How Fashion’s Rising Stars Are Surviving the Luxury Slump

Satoshi Kuwata’s story reads like a fashion fairy tale.

In 2023, the Setchu designer won fashion’s most prestigious award, the LVMH Prize for Young Designers. It came with a year of mentorship and a €400,000 ($429,000) cash prize — but just the status alone paid dividends. Within a year, the Milan-based Kuwata, a veteran of Givenchy and Edun whose designs fuse Japanese and Saville Row sewing techniques, had inked 20 new wholesale partnerships. Turnover grew around 30 percent year-over-year in 2024 and is on track to grow again this year. He regularly fields investment offers.

But even with all that momentum at his back, Kuwata doesn’t feel at ease.

“Everything is going as I planned, but I’m not satisfied at all, because as I can see, the sell through is tough,” he said. “As the company gets bigger I need to have more strategy. I’m not a CEO, I never studied economics.”

Kuwata finds himself a juncture countless designers have faced before. After breaking out, emerging designers are faced with a new hurdle: translating creative acclaim into sustained commercial success. It’s a tricky feat to pull off, even for designers plucked as fashion’s most promising. And as a business grows, so too does risk.

Circumstances today are particularly testy. There’s upheaval in wholesale, with Matchesfashion closing; Farfetch, Neiman Marcus and Nordstrom all under new ownership and a proliferation of delayed payments, including at US mega-retailer Saks Global. Plus, the luxury sector is still contending with a global slowdown, as well as fears of a souring US economy and the potential impact of tariffs implemented by US President Donald Trump.

On one hand, compounding uncertainty demands extra caution. But playing it too safe represents just as much of an existential risk for emerging brands, who need to offer something new to survive.

“[Nothing] that’s not special needs to exist right now, there’s too much product,” said Rachel Scott, designer of breakout New York-based womenswear label Diotima, which took home the CFDA Womenswear Designer of the Year prize last year. “We don’t need more quiet luxury in the world, it exists at every price point.”

For many, sales are stagnant or falling. Those who are growing are doing it slowly and steadily, with an eye on profitability, focusing on building their reputations with a product mix that stands out in a crowded marketplace, as well as adding more accessible, consistent hits. To hedge against market headwinds, they’re shoring up direct channels — finessing their own e-commerce sites and creating clienteling strategies to more directly connect with top shoppers. They’re also taking a careful approach to wholesale, with a new focus on smaller specialty stores — where accounts can be smaller, but productive.

Designer and co-founder of New York-based label Commission Jin Kay likens building a business in this environment to driving a car: the bigger it is, the harder it is to control.

“We’re gripping the steering wheel a bit more tightly, and we’re driving a little bit more slowly, but we’re still moving,” said Dylan Cao, Commission’s other designer and co-founder.

Product and Prestige

Creating a commercially viable fashion business is a balancing act between managing supply chain and store timelines, prices and margins, growing awareness and keeping costs down.

But it all starts with product.

To have a chance at lasting success, brands must have reliable sales hits. That can mean adapting brand signatures for a more mass audience: Diotima, which first gained attention for its crochet pieces, has emphasised wovens and knits, which are similar but easier to produce, scale and sell. Brands can also bet on proven categories: Diotima launched denim and footwear last spring, both more widely approachable and wearable items Scott felt like she could bring her own craft and handwork-infused approach to. Similarly, London’s Sinéad O’Dwyer, known for her innovative pattern-making and size inclusivity, is rolling out base layers, like undergarments, at a more accessible price point (from £35 to £150) this year.

Making it to the point where a new brand can start building out and selling a differentiated mix takes time, said O’Dwyer, who just showed her last collection as part of the British Fashion Council’s New Gen mentorship scheme for emerging talent. There were logistical challenges like finding the right factories, but also strategic ones — like giving her design language time to develop, and building enough awareness to create desirability among shoppers who have plenty of better-known or less expensive brands to choose from.

“It’s a long process to get to the point where you have enough work that you believe in to be able to commercialise in a way that feels meaningful,” said O’Dwyer.

Product differentiation, however, is key, as it’s harder for emerging brands to attract shoppers on name appeal alone. Good product is ultimately more cost-efficient, said Kuwata, who has innovated with washable cashmere and foldable origami jackets: “If you’re not unique, you need to invest a lot in the image.”

Taking those creative risks can feel harder to justify in tough times, but is necessary to stand out.

Scott, for example, was nervous about how buyers would receive her latest collection, which centred on motherhood and the flattening of Black women in society, in part in reaction to the emotional heft of the aftermath of the US presidential election, and was “less happy and colourful” than usual. But the collection was critically celebrated, helping to solidify Scott’s place as one of American fashion’s boldest new voices.

And sometimes, it’s the riskier products that end up becoming bestsellers. In 2022, Commission released a Western shirt with what designers thought was too risqué of an “underboob cut out” for shoppers to style and wear regularly. But it was a hit; the brand now reissues it season after season.

Creativity and commerciality aren’t as diametrically opposed as they seem, said Kay. Designers should aim to strike a balance between listening to their gut and taking external feedback — whether from shoppers, buyers or would-be investors.

“To take everything in and digest it poses more challenges than solutions because you get so distracted,” said Cao. “The classic advice when you’re starting is to be a sponge and absorb everything. The biggest lesson we learned is not to listen to a lot of people.”

Cash Flow and the Gambit of Growth

Cash flow is the hardest thing for a young brand to wrangle — and increasingly so amid wholesale upheaval and industry-wide sales slumps. Brands are finding new pockets of growth by building more engaging websites, doing private clienteling and activations. Many are putting an emphasis on working with boutique retailers that champion independent brands. What’s certain in times of uncertainty, said Scott, is relationships matter.

“[Specialty stores] have such strong relationships with their clients, and when they’re buying the collection, they’re buying with people in mind,” said Scott. “That’s so powerful.”

Brands are also thinking deeper about exactly who they’re designing for: After losing several wholesale accounts in 2023, Paris-based Victor Weinsanto is recalibrating to focus on the customer that is actually buying his clothes — mostly, women aged 40 to 50, not his 20-something Instagram followers. It’s a disconnect many emerging designers will be familiar with.

“My customer that goes into [stores] to buy clothes doesn’t know much about the brand,” said Weinsanto. “But my real community is really young, and doesn’t have the money to buy anything from my brand.”

He’s not abandoning those young followers though, adding affordable products like T-shirts sold through pop-ups and designing in a more cost-conscious manner to help lower prices.

To keep prices down and appeal to new shoppers, many emerging designers sacrifice margins; but clawing those back is easier said than done.

“The economy is difficult. Who wants to spend a ton of money on clothing? At the same time it costs what it costs to manufacture a nice shirt,” said Cao. “It’s a constant dilemma.”

For Setchu, the increasingly high cost of manufacturing and stringent demands from retailers are stressors: “Shops are telling me ‘Satoshi, if you raise the price even one euro more, I’m not going to buy from you,‘” Kuwata said.

Where the brand once benefitted from being a less-expensive alternative to better known-brands, many of whom were raising prices, as luxury prices rationalise, he’s worried about losing that edge. Plus there’s the fact that growth requires investment: scaling up production and inventory is costly and so is hiring people, all the more risky in a tight and unpredictable environment: “My company growing means I’m spending more money,” Kuwata.

Still, he’s focused on the long game — and if luxury’s sales slowdown is any indication, fashion is craving new ideas.

“One day when I die I want someone to take over this business. I’m deep in this,” said Kuwata. “We are really building our foundation.”