‘Why Hermès dethroning LVMH signals a new luxury paradigm’

The first quarter of 2025 has delivered a seismic shift in the luxury landscape: Hermès, maker of the iconic Birkin bag, has overtaken LVMH as the world’s most valuable luxury company. Many headlines focus on the numbers: a 3% sales decline for LVMH versus a surging market cap for Hermès. But the real story is far more nuanced. We’re witnessing a perfect storm for luxury brands — one that’s testing even the most accomplished players and redefining the rules of engagement for the next era of luxury. The perfect storm: New clients, new expectations At the heart of this shift is the emergence of Gen Z as a critical luxury clientele. This generation is entering the market with expectations that are fundamentally reshaping the industry. For Gen Z, luxury goes far beyond the product. It’s about personalized clienteling, immersive brand experiences, and a level of customer service that feels both authentic and emotionally resonant. They demand transparency, digital fluency, and a sense of belonging — challenging even the most established maisons to rethink every touchpoint. And digital fluency now reaches far beyond social media as social selling becomes a key success factor, particularly in the critical Chinese market. Complicating matters further is the growing issue of trust and value perception, as highlighted in a recent Bain report. The luxury industry’s aggressive price increases over the past two years have not gone unnoticed, even by its wealthiest clients. Recent market research highlights that a significant cohort of luxury clients — especially younger, wealthy, digitally native ones — increasingly perceive luxury brands as overpriced. While luxury has always commanded a premium, more clients now feel that recent price hikes have crossed a line. This sentiment is particularly acute for brands like Dior and Louis Vuitton, both cornerstones of LVMH, which led the charge in portfolio-wide price increases over the last few years. In contrast, Hermès has exercised notable restraint, maintaining a pricing strategy that, in my view, has preserved an aura of fairness in the eyes of clients. This subtle but powerful difference is resonating with clients who are now scrutinizing the value proposition behind every purchase. Scarcity and storytelling: The twin engines of luxury Hermès’ ascent is not just a matter of pricing discipline. The brand’s unwavering commitment to scarcity is reflected in meticulously controlled supply, limited editions, and a deliberate refusal to chase volume on some of its most iconic bags — creating an ecosystem where demand consistently outpaces supply, and where pre-owned prices often exceed those of new items. This is not accidental. It’s the result of decades of strategic discipline, an almost obsessive focus on extreme craftsmanship, and a deep understanding of the psychological drivers of luxury consumption. In an era where abundance is the norm, scarcity is a luxury in itself. Still, it would be a mistake to underestimate LVMH. The group remains one of the most formidable forces in luxury, with an incredible portfolio of brands that have set the standard for delivering exceptional experiences at scale. LVMH’s talent pool is second to none, and its mastery of storytelling across fashion, jewelry, wines, and spirits has inspired generations of clients. The ability to create anticipation, desirability, and emotional connection on a global stage is a skill that few can rival. Lessons at the top: Why even the best must evolve LVMH’s recent decline offers a powerful reminder: even the best must constantly evolve. In today’s climate of uncertainty, the traditional pillars of luxury, scarcity, craftsmanship, storytelling, and emotional inspiration are more critical than ever. But they must be continually reimagined for a world where client expectations are rising faster than ever before. For LVMH, the path forward will require a continued focus on inspiring clients at every single client touchpoint. This means further elevating the emotional resonance of its brands, deepening client relationships, and ensuring that every interaction, online and offline, feels personal and meaningful. The group’s scale remains a strength, but in today’s environment, it’s agility, creativity, and an unwavering commitment to client-centricity that will determine who leads and who follows. The call to action: Audit, optimize, overinvest For the rest of the industry, the bar has never been higher. Brands must conduct rigorous and brutally honest audits to understand and eliminate vulnerabilities, from pricing strategy to storytelling to the quality of client engagement. Emotional clienteling is no longer a “nice to have”; it’s a baseline expectation. Luxury training is another critical success component. Training for leadership, marketing, and sales teams must move beyond product knowledge to encompass empathy, psychological fluency about luxury clients, and the ability to forge genuine emotional connections. I’ve seen dramatic improvements on the organizations I’ve had the opportunity to train, once people understood the true drivers behind luxury purchases. In times of uncertainty, investing in the fundamentals is essential. Brands that fail to inspire — that neglect the evolving expectations of their clients — will find themselves left behind, regardless of their heritage or past successes. The new luxury order Hermès’ rise to the top signals that the rules of luxury are being rewritten. Scarcity, fairness in pricing, and emotional desirability are the currencies of extreme value, with relevance to the next generation of luxury clients being key. LVMH’s legacy and capabilities remain extraordinary, but even at the very top, the need to elevate is unrelenting. For those who aspire to follow, the challenge is even greater. The luxury sector’s future will be defined by those who can master the art of inspiring clients — consistently, authentically, and at every touchpoint. In this new luxury order, the truly exceptional will win. This is an opinion piece by Daniel Langer, CEO of Équité, recognized as one of the “Global Top Five Luxury Key Opinion Leaders,” and advisor to some of the most iconic luxury brands in the world. He serves as an executive professor of luxury strategy and pricing at Pepperdine University in Malibu and as a professor of luxury at NYU, New York. Daniel has authored best-selling books on luxury management in English and Chinese, and is a respected global keynote speaker. Daniel conducts in-person masterclasses on various luxury topics across the world. As a luxury expert featured on Bloomberg TV, Forbes, The Economist, and others; Daniel holds an MBA and a Ph.D. in luxury management, and has received education from Harvard Business School. Sign up for his online luxury masterclasses at the Jing Academy.

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‘Why Hermès dethroning LVMH signals a new luxury paradigm’