
Why did the 2008 push the luxury industry to reinvent itself?
A past much closer than we think
January 21st, 2025
What would happen if one of the most powerful banks in the United States were to fail? It already happened, in September 2008, with the collapse of Lehman Brothers. A Wall Street giant, built on debt and promises, that dissolved in a matter of hours. The fall of Lehman was not just the failure of a bank: it became the symbol of the downfall of an entire era. The crisis originated in the United States, fueled by the collapse of the housing market and the unsustainable expansion of subprime mortgages. The failure of major financial institutions (such as Lehman Brothers) dragged the global economy into a deep recession, with effects that quickly impacted the luxury sector. Before that fateful autumn, luxury was enjoying a golden age. The fall of Bear Stearns in March 2008 had not shaken brands like Gucci, Saint Laurent, and Balenciaga, which were expanding their reach by opening new stores in prestigious locations. In the United States, Michelle Stein, then president of Aeffe, was signing contracts for boutiques in iconic areas like Melrose Avenue in Los Angeles. The summer of 2008 was characterized by growing demand, with luxury conglomerates working to meet the aspirational consumers' requests, who flocked to boutiques. But the storm also hit the luxury bubble.
@barelylegalclothing The good old days #funnytshirt #shirt #lehmanbrothers #bank #finance #financememes #financebro #recession #meme California Dreamin' - The Mamas & The Papas
Sales plummeted, especially among VICs, who drastically cut their spending due to economic uncertainty. Saks Fifth Avenue, the historic New York department store, was among the first to react, introducing discounts of up to 80% even before Christmas. This move undermined the positioning of high-end brands, for which exclusivity is a crucial value. Items that just months earlier embodied status symbols became discount merchandise: unofficial reports mentioned designer bags, like those from Jil Sander, dropping from $3,000 to $300, shattering the untouchable image of luxury. An industry that had thrived during an era of uninterrupted growth was unprepared for a shock of this magnitude. The wave of discounts, although necessary to clear out inventory, proved to be a blow to the entire sector. Many brands began renegotiating expensive lease contracts and reducing orders to suppliers, often small family-run Italian businesses. Gucci Group, then led by Robert Polet, held emergency meetings to prepare for a potential 10% revenue drop. Despite efforts to support the supply chain, many factories were forced to close, highlighting the fragility of small businesses in a global crisis.
that fit isn't y2k either that was peak obama recession fashion...2008 core... https://t.co/Ok5rO12rko
— eden berzatto (@astralcenter) December 29, 2023
In 2009, the Richemont group reported a 4% drop in revenue, totaling 5.2 billion euros, while net profit fell by 18% to 603 million euros. While many groups saw declining revenues, Valentino reported consolidated revenue of 2.2 billion euros in 2008, up 3% from the previous year. This reflected a shift towards more institutional and less logo-centric brands, capturing the attention of increasingly discerning consumers and accelerating a change in style and strategy within luxury brands. Logomania, which had previously been a distinctive symbol, gave way to a more understated and refined aesthetic. The concept of "luxury shame”, a vision of luxury that renounced ostentation to focus on quality and discretion, emerged as a way to express value without shouting it. Inspired by Bottega Veneta and its motto "When your initials are enough," Gucci relocated key merchandising and marketing executives from Bottega, including former CEO Patrizio di Marco.
Valentino FW09/10 beauty #couture pic.twitter.com/EMvzJSkCO4
— ? (@maximalistes) January 12, 2016
While luxury giants sought to recover without losing their exclusivity, dozens of emerging and independent designers were crumbling. To save the new generation, Made Fashion Week was born, conceived by producer Keith Baptista, Mazdack Rassi, co-owner of Milk Studios, and Jenné Lombardo. An event held during New York Fashion Week featured a weekend of shows and presentations at Milk Studios. Made Fashion brought a fresh approach, even inviting influencers who, at that time, had never attended shows. Acquired by IMG in 2015, Made helped New York Fashion Week experience a brief period of innovation, transforming it into a hub for emerging talent. In the following years, Made helped launch brands like Altuzarra, Proenza Schouler, Public School, Billy Reid, and Alexander Wang.
The autumn of 2008 marked a turning point for the luxury industry. Major brands began taking direct control of their distribution networks, reducing reliance on wholesale models. They hired their own sales staff in department stores and centralized pricing and merchandising strategies, aiming to rebuild the perception of luxury as an exclusive and intangible asset. The 2008 economic crisis led to inevitable restructuring across all sectors of the economy, and the luxury market, a key driver of the Italian economy, was no exception. Although luxury had undergone a "democratization" in prior decades, making its products more accessible and lowering prices to attract a broader clientele, the crisis severely tested this balance.
@victoriasaintdenis Replying to @cheriebeckom expanding a little bit on how the 2008 crash created what we can ‘expect’ recession fashion to look like #fashiontok #fashiontrends #recession2023 #digitaltrends original sound - VICTORIA influencer tech
Luxury companies faced the challenge of maintaining the brand's elite character while responding to an expanding demand. At the same time, changes in consumer behavior highlighted how even the wealthiest segments had reduced their purchases. Nevertheless, brands like Louis Vuitton and Gucci proved more resilient due to their strong international presence and targeted strategies. Since 2008, the luxury world has faced other shocks, such as the 2020 pandemic, which led to the permanent closure of Barneys New York, which was declared bankrupt. However, in recent years, luxury has responded much more quickly, shifting focus to its e-commerce platforms and proving to be better prepared.
In response to the 2008 crisis, luxury companies broadened their customer base to include new segments, such as "excursionist" consumers—those farther from the traditional luxury market but still interested in more accessible products. This, combined with an internationalization strategy, helped counteract the recession's negative effects. Brands turned to emerging markets, particularly in Asia, with a strong focus on China, where luxury demand continued to grow. In this context, Prada's decision to list in Hong Kong in 2011 instead of Milan's Piazza Affari was significant. This strategic choice reflected the growing importance of the Asian and particularly Chinese market, where consumers accounted for an increasingly significant share of global sales. Unfortunately, 17 years later, even this seemingly unshakable market succumbed to intense socio-economic pressures, leading to a luxury crisis comparable only to that of 2008.