The Business of Fashion Podcast: "The Luxury Crisis, Explained"

Release Date: January 31, 2025
Host: The Business of Fashion
Guests: Imran Ahmed (Founder and CEO of The Business of Fashion), Bob Safian

Introduction: The Unprecedented Shakeup in Luxury Fashion

In the January 31st episode of The Business of Fashion Podcast, host Imran Ahmed engages in a deep dive conversation with Bob Safian to unravel the current turbulence within the luxury fashion industry. Recorded in December, coinciding with Mathieu Blasi's appointment as Chanel's new creative director, this episode addresses the significant leadership changes and the broader crisis impacting the sector.

Imran Ahmed [00:50]: "I have never seen this volume of change in the leadership of big fashion companies, ever."

Leadership Turnover: A Symptom of Deeper Issues

The discussion opens with an analysis of the rampant turnover at the helm of major fashion houses. From Kim Jones departing Dior to Glenn Martins taking over Margiela, the frequency and scale of these shifts are unprecedented.

Imran Ahmed [04:16]: "It's pretty unprecedented, this level of turnover. I have never seen this volume of change in the leadership of big fashion companies ever."

Safian probes the nature of the new leaders, questioning whether their emergence signifies a new direction or merely a continuation of existing patterns. Ahmed acknowledges a lack of diversity among the new leaders, noting a prevalence of white men ascending to top roles despite ample female talent available.

Imran Ahmed [05:18]: "Sadly, I don't think there's like a sense that the people that are coming up in some of these roles are kind of from a new template."

The Luxury Crisis: Multifaceted Challenges

Ahmed characterizes the current predicament as the most severe crisis in the luxury fashion sector since the Great Recession. Multiple factors converge to undermine the traditional business model:

1. Chinese Market Slowdown:
   The luxury industry's heavy reliance on the Chinese market has backfired amidst a consumer confidence crisis and a real estate downturn.

2. Post-Pandemic Spending Shifts:
   Aspirational luxury consumers, who heavily indulged during the pandemic, are now curbing their expenditures due to economic uncertainties.

3. Ethics and Sustainability Concerns:
   Investigations into brands like Dior and Armani regarding supply chain practices have eroded consumer trust.

4. Pricing Pressures:
   Luxury brands face stagnant pricing strategies after substantial increases over the past decade, compelling a reevaluation of their pricing architectures.

Imran Ahmed [08:07]: "This is probably the most severe crisis that I've seen in the luxury side of the fashion industry since the Great Recession."

Despite these challenges, Ahmed highlights that crises can spur innovation, citing brands like Miu Miu and Hermès that continue to grow by offering unique, high-quality products.

Imran Ahmed [10:00]: "I think what's exciting about a time like this is it forces companies to innovate... brands like Brunello Cucinelli and Hermès... creating products that have this kind of timeless, luxury, highly qualitative element to them."

Sustainability: A Faltering Priority

Sustainability remains a critical yet neglected area. Ahmed expresses concern over the diminishing urgency among industry leaders to address environmental and ethical issues, noting a significant drop in sustainability's prioritization.

Imran Ahmed [20:10]: "I'm sad to say that I just don't see the level of urgency amongst the leaders in the industry to really make the necessary change."

He advocates for stringent government regulations to compel the industry towards meaningful sustainability initiatives, as self-governance has proven insufficient.

Emerging Opportunities: Silver Spenders and Challenger Brands

Silver Spenders: An Overlooked Demographic

Ahmed introduces the concept of "silver spenders"—consumers over 50 who possess substantial disposable income and are eager to invest in fashion. Contrasting the industry's traditional focus on youth, he emphasizes the potential of catering to this mature, affluent demographic.

Imran Ahmed [22:20]: "They absolutely should. If you think about the established markets, those are all heavily aging populations."

Drawing inspiration from actress Michelle Yeoh's role as a brand ambassador, Ahmed illustrates how representing older, influential figures can resonate with this group.

Imran Ahmed [22:20]: "Michelle can wear anything and look amazing, you know, and she's an incredible ambassador and she's an incredible role model for lots of women who are like, 'I still want to feel fabulous and look fabulous.'"

Challenger Brands: Innovation Over Tradition

The conversation shifts to the rise of challenger brands like On and Skims, which have outpaced giants like Nike and Adidas through product innovation and authentic cultural engagement.

Imran Ahmed [24:48]: "They are brands that are really focused on product innovation. And I think this is where some of the bigger companies have really struggled."

These brands leverage deep cultural connections and continuous innovation, setting them apart from established players reliant on legacy products.

Fashion Weeks: Rethinking Tradition

Ahmed critiques the proliferation of fashion weeks globally, labeling them as largely redundant and resource-draining, especially for major brands that maintain multiple shows annually across various cities.

Imran Ahmed [31:23]: "Honestly, Bob, I think it is waste. It is waste."

He advocates for a more streamlined and meaningful approach, akin to Apple's individualized product events, emphasizing quality over quantity.

The Role of AI in Fashion Design

Artificial Intelligence is making inroads into the creative processes of fashion designers. While AI tools are being utilized to generate ideas and assist in research, Ahmed stresses that human creativity remains indispensable for meaningful innovation.

Imran Ahmed [27:33]: "AI is just one early input into the creative process. But to create something really genuinely novel, interesting, disruptive, creative, beautiful, a human has to be involved."

Looking Ahead to 2025: Optimism Amidst Challenges

Despite the industry's current struggles, Ahmed remains optimistic about the influx of new designers and the potential for creative reinvention. He anticipates that the leadership turnover will pave the way for fresh perspectives and innovative approaches on the runways.

Imran Ahmed [33:31]: "I think the creative reinvention of our industry is going to start with what some of these designers are doing on the runways."

Conclusion: Navigating Through Crisis with Innovation

The episode concludes with a reflection on the necessity for the fashion industry to embrace change and innovation in response to its multifaceted crisis. Ahmed underscores the importance of leveraging new leadership, exploring untapped markets, and integrating technological advancements to foster resilience and growth.

Imran Ahmed [33:31]: "I'm exhausted after 2024. It has been, you know, it has just been a relentless year, but I'm also really excited about what's to come."

Key Takeaways:

• The luxury fashion industry faces a severe crisis driven by market slowdowns, sustainability issues, and leadership turnovers.
• There's a growing opportunity in targeting the "silver spenders" demographic, previously overlooked by major brands.
• Challenger brands excel through continuous innovation and authentic cultural engagement, posing significant competition to established players.
• Sustainability remains a low priority, necessitating external regulation to drive meaningful change.
• The traditional model of multiple global fashion weeks is under scrutiny, with calls for a more streamlined approach.
• AI serves as a supplementary tool in the creative process, with human ingenuity remaining essential for true innovation.
• Optimism for 2025 hinges on embracing new leadership and fostering creative reinvention within the industry.

Notable Quotes:

• Imran Ahmed [08:07]:
  "This is probably the most severe crisis that I've seen in the luxury side of the fashion industry since the Great Recession."

• Imran Ahmed [20:10]:
  "I'm sad to say that I just don't see the level of urgency amongst the leaders in the industry to really make the necessary change."

• Imran Ahmed [22:20]:
  "Michelle can wear anything and look amazing, you know, and she's an incredible ambassador and she's an incredible role model for lots of women who are like, 'I still want to feel fabulous and look fabulous.'"

• Imran Ahmed [31:23]:
  "Honestly, Bob, I think it is waste. It is waste."

This comprehensive summary encapsulates the multifaceted discussion between Imran Ahmed and Bob Safian, shedding light on the current state and future prospects of the luxury fashion industry.