Strategic Planning Under Persistent Inflation Uncertainty
A new It's A Working Title white paper argues that a scenario-based approach to strategy is essential for the luxury industry in a turbulent market environment
In our latest white paper, the IWT Markets team at It’s A Working Title argues that the luxury industry faces a set of challenges that are unique among retail sectors in managing inflation volatility.
The level of inflation matters less for luxury planning than its volatility. Economies and firms can adapt to inflation that is high or low, provided it is stable, because stable conditions can be priced into plans. What they struggle to absorb is inflation that moves.
The past eighteen months have given luxury a concentrated version of this problem: gold rose by more than half over 2025 and peaked above five thousand four hundred dollars an ounce in January 2026, US tariffs reset landed costs mid-cycle, and wages, logistics and financing costs shifted at different speeds across markets. No single pressure would have overwhelmed the industry. Their combination—and the speed at which each can change—has made planning assumptions expire faster than the plans built on them.
Luxury is uniquely exposed to this dynamic. In luxury, price is not simply a commercial variable; it is part of the product, communicating scarcity, craft, and position, and it moves in practice in only one direction. A consumer goods company facing volatile costs can raise prices, lower them and discount as conditions change. A luxury house cannot do this without eroding the desirability that justifies the price, so an increase, once taken, is difficult to reverse. Nor do the inputs offer relief: gold cannot be substituted, artisan labour cannot be scaled on demand, and heritage production cannot be relocated to follow a tariff. The industry is absorbing volatile costs through one of the least flexible pricing models in the consumer economy.
This paper, entitled Strategic Planning Under Persistent Inflation Uncertainty: A Scenario-Based Approach for the Global Luxury Industry, argues that scenario planning, rather than point forecasting, is the way to set strategy in this volatile environment. The objective is not to predict where inflation settles, but to understand the operational implications of several plausible paths before any of them arrives. This paper examines three: persistent cost pressure, a stagflationary combination of soft demand and sticky costs, and a rapid disinflation in which elevated price structures may need to be unwound. Each carries different implications for pricing governance, sourcing, allocation, and client strategy, and each can be distinguished in advance through specific signals, from precious-material prices and US tariffs to Swiss export data, Chinese confidence and the secondary market.
The broader message for enterprise luxury businesses is preparedness rather than prediction. Houses that have rehearsed alternative conditions respond faster and with more conviction when conditions change, and in a category where a mistimed pricing decision costs both margin and desirability, reaction time has become a genuine source of advantage.
