Third Bridge experts note these brands share common challenges: luxury pricing has exceeded consumers’ psychological thresholds, while product innovation has failed to keep pace. Frequent designer changes, increasingly homogeneous collections, and an overemphasis on entry-level products have gradually eroded the exclusivity that luxury once commanded, leading to consumer fatigue and disengagement.
Taking Gucci as an example, Third Bridge experts expect its performance to remain weak in 2025, with ongoing struggles in creative direction and product innovation likely to put further pressure on sales and profitability. Core leather goods have performed flatly, lacking must-have items that draw consumers back to stores.
The appointment of new creative director Demna appears to have added complexity to Gucci’s brand positioning. Our experts say his bold, streetwear-influenced design language creates tension with Gucci’s heritage-focused, classic identity. The shift from understated, timeless design to a louder, avant-garde approach has raised questions about whether this new aesthetic sits comfortably alongside existing product lines. While Demna may inject energy into Gucci’s apparel lines, especially among younger consumers, his expertise in streetwear and casual styles may attract emerging affluent consumers in Asia. However, this transformation risks alienating loyal customers who prefer Gucci’s classic or diversified styles.7
Drawing on insights from multiple industry conversations, Third Bridge Senior Analyst Yanmei Tang noted in an April interview with CNBC:
“Market concerns around Gucci’s brand positioning are growing. The lack of a clear direction and unified creative vision risks sending confusing signals to consumers. Leadership changes and inconsistent strategies have increased uncertainty, and this lack of clarity could continue to weigh on the brand’s image and financial performance.”
In pricing, Gucci raised prices by around 12% last year, higher than the industry’s average of 8-10%. While trying to maintain its high-end customer base, the sharp price increases have alienated core emerging affluent consumers, whose purchasing power has been weakened by inflation.8
Similarly, Dior has seen a sharp sales decline and faces challenges from creative fatigue and high prices. The brand lacks innovation momentum and could fall behind competitors if adjustments are not made quickly. However, compared to Gucci, Dior carries lower risk in 2025, with market optimism for its menswear and leather goods lines following the appointment of a new artistic director.9
Third Bridge experts note that Dior’s frequent price increases on handbags may have been too aggressive, with twice-yearly hikes of around 10% and individual bags rising as much as €500. Dior capitalized on post-pandemic demand surges, but as the heat fades, these high prices have become harder for consumers to accept. While Dior has been more cautious on shoe pricing, the luxury handbag market is seeing signs of buyer pushback.
Additionally, Dior’s excessive variations on the same product may be diluting its brand image. Particularly with women’s handbags, consumers faced with 15 nearly identical shades of blue for the same model struggle to differentiate, reducing purchase motivation. Instead of clarity and exclusivity, the brand risks becoming overly complicated and unfocused. Striking a balance between “novelty” and “simplicity” has become Dior’s critical challenge.10
Burberry appears to be facing similar issues with unclear brand positioning and a mismatch between creative direction and its DNA. While current Chief Creative Officer Daniel Lee is known for his sharp luxury aesthetic, experts believe it has not yet fully integrated with Burberry’s traditional heritage. There is public speculation about his potential departure, which could bring short-term disruption, but Burberry’s reliance on its classic trench coats and check patterns may provide some resilience.11
Overall, luxury consumers are shifting from merely buying products to seeking experiences and emotional connections with brands, making “experiential luxury” a new market trend. Brands that fail to continuously create differentiated experiences and deepen emotional engagement with consumers, both online and offline, may gradually lose appeal, regardless of how high their pricing is.12
3. Slow recovery in China and experiential luxury as the new trend
China remains a significant unknown for luxury brands including Dior. The market’s recovery has been slow, with consumer behavior shifting from conspicuous logo-chasing to quieter luxury, requiring brands to focus more on emotional connection and storytelling rather than relying solely on reputation.
Economic uncertainty, combined with brands’ overexpansion during the pandemic—particularly in third-tier cities where no new stores have opened in 2025—means 2026 will see fiercer competition, forcing some brands to scale back. LVMH’s heavy reliance on the Chinese market contrasts with Hermès’ stronger resilience, thanks to its strict scarcity strategy.13
Drawing on insights from multiple industry conversations, Third Bridge Senior Analyst Yanmei Tang told The Times in April 2025:
“Chinese consumers, once the backbone of global luxury markets, are now traveling less frequently and spending more cautiously. Domestic economic uncertainties and the Chinese government’s lack of incentives for overseas spending have significantly slowed outbound travel and luxury purchases abroad.”
Third Bridge experts describe China as a “challenging market” for traditional Western luxury brands. Domestic brands are rising rapidly, foot traffic in stores is declining, and consumers are becoming more price-conscious. Although the prestige of traditional brands still holds value, local brands offering better value for money are creating increasingly fierce competition. Going forward, luxury brands may need more targeted events, experiential initiatives, and a rethinking of pricing and brand attractiveness to generate growth in China.14
Key focus areas for luxury in H2 2025:
Looking ahead to the second half of 2025, the luxury market is expected to continue evolving around several key areas. Below are the topics we plan to discuss with industry experts in our upcoming calls:
- How are ongoing uncertainties around US tariffs impacting brands’ flexibility in supply chains and pricing strategies?
- What is driving sustained consumer interest in second-hand luxury, and how are platforms like eBay and Vestiaire Collective positioned to benefit?
- What factors are contributing to the rapid growth of the Middle East luxury market, and how are brands adapting regionally?
- To what extent will Europe’s summer tourism season inject renewed energy into physical retail performance?
- Is China’s luxury market entering a stable “new normal,” or is it still in the midst of a broader recovery phase?
- How is the growing adoption of AI transforming operational efficiency and marketing in luxury—and what implications does this have for brand positioning?
Transcript references
- China’s Luxury Market – Can Shifting Consumer Habits Make Room for Affordable Domestic Alternatives? (Conducted in Mandarin)
- LVMH – Dior Brand Momentum & Inflection Point Following Designer Change
- Kering – How Does Saint Laurent Defend Brand Equity Amid Tariff Threats & Demand Softness?
- Brunello Cucinelli – US Market GrowthOutlook, Pricing Strategy & Channel Strategy
- Hermès vs Louis Vuitton – China Market Update & Growth Outlook (Conducted in Mandarin)
- Brunello Cucinelli – US Market GrowthOutlook, Pricing Strategy & Channel Strategy
- Kering – Where Does Gucci Go Now?
- China's Luxury Fashion Market & Gucci
- LVMH – Dior Brand Momentum & Inflection Point Following Designer Change
- LVMH – Dior Sales Growth, Consumer Segmentation & Strategic Outlook
- Burberry – Is Burberry's Move Back to Premium Luxury the Right Call?
- Hermès – Performance Resilience Amid Sector Weakness & Product Diversification
- LVMH – Dior Brand Momentum & Inflection Point Following Designer Change
- Hermès vs Louis Vuitton – China Market Update & Growth Outlook