Luxury has its limits, and the global economic downturn delineated them clearly.

Even as luxury goods executives grow more optimistic that the worst is over, the recession will leave behind a sector with fewer players and a new set of rules and dynamics. “Value” and “meaningful consumption” are among the new buzzwords, and “accessible luxury” is possibly on the endangered species list.

“We live in a world of competition. Maybe there was too much,” mused Karl Lagerfeld, among major industry figures WWD surveyed to divine how the luxury landscape might look once the dust from the downturn has cleared.

The designer of Chanel, Fendi, and Karl Lagerfeld collections also said an “obsession” with extreme fashion statements is also likely to ebb and “commercial,” long a disdainful term used to describe a boring fashion show, will lose its sting. “Clothes are made to be worn,” Lagerfeld stressed.

While a range of opinions emerged, designers, chief executives, analysts, and other observers agreed that, in luxury’s next wave, consumer expectations are likely to be higher than ever, with craftsmanship, service, heritage, and longevity among new priorities.

“They want it all: the quality, the creativity, the exclusivity, and the service. You tend to forget that in good years because in good years it’s easier,” said Pierre-Yves Roussel, chief executive officer of the fashion division at LVMH Moët Hennessy Louis Vuitton. “Being in luxury, we have to be perfect in everything we do.”

Meanwhile, on the business front, emerging markets for luxury goods, the growth of e-commerce, and social networking and eco concerns are also likely to shape the industry in years to come.

Harsh market conditions will certainly separate the wheat from the chaff, some observers noted, even as there have been recent predictions the sector might see a rebound in the second half of 2010.

“Many brands have appeared that may not be perceived as ‘true’ luxury,” noted Gilbert Harrison, chairman of Financo Inc. “The changes occurring will bring a much sounder definition of what is luxury, and the iconic brands will survive and continue to have demand and luster that they have had in the past.”

Below, here’s what the experts had to say.

A Smaller Sector, Slower Growth

Robert Polet, president and CEO, Gucci Group: “I believe the era of ‘accessible luxury’ is over. The current crisis has been particularly difficult for these ‘affordable luxury’ brands as their customers have been most affected by it. It has also been tough on brands without a strong financial base or global profile…so I think the industry will also emerge from the crisis a bit leaner—with fewer, stronger brands offering products of superior quality and value. There is a noticeable trend away from conspicuous consumption to conscious consumption. People are returning to a consciousness of heritage, quality, craftsmanship, and long-lasting value. Luxury remains about experience: the experience of heritage, quality, authenticity, and artisanship. The other trend being witnessed in the industry is the ongoing importance of China and other emerging markets, which now represent a third of the luxury business.”

Michael Burke, CEO, Fendi: “There will be a lot fewer players. This is the first recession that luxury goods has entered with leverage. It shows that you can’t use the same financial tools. This recession has proved that trying to be too much to too many people is not the right way. If you want to go global, you have to be very focused. Your brand strategy can’t rely on too much diversification.

Since we’re not supposed to go after all customers, we have the luxury of being focused, the duty to be focused. Also, this is the first recession where the Internet is a major medium. People have as much information as professional investors. Your mistakes are much more visible: your expansion mistakes, your design mistakes.”

Gilbert Harrison, chairman, Financo Inc., New York: “When the economy rebounds, luxury purchases are not expected to return to the same level as experienced over the past 20 years. Consumers will have been trained to get comparable levels of satisfaction from secondary lines or private-label lines. Tougher credit will limit the ability of high-value purchases, [and] residual economic worries of the recession will mitigate purchasing power.… These trends have highlighted the overbranding, overstoring, and overpricing of the U.S., which is leading to a major shakeout of brands and retailers. Luxury brands can use scarcity to enhance the desirability of their products. Emerging markets are widely viewed to be helpful, but not fully dependable, in serving as an offset to the sales declines and margin erosion in developed markets.”

Matteo Marzotto, co-owner, Vionnet: “The decade between 1997 and 2008 wasn’t sustainable anymore because it was too financially driven. The multiples used for the valuation of a company were mesmerizing. Already, after 9/11 there were warning signals that excess was starting to waver, but then the whole industry became too centered on finance and it fell to the floor. Now, it will take years for the consumer to go back to the pre-crisis buying approach—and even when things pick up, we must come to terms with the fact that it won’t be like 2007 anymore. More than ever, it’s important to excel in the quality-price-craftsmanship ratio because even those consumers with money and a lighthearted and whimsical shopping approach are knowledgeable and attentive to this aspect.”