Luxury Can’t Live on Scarcity Alone

Jane Birkin’s original Hermès Birkin bag made headlines when it sold for $10M at a Paris auction last month. And earlier this year, Hermès’ market cap surpassed that of LVMH, making it the number one luxury house globally. But reading past the headlines revealed that Hermès’ achievement had as much to do with LVMH’s decline as it did its own success. Overall, the luxury goods market struggled in 2024, experiencing its first contraction (-2%) in 15 years. The market is expected to decline again in 2025, given muted demand in the U.S. and China, according to the Wall Street Journal. Yesterday’s playbooks are no longer relevant for luxury brands, which need to innovate across multiple dimensions to grow.

Ultra high-end luxury brands like Hermès once provided a masterclass in marketing. By strategically limiting product and access (customers on waiting lists for years, encouraged to buy other Hermès products to demonstrate loyalty and move up the list), Hermès made its bags the ultimate status symbol in luxury fashion. The behavioral science was obvious: if an item is hard to get, it must be valuable, and those who own it are part of an elite club. This scarcity mindset not only kept brands such as Hermès and Rolex desirable, but also largely insulated them from economic downturns, as their core customers were less affected. This dynamic is changing.

Many of these same customers are pushing back against the ever-rising prices they’ve encountered since the pandemic, coupled with the perception that quality and craftmanship are decreasing across many luxury houses. Channel’s Classic Flap Bag almost doubled in price from 2019 to 2025, increasing from $5,800 to $11,300; meanwhile, customers have complained about the declining quality of Chanel bags, from leather to hardware to stitching.



Other recent issues luxury brands have faced include a continuous churn of creative directors and leadership that undermines their ability to innovate. At the same time, many customers are redirecting their spending toward luxury experiences, such as fine dining, travel, and wellness for personal enrichment, rather than luxury goods.

Ultra high-end luxury brands are also competing with new fast-growing segments, such as a booming resale market and a class of emerging digitally native brands. Resale platforms such as The RealReal, Fashionphile, and Rebag have made ultra high-end luxury brands more accessible, with no waiting lists and the ability to buy vintage pieces. Customers can buy a pre-owned Birkin bag with a few clicks (albeit for not much less than a new one, if at all), undermining the scarcity mindset that Hermès has so carefully crafted.



In the past, luxury brands had greater control over their inventory and where it was sold, with some brands going so far as to burn extra inventory rather than sell it at a discount and degrade their brand value. But resale platforms have provided luxury customers with the agency to sell and purchase their own wares easily, without involving the brand whatsoever.

Then there’s the wave of new mid-range luxury brands such as Cuyana, Polène, and Mejuri that have built massive followings by emphasizing quality craftsmanship and compelling digital storytelling. Polène has leveraged influencer campaigns and social media buzz to cultivate strong consumer loyalty (about 25% of sales come from repeat customers); many online creators freely laud its minimalist bags made of high-quality materials, without being paid by Polène. These brands have responded to the customer desire for quality in the wake of declining quality perception among many of the traditional luxury houses. Furthermore, they’ve succeeded in building strong communities around their products and focusing on the customer experience. Traditional luxury brands should pay attention.

Traditional luxury brands need a new playbook to tackle the fundamental challenges they face: slipping quality, a lack of innovation, and pricing that feels increasingly disconnected from value. Brands can tackle these challenges by pairing a renewed focus on craftsmanship and creativity with greater personalization of offerings and bespoke services. Louis Vuitton, as an example, produces made-to-order handbags for private clients, a service that is not publicly advertised but could draw more clientele if it were properly scaled.

The bottom line is that scarcity alone is no longer a sufficient strategy. To attract the next generation of loyal luxury customers, brands need to stay culturally relevant by building communities that feel a sense of connection rather than pretension. They need to refocus on quality so customers perceive value again, to innovate their products so customers feel inspired enough to invest in that big purchase. And brands need to re-think their pricing strategies, as continually increasing prices in the absence of increasing perceived value will fail. Empowering business and creative leadership to strategize and act for longer than a season will be the ultimate key to solving these challenges.

HighPoint Associates understands the unique challenges and opportunities within the luxury retail sector. Our work with leading luxury brands demonstrates our capability to deliver tailored solutions that drive growth and efficiency. Contact us to learn how we can help your brand navigate the evolving luxury landscape and achieve sustainable success.