Luxury in 2025

“Luxury” comes up a lot in business. I see it all the time researching for my candle brand, and most businesses review the luxury industry because it’s valued at just under $500 billion dollars.

In a recent conversation with a few consultants, we talked about what makes something luxury.

There are big brands like Louis Vuitton, Gucci, and Dior. Today, they’re household names known for making expensive, high-end products. But Dior for example was recently crushed by the news that one of their bags (which sells for $2,780), only costs $57 to make.

Most people don’t know that, and still associate Dior with being a ‘high-end, designer product.’

Is it “luxury” when it’s made by illegal workers for $57 and sold to us for $2,780? Or is it just a rip off?

Today, I’ll share how ‘luxury’ is about much more than expensive items, and how the industry is changing.

And if you think this doesn’t affect you, think again.

This industry is a model that influences several others. Most entrepreneurs would charge a 50x markup like Dior if they could.

But we’re not looking at the past and how they did it before. We’re looking into the future.

Let’s get into it.

We landed on three ways of looking at ‘luxury.’

At first, we talked about how luxury items are status markers.

The idea was that an item is luxury because it brings you benefits such as prestige, status, financial opportunities, etc. An Audi R8 that closes deals for you was the example. Another would be that if a certain t-shirt advances your position in society, much more than the average t-shirt, it’s a luxury t-shirt.

A well-known marketer did a study where he only wore luxury clothes, saying that he spent ~$160k on clothes and it earned him an extra ~$700k in revenue for his business. Something about this makes sense, he’s associated with the success (talent, competence, skills), associated with wealth because he’s wearing clothes only the wealthy can afford anyway. Humans, as we love to judge quickly, make these assumptions daily, and so the clothes provide financial opportunities.

Then, we addressed the concept of freedom and time. Get up whenever you want, do whatever you want. Answer to no one but yourself. Travel, enjoy new experiences, do things no one else in their lives has the time to do.

Again, this makes sense in many ways too. If ‘regular’ people have to worry about getting up and going to work, and you can lounge around all day, there’s an element of freedom that suggests you have more than what you need to get by already.

So far, both of these definitions make sense. But I started poking a few holes into this.

Not all fashion is seen in the same light across the board. Sure, Louis Vuitton is a major luxury brand that is associated with prestige, status, and wealth. But what happens when the people in the room don’t know what is? Or if they know what it is, but don’t care for it? If the status markers don’t offer any of the prestige or status in those rooms, it’s not really a luxury item anymore. Context matters.

Freedom and time are also not clearly luxury. What happens when you’re sick, bedridden, and can’t travel? Freedom’s gone, and so is that sense of luxury.

So I introduced my definition.

My definition of luxury was also around a material item. A watch. But not just any watch. I asked them:

“Well, what about my late father’s watch, and the feeling I get when I wear it?”

You see, no one else can ever have the same feelings I do when looking at that watch. The sentiments, memories, everything that suddenly resonates with me in those moments. I feel something that’s absolutely exclusive, that can never leave me if I’m broke, sick, or bedridden.

If I walk into a room that people don’t care for that watch, it doesn’t change how it makes me feel. The luxury behind it (those feelings), doesn’t fade because they start and end with me.

It’s also a form of freedom in the sense that I can wear what I want, whenever I want, but I choose the item(s) that mean something to me, and reflects how fortunate I to have what those sentiments refer back to.

If you’re wearing LV or Dior to make someone else feel a certain way about you, isn’t that by definition the opposite of doing what you want, when you want? If you’re wearing what you want, because you love it, and you don’t have to worry at all about what other people think, isn’t that the actual luxury?

Now of course, sentimental memories and feelings can also be expensive. It’s not the money or the fact that someone else knows it’s expensive that matters.

And no, I’m not saying we should be done with all material possessions and live like the Amish.

What I’m saying is that when we start seeing luxury as a matter of how we feel, we can better see when we’re being sold into a never-ending game that nobody wins by the big brands, which are facing serious challenges in 2025.

Mainstream luxury brands are dying.

The luxury industry is worth just under $500 billion dollars. It is largely defined by a few massive players, all of which are having terrible years right now.

Year to date:

Why such a big drops? A few key factors.

Most luxury fashion houses have a rich, storied history, and have been around for ages. LVMH was founded in 1987, Hermes in 1837, Tiffany & Co, also 1837 (amazing coincidence).

But Gentle Monster was founded more recently, in 2011. They had a very specific Korean-inspired design focus that appealed to that niche, and (fortunately for them), that niche grew with the explosion of K-pop in the west.

How did they even get a foot in the luxury market with less money, and a niche focused on Korean styles? (They earned $570M in 2024).

The market’s changed. But where’s it going next?

To become a luxury brand and enter the market, I believe there are two requirements, and then one defining factor.

The requirements are:

The defining factor for every luxury brand is:

This is where luxury brands win (or lose) their market. Quality materials, craftsmanship, and “made in Italy” are not enough anymore. Chinese conglomerates have started buying factories on Italian soil and using illegal workers so they can say “made in Italy.”

Gen-Z, the new generation, is already spending more money on luxury, and earlier in their lives. But the definition for them is different. It’s about quality, yes, but also experiences, sustainability, and a sense that the brand is not running illegal sweatshops (again, a $57 bag sells for $2,780).

We can see this is the case as mainstay brands like LVMH are down 30%, while Gentle Monster is seeing massive growth and the Google deal. Staying true to their design roots (how they spent that excess money and time), worked out for them.

Some brands spend the excess money and time they have on design. Others, have the founder spending it on cars and watches while being as rude as possible. Few find niches in things like sports and make “Sporty and Rich” it’s own category (and brand name).

And it all speaks to one thing.

The luxury market is breaking up into smaller fragments. The big, mainstream names aren’t doing as well, while the niche brands are succeeding.

The industry would have you believing that to be part of the ‘right’ crowd, you need certain items. Yet, dressing so other people feel a certain way about you, for their opinions, doesn’t feel very luxury.

The industry would also have you believe that ‘freedom’ is luxury. But life is not always full of freedom. Is it really so luxurious if being sick means you can’t do anything anymore? Does having responsibilities mean that you can’t have luxury?

If something is truly luxury, shouldn’t be such that it can’t be taken from you?

Feelings and sentiments, whether you’re healthy or sick, rich or poor, cool or a total loser - can never be taken away. Luxury is not about wearing a marker so someone else can easily judge if you’re cool or not.

Those feelings of love whether for a father’s watch, or a toy your mother gave you as a child, are many of the only things we have that are exclusive to us, that few others can begin to understand in the first place.

The companies that will win in the luxury market from 2025 and beyond are the ones who can most closely connect to those feelings.

Making things in a way that resonates with select groups of people on such a deep level they everything about it immediately resonates, and compels them to be part of whatever it is that brand is building.

That’s where the luxury market is going.

Thanks for reading!