Luxury’s problem? The price isn’t right
High-end brands have ignored the aspirational shopper. No wonder they’re in trouble
Do you remember your first designer purchase? Mine was in Fenwick, the department store formerly on Bond Street and even then a somewhat fusty retail experience. I bought a grown-up work bag from Sportmax, in dark-brown suede, with big silver details and a secret pocket to put my keys. It cost £250, which for my salary, then in the teens of thousands, was far more than I could afford.
I think about this purchase when I read of the luxury industry’s current woes. Results this week have seen Gucci sales plunging another 25 per cent at Kering, with the parent group suffering a loss of 15 per cent in sales. The picture is not much brighter at LVMH, the group which owns 75 brands including Celine, Louis Vuitton and Dior. LVMH, which has seen its share price slump 19 per cent in the past year, is said to be considering offloading some of its lower performing houses, with Marc Jacobs rumoured to be readying for sale. “We will not keep brands if we believe they are not a good add-on, or we are not the right operator to operate them,” said Cécile Cabanis, LVMH’s finance chief, on an earnings call.
What makes us buy a luxury item? I’ve spent nearly two decades considering the moment that triggers an individual sale. No one needs a luxury: the purchase is instead propelled by aspiration, status, self-affirmation and desire. Then, there’s the slightly transgressive thrill of spending lots of money on something you simply want. The sweaty, credit-card-at-the-ready denial of what others might interpret as a reasonable spend. Some will never feel the impulse. Others know it well. They, like me, are probably familiar with the splurge index of things we are prepared to sacrifice — food, socialising, taxis — in order to justify a spend.
For many years there was a consensus among retailers that the gateway price to snagging a new client was around £250. Having made that psychological leap on that first purchase, so went the thinking, the customer would then return.
That was certainly my experience. The handbag cemented a relationship with luxury that has (ahem) flourished to this day. And while the entry figure of £250 has no doubt increased since the late 1990s, it has by no means kept pace with the price inflation we’ve seen across the industry. A straw poll of my colleagues’ first designer purchases reveals a fascinating inventory — Prada shoes, Chanel sunglasses, Moschino key ring, an Hermès scarf, a vintage Luella “Gisele” bag, so much Marc by Marc Jacobs — that spans several decades but still crucially falls into a price range of between £200 to £350.
Try taking £350 up Bond Street these days and see what you can buy: a pair of shoes is generally about £800. Handbags are at least £2k. Even I am shocked to find a plain white cotton vest top, from a highly covetable Italian label, priced at £870.
After the pandemic, the industry redoubled its efforts on courting the tiny percentage of high-spending clients who made up the majority of sales. And fair enough — if you can sell it. But in driving prices so far beyond anything that might be considered accessible, the aspirational shopper got left behind.
It makes me especially sad that a brand such as Marc Jacobs, once the quintessential entry-level brand for young fashionistas, is considered to have failed. A strategic restructuring by LVMH in 2015 subsumed the cheaper offering into the more expensive fashion line and in doing so it became too esoteric and high-end. Likewise, all the kids who once bought its tote bags, T-shirts and shoes found their portal into fashion closed.
Much has been written about the slowdown in the luxury industry, and how the real success stories are those brands that have cleaved to more conservative aesthetics instead of chasing febrile trends. This week, Hermès reported 9 per cent growth in its second quarter, a rare star in a beleaguered field. But although most analysts obsess about demand for its £12k Birkin handbag, the house is still buoyed by lowly folk like myself who buy its perfumes, notebooks and fashion jewellery.
And not all of luxury is suffering: in the wake of the pricing vacuum a number of smaller independent brands have emerged. Studio Nicholson, Tove, Me+Em (all founded by women, incidentally) are boasting healthy growth. The secret to their success has been the dazzling revelation that most people don’t have infinite bank accounts. Toteme, the Swedish brand co-founded by husband and wife Elin Kling and Karl Lindman in 2014, for example, is now turning revenues “just shy” of £200mn. Their strategy from the outset has been to keep its pricing aspirational.
For the past few years, the aspirational shopper was seen as a dirty word. The big houses didn’t seem to care about them — they only wanted the crème. I have since bought many other handbags, but that first Sportmax purchase remains dear. At the time it was a huge investment, but it was also an investment in my self-worth. It made me feel confident and stylish: it was something I had earned. There’s no luxury in going shopping and simply feeling poor.