In the luxury industry, price has always represented more than just cost. It signals craftsmanship, and exclusivity. Once considered untouchable by global economic forces, the luxury industry’s pricing power is facing growing pressure in 2025.
Tariffs, inflation, currency fluctuations, and changing consumer expectations are forcing luxury brands to reconsider how they price. And the pressure is mounting fast. So how can the luxury industry navigate this complexity while protecting both profitability and prestige? The answer lies in a new strategic pillar: Proactive price intelligence.
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The perfect storm shaking the foundations of luxury pricing
For decades, luxury brands operated with near immunity to economic pressures, wielding pricing power that seemed untouchable. Premium pricing was non-negotiable, supported by affluent consumers who viewed high prices as markers of exclusivity. That era is ending. Global volatility and new customer expectations are threatening luxury pricing power, forcing even iconic brands to confront uncomfortable realities.
The consumer confidence crisis
The long-held belief that high prices reflect high value is breaking down. Even high-net-worth individuals now expect more than logos. They evaluate craftsmanship, authenticity, and consistency. The rise of “dupe culture”, even among wealthy buyers, reflects growing skepticism about luxury pricing, with many questioning whether price increases represent real value or merely responses to rising costs.
This skepticism is even more acute with aspirational consumers, who were such an important target demographic historically. With volatility squeezing disposable income, discretionary spending is no longer guaranteed. Every price tag now undergoes scrutiny, transforming luxury purchasing from emotional to analytical decision-making.
The inflation and currency squeeze
Inflation and currency volatility are distorting value perception. Stabilized in some regions but unpredictable in others, resulting in a fragmented landscape where consumers perceive value differently across markets. In 2024, luxury brands achieved exceptional performance in Japan, though this success was primarily attributed to the significant depreciation of the Japanese yen against major currencies.
The weakened yen created a favorable pricing environment that attracted substantial numbers of international shoppers, particularly from other Asian markets, who capitalized on the resulting price differentials to make luxury purchases at considerably reduced costs. Yet, many other markets experienced the opposite situation, China being one of them.
Greedflation
The pressure on consumers intensifies when coupled with aggressive price increases. Chanel’s iconic Classic Flap bag has tripled in price since 2010, with post-pandemic increases pushing luxury pricing beyond traditional boundaries. These price hikes, often implemented without corresponding improvements in product value or quality, are severely testing consumer loyalty.
This phenomenon exemplifies what economists call “greedflation” — a term popularized by Isabella Weber, an economist at the University of Massachusetts Amherst. Greedflation refers to the practice of companies raising prices beyond what would be justified by increased costs (such as materials, labor, or supply chain disruptions). Instead of simply passing along legitimate cost increases to consumers, companies exploit inflationary periods or market conditions to boost their profit margins excessively.
The tariff disruption
The most immediate threat comes from escalating tariff tensions. In the U.S. market, which accounts for 21 percent of global luxury revenue, consumers may soon face duties of up to 50 percent on European luxury imports.
These pressures are triggering price hikes, but even affluent consumers have price tolerance limits. Luxury automotive prices could rise by up to $20,000 per vehicle, representing a potential $30 billion annual impact on U.S. buyers. Similarly, Hermès has announced it would fully pass along tariffs resulting in higher prices to its consumers.
Tariff-driven price increases offer no added value to consumers, making them especially difficult to justify.
The new reality
Market volatility has fundamentally altered the luxury landscape. The convergence of inflation, changing consumer expectations, and tariff pressures has created a perfect storm challenging the industry’s core assumptions. Brands must move beyond logo prestige and focus on delivering clear value while staying agile. This new reality calls for a more responsive, intelligent approach to pricing. One that balances agility with integrity. That’s where price intelligence comes in.
Price intelligence: From tactical to strategic
In this volatile landscape, price intelligence has become a business necessity.
Here’s how it’s transforming luxury pricing:
- Maintaining brand equity: In the luxury world, price is a communication tool. By benchmarking against competitors and market trends, brands can strike the right balance between aspiration and accessibility.
- Acting in real time: Price changes now happen weekly, even daily. In May alone, across 6,000 SKUs in the U.S., nearly half underwent pricing changes, with 10 percent seeing increases of more than 10 percent. These shifts are the new norm and require rapid response. An agile price intelligence system can monitor these shifts at scale — across competitors, regions, and currencies. By capturing live data, brands can spot shifts early, identify patterns, and adapt quickly to avoid losing competitiveness or overcorrecting margin loss.
- Localizing strategically: While luxury brands operate globally, pricing must be localized. Price intelligence helps identify regional sensitivities, white spaces, and optimal entry points without compromising global cohesion.
- Building trust through consistency: Consistency breeds’ trust. When clients see coherent pricing across regions and channels, it strengthens the perception of fairness and transparency. In uncertain times, trust is invaluable. It supports pricing consistency and identifies where flexibility drives loyalty without sacrificing margin.
The future of pricing power
The luxury industry stands at a crossroads. The traditional levers of exclusivity and heritage are no longer enough to justify unchecked price increases. Consumers expect more: Not just elevated goods, but elevated logic behind the price.
The future of luxury pricing lies in intelligence, not intuition. Data will define who maintains relevance, profitability, and loyalty in an increasingly complex landscape.
Brands that embrace price intelligence will protect their market share and strengthen customer trust. In an age of volatility, confidence is currency. And price intelligence is how luxury brands can earn it back.
Christophe Caïs is the founder and CEO of CXG.
