Sweet Clarity
The Story: President Donald Trump struck deals with Japan, the European Union and a few other countries, setting (theoretically) permanent tariff rates. On July 31, he announced tariffs on dozens of countries set to kick in on Aug. 7.
Still Waiting: In what’s being called Liberation Day 2.0, few trade partners emerge unscathed. Watchmakers’ shares dropped after Switzerland was subjected to a 39 percent tariff. Mass-market brands were relieved to see Bangladesh received “only” a 20 percent tariff, and Cambodia 19 percent. . But looming over all of this is China, which theoretically reverts to a prohibitive 145 percent tariff if a deal isn’t reached by Aug. 12.
Permanent Uncertainty: The soaring stock market is a clear sign investors believe a deal with China is in the offing, and that the Aug. 12 deadline is flexible. Even if they’re right, the new trade order isn’t exactly stable; as Canada recently learned, a trade agreement with Trump is only good until it isn’t. No wonder then that brands from Adidas to Steven Madden say they can’t update guidance on second-half sales or profits until the picture clears. When that will happen, nobody can say.
Coping Mechanisms: As the lack of forward guidance suggests, in this environment, most retailers are avoiding any big moves, such as moving production in case the landscape shifts again. That’s proving wise: Brazil and India were floated as alternative sourcing centres if Southeast Asian nations were hit by tariffs. Now, both countries face even higher duties.
A Gilded Wasteland
The Story: Outliers like Hermès aside, luxury earnings this month were mostly bleak, with sales declines deepening at LVMH and Kering, and even the once high-flying Prada stumbling.
Same Old, Same Old: You know the score by now – big brands have turned off consumers with higher prices without corresponding product innovation. If anything, reports of diminished quality have furthered the feeling that luxury brands just aren’t worth it anymore. The US-EU trade deal slaps a 15 percent tariff on Italian handbags and French perfume, among other goods, and most of the big designer debuts meant to revitalise flagging megabrands are still a couple months away.
The New Look: The industry is projecting confidence that some combination of fresh creative, new management, improved economic conditions and the passage of time will fix things. Bernstein’s Luca Solca called Kering’s grim results a “wait and see” moment, and LVMH and others are similarly implying that investors check back in September, when new designers at key brands will hopefully change the narrative.
Quality Questions: The great unknown is whether quality concerns, and especially the steady drip of revelations about sweatshop conditions at Italian garment factories will leave a mark not even a blockbuster designer debut can erase. Loro Piana was the latest brand to face charges this month, with Italian authorities alleging many of its cashmere jackets were made by undocumented migrant workers paid as little as €4 ($4.67) an hour.
Dopamine Culture and the Simulacrum
The Story: A pair of must-read articles published by The Business of Fashion last month unpacked how luxury brands lost the plot – and what the industry can do to win back trust.
Quick Hits: The first piece, by senior correspondent Marc Bain, explores how “dopamine culture,” the term coined by music historian and critic Ted Gioia to describe the decline of art and entertainment into empty distraction, applies to fashion. Luxury brands in particular have been swept up in a constantly accelerating cycle of shows, marketing activations and social media posts, the result being a deluge of images and products that are forgotten as soon as they’re released. Coherent and consistent brand identity, let alone aspirations to high art, are sacrificed in the chase for EMV.
Accept All Imitations: In an opinion column, Eugene Rabkin argues that brands have sold the idea of luxury for so long that they forgot their omnipresent logos used to stand for something. “It’s not that people no longer want the symbols of luxury,” he writes. “But those symbols have to be grounded in great product to be believable.” That’s what makes the labour violations at Dior, Loro Piana and others so devastating for the industry – it confirms what many consumers have long suspected, that they’re paying astronomical prices for cheaply produced products. And if that’s the case, why not just buy the dupe?
The Way Out: Rabkin, and the experts quoted in Bain’s piece, make the case for a back to fundamentals approach – put more effort into craftsmanship and less into runway stunts, and maybe sit the next few microtrends out. Real luxury isn’t cheap, of course. Brands that make the pivot will have to take the potential hit to their profit margins, and wager that consumers immersed in dupe culture will still pay more for quality.
Don’t Take My Word for It: These are two articles you should read in full to understand what’s ailing luxury today.
Rise of the Machines
The Story: Agentic AI – bots that can perform autonomous tasks, including shopping – is coming into its own, and may have a bigger impact on the fashion industry than generative AI has to date.
Rewiring the Web: Retailers are preparing for a reality where bots trawl the web for product information and deals, or even make purchases, without shoppers ever visiting e-commerce sites themselves. Widespread adoption would render much of the current thinking around web design obsolete; AI agents struggle to read JavaScript, the programming language that brings to life most of those sleek menus, imagery and video brands use to sell products to humans online. Not that AI has much use for aesthetics in the first place.
Major Upside: For brands that can adapt, there are potentially big rewards. New companies like Daydream use AI to supercharge discoverability and reduce the labour involved in sorting through thousands of options to find the perfect pair of sandals for a beach vacation, or going-out top. Investors are showering these startups with cash.
On the Other Hand: This frictionless future could accelerate the worrying trends identified by Bain and Rabkin in the previous item. If brands were already sanding off their unique edges to please the algorithm when human shoppers were the target, what will they do when bots are their main audience?
Smells Cheap – And That’s a Good Thing
The Story: The private equity firm TSG Consumer Partners acquired the indie fragrance brand Phlur, The Business of Beauty reported exclusively. Meanwhile, beauty conglomerate Coty may be looking to offload its luxury fragrance licenses.
Big Deal: Phlur has a knack for creating scents that appeal to young consumers, including many who have never worn fragrance before. Its scents have catchy names like “Missing Person” and “Father Figure.”
The Price Is Right: Importantly, a 50 mL bottle is priced at $99, about $50 below comparable scents. It’s part of a trend towards a more accessible and playful approach to fragrance, with body mists and layering favouring the rise of masstige brands.
The Missing Middle: On the high end, niche fragrances are capturing consumers’ imagination, providing unexpectedly stiff competition for the expanding range of pricey scents put out by luxury brands like Creed, Le Labo and Parfums de Marly in recent years. That doesn’t leave much room for mid-priced perfumes, with both premium brands as well as smaller bottles of luxury fragrances finding themselves squeezed out.
Dollar Signs: If Phlur’s sale is one signal, the fate of Coty’s perfume division will be another. The beauty conglomerate is reportedly looking to sell off assets, and the price it fetches for long-term licenses of Gucci, Hugo Boss and Calvin Klein fragrances will say a lot about the future of the category.