Luxury Burnt Through Its Trust. The Bill Just Arrived.
Updated: Sep 8
For about a decade, luxury brands have basically run the same play.
You raise prices, change nothing else and call it "elevation."
The Business of Fashion and McKinsey's State of Fashion 2026 report just confirmed what anyone paying attention already knew, luxury has raised prices without raising quality or creativity while design-led mid-market brands made the opposite trade. Now as a result they're fashion's fastest-growing value segment and the very thing luxury used to be.
The industry is calling this a "shift." It's not a shift. It's actually an invoice and it's been a long time coming in my opinion.
I've sat across the table from brands like Balenciaga and Givenchy twice a year in Paris, and in the rooms at Nike and Adidas where these pricing calls get made. I can tell you they're never framed as trust decisions. They're framed as margin decisions and trust gets treated as a renewable resource when it quietly isn't. Every time the price goes up and nothing else does, something gets withdrawn from an account the customer didn't know they were even funding.
The construction didn't get better, the materials didn't get better. In several houses that brought in new creative leadership through 2025, the creative direction got thinner, not bolder with fewer ideas, more logo, more "elevation" that just basically meant a pricier version of last year's idea. For years nobody noticed the drawdowns, because luxury had decades of trust to draw against and customers who wanted to believe the story. Now the account is unfortunately closer to empty than full, the bill has arrived, and mid-market brands at a fraction of the price and a fraction of the marketing spend are cashing it.
Here's the part that should worry us far more than anything happening in luxury right now, AI is about to do this to every brand and in every category. And I hate to say it but I think a lot of leaders are about to make it worse, not better.
The same report frames AI mostly as efficiency with roles becoming AI-centric, processes redesigned, headcount redirected to "higher-value" work. Protecting human creativity gets a mention of course, but almost as an afterthought. Read that the way a lot of leadership teams will, and it becomes permission to do to the workforce what luxury did to its pricing, you strip out the human layer, call it transformation and assume the customer won't notice because the spreadsheet says output is unchanged.
They'll notice and probably faster than they ever noticed the price increases. A price increase is kind of abstract until you're standing at the register but a brand that's quietly removed its human layer is obvious from the first interaction, the email that reads like a template because it is one, the store associate replaced by a screen with a friendlier font, the "personalisation" that's just your own purchase history reflected back at you.
Reinvestment and replacement can both be called "using AI." However, they are not the same thing. Reinvestment is AI absorbing the repetitive, low-judgement work so the people closest to the customer have more time and more capacity for that read-the-room moment that was never a process and can't be automated away. Replacement is the same email, the same store, the same talk about "service" just minus the people who made it feel like service instead of a transaction with extra steps.
Luxury took roughly ten years to spend down enough trust for the market to correct and even then, it took a flat global market and a wave of new creative directors before the industry would admit it. AI-driven cuts to the human layer could compress that into two years because unlike a price tag, the absence of a person is something a customer feels on contact, every time and with no annual report required.
The brands in this report's "things will improve" camp aren't the optimists in my opinion. They're the ones who read "efficiency" and heard "reinvestment," not "replacement." They're also about to widen the gap between themselves and everyone else faster than luxury ever could. Watch this space.
I would be bold enough to say if your brand's 2026 AI strategy is a cost-cutting exercise, you're not modernising. You're luxury, five years ago, congratulating yourself on a price increase.
Nick Gray
Founder & CEO,
IGU Global
Nick Gray is Founder & CEO of IGU Global, a Sydney-based retail and brand strategy consultancy. He has spent 25+ years working with and alongside some of the world's most culturally significant brands.
Common questions
Why is luxury losing ground to mid-market brands?
Because for about a decade luxury ran the same play: raise prices, change nothing else, and call it elevation. The Business of Fashion and McKinsey's State of Fashion 2026 report confirmed that luxury raised prices without raising quality or creativity, while design-led mid-market brands made the opposite trade. Those mid-market brands are now fashion's fastest-growing value segment, and the very thing luxury used to be.
What does it mean to spend down brand trust?
Pricing decisions are never framed as trust decisions in the room, they are framed as margin decisions, and trust gets treated as a renewable resource when it quietly isn't. Every time the price goes up and nothing else does, something is withdrawn from an account the customer did not know they were funding. Luxury had decades of trust to draw against, so nobody noticed the drawdowns. The account is now closer to empty than full.
What is the difference between AI reinvestment and AI replacement?
Reinvestment is AI absorbing the repetitive, low-judgement work so the people closest to the customer have more time and more capacity for the read-the-room moment that was never a process and cannot be automated away. Replacement is the same email, the same store and the same talk about service, minus the people who made it feel like service instead of a transaction with extra steps. Both get called using AI.
Why will customers notice AI cuts faster than price rises?
A price increase is abstract until you are standing at the register. A brand that has quietly removed its human layer is obvious from the first interaction — the email that reads like a template because it is one, the store associate replaced by a screen with a friendlier font, the personalisation that is just your own purchase history reflected back at you. Luxury took roughly ten years to spend down enough trust for the market to correct. AI-driven cuts to the human layer could compress that into two.
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