Amid a broad decline in demand for their signature high-end products, such as $3,000 handbags and $4,000 cashmere jackets, major luxury brands are turning to more affordable options to maintain relevance. Scarves, belts, wallets, and home goods priced under $500 are now being emphasized as companies attempt to attract middle-class customers who are increasingly price-sensitive.
This strategic pivot comes after a series of price hikes by iconic brands like Chanel, Prada, and Dior, which raised handbag prices by over 50% in France in 2023 compared to 2020. While these premium goods have long been associated with exclusivity and high-profit margins, the high price tags are now threatening to alienate aspirational consumers who have historically driven growth for these brands.
Recent data highlights the shift in consumer behavior: U.S. spending on luxury items fell 6% in November, signaling a weak start to the holiday shopping season for giants such as LVMH, Kering, and others in the industry.
To adjust, luxury labels are introducing products at lower price points. For example, Gucci has launched a $440 pet leash and $200 sticky note boxes adorned with the brand logo, while Louis Vuitton offers items like a $360 card holder and a $395 bracelet. Burberry is also adjusting its store layouts to emphasize cashmere scarves priced between $450 and $1,050.
In addition to shifting product offerings, companies like Kering and Cartier’s Richemont are focusing on bringing their perfume and cosmetics lines back in-house, while LVMH has expanded into cafes and entertainment to diversify their business.
Despite these efforts, demand for luxury goods remains fragile. Analysts at Citi note that luxury spending, particularly from the aspirational clientele, has been weak since the U.S. presidential election, with global luxury shoppers declining by 60 million. High inflation, a preference for spending on experiences, and ongoing macroeconomic challenges, particularly in China, have dampened demand.
Looking ahead, luxury brands face a tough road in 2025. Although some companies are betting on IPOs and expanding product lines to regain market share, profit margins are expected to suffer as they broaden their appeal to a more price-sensitive customer base.
While companies like Burberry and Prada work to maintain brand exclusivity while broadening their range, LVMH remains cautious, warning against offering too many “very affordable products” that could tarnish a brand’s elite status. For now, the luxury market is navigating the tricky balance between maintaining exclusivity and responding to shifting consumer demands.
