By definition, luxury brands target a demographic that is small in numbers but has deep pockets. So what do they do when revenues dip? According to this WSJ piece, recently some brands such as Burberry and Gucci have been making a play for middle-market shoppers, with smaller items priced below $2,000. Prada’s Miu Miu brand, for instance, is offering “micro” handbags for $1,000 and handbag charms for $800. These are meant to appeal to consumers who may not spend much on an individual basis, but represent tremendous financial strength in their sheer numbers. The strategy seems to be working. The article reports that Miu Miu’s sales rose 93% in the first half of 2024.
“Although they don’t buy the biggest-ticket items, middle-income shoppers purchase in big volumes as a group. More than half of all global luxury purchases by value are made by 330 million or so people who spend less than €2,000 a year on expensive handbags, clothing and jewelry, according to Boston Consulting Group—equivalent to $2,237 at current exchange rates.”
Luxury brands have lost some of these consumers due to luxury-good price increases since the pandemic. The current strategy is an attempt to win them back. But it is still a tricky game for the brands, who want to have offerings for aspirational shoppers, but also can’t afford to diminish their luxury bonafides, less they risk losing the very cachet that makes them so aspired to in the first place.