Luxury’s shifting facade: As scandals mount, is consumer trust eroding?

In the glossy yet troubled world of luxury fashion, an unsettling question is increasingly being raised: is the prestige of luxury still built on quality and ethics, or is it now a veneer sustained by branding and margin manipulation?

Recent investigations in Italy have linked several top-tier maisons, including LVMH-owned Loro Piana, Dior, and Giorgio Armani, to subcontractors operating sweatshops around Milan and Tuscany regions. Italian financial police (Guardia di Finanza) and the labour inspectorate uncovered that workers, some undocumented, were employed in unsafe conditions and paid as little as 4 euros an hour, far below the national minimum wage. These findings echo a wider unease about what “Made in Italy” or “Made in France” truly means when production is obscured by opaque subcontracting chains.

The implications go beyond labour violations. Luxury’s very value proposition - exceptional materials, timeless design, artisanal craftsmanship - is now facing scrutiny, not just from regulators, but from consumers. As the Business of Fashion recently asked, if you can't trust the highest echelon of brands, who can you trust? A new generation of critical voices, including leather expert and content creator Volkan Yilmaz, known as Tanner Leatherstein on social media, has gained traction online by physically dissecting luxury handbags to assess their true production cost and material value.

High price, little value

Yilmaz’s analysis of the Saint Laurent Loulou bag, for instance, revealed an estimated production cost of 190 dollars, less than 7 percent of its 2,900 dollars retail price. Another examination, of Salvatore Ferragamo’s Soft Hug bag, estimated a 355 euro production cost for a 2,400 euro price tag, a much fairer and qualitative value. While high mark-ups are standard in luxury retail to account for marketing, R&D, and distribution, such ratios challenge the notion that price correlates directly with quality or sustainability.

Moreover, the recent reports from Italy’s Ministry of Labour confirm that proximity to European manufacturing hubs does not guarantee ethical oversight. In the instances where authorities discovered subcontractors operating illegal sweatshops, Loro Piana and Dior parent LVMH as well as Armani have all stated they are cooperating fully with investigations and are committed to ensuring ethical practices within their supply chains.

An uncomfortable truth

Yet such scandals reinforce an uncomfortable truth: the layers of subcontracting in global production make accountability difficult. Under EU regulations, a product can bear the “Made in Italy” label if its final, substantial transformation, sometimes as minor as affixing a strap or a shoelace, occurs in Italy, even if most of the assembly is conducted elsewhere.

This disconnect between perception and reality is prompting disillusionment. As luxury conglomerates continue to post record profits, LVMH’s fashion and leather goods division brought in over 42 billion euros in 2023. many consumers are beginning to question whether they are paying for excellence or for the illusion of it.

Illusion of excellence

Fashion houses insist their price points reflect more than mere materials: heritage, design innovation, store experience, and brand equity all play a role. But in an age where transparency and sustainability are rapidly gaining currency, opacity in production and disproportionate margins may become liabilities rather than strengths.

For decades, the narrative of luxury rested on artisanal legacy and exclusivity. But as supply chains are exposed and digital platforms democratise critique, brands may find themselves at a crossroads: return to foundational principles, or risk eroding the very trust that sustained them.