Why the luxury playbook is destroying the industry

The luxury industry is trapped, and current macroeconomic challenges are amplifying the problem. The most dangerous part? From the inside, it looks like strategy. Every major brand is running some version of the same playbook. Every competitive analysis, every competitive mystery shopping assessment, reveals another sea of sameness. Influencer partnerships with diminishing returns. Logo-heavy entry products designed to capture aspirational buyers. Seasonal campaigns that blur together. Annual price increases disconnected from any corresponding investment in the client experience. Experiences that are luxury in price and ambition only but fall short of expectations. No single brand has a clear incentive to stop. And so nobody does. A bad equilibrium This is a Nash equilibrium: a state where no individual player benefits from unilaterally changing their strategy. In game theory, a Nash equilibrium sounds stable. It sounds rational. What most people forget is that Nash equilibria are often suboptimal. Every player is making their best individual choice, and the collective outcome is still terrible for everyone. This is where we are in luxury. The evidence is overwhelming. Consumer trust in luxury brands has reached a historic low. More than half of luxury clients now perceive prestige brands as overpriced. Net Promoter Scores have cratered. Over 20% of luxury clients were lost in 2024 alone, and 2025 added to this trend. The top 2% of brands are growing 7% to 12%, while the bottom half of the industry is contracting. The equilibrium holds, and value is being destroyed inside it. The question worth asking is, why do brands stay trapped when the data so clearly signals that the current playbook is failing? Why brands stay stuck Three mechanisms keep brands trapped in place. The first is asymmetric risk. Breaking out of a bad equilibrium requires doing something meaningfully different from everyone else. The outcome is binary: you either leapfrog the competition or you alienate your existing client base. The upside takes years to materialize, while the downside is immediate and visible. A CEO who deviates from industry consensus and fails will be held personally accountable. If the same person instead follows the consensus and delivers mediocre results, they can blame market conditions and survive. Corporate incentive structures actively reward staying inside the trap and punish any attempt to escape it. The second mechanism is circular belief formation. In a Nash equilibrium, each player chooses the best response based on what they believe other players are doing. In luxury, these beliefs have become self-referential. Every brand assumes clients want influencer-driven marketing because every other brand is investing in influencer-driven marketing. Every brand assumes entry-level logo products are essential because every other brand has them. The assumptions reinforce themselves. Nobody tests whether a fundamentally different approach would generate stronger client loyalty, higher lifetime value, and deeper emotional connection, because the perceived cost of being wrong feels existential. Bain data on luxury’s contracting consumer base proves these assumptions wrong. The industry has not updated its strategy. The third and most consequential mechanism is player misalignment. Nash equilibria depend on who is playing. For a founder, the brand is their life’s work and legacy. The cost of destroying it through short-term extraction is infinite. For a professional manager on a three-year contract with compensation tied to EBITDA, the cost of eroding brand equity over a five-year horizon is zero. They will have moved on before the damage becomes visible. Different players with different payoff structures produce different equilibria from the same competitive environment. The brand looks the same from the outside. The game being played on the inside is fundamentally different. The governance advantage This explains a pattern that the industry has struggled to articulate. Family-controlled and founder-led brands, including Hermès, Chanel, Patek Philippe, and Brunello Cucinelli, have disproportionately outperformed over the past decade. While conventional wisdom attributes this performance to heritage or craftsmanship, the game-theoretical explanation is more precise: their governance structures align the decision-maker’s payoff matrix with the long-term health of the brand. They can absorb short-term risk to achieve a superior equilibrium that competitors under different governance cannot reach. Hermès walked away from wholesale distribution when the entire industry was committed to it. Brunello Cucinelli refused to discount when the rest of the fashion industry was addicted to markdowns. These deliberate deviations from a bad Nash equilibrium were executed by leaders whose governance structure allowed them to absorb the short-term cost of being different. The strategic question for every luxury CEO is not whether their brand is in equilibrium — it almost certainly is. The question is whether it’s a good one. If the answer is no, the next question becomes whether the organization’s governance structure permits the kind of sustained, deliberate deviation required to reach a better position. Most brands will not break out. The trap is comfortable. The consensus provides cover. The quarterly numbers are defensible. And the erosion of brand equity is slow enough that it remains invisible until it becomes irreversible. The brands that will define the next decade of luxury are the ones led by people who can see the trap for what it is and who have both the framework and the conviction to walk out of it. Are you ready? 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 the luxury playbook is destroying the industry