thecleanTusk

Product quality issues have recently become the talk of the town within the luxury goods community. Both customers and influencers have been openly vocal in expressing their concerns over quality versus the price of the luxury goods that they purchased. Louis Vuitton, Chanel and Prada are just some of the brands that have come under fire over products that have failed to meet quality expectations, a surprise to onlookers as high quality standards are known to be a bare minimum offering in the luxury goods industry. But what does this have to do with their supply processes? In this article we unpack how frictions in the luxury supply chain negatively impact brand perceptions and diminish their brand equity.

Misalignment #1: Downgraded material processing
Missed and popped stitches, leaking edge paints and changes in canvas and leather quality are just a few of the quality issues faced by customers of luxury giants Louis Vuitton and Chanel. An uptick in complaints was seen after Louis Vuitton launched its US production facility, resulting in many consumers comparing styles produced in the US to those produced in Europe.

In March 2024 Chanel had to respond to quality issues at an executive level. The brand’s president of fashion Bruno Pavlovsky recently had to explain why its classic flap bag was worthy of the 75% price increase it has seen over the past six years despite facing multiple quality concerns. Majority of the 1798 commenters on Diet Prada’s post on the news however, were not convinced by his statement. Some stated that the production process detailed by him is a common standard across the industry and lacks any speciality to justify the new $10k price.

Misalignment #2: Vertical Integration vs Outsourcing
Vertical integration of factories with design houses and retail distribution has become a popular expansion decision among the executives at multiple luxury fashion houses. Hermes and Louis Vuitton going as far as buying exotic skin farms and tanneries to control cost centers, quality and improve margins. This information contradicts the rationale behind the 3% to 15% increases that are casually seen year after year as vertical integration is a business decision made to improve efficiencies across multiple variables including volume and cost per unit supplied, and ultimately pass on their benefits to customers.

On the other hand, there are luxury giants who continue to outsource a large part of their supply as they seasonally innovate and benefit from leaving prototyping, testing and masterful craftsmanship to manufacturers who have been long-standing experts in the field. One such example is the Paula’s Ibiza collection by Loewe , a brand storytelling and production partnership which highlights the carefree lifestyle of the Balearic Islands. Many of the items produced in the collection are made by local craftsmen using a variety of natural materials. This collection has become increasingly popular among consumers who value transparency and ethical production practices in their luxury purchases.

Misalignment #3: Pressure of expansion
Most well-known luxury brands are globally distributed. LVMH and Kering have 6097 and 1771 retail stores, respectively, indicating that their products have to be mass produced to answer to changes in demand. In the recent past, the majority of the leading luxury brands experienced an increase in demand as the luxury market grew from $260 billion in 2020 to $354 billion in 2023, and is expected to reach $418 billion by 2028. It is likely that most large scale brands ramped up production and distribution efforts heavily to satisfy this demand and will continue to do so in the foreseeable future.

The by-product of mass scaling however, is that less attention to detail is given to products now than those that were produced a decade ago, leading to a heavy increase in quality complaints, returns and ultimately a change in consumer perception. The dissatisfaction caused by increases in availability but decrease in quality is seen across YouTube’s luxury content community where many creators have posted videos about selling their luxury goods as they no longer wish to be associated with brands that they feel promote mass consumerism. A high volume of products in supply also seems to lead to consumers feeling bombarded by multiple marketing messages which is negatively affecting brand value across the industry.

A 2011 Think with Google article revealed that customers refer to up to 10.4 resources before making a purchase decision. Showing that consumers seek in-depth and sufficient product knowledge to motivate purchases. This is also true for the luxury goods market as consumers have demonstrated a significant demand for transparency and authenticity. Younger consumers are also more likely to engage more with brands that provide detailed descriptions of production processes and ESG reports.

In essence, the product in hand plays a significant role in determining whether the consumer is convinced of a brand’s value. However, information about manufacturing, ethical practices and frequency of marketing messages can also provide important clues to support or deter luxury purchases. Luxury brands should aim to find harmony and balance between product quality, quantity and sufficient product information as not doing so may ultimately impact consumers’ perceptions about the brand.