The fashion industry, in crisis, is undergoing a transformation

“Ah, so you see that fashion is making a comeback in Italy too?”, readers write on WhatsApp and social media in the comments under posts featuring the first photos of the new Prada Gallery, set to open in two days’ time – some twenty metres of underground passageways running through the Galleria Vittorio Emanuele, hosting temporary exhibitions – and shots of the new Dior boutique on Via Montenapoleone, which to call it simply a ‘boutique’ is an understatement when you consider the restaurant run by Enrico Bartolini, illuminated by a huge canvas by Francesco Clemente, and the many works of contemporary art dotted along the route – a deliberate marketing choice in line with that strategic school of thought which for years has been termed ‘experience’, and in which purchasing is indeed the ultimate goal, but not the only one.

Unfortunately – or perhaps fortunately, given that the system had been in need of a real shake-up for years, and we’ve been writing for years that it could not have expanded beyond these conditions – the fashion industry is not recovering at all. It is, however, changing its face, and is doing so in the only way it can, having neither the will nor the means to backtrack on its pricing strategy: it is shifting its objectives, its offering and its focus. Plates and glasses alongside handbags, embroidered tablecloths next to clothes – which, incidentally, are showcased on the catwalk but produced in ever-smaller quantities – chessboards alongside watches, and then creams, perfumes, lipsticks, suitcases and books, exhibitions and permanent displays to reassure the public – certainly foreign visitors, but not only so, as the domestic market is regaining its central role everywhere: too many destinations have become dangerous due to wars; low-cost flights are increasingly a gamble; after all, there’s always the grandparents’ seaside cottage where life is lovely. Consumers are returning to buying locally, and AI is being used to verify purchases. Deloitte reports that consumers trust AI or GenAI roughly twice as much as they do social media and influencers – a fact that the most astute fashion houses have long been aware of, as demonstrated, quite simply and with a few curious exceptions such as Chanel, by the front rows at fashion shows, where influencers are now reduced to a minimum. Domestic luxury consumption is therefore on the rise in the major international markets, starting with the United States, although this does not necessarily relate to sales of clothing and accessories. All this display of old-school Milanese power and sophistication in the Galleria Vittorio Emanuele – because, in fact, the reading room opened by Prada on the first floor of the boutique itself could well have been intended to sell a few items, yet to use it one simply needs to register on the website – is in fact aimed squarely at that sort of audience that defines itself as ‘international’, just like the menus featuring Caesar salad and fettuccine Alfredo with butter and truffle – which have become as indispensable to Italy as they are to the Milanese themselves, a group long neglected, as evidenced by certain shop windows blatantly designed to appeal to different tastes: At Prada Galleria, it is reported that a certain pair of shoes, which sold out in a matter of weeks, was snapped up exclusively by Milanese women, who evidently still buy schoolgirl-style designs today just as they did fifty years ago, when Miuccia Prada’s mother, wearing a black apron, stood at the boutique’s till and everyone wanted – indeed, we all wanted – a certain model of brushed black leather handbag. The vast majority of customers for national or international ‘Made in Italy’ luxury goods remain foreign at present, but a slight reversal in the trend is noticeable. The crisis in the Middle East, the severing of ties with Russia and Putin’s allied republics, and the instability of relations with North-West Africa over the issue of illegal immigration have rendered too many destinations inaccessible or potentially dangerous (in a month’s time, a major party is to be held in Tangier, and the guests are thinking with apprehension about its proximity to Ceuta, and are therefore considering declining the invitation). Even at the broader level, the sector of domestic sales to overseas markets is facing difficulties, and an equally – and increasingly – restricted playing field. The Chinese market, which is becoming less and less responsive – partly because it is focused on its own growth in the luxury sector – is shrinking month by month; Dubai is struggling to recover from a shock that was primarily psychological (no one is invulnerable), despite the fact that many foreign investors – including those in the premium mass market such as the OVS Group with its beauty division, which is growing to a turnover of 150 million – have just opened a retail outlet there. ICE, Confindustria and the government are seeking new outlets and opportunities. At times, this leads to reflections or assessments that history has repeatedly disproved. For example, those who still pin their hopes (for the third time in twenty years) on India’s growth, or know nothing of the history of civilisations and the motivations underlying the rise of the fashion system (in a nutshell, a fluid society, not rigidly divided into castes), or are simply pretending to do so to reassure their clientele and boards of directors, who no longer know which way to turn and are therefore turning to Trump, banking on US interest rates remaining stable. For several months now, the Meloni government has been finalising agreements with Mercosur, and even the president of Confindustria Moda, Luca Sburlati, tells us that ‘in the medium term’ – that is, in at least five years’ time, which is an extremely long period for the fashion industry – the region could grow; we, who have been analysing the sector for over thirty years, have already seen it develop and collapse miserably once, around 2006, in Brazil, during Lula’s first term as president, before running aground shortly afterwards in Argentina and disappearing for twenty years. We are not sure that this might not happen again in the coming years, due to the profound asymmetries between the countries making up the bloc, and an underlying populist policy which, in times of difficulty, leads to the demonisation of discretionary spending and the imposition of restrictive fiscal measures; this, despite the historic trade agreement reached with the EU last spring. It appears that Palazzo Chigi intends to establish even closer ties with some of these countries, working both on credit protection and trade flows with SACE and on the training of buyers and commercial operators, but at present there is no precise information regarding the timing and implementation of this programme. The latest figures show a 5 per cent decline in Italian industrial production in the textiles and clothing sector, against a backdrop of a trade balance that remains stable thanks to a balanced import-export relationship; however, as Sburlati warns, “the real industries are suffering considerably, albeit with a few positive exceptions”.

Camera Moda forecasts a year-end decline of 1.6 per cent to 91.6 billion, around 10 billion less than just three years ago, and is pushing hard for a revival of trade relations with Asia, but it is now clear that every brand has its own target markets and that the 60 million customers lost by the luxury sector over the last five years, according to Bain, (some other research firms believe the figure to be lower, but the trend is not positive), will not be easily regained or replaced. It is no coincidence that some high-profile creative directors, such as Kim Jones or, more recently, Sabato De Sarno, have chosen to work with Chinese brands amongst the many consultancy opportunities available: they offer security, have five-year plans reminiscent of the Mao Zedong era, and managers who do not succumb to nervous breakdowns and disappear for six months or take a hard line against those who disagree with them (Steven Kolb, president of the CFDA – the equivalent of the National Chamber of Fashion – has just resigned after roughing up a PETA activist at the Cos fashion show). Gucci’s former creative director has signed with Icicle, a Chinese brand partly owned by Kering – which must surely feel a little indebted to him – and will be working from Paris with trusted European manufacturers. Speaking of which. Something has been irrevocably broken in the chain of trust that once bound brands to the fashion industry’s key customers – the so-called ‘aspirational’ consumers, that is, those who view brands as symbols and seals of their own worth and success – and the numerous geopolitical crises that began whilst we were still in the throes of the Covid emergency, whilst obviously significant, are not the primary cause of this rupture. These causes are to be found, first and foremost, in the disappearance of the grey market in Asia, which had inflated turnover, triggering a sense of omnipotence in CEOs and managers who had soon convinced themselves they could multiply their annual bonuses indefinitely, perhaps even groping the face of the international campaign en passant and in public, only to find themselves, all of a sudden, with warehouses full of overpriced goods that nobody wanted any more, not even at a discount, because the continuous and unjustified rise in the prices of accessories and garments that had been affordable until the previous decade had alienated the middle class of the Western public (does Saint Laurent really believe that the slump in sales is down to its creative director Anthony Vaccarello—one of the best of the last decade—and not to prices that are completely divorced from any principle of reasonableness?). This situation, already dire in its own right, has been further exacerbated by the gradual decline in product quality. Not all of them, of course; one need only touch one of Dior’s full-grain nappa leather handbags or a knitted jumper by Cucinelli or Scervino to realise how well they are made, but the use of polyester – for which Stefano Gabbana accused Elisabetta Franchi in one of those nefarious posts of his that, time and again, create further problems for a company already in such a deep crisis as hers – is a feature common to many brands, even in the luxury sector, where for far too many years it was thought that the brand’s value would make up for any other shortcomings.

It is therefore this combination of negative factors – confirmed by research or even simply by observing people’s behaviour, which is now more or less identical in its reactions across the globe – that has led to the decision to restyle the boutiques mentioned at the start, in Milan, where Fashion Week is about to begin, just as it is everywhere else in the world. For some, the financial commitment involved in these operations is colossal; for others, less so; but no one can escape it any longer – not even luxury e-commerce conglomerates such as Mytheresa, which, in order to safeguard a spending model that was on an unstoppable rise until 2023 but is now becoming increasingly unattractive, now has a division dedicated to entertaining high-spending customers, let’s say from half a million euros a year upwards, by treating them to trips, balls, visits and exclusive meetings with the designer of the moment – in other words, the sort of ‘experience that money can’t buy’, as CEO Michael Kliger always says. These are, in fact, the conclusions reached by the latest edition of the annual study carried out by Banca Ifis for Il Foglio, on which we published an initial in-depth analysis in late spring, and which the head of the research department, Carmelo Carbotti, sums up with a striking slogan: “From ownership to experience, from fashion to wellbeing”. The Western world has “redefined the concept of individual wellbeing”, creating a new context where “fashion has not been abandoned, but has lost its centrality in favour of categories perceived as more directly linked to quality of life” – namely health (we are an ageing world), travel and the home: there has been a return to entertaining at home after two decades of dining out; fashion itself has moved away from lavish gatherings in favour of what were once called “exclusive dinners” and are now described as “intimate” gatherings. Abroad, Banca Ifis reports, “the proportion linked to changing priorities reaches as high as 52 per cent (39 per cent due to changing habits and 13 per cent due to different spending priorities), clearly surpassing economic reasons (37 per cent). This figure includes Dior’s coloured, cut-glass glasses, Prada’s embroidered tablecloths, the many new Rimowa suitcases, and even the ultimate reason behind the numerous new mergers and acquisitions reported by Deloitte in the 2026 edition of its “Global Fashion & Luxury Private Equity and Investors Survey”, conducted globally amongst a sample of around fifty representatives from private equity funds and 119 companies representing approximately $941 billion in turnover in 2025 across the clothing and accessories, watches and jewellery, cosmetics and fragrances, luxury cars, hotels, private aviation, cruises, furniture, yachting and restaurants sectors. Last year, the fashion and luxury sector recorded 345 M&A transactions, an increase of 3.6 per cent compared with the 333 recorded in 2024. This growth was driven in particular by personal luxury goods, which accounted for 145 transactions (+8.2 per cent), representing 42 per cent of the total, though with an average value down by 16.5 per cent to 339 million; These two figures suggest two noteworthy conclusions, fully in line with what we have been stating from the outset: namely, that competition requires capital and scale, and that many, in order to achieve this, are accepting lower valuations for corporate takeovers compared to two years ago. In a contracting market, where the fashion sector is losing ground, no conglomerate intends – or can afford – to see its scope shrink excessively: the growing squeeze on margins, “which remains the sector’s real structural problem”, as Deloitte puts it. By 2025, the average EBITDA margin had fallen to 15.5 per cent, with the personal luxury goods sector having completely lost its post-Covid gains.