Luxury Fashion is a Scam

Written by: Vivian (25-I3)

Designed by: Giselle (25-E3)

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Consumers have long been enthralled by the allure of luxury items, being drawn in by their prestige, exclusivity and craftsmanship. While luxury goods encompass a wide range of products and services, some of the most common types are designer apparel, handbags, jewelry and watches. 

With economic growth of the past few decades increasing global incomes, the luxury market has been booming. In 2024, the luxury goods market was estimated at $266.6 billion. By 2030, this figure is projected to rise to $369.8 billion, with nearly a third of the total, $115.4 billion, being expected to come from luxury apparel alone. 

While a small group may be able to comfortably afford these goods and genuinely appreciate them, the vast majority cannot. For most, the prices are wildly disproportionate to their income, and more often than not, not remotely justified by what they receive. What makes the situation more frustrating are the marketing tactics employed by luxury brands to draw you in and keep you coming back for more. In light of this, this article aims to provide deeper insight into the luxury goods industry, help you make more informed financial decisions, and hopefully save you a few (or even a lot) of dollars.

The temptation of luxury brands

What exactly persuades someone to buy a $6,900 Saint Laurent jacket or a $4,500 handbag from Prada, when countless cheaper and functionally identical alternatives exist? While there are pragmatic reasons such as investment value and higher quality, most of this motivation can be traced back to powerful emotional triggers that luxury brands know how to tap into.

Luxury purchases often arise from emotional needs rather than practical ones. For many, these items become symbols of status and success. This is a clear demonstration of status-signalling behaviour, where highly visible logos serve as outward indicators of wealth and social standing. 

Luxury companies craft narratives that evoke a feeling of prestige, self-worth and identity, appealing to consumers on a psychological level. The majority of successful luxury firms have spent decades deliberately curating this perception. As a result, these goods serve as tools for self-expression, where customers choose brands that reflect their identity, values or aspirations. By buying into these narratives, consumers are purchasing more than a simple product, they are buying a version of themselves that the brand promises to reflect. 

The illusion of glamour: Why you pay more for less

In the modern world, visibility of luxury goods has been at an all-time high. Through everyday media, influencers and celebrities routinely flaunt them to millions of viewers, embedding luxury brands into pop culture and subsequently amplifying our collective desire for these goods dramatically.

Complementing this development, luxury brands have pivoted to targeting aspirations rather than affluence. While it used to be the rich that were the main consumers of luxury goods, it is now primarily the middle and lower classes who sustain the industry, with a 2021 study finding that nearly 75% of spending on luxury goods came from these groups. As LVMH’s former Chief Financial Officer, Jean-Jacques Guiony, put it, “We don't sell most Louis Vuitton products to rich people; it is to people who have money and want to indulge themselves. The advantage is this cohort is much, much bigger than the super wealthy.” 

Luxury brands implement aspirational marketing such that their products are framed to be gateways to status and validation, which strongly appeals to this demographic. At a time where other signs of success such as owning a home are becoming increasingly unattainable, purchasing a luxury item for a few thousand dollars is a far more achievable symbol of accomplishment. 

The problem arises when these people cannot afford such expenditures. A 2023 survey found that nearly 40% of Gen Z shoppers had gone into debt to buy a luxury item. Beyond youths, middle-class consumers are also spending more than ever on luxury goods, even amidst economic uncertainty and rising inflation.

Luxury brands also prey on our desire for exclusivity by deliberately manufacturing scarcity. They tightly restrict supply in order to create the impression that their products are rare and difficult to obtain. By leveraging our need for uniqueness and fear of missing out, or FOMO, this engineered exclusivity intensifies demand. Many brands will spare no efforts in preserving their perception of rarity, even going to the extent of destroying their own products. In May 2018, Richemont, the owner of the jewelry and watch brands Cartier, Piaget, and Baume & Mercier admitted to destroying unsold products worth $563 million in 2 years.

A prominent example is the Hermès Birkin Bag, where long waiting lists, restricted production, and selective availability have made it the ultimate status symbol. This is the scarcity principle in effect: when something appears to be limited, its perceived value rises, and the more you are willing to pay for it. After all, people desire what they can’t easily have. 

All of their efforts ultimately serve to distract you from the less glamorous truth: many luxury products in fact have relatively low real value. Hiding behind their lavish image, a significant portion of their goods are produced in the same factories as much cheaper products, usually in countries such as Vietnam, Bangladesh and China, where labour costs are low and working conditions can be poor.

Consequently, in spite of their exorbitant prices, the actual cost of producing luxury goods is surprisingly low. Brands attach their labels to items that cost merely a fraction of their retail price to manufacture, then sell them for thousands. According to Bernstein estimates, companies often charge a mark-up of 8 to 12 times the production cost. In truth, what you’re paying for isn’t superior materials or craftsmanship, but instead the fortune poured into marketing and branding. 

You may then be wondering about the “Made in Italy” or “Made in France” labels, which are so often associated with luxury. In many cases, they are put in place to mislead consumers. A bag may be “finished” in Italy, but most of its components are sourced and assembled elsewhere, in the same factories mentioned above. 

With prices for luxury goods skyrocketing, many have begun to question the true value of these items. Historically, luxury houses have raised prices by 5 to 7 percent annually, already more than twice the rate of inflation. While luxury companies have always raised prices at a higher rate relative to inflation, the rate of recent hikes are particularly disconcerting. From 2019 to 2024, the cost of Prada’s popular Galleria Saddiano bag rose by 111 percent. Likewise, across the market for popular luxury bags, average price increases relative to inflation range between 120 and 200 percent. According to HSBC, luxury prices in Europe are at least 52 percent higher than they were in 2019, far outpacing inflation.

One might assume that such a dramatic rise in price would correspond to improvements in quality as well, but reports suggest otherwise. In the consumer psyche, a higher price has long been equated to higher quality–a cognitive bias the industry acutely understands and frequently exploits. They rely heavily on sophisticated advertising campaigns and brand narratives to reinforce this perception and justify their inflated prices.

In the past, luxury houses were renowned for master craftsmanship and products built to last decades. However, increasing industrialisation of the production process has led many to question the luxury promise of uncompromising quality. A series of scandals have linked brands including Dior, Armani, Valentino and Loro Piana to sweatshops in Italy, casting further doubt on their reputations. 

The decline in quality of designer goods has not gone unnoticed by consumers, with many taking to social media and online forums to voice out their dissatisfaction. One viral example is TikTok user Janet Lin (@janetlinxo), whose video depicts the dramatic decline of her Goyard Saint Louis GM tote bag. Despite retailing for about $2,000, the bag was documented to have fallen apart after being used outdoors for merely a few hours in the heat.

The above is far from an isolated incident. Similar anecdotes and in-depth analyses of the construction of luxury items have become growing topics in fashion-focused content, fueling a broader debate on the value of luxury goods. Critiques have highlighted the inferiority of such goods in comparison to their high price tags, with some even calling for boycotts of certain brands.  

As a result of growing disillusionment with luxury brands as well as economic hardship, there has been a noticeable shift away from luxury spending. Industry experts have also identified a rising sense of "luxury fatigue", where consumers feel that rising prices are no longer justified by the quality or meaning these products offer. In China, slow economic growth and an uncertain job market have resulted in a focus on practicality and thrifty shopping, while high living costs in the West are turning away potential buyers. 

In a world where calls for consumption appear at every turn, it has become more crucial than ever to spend thoughtfully, and that includes a call to rethink luxury. Luxury brands thrive on creating insecurity, encouraging the belief that status and self-worth depend on their labels. Yet many people, especially the younger generations, are redefining what luxury means to them, placing more emphasis on meaningful experiences, personal fulfilment and individuality over material possessions. 

While indulging occasionally in a branded good is perfectly fine, it is vital to spend within your means and evaluate whether the purchase truly holds value to you. True luxury lies beyond a logo; it’s about what gives you lasting contentment.

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