Why Imran Amed says the fashion industry is in a ‘full-blown luxury crisis’

In recent months, the fashion industry has seen unprecedented price hikes,  CEO turnovers, sustainability backpedaling, and more—culminating in what founder and editor-in-chief of The Business of Fashion, Imran Amed, calls a “full-blown luxury crisis.” Amed joins Rapid Response to take us inside the industry chaos and share his insights and predictions for the year ahead. 

This is an abridged transcript of an interview from Rapid Response, hosted by Bob Safian, a former editor-in-chief of Fast Company. From the team behind the Masters of Scale podcast, Rapid Response features candid conversations with today’s top business leaders navigating real-time challenges. Subscribe to Rapid Response wherever you get your podcasts to ensure you never miss an episode.

When you were on the show a few months ago, you talked about how the fashion business was in need of a makeover. And since then, I’ve seen this burst of turnover among label designers, also among CEOs at Gucci, Burberry, Givenchy. Is this the reckoning that you saw coming? Is this just sort of standard turnover for the industry? It seems dramatic from an outsider’s perspective. What’s going on?

It’s pretty unprecedented, this level of turnover. I have never seen this volume of change in the leadership of big fashion companies. And as you pointed out, it’s not just on the creative side, which is what I think the mainstream culture tends to follow. It’s also on the business side. And is it a reckoning? Yeah, I think a lot of companies are coming to the end of their relationships with some of the people who have been leading those companies. New names are coming to the fore. Some of the names that are emerging in the top roles on the creative side are mostly new to the mainstream public, although they may be somewhat well-known to fashion insiders. But yeah, this is a pretty unprecedented level of change.

And the new business leaders, are they offering the promise of any new business creativity? Or are the challenges you see this business being in that there are not a lot of fresh ideas yet? 

Well, probably the most interesting and exciting new business appointment was made two years ago now, and that was when Chanel appointed Leena Nair as their new CEO. Lena came from outside the fashion industry. She was a top executive at Unilever; but not only was she outside of fashion, she came from the HR or “people’s” side of the business.

That was quite an exciting new appointment. She was the first woman of color to be appointed to one of these really big top jobs. We are seeing a lot more women come through on the business side. The former CEO of Miu Miu, Benedetta Petruzzo, was recently named to a new, very senior role at Dior.

So we are seeing women come through on the business side, but it’s on the creative side where I think there’s a bigger gap. And the reason I found Lena’s appointment so interesting was because it showed that someone was thinking about the value of the outsider’s perspective in our industry.

Most of the executives you see rising to these top jobs have grown up in the fashion industry.

You’ve said that we’re in a luxury crisis, and it sounds like it’s part design and part business. Do you feel like there’s progress in this crisis? I mean, I know you’ve also talked about the death of extravagance, which is maybe more cultural than just what the industry itself can do.

This is probably the most severe crisis that I’ve seen on the luxury side of the fashion industry since the Great Recession of 2008-2009, after the collapse of the global financial system when everything almost fell apart everywhere.

The reason I think some people are calling this a crisis is because it seems like we’ve reached a point, Bob, where the template business model and approach that the luxury industry has been using for the last decade or so are running out of steam. And that is driven by a number of different factors.

First and foremost, the industry has highly relied on the growth of the Chinese market to propel the luxury industry to new heights. Anyone who’s been following the Chinese economy knows there’s a consumer-confidence crisis happening there, linked to a wider real estate crisis.

On top of that, you have a wider slowdown amongst aspirational luxury customers who were gorging on luxury products during the pandemic because they couldn’t spend on travel, dining, and all the other things they wanted to do.

And then finally, I do think there is more of an internal existential crisis around how customers are responding to the current luxury template. There are questions around ethics and sustainability, with a couple of big luxury brands, Dior and Armani, involved in serious investigations by the Italian authorities around the supply chains of their products in Italy. Some customers are questioning [that] if a bag only costs 50 or 100 euros to create, it’s being made under conditions that don’t seem to be entirely consistent with the dream these luxury brands are selling.

This is really calling into question the value customers see in those products. There is this whole question around the price hikes. Brands were able to increase their prices by 80%, and they’ve reached a limit now. They can’t increase their prices anymore.

In fact, some of them are going to really start to think about their whole pricing architecture and if it’s out of whack. So there are so many things happening all at the same time, and a CEO at the top of a big luxury house right now is grappling with a bunch of things. And on top of all that, Bob, you and I spoke last time about the creative side of the industry just losing a little bit of its magic.

A lot of it has become templatized and commoditized. And so I think what’s exciting about a time like this is it forces companies to innovate because the market isn’t growing super fast anymore. In order to grow and succeed, you have to take market share from someone else.

To take market share from someone else, you have to offer something different and special in the market. You can’t succeed doing things the same way you’ve done over the past 10 years.

One of the trends you talked about at Voices was India, with India’s economy poised to keep soaring, but most of the popular brands are domestic. It sounds like potential opportunity there for global luxury and retail brands, but they’re struggling.

As long as I can remember, the industry has been talking about whether India is the next China. They were looking for that next big propeller of growth. If you’d asked me this question five years ago, or even three years ago, I would have said there’s still a lot that needs to be established and proven for India to take its position as one of the very big markets in the world. But I think we’re at a tipping point right now.

We are genuinely at an inflection point. Some of it is driven by sheer demographics, the growth of the middle-class market there.

India is the fastest-growing major economy in the world and is soon to be the third-largest economy. A lot of the challenges the industry has faced, up until now around retail infrastructure, around bureaucracy, around local cultural norms, all still exist but are starting to change.

There are new airports opening, new infrastructure in terms of retail opportunities.

Access to broadband and mobile internet is ubiquitous in India now. So, like, all of the factors that have made it hard for brands to penetrate the market are changing. The one thing that brands have to contend with, whether they’re luxury or mass market, is the very vibrant local fashion industry in India.

The way people dress in India is more of a cultural fusion. If you walk the streets of Shanghai, most people wear Western clothes. If you walk the streets of Delhi or Bombay, people are wearing a mixture of Western handbags or shoes with traditional kurtas or the clothes Indian people have been wearing for decades, thousands of years. Trying to figure out where you fit into the Indian customer’s lifestyle is what a lot of brands are contending with. There is a lot of local competition, so the Indian market is on the precipice of something big, but it’s not going to be easy.

It sounds like the challenge is both style culturally and how business operates in India, which has not necessarily been cracked by the fashion industry from outside.

The right talent, Indian local talent, can empower those leaders to help make decisions that are right for that market.

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