For more than a century, the luxury fashion business was made up of small family companies that produced beautiful items of the finest materials. It was a niche business for a niche clientele. But in the late 1980s, business tycoons began to buy up these companies and turn them into billion-dollar global brands producing millions of logo-covered items for the middle market. The executives labeled this rollout the “democratization” of luxury, which is now a $157-billion-a-year industry.

Image Credit... Jillian Tamaki

To help these newly titanic brands retain an air of old-world luxury, marketing executives played up the companies’ heritage and claimed that the items were still made in Europe by hand — like Geppetto hammering in his workshop by candlelight. But this sort of labor is wildly expensive, the executives routinely explain, which is why the retail prices for luxury goods keep going up and up.

In fact, many luxury-brand items today are made on assembly lines in developing nations, where labor is vastly cheaper. I saw this firsthand when I visited a leather-goods factory in China, where women 18 to 26 years old earn $120 a month sewing and gluing together luxury-brand leather handbags, knapsacks, wallets and toiletry cases. One bag I watched them put together — for a brand whose owners insist is manufactured only in Italy — cost $120 apiece to produce. That evening, I saw the same bag at a Hong Kong department store with a price tag of $1,200 — a typical markup.

How do the brands get away with this? Some hide the “Made in China” label in the bottom of an inside pocket or stamped black on black on the back side of a tiny logo flap. Some bypass the “provenance” laws requiring labels that tell where goods are produced by having 90 percent of the bag, sweater, suit or shoes made in China and then attaching the final bits — the handle, the buttons, the lifts — in Italy, thus earning a “Made in Italy” label. Or some simply replace the original label with one stating it was made in Western Europe.

Not all luxury brands do the bait and switch. The chief executive of the French luxury brand Hermès readily told me that some of its silk scarves are hemmed by hand in Mauritius, where labor costs less. And Louis Vuitton, which boasts that it churns out its $3 billion worth of leather goods each year in its company-owned factories in France, Spain and Southern California, announced in September that it plans to build a factory in India to produce shoes.