Luxury’s New Reality

0:08Robert Williams: Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young. We hear a lot about the luxury industry slowdown. Consumers are pulling back. Aspirational shoppers have disappeared. China is changing. the U.S. is changing, but what's actually motivating people to buy luxury right now? That's what our latest State of Fashion report, produced in partnership with McKinsey, set out to answer. We spoke with more than 2 ,000 luxury shoppers across the U.S.

0:44Robert Williams: and China and some of the industry's top executives to understand all of the shifts impacting luxury. Emotional connection is outpacing heritage, AI is influencing shopping decisions, and while consumers in China and the U.S. have a lot in common, there are also some fascinating differences. Luxury editors Mimosa Spencer and Robert Williams have spent this year elbow deep in the research behind that report and are joining me today to help make sense of the market outlook. Mimosa, Robert, welcome to The Debrief.

1:12Mimosa Spencer: Hi, Sheena. Thanks for having us.

1:14Robert Williams: Thanks for having me, Sheena.

1:15Mimosa Spencer: It's great to be here.

1:16Robert Williams: So, Mimosa, let's start with the report itself. It's no secret that luxury has been struggling to grow for at least the past three years, and brands have been trying to do everything in their power to recapture attention and desirability. One of the biggest findings of this report is that emotional connection has overtaken things like craftsmanship, heritage, and even logo recognition as the biggest driver of luxury purchases. That's a pretty profound shift. Can you help us understand how we got here as an industry and what's driving the change?

1:45Mimosa Spencer: I would say that luxury fatigue has been a real problem. Shoppers are tired of price hikes. They're tired of things costing more when the product hasn't actually changed. There's also been a higher cost of living. People have been focusing their attention to travel and experiences. At the same time, a lot of people have pretty stuffed closets. So it takes more to convince them to actually splash out and buy something more. And so everyone's kind of hit the pause button and they're thinking more about how they want to spend their time and their money. And it's not always on the latest handbag.

2:21Robert Williams: It's interesting because I think another interpretation of people seeking emotional connection before they, you know, they hit the purchase button is that maybe they feel like, you know, the craftsmanship or the quality is just table stakes. Like I need something more to convince me to buy this Louis Vuitton piece, this Chanel handbag, this pair of luxury shoes. Do you feel like there's some truth to the fact that people actually just expect it to be good? And then what?

2:48Mimosa Spencer: Yeah, that's exactly it. You have such a huge array of offers from different brands and everybody's showcasing the craftsmanship, really emphasizing it and to say how special this product is, how it's made so specially. And in fact, that's kind of what people are expecting now from luxury brands. They expect things to be high quality and they also expect them to be made in the right conditions. So, you know, this is no longer something that makes a difference between a purchase or not.

3:16Robert Williams: And Robert, I'm going to come to you soon on Chanel and that one-on-one conversation you had with Bruno. But I also am curious on this point of craftsmanship being sort of table stakes. And I think luxury brands also on the storytelling point have spent so long focusing on myth-making, if you will. It seems like they're also losing customers over something that is much simpler, which is like these really uninspiring store experiences. And not the least of which is affected by these long queues outside the store that used to maybe make you feel like, oh, this is so coveted. I'm going to stand in line.

3:46Robert Williams: But now it's just annoying. Have brands overcomplicated some of this, the storytelling where they're investing and kind of are missing out on the fundamentals?

3:54Mimosa Spencer: Yes, I would say one of the things that we learned from the surveys that were conducted is that people, when they're interested in buying something, they want to be able to buy it right away. They don't want to have to beg. They don't have to wait in line. They want a kind of a frictionless experience. And so this is quite interesting because it means that brands, well, they can find ways to answer this. They can make it easier for people to make purchases. I think the lesson to take away is that once you've piqued somebody's interest, you've gotten your audience, you want to be able to serve them right away.

4:31Mimosa Spencer: Don't make them go through hoops. Don't make them wait in line. None of that is appealing anymore.

4:38Robert Williams: We'll kind of double click on how Chanel might be thinking about the store experience a little later when we unpack your interview, your conversation with Bruno. But based on, you know, how you've engaged with the rest of the report, what do you think about the role of the store experience? Like luxury brands have spent a long time on kind of making it feel like it's so coveted you have to wait to get it. Maybe you do. Maybe you queue around the corner to get into a store. But now it feels like it's having the opposite of the myth making effect.

5:04Mimosa Spencer: You know, it really can be case by case. And I think depends on what price point you're playing at and whether or not it's maybe a lifestyle brand where you're focused on kind of outfitting customers from head to toe. Or if you're dealing in like really exceptional souvenir or kind of one-time purchases, a lot of brands really need to activate both ends of the spectrum. And that's what can be really challenging for a brand like Chanel, where you could enter the brand through a piece of costume jewelry, a flower brooch or a pair of glasses, and where you also have clients who are buying heavily into the ready-to-wear collections to the tune of maybe, you know, more than$100 ,000 a year.

5:48Mimosa Spencer: So you have to think about how can we have these customers who want to be there in the scene with a lot of people and that experience of going and there's activity in the store. That's exciting for them maybe. And then you also have people who would want a lot of privacy, a lot of ease, a really frictionless experience. I think a lot of the biggest brands are really focused on how they can do both now. But then you also have, you know, I think a lot of success really at both ends of the spectrum still. I think one of the most successful stores in Paris continues to be Officine Bouly, where people really will line up for hours for soaps, for perfumes that are at a really high price point for the cosmetics industry.

6:31Mimosa Spencer: But at a few hundred dollars, still much less than for a bag or a piece of ready to wear from a luxury fashion brand, where often the people who are playing in that price point are not often willing to wait.

6:45Robert Williams: It's so interesting you mentioned the, I think we call them the VICs, the very important clients, perhaps that want the maybe more private, intimate experience. And that brands are now maybe working a little harder to appease both ends of the customer spectrum. But a lot of the downturn that we've covered in luxury, at least analysts have attributed that to an overinvestment in these VICs, the 1%, right? What do you make of where that is today? Like, are brands closer, based on the report, to attracting the aspirational shopper again? Because I think people believe that they've lost sight of that customer.

7:20Robert Williams: Are they doing a better job now? Is that coming back into focus? That's a really good question.

7:25Mimosa Spencer: It's been really interesting to see after the post-pandemic boom wound down how brands really started focusing on the higher end wealthier shoppers as the more entry level shoppers started pulling back. So as they focused on these wealthier shoppers, a lot of brands, you know, they expanded private space in their stores. They pushed up their product quality and price points quite a bit, which in turn further alienated, I think, some of the more entry-level shoppers. So, you know, they've been really focusing on that higher end. And now they're having to revisit more entry-level shoppers and find ways to bring them back.

8:07Mimosa Spencer: One of the key ways has been to renew their product assortments more, to offer more at the entry level, and as well, you know, the big creative reset, all these new creative directors that have been recruited to renew the aesthetics of the brands. They're moving much more quickly to get these new products in stores. However, it's much more complicated for them to bring shoppers back. And I think they're going to have to work much harder than they did in the past because people are turning, they're spending their money on other things. And they're taking a lot more convincing to be brought back into the stores.

8:48Mimosa Spencer: So growth is still coming from the wealthy shoppers who tend to be more resilient when there's economic instability. So they're driving the growth. For instance, jewelry sales are doing really well, and they're really driving that growth of a more expensive product. However, some of these brands are so big that they're really going to have to find a way to bring back also the more aspirational shoppers that purchase things at a lower level. And if they want the kind of growth that they've seen in the past, these other shoppers are going to be key. I would add that what's also happening is some brands have been quite successful at redefining what aspirational shopping is for them.

9:36Mimosa Spencer: And so rather than necessarily all squeezing that lemon of the very wealthy, very top-end customer who buys compulsively, I think they're also looking at how can they reinforce the perception of value and a strong perception of price per wear, even for quite expensive products. I think this is where jewelry houses have been extremely successful. It is impossible to compete with the price per wear that someone sees with an item like a Cartier Love bracelet or also where Rolex has been very successful. A watch like even a more basic submarine or basic diving watch from Rolex. It's expensive. They're at the top end of the watch market.

10:16Mimosa Spencer: But people are going into that purchase anticipating that they will wear it so often that there's kind of this other client bracket that I would say are people in their 30s, 40s and 50s often who are high earners. And so they're not who you would think of as an aspirational client. Typically, they're not maybe the same people that were buying heavily into streetwear a few years ago. But they are someone who looks at luxury purchases very judiciously and as an occasional indulgence. And I think some brands have been really smart about how they reposition their offer to appeal to that kind of shopper without necessarily lowering the prices at all.

10:58Robert Williams: You know what else I thought was interesting in the report is it was divided by the markets, U.S. and China. And then we had this headline that emotional connection is like the biggest driver of purchase, but it actually means something different in each market. So China, according to the report, it's because consumers are engaging more around self-expression, while in the U.S., luxury is increasingly about, you know, self-reward or buying into a brand's values. What does that mean? Like, what does self-expression in China mean versus a U.S. customer who, by the way, we've been saying for years that customers shop their values.

11:32Robert Williams: in the mass market side of things, I actually think it's not proven to be true. It's, you know, like, oh, they care so much about diversity or sustainability, and they actually don't spend that way. I'm very curious from both of you, what does this actually mean? What does it mean for China? What does it mean in the US? Mimosa?

11:49Mimosa Spencer: Yes, it's interesting, because there's a lot of interest in China to have a luxury purchase be part of how you're recognized. Now that can be also quiet luxury. It can be quiet luxury where only certain people know what kind of brand you're wearing. But there's this idea that in China, people are interested in using luxury as a way to kind of express themselves a bit towards the outside world. Whereas in the US, it's a little more about personal tastes and people really want brands that resonate with them personally. So it's less about kind of external looking, less about status. So it's quite interesting.

12:34Mimosa Spencer: But, you know, on the same sense, both markets, people are clearly looking for a bit of a personal connection and an emotional connection. So in the U.S., you could say it's a little more individualistic and less about being part of a club. I thought what Robert was saying was really interesting, the way he was describing these customers that are thinking very carefully before they make a purpose. So it really has to be something that they feel a strong connection with, especially in the U.S. market.

13:02Robert Williams: Robert, is that a different, does that represent a change in terms of how luxury brands would have viewed both of these markets? Does that finding say to an executive, oh, you should change strategy? I imagine that they're not, no brand is running a singular global playbook, but have they assumed something about the U.S. market or the China market that now needs to change.

13:22Mimosa Spencer: The Chinese market has evolved so quickly in recent years and matured so quickly. And as that economy becomes more of a mature economy as well, where you're having fewer first time buyers shopping, fewer recent luxury customers and much more established buyers. You have people that know brands have fashion and visual culture much more extensively than they did than they did a few years ago. This is also just an effect of social media, fashion media, all of this being more prevalent and established. So while I think historically there is a stereotype that conspicuous consumption and very obvious signifiers of luxury are what are going to perform much better in a country like China, you have a really strong success for certain brands there that have a much more discreet or understated approach, that have a really strong focus on craft and really justifying their value.

14:21Mimosa Spencer: I think stories where the quality problems and the fact that things were not really made end to end in Italy, stories like that that really popped off on social media a couple of years ago, they traveled quite a bit in China as well. And so I think everyone has to prove their credibility and not just putting a flashy logo on things in general. There is certainly a sense, however, that like even something that's much more discreet can still serve that anchoring purpose socially and show off socially in a way that's just a different visual language than before. You know, I think the row is a great example, both in certain U.S.

15:03Mimosa Spencer: cities like New York or L.A. or really fashion capitals in the U.S. or in China or in much of Europe. That while being a logo free brand, that Margo bag is such a signature shape. It's so identifiable that you have to ask, is that really, you know, discreet, understated luxury anymore? The same goes for a lot of the flagship bags from Bottega Veneta that have a really very identifiable introchado pattern that ultimately serves like a logo. So, you know, I think it's a really nuanced question whether people are buying for that personal emotional connection, whether it's about expressing their personal style or whether it's still to impress people, whether there's a huge logo on it or not.

15:48Mimosa Spencer: You know, it could certainly be both one or the other. And lots of people choose to dress in crazy logo looks to express themselves as well, not as a means of impressing anyone else.

16:01Robert Williams: One of the big themes of this report, what stood out to me, was that I think a lot of luxury brands are having to evolve and innovate in ways that they did not used to have to do. So like AI is an example of this. Resale platforms are an example of this. These are things that they have to contend with that they didn't have to 10 years ago. how should executives be thinking about ai and resale because those are the things that are informing how a customer shows up in a store to make a purchase like people are thinking if i buy this chanel or this rolex to your point robert like what's the resale value how long do how much do i get out of it they're also getting information from ai and digital platforms about the value of something should luxury executives be thinking about that and if so how yeah i think

16:44Mimosa Spencer: that's one of the really interesting things from this report is that we're realizing that resale, for instance, it's no longer about getting bargains. It's actually about the excitement of looking for things, hunting for things. In the U.S. in particular, there was a correlation between how wealthy a shopper was and how much they use resale. And in fact, it tends to be wealthier shoppers that are interested in hunting for secondhand products. And then the other issue is for AI. We discovered that when it comes to very technical products like watches, people are turning to AI for information. So these two areas that a lot of luxury companies have shunned have actually become extremely important ways to engage with shoppers.

17:33Mimosa Spencer: Brands that decide just to leave that realm to its own and not get involved, they're leaving a chance to actually steer the shopper's interests. So these are two key areas of which can actually become big opportunities for some of these luxury brands. So it becomes an opportunity for these luxury brands to tell their story the way they want to tell it.

17:57Robert Williams: We'll be back with more of The Debrief right after this.

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19:14Robert Williams: So I want to pivot now to your one-on-one with Bruno Pavlosky, Robert. He said a lot of interesting things, actually. It was quite an unexpectedly funny read for me in different areas. We'll get to that a little bit later. But I want to talk about this idea of how realistic growth targets have been for luxury for the past five years, like post-pandemic, huge luxury boom. And, you know, a lot of shareholder and analyst targets got very outsized, the expectation of ongoing double and triple digit growth. A lot of that has sort of come down to earth, but we've also debated about how realistic those targets have ever been.

19:52Robert Williams: Like, should luxury brands or any brands for that matter be expected to continuously grow at these rates? So something that Bruno said, he mentioned that, the brand had returned to growth last year, about 2%, up about 2%. He described it as solid growth and not being huge growth. And then he said, we're actually not targeting huge growth. Do you buy that? What do you make of that? What does that say about Chanel, but also the broader luxury sector?

20:21Mimosa Spencer: I think the luxury sector is generally just struggling right now to digest that rapid growth that they saw in the years following the pandemic, the customers fell back in love with stuff in such a way that they had to seize that opportunity. But now digesting all of that growth is quite challenging. And I think brands are struggling now to deal with shrinking and falling sales coming off of that high. And I think a brand like Chanel, which has now returned to growth, but very modest growth last year, and now is growing at something more like high single digits. I think that's more or less what they would consider healthy growth, because it's in a place where you can make some big moves, you can invest in a new store, you could launch a new product category, you can digest inflation each quarter, but you're not having that runaway growth.

21:16Mimosa Spencer: So I think a high single digit growth rate or a low double digit growth rate is what would have been considered normal for the luxury industry during much of the past and which I think people would still consider to be quite healthy.

21:32Robert Williams: He also spoke about queuing the lines wrapped around the block that I spoke about earlier. And he said that it's never a great sign when there are queues at boutiques, which surprised me, by the way. And he said the next phase after queues is always no queues. is that a realistic objective for luxury and also just hype driven streetwear labels things like that more broadly or is this just an ideal or an objective that Chanel can hold like what do you make of the fact that he's saying queuing is not a good sign or that after you've had queuing you want to move to another phase which is to not have queuing no I think he's being he's being a little

22:10Mimosa Spencer: bit flippant I think you know having too much demand having a line at your store is a problem that most people, most executives would love to have. That said, it can be a problem because if you're trying to manage growth long-term and you're trying to establish yourself not just as a fashion brand that has big hype moments, but as an enduring luxury institution, which is the way a company as big as Chanel needs to think, then you do have to be quite wary of why is everyone so excited about this brand right now? What did that mean? What does that say about what they see in the brand tomorrow and what they saw yesterday?

22:51Mimosa Spencer: Are we emphasizing the right qualities that are more timeless versus the ones that are more urgent? I think all of that is, it makes smart brands ask questions when they're having this big surge in hype and they manage that carefully. I think we've seen and documented quite a bit how much Gucci has struggled to bounce back after really leaning into that hype-driven, rapid growth moment for several years versus just one or two years after the pandemic. They had been growing that way and having that kind of dynamism in their stores for four or five years prior to the pandemic as well. And I think that's been very hard for them to digest because a lot of parts of the brand are kind of seen as overexposed because they didn't get a chance to sneak up on people and become part of the furniture.

23:40Mimosa Spencer: They were just suddenly very in your face, very present everywhere. Yeah, I think it's something that all luxury executives are going to be thinking about, but which, yes, Chanel as a private company can afford to actually adapt to. They can actually afford to say, this growth is too fast. This is unmanageable. Should it reach that stage? For the moment, I think while there has been much more activity in the stores with the last couple collections coming from the new creative director, I don't think there's really been like a run on Chanel stores across categories. They're not packed to the gills.

24:16Mimosa Spencer: They're certainly just much more active at the moment than a lot of their rivals that are still struggling. and just with a bit more excitement as lots of people are coming in to see the new collections, to sign up for appointments, to try things. And there have been quite a few items from those first few collections that have sold out. But I think that's an impact of renewed excitement around the brand generally, but also just people wanting to get a piece of fashion history.

24:46Robert Williams: I love that you brought up the creative director, Mathieu Blasi. It's something that Mimosa spoke about earlier and maybe you inferred as well. This consumer pushback that price hikes did not match quality or innovation. In fact, that prices were going up as quality was going down. Pavlovsky was very clear that nothing had changed on the quality side of the conversation. That same ateliers, same process, and that prices have just not gone down. He said that price was tied to like perception, like interest was tied to perception. And now that Matthew has arrived, interest is higher because brand perception is higher.

25:26Robert Williams: Do you agree? Help us understand what you think. What do you think he was saying?

25:31Mimosa Spencer: This is a multi-layered question and how accurate his answer was. Or I think, of course, he's an honest and forthright person. But the most flattering part of the truth is that it's true that Mathieu has people paying attention to the brand, has people excited about the brand again, and that makes the products seem more valuable. And so whether or not they're overpriced or whether or not they're worth the price is no longer driving the discussion. I think there's a bit more to it than that. I think it helps that Mathieu's vision is much more anchored to wardrobing. As I mentioned just before, when I was talking about price per wear and a perception of price per wear, I think there's a certain kind of client who is a high earner, but not necessarily extraordinarily wealthy, who imagines that she can wear these pieces quite a few times.

26:27Mimosa Spencer: And so they seem more valuable than they did before. They also have this aura of being a part of fashion history, of being a part of this new moment. I think there's also a sense that, you know, Matt Scherz has been quite savvy about making the craft visible. I think there was a lot of really high craft going into Chanel's collections always. And in Virginie's era, there was also a strong kind of price per wear aspect because the clothes were lighter and easier to wear. But maybe, you know, like the textures were all very smooth and refined and a certain finesse and fineness was what was seen as luxurious.

27:05Mimosa Spencer: whereas maybe mature realized that actually something that's more braided crocheted high texture that that's going to read as luxury visibly to people it's luxury in a way they can touch and that they can feel and prove that it's there versus just believing the brand when the brand says oh this is the finest possible weave of cashmere so it's um it's a strategic it is true that the prices are broadly in line with what they were before. And they are also using the same level of absolute quality, but there's other elements going into it that make them not feel as expensive to people.

27:44Robert Williams: I want you to correct me if I did not interpret this correctly, but I actually caught some shade in something that he said in response to a question around some of the perception about quality and craftsmanship, he drew this distinction. He called it like a considerable distance between basically the loyal, I assume VICs that are in the store and making those big purchases, presumably. And then he called the other people fans versus the fans that are on the internet or digital platforms discussing brand perception, perceived quality stuff. Like, is that, do you believe that that divide is real?

28:28Robert Williams: I mean, and I will just say, I'm calling him shady. I actually believe that's true. I think there's a lot of people that are online that don't own a single Chanel item that are pontificating about, about value, but also whether or not that influences what the VIC spends, who among us can be sure, but what do you make of it.

28:45Mimosa Spencer: Yeah, I think he was saying that the brand had maybe taken a hit amongst fans in terms of, you know, how much people in the discourse, how much people, spectators were loving the brand. The brand had maybe lost interest among those people, even while the business was still very resilient in recent years. And I don't think he's saying that a brand shouldn't worry about what the fans think. The people who are spectators of fashion, who are consuming these images online, they are the pipeline of people that eventually could become your actual clients. And there's also certainly important for creating a sense of broad-based desire that the wealthy people who can afford to buy the products, they want to buy into that and be a part of it.

29:33Mimosa Spencer: But I think it's interesting to think about how brands manage both the fans and the clients, and also the distance between them. There is a real issue in fashion right now with spectatorship and the idea that I think lots of people are just as happy to consume images of fashion than to actually go buy it. We're compulsive consumers of imagery in our culture today and in a way that in previous generations, people compulsively consumed stuff. So that's certainly, and Chanel has been very savvy about kind of trying to collapse that distance in certain ways over the past few months. You know, they engaged with shopping influencers.

30:17Mimosa Spencer: They have lots of influencers and VICs and, you know, ambassadors who go to the stores, go to fittings and who post about that. And they're kind of facilitating and fostering a dialogue, not just about what's going on in the runway and what's going on in the imagery, but also what's going on in stores. I think a few years ago, people would have thought that was really quite gauche, maybe even distasteful for a brand like Chanel to be like inviting in shopping influencers. But, you know, I think it's been a big part of the success that people see Chanel as an actionable fashion story versus a theoretical one.

30:57Robert Williams: I think it goes back to the theme that I think I got from the report, which is like this brands in luxury being compelled to innovate in ways we would have never expected. I've been seeing some pretty promising results. So we're going to do a quick lightning round. And I really am going to ask both of you, because you're such great analysts, but to take that hat off and just one word answer, immediate, visceral, one word answers here as quick as you can and what comes to mind. So Mimosa, one word review of Chanel's current strategy. One word to describe it. No analysis, no follow up thoughts. Just one word.

31:30Robert Williams: One word. OK, I would say. Gosh, working. Working. Robert, one word. Chanel's current strategy.

31:39Mimosa Spencer: Well calibrated.

31:41Robert Williams: I don't know if that counts. I will accept it. The judges will accept it. More dangerous for luxury right now. Overpricing or overexposure? Overpricing.

31:51Mimosa Spencer: Overexposure.

31:52Robert Williams: Oh, OK. A little bit of tension. Last one. Emotional connection or exclusivity. Which matters more in 2026? Connection or exclusivity? The report says it. Connection. Emotional connection.

32:06Mimosa Spencer: emotional connection.

32:08Robert Williams: Amazing. Well, thank you both. That was an amazing conversation. Thank you for your time and your insights and for also taking off your analyst hat for just a few, a few minutes at the end.

32:17Mimosa Spencer: Thank you so much for having us.

32:20Robert Williams: Please be sure to check out the full report, The State of Fashion, Face-to-Face with Luxury Clients at businessoffashion.com. These and other stories are available to BOF professional subscribers only, and you can find the links in the episode notes. You've been listening to the Debrief, produced and edited by Olivia Davies and Angel Nemov. I'm Sheena Butler-Young. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcasts.