Road to nowhere: why is fashion so expensive in 2024?

In the history of fashion, 2024 might be remembered as a year of transition. From the prosperity of the previous decade and the glories of the post-pandemic recovery, the climate has shifted to one of instability and distrust. Consumer sentiment is low, the production chain is in crisis, and above all, prices have become utterly outrageous. An over-saturated fashion industry, which resonated less, has also started to sell less, and for many within the system, especially in fashion journalism, the core of this issue is precisely the increasingly unaffordable prices. This has been stated by Business of Fashion, the Wall Street Journal, WWD, Jing Daily, and the Financial Times. Both Andrea Guerra, CEO of the Prada Group, and Carlo Capasa, president of CNMI, have partially addressed the issue, essentially acknowledging that elevating the price point across the entire range, making even entry-level products inaccessible, was not the best strategy. Mulberry, Burberry, the brands of Capri Holdings, and, according to the WSJ, also Saint Laurent, have quietly started lowering prices on some key products – but is the pricing issue really the Achilles' heel of fashion? To better understand the state of the system, we consulted three insiders: Francesco Tombolini, a senior brand advisor with a résumé including administrative roles at Giglio.com, Yoox-Net-a-Porter, Armani, and Gucci, to name a few; Tommaso Mello, co-founder of Milk Revolution and RPM Agency; and Giacomo Piazza, co-founder of 247 Group and FABS – Fashion Buyer Society. For all three, indeed, the sales crisis in fashion can be attributed, though not reduced, to pricing. Piazza succinctly summarized the concept by stating that «this luxury crisis is a multifactorial disease, a perfect storm of many situations». Mello echoed this sentiment, describing exorbitant prices as a «component» of a crisis driven by the «saturation of markets like China, Russia, and South Korea, which have been flooded with products and have reached saturation».

Nonetheless, beyond geopolitical causes and the wealth gaps that are widening – variables beyond a company’s control – the real issue is that the unjustified price hikes have eroded the love many customers felt for brands. «Prices should rise, but in proportion to demand, leaving a margin of interest,» explains Francesco Tombolini. «Here, however, they did the opposite: they flooded the markets with goods and raised prices. But by continuously increasing them, they’ve reached a point where no one can buy anymore: at those levels, there is no longer tangible value, nor pleasure nor dignity. This has opened the doors wide for Zara. Today, prices are calculated based on costs, but this is a mistake: prices should be based on consumption.» Yet costs have risen, as Mello points out, «to maintain certain positions or have distinctive services like rents in prime locations and specialized staff,» and due to the perception issue, which forces many brands «to maintain or even increase prices to avoid completely losing the trust of their current end customers». Piazza, on the other hand, considers the issue from a broader perspective: «If brands sell less, they raise prices to compensate, and this affects the whole system: if luxury brands raise the bar, everything below it also rises,» even though «the most recent geopolitical situations» have triggered «a chain of speculation, which ultimately falls on the customer.» However, this phenomenon has historical roots since «pricing is the result of years of policies, not a current policy,» continues Piazza, who believes «there is a problem when price increases no longer correspond to the function that each brand has in the collective imagination, because you don’t need to change the price to become luxury. If a fashion brand changes the price tag to match that of Hermès, it doesn’t become Hermès because the base brand value is different.»

This factor of perception that is artificially manipulated (Piazza referred to a «great confusion») brings us to the heart of the problem: the power struggle taking place at the top of the luxury pyramid between real luxury brands and fashion brands. «Luxury brands should only include those that fully manage their supply chain: from production to commercial, going directly to the end consumer,» explains Tommaso Mello. «Below this apex level are all the top brands that make fashion: here they operate on the so-called “double margin,” since revenues depend on multiple channels and not just direct-to-consumer sales». The desire of fashion brands or top brands to invade the luxury space has created a dangerous upward pricing spiral: «If Chanel and Hermès have raised their prices, there are two reasons: to distance themselves from the mass of brands that have approached their price points and to discourage resale. On the one hand, if regular fashion brands start making a bag for four thousand euros, theirs must cost eight thousand – the proportion must remain the same». However, the distinction remains crucial because «when you buy from Chanel or Goyard, you are buying items that are much more timeless, never going out of style. Whereas a bag from any other fashion brand lasts a few seasons because they produce many new bags, many new items, and have a different pace because they are fashion: luxury is slow, fashion is fast». For Francesco Tombolini, the distinction lies in the very nature of an industry that has expanded too much to preserve its original essence: «Craftsmanship still exists, but the retail price of certain categories is multiplied twenty times. In the post-globalization world, we should talk about post-luxury. Consumption is no longer tied to aspiration but to identity,» he explains. «Post-luxury needs to show that it costs a lot to attract not those who desire a good, but those who want to feel good. In this, fashion has failed». Unfortunately, for these «over-distributed brands,» there have been issues because «even margins are reduced, as transporting this merchandise and opening stores in every geography comes at a cost.»

But what caused this confusion? For Tombolini, it is tied to the «mathematical logics» promoted by «false consulting gurus». Giacomo Piazza also spoke of «analysts who have never done anything in fashion» and who «imagine associations, look at data, and decide that the consumer behaves this way or wants that», creating «an increasingly profound disconnect between the world of fashion and the real world». For Tommaso Mello, another problem is the lack of flexibility in «three-year, five-year plans that are not updated to market dynamics influenced by fluctuations driven by uncontrollable causes». The excess of finance and hyper-commercial growth has caused executives to lose touch with reality. «The theory of our executives is simple: follow the money. And in doing so, they have chosen only the new money, while fashion and luxury were phenomena tied to old money,» explained Tombolini. «Luxury belongs to another sphere and can decide, not being in competition with others, what, when, and at what price to sell, because it targets a very specific and already loyal clientele,» adds Tommaso Mello. «But top brands trying or having tried to follow high-price strategies almost never achieve the goal because they lack control over the end consumer» and this is because «they are losing organic presence within multibrand retailers, which are the primary channel to attract new customers because they are well-rooted in their territory, have credibility even historical, and a loyal and constant audience». Giacomo Piazza, for his part, believes that the obsession with data has led brands to turn their backs on the «real customer, who has been labeled “aspirational” as if they were a poor person aspiring to enter the world of luxury, and they have strategically bet on a big-spender customer who is increasingly less real». The problem, however, is that «this pricing policy has not taken customers away from luxury brands like Loro Piana, Zegna, Goyard, Hermès, Chanel. It has simply taken customers from competitors – but fashion brands are still competing for the same customer». Furthermore, Piazza continues, «if you try to position yourself in luxury, you end up talking to a customer who is no longer yours. And your customer, meanwhile, goes elsewhere».

In short, the problem lies in the contradiction of fashion wanting to be exclusive while being more mass-market than ever. «If they truly wanted scarcity, they would sell products only to their VIPs. Instead, what is worn by the Kardashians is meant for mass consumption», says Tombolini. A view shared by Mello: «We can find some of the top brands in seventy or eighty different Italian cities within the best multibrand showcases—can we really call this exclusivity?» This massification stems from the myth of infinite growth, a myth that for Francesco Tombolini «will lead to the destruction of the brand». For Giacomo Piazza, «growth cannot be infinite», and the problem lies in mentality and narrative. Brands like Louis Vuitton or Dior «making twenty-two billion, sixteen billion, may not be in crisis but have reached their peak and now grow by 2% or 3%. Or they might even decline—and that’s okay. We live in a time where it’s always thought that “the only way is up.” But that’s not true; it’s never been true. I don’t understand why we must live under this illusion». In fact, «brands making substantial revenues eventually need to transcend and do other things, like hotels». When this drive for expansion at all costs is combined with the saturation of a hyper-fast market, confusion arises even among the upper echelons of clientele: «The big spender is not a fool. Just because they’re a big spender doesn’t make them a stupid spender», Piazza jokes. «Even they will assess the proportionality of the offer. Precisely because they have the broadest range of choice, they can buy the same product from brands with more traction». Meanwhile, there are «brands that are neither fish nor fowl because maybe the design appeals to a certain type of client who, however, cannot afford it, while the wealthy client cannot relate to that creativity. The range of potential customers is vast: there are many who want a product better than a fast fashion brand’s bag but can’t find it. This has created a power vacuum in the middle of the market».

So far, we’ve talked about direct sales. But what happens in the other facet of the market, that is, the multibrand retailers who act as the outposts of the fashion industry in vast territories beyond the major hubs? «The price increase has impacted the retail world terribly», says Tombolini. «Both direct and indirect retailers, whether physical or digital, have 75% of transactions at a discount. Even those that don’t offer discounts provide loyalty cards and various types of gifts». Tommaso Mello described this downward spiral in all its contradictions: «When a brand raises prices too much and too quickly, it faces an unanticipated drop of 15% or 20% in sales during sales campaigns, with supply chain costs already fixed. This usually leads to a negative loop where the brand loses wholesale market share fairly quickly and must replace the lack of “external” revenue with “direct” revenue. However, since retail revenue is cost-heavy, they must increase sales investments for the products, which “forces” them to raise prices—not only due to structural cost increases but also because putting fewer products into the wholesale network means they must compensate for the loss in quantity by raising the average price. Once in this loop, the process is quite irreversible unless the top brand finds an “IT Item,” that is, a coveted product that can drive revenue with a single SKU». But unsold stock doesn’t just disappear: «To reduce the burden of inventory, brands have drastically increased retail prices, later selling in outlets or on platforms», Tombolini explains. He adds, «Outlets will continue to grow, as will installment or fractionalized sales. Sometimes I think boutique prices are so high that outlets make more profit». This sentiment is echoed by Tommaso Mello: «McArthurGlen reported record sales in 2024, with a 7% revenue growth since the start of the year, marking the fifteenth consecutive quarter of growth since the pandemic. What did groups like LVMH and Kering report in the same quarter? -2% for the former, -15% for the latter».

So what could be the solution to this dysfunctional system? «I would suggest, for example, ending seasons», says Tombolini. «Apart from brands with insignificant distribution, there are three seasons’ worth of excess goods on the market. I believe that, in the end, many companies will have to create different products for different channels and markets. The price war can only be fought by lowering them and rationalizing the offer». For Tommaso Mello, the future belongs to «those new brands that, already knowing their target final customer, have studied their tastes and consumption habits, as well as intercepted their needs, both stylistic and budgetary, without having to defend huge revenues or legacy positions, thus ensuring higher margins than those of top brands». Finally, Giacomo Piazza pointed to deeper roots of this problem, found in an industry resting, so to speak, on its laurels. For Piazza, beyond geopolitical situations and corporate mindsets, pulling the industry out of the pricing spiral requires more radical rethinking: «It’s not necessarily a demand problem; there’s certainly a demand adjustment, but the issue is with the supply itself. It’s a very flat supply. We need to get to ground zero and reinvent a new kind of supply. We need to offer a bit more for a fairer price». Undoubtedly, reinvention is necessary: the longer the industry waits and hesitates, the more radical and painful this will have to be for everyone. But from this observation arises an even more pressing question: Is fashion capable of reinventing itself? From season to season, from quarter to quarter, the question becomes more existential. What will the industry be willing to sacrifice before it sacrifices itself?