Why investors are losing patience with luxury brands

I recently had the privilege of attending one of the most important global investor meetings in Hong Kong, where I presented the 4E framework for managing luxury brands: Emotion, Experience, Engagement, and Exclusivity. This concept offers a new blueprint for managing luxury brands globally. During the conference, several influential investors in luxury brands requested one-on-one discussions. These conversations were marked by unease, even alarm, about the current performance of many luxury companies. While some are growing in revenue and market capitalization, many have seen double-digit declines, and the outlook for those brands is bleak. What stood out most was investors’ frustration: they felt too many management teams were blaming market conditions instead of taking responsibility for underperformance. Evolving client expectations The truth is, markets are always challenging. It’s part of doing business. Blaming external factors does nothing to improve a brand’s position. Rapidly evolving client expectations and Generation Z as a significant disruption force have introduced challenges for all luxury brands. While some are rising to meet these changes, others are falling behind. As a result, the polarization between successful and struggling brands has never been greater. In my audits of underperforming brands, I frequently see internal mismanagement rather than external factors at play. Client experience and brand storytelling are often neglected. Generation Z, soon to be the most influential and highest-spending luxury consumers, does not resonate with many brands' outdated, product-focused approaches. Experience and storytelling Moreover, many luxury brands face major issues with their in-store and online experiences. In a recent global mystery shopping exercise for a major luxury brand, despite multi-million dollar investments in physical stores, the in-store experience was far from luxurious. Staff seemed disengaged, and the exclusivity that luxury clients expect was absent. This is not an isolated case. Many luxury brands struggle to connect their digital and physical experiences, leaving clients with a fragmented, underwhelming journey. E-commerce, which should extend the brand experience seamlessly, is often clunky, slow, and disconnected. This issue is especially pronounced in China, where discrepancies between e-commerce platforms and physical stores of the same brand have caused significant reputational damage. Chinese social media is full of complaints from clients who point out these inconsistencies, but many brands fail to take these concerns seriously. The deeper issue, however, is a lack of clear, compelling brand stories. Brand storytelling is not just about launching another glossy campaign or hiring a celebrity ambassador. True storytelling is about authenticity and clarity—it’s about standing for something tangible, rooted in core values. It’s about consistently communicating those values across all touchpoints to create desire. Many brands have lost sight of this. The 4E framework The 4E framework I presented at the conference offers a path forward and a tool for investors to evaluate which brands are worth backing. Emotion, Experience, Engagement, and Exclusivity should define every aspect of a luxury brand’s strategy. Yet many brands neglect one or more of these pillars. Brands that fail to evoke strong emotional connections rapidly lose relevance. Those that offer “just okay” experiences, whether in-store or online, alienate clients. Without genuine engagement, a brand becomes irrelevant in a world where clients expect inspiring dialogue. And without exclusivity—achieved not just through price but through empathy and total client focus—luxury loses its essence in the eyes of today’s consumers. The investors I spoke with were clear—they expect more. They don’t want to hear excuses about market conditions or external pressures. They want proactive, visionary management teams that acknowledge the challenges and address them head-on. They want accountability and urgency. I urged these investors to challenge the boards and management teams of the luxury brands in their portfolios. Blaming the market is not a strategy. The real problem lies within many brands themselves. Without a radical shift in focus toward mastering the client-centric ethos of the 4Es, further decline is inevitable. For investors, the time to act is now. Luxury brands cannot afford complacency or rely on past successes to navigate today’s turbulent landscape. The brands that will lead and thrive long-term are those that embrace responsibility, act decisively, and prioritize creating compelling emotional connections, unforgettable experiences, genuine engagement, and a sense of exclusivity that today’s discerning clients demand. Anything less will continue to disappoint. This is an opinion piece by Daniel Langer, CEO of Équité, recognized as one of the “Global Top Five Luxury Key Opinion Leaders to Watch.” 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 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 masterclasses at the Jing Academy. Follow him: LinkedIn and Instagram. All opinions expressed in the column are his own and do not reflect the official position of Jing Daily.

Why investors are losing patience with luxury brands

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Published September 16, 2024

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Why investors are losing patience with luxury brands