Why Would a Luxury Brand Want to Sell Less?
Imagine you own a business.
Customers love your product.
So what should you do?
The obvious answer is:
Make more.
Open more stores.
Sell to more people.
Make more money.
That is how most businesses grow.
But luxury has a strange problem.
If too many people can buy your product, part of the reason people wanted it may disappear.
So one of the hardest questions in luxury is surprisingly simple:
How do you grow by selling more without making your product feel common?
Sometimes the answer may even be:
Sell less.
Most Companies Want More Customers
Imagine a company selling bottled water.
If it can sell:
1 million bottles instead of 500,000,
that is usually good.
More factories.
More stores.
More customers.
More revenue.
Scale is powerful.
Amazon wants more orders.
McDonald's wants more customers.
Toyota wants to sell more cars.
But luxury works differently.
A luxury company is not selling only:
a bag,
a watch,
or:
a car.
It is also selling a feeling.
The feeling that:
not everyone can have this.
And that changes the economics.
LVMH Became Enormous
Consider LVMH.
The group owns more than 75 brands, including Louis Vuitton, Dior, Fendi, Bulgari, Tiffany & Co., Moët & Chandon and Hennessy.
In 2019, LVMH generated around:
€54 billion
in annual revenue.
By 2023:
€86 billion.
That is extraordinary growth.
Its recurring operating margin also climbed to around:
26.5%.
And in 2023, LVMH became the first European company to cross:
$500 billion
in market value.
Luxury had become enormous.
Then things changed.
By October 2026, LVMH was worth less than half its former peak value.
According to Reuters Breakingviews, more than:
$167 billion
of market value had disappeared in 2026 alone.
What happened?
Part of the answer was China.
Part was the economy.
Part was changing consumer tastes.
But underneath all of that sits a fascinating problem.
LVMH had become incredibly good at making luxury:
bigger.
Now it had to make sure bigger did not become:
ordinary.
Luxury Sells Something You Cannot See
Take a handbag.
At the simplest level, it carries things.
A $100 bag can do that.
A $1,000 bag can do that.
A $10,000 bag can also do that.
So why would anyone pay $10,000?
Because the customer is not buying only:
leather + stitching + zipper.
The customer may also be buying:
design
craftsmanship
history
brand
status
scarcity
belonging
the feeling of owning something special.
Those invisible things can be worth far more than the physical materials.
And that creates a strange business model.
Imagine Everyone Suddenly Owns One
Imagine a school has 1,000 students.
Only:
5 students
own a certain pair of shoes.
Everyone notices them.
Now imagine:
800 students
own exactly the same shoes.
The shoes may still be excellent.
Nothing about the leather changed.
Nothing about the design changed.
But something else changed.
They are no longer unusual.
Luxury companies face the same problem.
A product can become more successful financially while becoming less special culturally.
That is the paradox.
More Sales Can Create Less Desire
For a normal company:
More availability → More sales
is usually good.
For luxury, the chain can become more complicated:
More availability
↓
More sales
↓
More people own it
↓
Less scarcity
↓
Less exclusivity
↓
Potentially less desire
That does not happen automatically.
Some brands become more popular and more desirable at the same time.
But there is a limit.
Luxury companies have to discover where that limit is.
Because there is one thing a factory cannot automatically produce:
desire.
This Is Why Hermès Is Interesting
Hermès provides a useful contrast.
In 2025, Hermès generated around:
€16.0 billion
in revenue.
That is much smaller than LVMH.
But its recurring operating profit was approximately:
€6.57 billion.
That means its recurring operating margin was around:
41%.
In the first half of 2026, it remained around:
41%.
Think about that.
For every €100 of revenue, roughly €41 remained as recurring operating profit before items further down the income statement.
That is an extraordinary level of profitability.
Hermès does grow.
Its leather goods production capacity is expanding.
The company opened its 24th leather goods workshop in France in 2025 and has additional workshops planned.
But it expands production carefully.
Why?
Because producing more is only useful if demand remains stronger than supply.
The Empty Shelf Can Be Valuable
This sounds strange.
Normally an empty shelf is bad.
If a supermarket runs out of milk, it loses sales.
But in luxury, limited availability can sometimes strengthen desire.
Imagine two stores.
Store A
The product is always available.
Any customer can walk in and buy it.
Store B
The product is difficult to obtain.
Customers wait.
Supply is limited.
People talk about finally getting one.
Which one feels more exclusive?
Usually:
Store B.
This does not mean every shortage is good.
A customer who can never buy anything may simply leave.
But controlled scarcity can create something valuable:
desire.
Ferrari Says This Almost Directly
Cars make the idea even easier to see.
In 2025, Ferrari shipped:
13,640 cars.
That was actually:
112 fewer cars
than the year before.
Yet Ferrari entered 2026 expecting adjusted EBITDA — a measure of operating profitability before several accounting costs — to rise from approximately:
€2.77 billion
to more than:
€2.93 billion.
Its order book extended toward the end of:
2027.
Ferrari described demand as strong while emphasizing disciplined management of demand across markets.
This is not an accident.
Ferrari has explicitly described limited production as central to maintaining the exclusivity of its brand.
The company has also warned investors that increasing production too much could damage:
desirability
and:
pricing power.
Think about how unusual that is.
Most companies worry:
What if we cannot sell enough products?
A luxury company may also have to worry:
What if we sell too many?
Why Not Just Double Ferrari Production?
Imagine Ferrari discovered tomorrow that it could sell:
30,000 cars
instead of roughly 14,000.
Why not build them?
Revenue could rise.
More customers could own Ferraris.
Dealers could sell more cars.
But there is another question.
Would a Ferrari feel the same if you saw one everywhere?
Maybe.
Maybe not.
That uncertainty is worth billions.
Ferrari is not merely managing automobile production.
It is managing:
how common Ferrari is allowed to become.
Luxury Companies Manufacture Two Things
This is the easiest way to understand the entire business.
A normal factory manufactures:
products.
A luxury company manufactures:
products
and:
desire.
The first factory is easy to see.
Machines.
Workers.
Leather.
Metal.
Stores.
The second factory is invisible.
Fashion shows.
Celebrities.
History.
Architecture.
Advertising.
Waiting lists.
Limited editions.
Craftsmanship.
Culture.
Price.
Scarcity.
All of these help manufacture:
desire.
And the second factory can be more valuable than the first.
But there is an important difference.
A company can build another factory and make more handbags.
It cannot simply build another factory and produce:
twice as much desire.
Price Can Also Create Scarcity
There is another way to limit access.
You do not necessarily need to produce fewer products.
You can raise the price.
Luxury prices increased dramatically after the pandemic.
According to an HSBC estimate cited by Reuters Breakingviews, luxury goods prices rose an average:
54%
between the end of 2019 and September 2024.
For years, wealthy consumers continued buying.
That was powerful.
Instead of selling dramatically more products, a company could earn more from each product.
But price has a limit too.
Eventually customers can ask:
Is this still worth it?
That question has become more important.
Chinese luxury demand weakened sharply in 2024 and remained under pressure in 2025, according to market estimates cited by Reuters.
And consumers did not stop spending on every type of luxury equally.
Jewellery performed better than some leather goods.
Beauty attracted spending.
Some brands performed better than others.
That tells us something important.
A logo does not automatically justify any price forever.
Price and Value Are Not the Same Thing
Imagine a bag costs:
$5,000.
The company raises the price to:
$6,000.
If customers still want it just as much, that is wonderful economics.
The company earns more without needing to manufacture another bag.
Now imagine it raises the price to:
$8,000.
Customers begin asking:
Why?
If the product does not feel more special, better made or more desirable, the price increase can start working against the brand.
Luxury pricing therefore depends on something difficult to measure:
perceived value.
The customer must continue believing:
This is worth being expensive.
LVMH's Problem Is Bigger Than Selling Bags
LVMH still generated:
€38.6 billion
of revenue in the first half of 2026.
Its recurring operating profit was:
€8.7 billion.
This is not a small or broken company.
But one division matters enormously.
Fashion & Leather Goods generated around:
three-quarters of LVMH's recurring operating profit in 2025,
according to Reuters Breakingviews.
UBS estimates cited by Reuters suggest Louis Vuitton alone contributes more than half of that division's profit.
These are estimates, but they reveal an important point.
LVMH may own more than 75 brands.
Economically, some brands matter much more than others.
That means keeping Louis Vuitton desirable is not merely a fashion problem.
It is a financial problem.
How Do You Grow Something That Must Remain Rare?
Now we reach the real question.
Suppose your business depends partly on scarcity.
But investors still expect growth.
What can you do?
You can:
raise prices.
Create new categories.
Enter new countries.
Sell perfume and beauty products to a broader audience while keeping flagship products scarce.
Offer ultra-expensive products to your wealthiest customers.
Create limited editions.
Improve personalization.
Make existing customers spend more.
Luxury growth is therefore not simply:
How do we manufacture more?
It is:
How do we make more money without destroying the reason people pay us so much money?
That is much harder.
Ferrari Can Sell More Without Selling Many More Cars
Ferrari provides another clue.
Suppose Ferrari sells roughly the same number of cars.
It can still grow revenue by selling:
more expensive models,
limited editions,
personalization,
options,
brand products,
and other high-value services.
This is very different from a mass-market carmaker.
Toyota may ask:
How many cars can we sell?
Ferrari can ask:
How much value can we create from each car and each customer without making Ferrari common?
That is a fundamentally different growth equation.
Hermès Can Build More — Slowly
Hermès shows another approach.
It is increasing production capacity.
But it takes time.
New workshops are opened gradually.
Craftspeople need training.
Production cannot simply be multiplied overnight.
That limitation may look inefficient from the perspective of mass manufacturing.
But for luxury, slow production can also protect:
quality
and:
scarcity.
The constraint becomes part of the business model.
Luxury Has an Invisible Supply Curve
This is where luxury becomes interesting for investors.
For ordinary products, companies often try to move supply as high as possible.
If customers want:
10 million phones,
a company wants to manufacture 10 million phones.
Luxury companies face another curve.
They need enough products to grow.
But not so many that the product becomes ordinary.
We can imagine three points:
Too little supply
→ lost sales.
Controlled supply
→ strong demand + high prices + exclusivity.
Too much supply
→ weaker scarcity + discounting risk + weaker brand perception.
The most profitable point may therefore exist:
before maximum volume.
Selling Less Can Sometimes Make More Money
Imagine two companies.
Company A
Sells:
100 products × $1,000
Revenue:
$100,000
Company B
Sells:
70 products × $2,000
Revenue:
$140,000
Company B sold:
30% fewer products.
But generated:
40% more revenue.
This is only a simple illustration, not the economics of any specific luxury company.
But it shows the idea.
Volume is not the only path to growth.
Sometimes the better business is:
fewer units × more value per unit.
But Scarcity Cannot Be Fake Forever
There is also a danger.
A company cannot simply announce:
We are exclusive.
Customers have to believe it.
Artificial shortages can frustrate buyers.
Huge price increases can make products feel overpriced.
Constant limited editions can make “limited” meaningless.
If every product is special:
nothing is special.
Luxury therefore depends on a difficult balance.
Scarcity must feel:
credible.
Quality must justify price.
The brand must remain culturally relevant.
Customers must still want the product before they are told they cannot have it.
Because:
scarcity without desire is not luxury.
It is simply:
unsold supply.
This Is Why Growth Can Be Dangerous
For most companies, growth solves problems.
For luxury companies, growth can create one.
Every additional store.
Every additional product.
Every additional customer.
Every additional logo seen on the street.
can generate revenue.
But each can also make the brand:
slightly less rare.
That does not mean luxury companies should stop growing.
LVMH, Hermès and Ferrari all grow.
The important question is:
what kind of growth?
Desire Does Not Scale Like Production
This may be the most important difference between luxury and ordinary manufacturing.
A company can double:
factory capacity.
It can double:
store count.
It can double:
advertising spending.
It may even double:
production.
But that does not mean it can double:
desire.
Desire does not move automatically with supply.
Sometimes producing more creates more demand.
Sometimes producing more destroys part of the reason the demand existed.
That is what makes luxury unusual.
The scarce resource may not be leather.
It may not be factory capacity.
It may not even be customers.
The scarce resource may be:
the customer's desire to believe the product is special.
The Real Product Is Desire
A Ferrari is a car.
A Birkin is a bag.
A Louis Vuitton trunk is luggage.
But economically, those descriptions are incomplete.
The physical object is only one part of the product.
The other part exists inside the customer's mind.
I want it.
Other people want it.
Not everyone can have it.
That is why luxury economics can look upside down.
A normal business worries when customers cannot find enough products.
A luxury business can sometimes become more desirable because customers cannot find enough products.
A normal company tries to eliminate scarcity.
A luxury company may need to preserve some of it.
And a normal company asks:
How much can we sell?
A great luxury company has to ask something much harder:
How much can we sell before selling more makes us worth less?
That is why a luxury brand might sometimes want to sell less.
Because luxury is not simply the business of selling expensive things.
It is the business of protecting desire.
And desire cannot be mass-produced.
BEYOND THE OBVIOUS.
Sources
Reuters Breakingviews — LVMH’s $167 bln unravelling faces tricky restitch
LVMH — Accelerating growth in the second quarter — Solid first-half results
LVMH — Solid performance in a disrupted global economic and geopolitical environment
Hermès — 2025 Full-Year Results
Reuters — Ferrari’s new sports cars, electric debut lift 2026 forecast