allemann alongside Jens Grede, the CEO of Skims. What those two brands have managed to do is tap into culture, and they’ve managed to do it in a way that feels really authentic.

Of course, Roger Federer is affiliated with On now. It was from a genuine connection and appreciation of the product that was created. The lesson I took from both Jens and David is that they’re brands really focused on product innovation.

This is where some bigger companies have really struggled. Adidas is doing quite well right now, but a lot of its success is predicated on bringing out some of its old models.

This idea of constantly going to your archive to reignite interest in products you created before can work, and Adidas is doing really well. But what On and Skims are doing is they’re focusing on product innovation, and it’s this combination of product innovation with really understanding how to tap into culture that’s been a magical formula for both of those companies.

SAFIAN: It feels to me like Nike has sort of lost its way in some respects; in tapping into culture, when it was, for so long, the leader in that. Even as challenger brands emerged, Nike was still a step ahead, but they’ve just lost a step.

AMED: They were so good at that at one stage.

Their marketing was so much associated with athletes and the notion that everybody could be an athlete. People would buy into that brand because a lot of their innovation. I remember when I went to the Nike campus in Portland many years ago to interview the CEO, Mark Parker; a lot of what he and I talked about was all of the innovation stuff.

I think where Nike and Adidas, to a certain extent, have lost their way is they’re not innovating like some of these challenger brands are. But don’t count them out just yet. I think with competition, you have to change, and with new leadership at Nike, I think they’ve understood the challenge ahead of them. It will be very interesting to see what happens next year.

Copy LinkThe role of AI in modern fashion design

SAFIAN: AI is sending ripples through all industries.

How are fashion and apparel designers reacting? Are some designers and brands leaning into AI tools more? Are others leaning away? What’s the conversation?

AMED: I think as with a lot of things involving AI, everybody’s using it, but not everyone’s talking about how they’re using it. I think that’s the right approach. People are figuring out the potential of this tool. As you know, Bob, we’re in the nascent stages of the development of this technology.

If there’s anything I’ve learned, it’s that when you’re at a technological inflection point like this, if you don’t start experimenting with it and trying it, you get left behind. Most smart, creative people and business people I know are trying things out.

The most interesting takeaway I’ve had so far was in a conversation I had with the interior designer Kelly Wearstler, who’s an incredible creative, and she’s been using AI and is very open about it in her creative process.

Basically, she said it just enables us to generate a lot more ideas.

It still requires a human to edit down and refine those ideas, maybe combine some of the ideas together. I’m seeing the same thing in fashion. Lots of people are using AI to generate ideas for their mood boards, but they’re also doing archival research, looking at what celebrities are wearing, and checking out stuff from other brands.

They’re grouping all of those things together. So AI is one early input into the creative process, but to create something genuinely novel, interesting, disruptive, creative, and beautiful, a human must be involved. I think it’s a mistake not to try to understand what inputs AI can bring into your creative process.

But it’s also a mistake to think that one day AI is going to design everything in fashion because I don’t think that’ll happen.

Given the financial and competitive crisis luxury and fashion are going through, do you see the fashion calendar evolving as we look to 2025? Are you adjusting your approach to the various fashion weeks at all?

The truth is anyone who works in fashion could go to a fashion week every single week of the year. There is a fashion week happening somewhere on our beautiful planet every single week.

So I have cut back significantly on the number of fashion shows and fashion weeks I attend because, at the end of the day, it just started to feel like it was eating into my personal time.

I think the industry did talk about reducing the number of fashion weeks. There was talk about consolidating fashion weeks. There are still questions, I’d say, if we’re being honest, about the future of New York Fashion Week and London Fashion Week because they are shells of their former selves in the post-COVID environment. A lot of the brands in London and New York have started to shift their shows to Milan and Paris. Paris, in particular, has really consolidated its position as the true global fashion capital when it comes to fashion week.

Copy LinkReimagining fashion’s event-driven calendar

SAFIAN: I mean, as you talk about it, it just seems like it’s so much effort. I don’t want to say waste because all the different fashion weeks provide opportunities for promotion and push the release of new creativity, but there’s a point where maybe it’s too much.

AMED: Honestly, Bob, I think it is waste. But, as I said earlier, the industry is looking for a new model. Maybe part of the model needs to be reevaluating how we engage with brands.

If you look at a brand like Jacquemus, Simon Porte Jacquemus is one of the most successful independent fashion designers in the industry. He does two shows a year on his own schedule. He chooses a place that means something to him.

That’s usually cinematic, beautiful, and picturesque. He creates these incredibly memorable shows, and those shows go viral. But a brand like Dior, Vuitton, Gucci, or Chanel doing four, six, eight, or ten shows a year, in multiple cities, and doing replica shows — it’s a lot.

SAFIAN: It reminds me in some ways of what Apple did, creating its own events around its own products instead of getting lost inside something like CES or one of the other enormous tech industry things.

AMED: That’s exactly what it is. We’re at a moment where innovation is going to matter, and brands are going to find new ways of doing things. It’s the brands that really think, “If we were starting from scratch, how would we do things now for the time we’re in, for the mindset customers have, for the budgets we’re working with, for the reality of the planet and its boundaries?” That’s the question I wish more people in our industry were asking. I have to admit, I thought COVID and the reflection and the world stopping would really change things. I really bought into that narrative. I was wrong. We’re back at it.

SAFIAN: What’s at stake for the fashion industry in 2025?

AMEDL Well, I think the thing I’m most looking forward to is, as a result of all of that turnover we talked about at the beginning of our conversation, there’s going to be a lot of new designers debuting.

I think the creative reinvention of our industry is going to start with what some of these designers are doing on the runway. I’m exhausted after 2024. It has just been a relentless year, but I’m also really excited about what’s to come.

SAFIAN: Well, Imran, this has been great. Always great to talk with you and learn more about this. Thanks so much for doing it.

AMED: Thank you for the chat.

SAFIAN: Coming away from my conversation with Imran, it really feels like the infrastructure of the fashion industry is, in many ways, a system built for a different time — one that’s no longer conducive to the fast-paced evolution of consumer habits, the temperamental global economy, and the need for sustainability. To truly scrap the system and start from scratch is unlikely, but the heart of that impulse is one that I think leaders everywhere should harness as they assess their own industry and markets today. Try to harness an outsider’s perspective and gauge what’s working, what’s not working, and what are the ways of working we do because it’s the way things have always been done but might not align with our new goals for the future. I’m Bob Safian, thanks for listening.