Quality seems to be making a comeback in the US, especially in menswear. We've entered an age where trial is cheaper than ever, and many online sellers offer nearly unconditional return guarantees.
The reason large luxury brands compete on image, and not necessarily on quality, is because they can. They've taken years to get there. Many of them are also public companies, so they're under intense pressure to expand profit margins and tighten costs. If Ralph Lauren can make a shirt for $5 and sell it for $50, and could make the same shirt for $2 and sell it for $50, they will take the latter option. Likewise, if they can make it for $5 and sell it for $100, they'll take that option. And if they can make it for $2 and sell it for $100, even better. They're creating shareholder value by doing so, and doing so at scale.
Conversely, startup clothing brands typically begin by addressing a specific niche, and addressing that niche's dissatisfaction with the status quo. A friend of mine runs an extremely successful tie company by following this strategy. You might think: why ties? Who actually wears ties these days, and does anyone actually care about their quality? Well, it turns out that, of the set of all people who do wear ties every day, some of the deepest-pocketed and most frequent purchasers of ties care a great deal about quality. Luxury brands have been pissing these people off by cutting corners on quality and coasting on brand image. So...enter my friend's startup, addressing this small but lucrative customer base. Bingo.
(Incidentally, Ralph Lauren himself started off selling neckties).