Luxury Brands Are Losing Customers: Price Hikes and New Trends

Luxurious setting with gold items: handbag, shoes, watches, and jewelry. "Luxury" shopping bag visible; rich, opulent atmosphere.

Luxury brands have long been symbols of exclusivity and prestige, but recent shifts in the market have started to challenge their dominance. From rising production costs to dwindling customer interest, these changes are reshaping the industry. Let’s explore how these trends are impacting the world of luxury.

What Are Luxury Brands?

Before we look at how luxury brands have changed in recent years, we must first understand what luxury brands are. Luxury brands are companies that create and sell high-quality, exclusive, and often expensive goods or services. These brands focus on craftsmanship, prestige, and appeal to a certain lifestyle.

Why Has There Been a Decrease in Luxury Brand Shoppers?

For the past few years certain luxury brands have been noticing a recent decrease in the amount of consumers trying to buy and acquire their luxury services and products.

The main reason for this cause would be that for the past few years luxury brands have been increasing their prices significantly and this has made it harder for consumers to purchase their goods and services. Many consumers are no longer willing to spend a larger portion of their income on these products. According to an article written by the Wall Street Journal, ”Since 2022 Luxury Brands have lost 10% of their usual customers.” This shows that luxury brands have been gradually losing customers over the past year, making it harder to sell their products. This trend is expected to continue.

Christian Dior's Lady Dior Handbag Graph — Retail price vs. Estimated manufacturing cost for Dior handbag

Looking at this graph, we can see that the cost of producing these products has increased slightly. However, Dior has raised their prices to customers by a much higher percentage. As a result, many people have stopped buying from Dior, as a simple handbag now costs a fortune. This price increase has made it too expensive for customers with lower incomes, and they are no longer willing to spend so much on these products.

Are Luxury Brands Losing Customers to the Second-Hand Market?

Due to price increases, people have turned to a new market to buy these goods: the second-hand market. Here, they can purchase past products at lower prices or buy look-alikes that cost much less than the original items. Over the past few years, this market has been expanding, and it continues to grow. As it does, luxury brands face the risk of losing a large number of customers and the revenue they would typically generate from their products.

Second-hand market for bags — The second-hand market is expected to grow 127% by 2026, as more consumers seek affordable, sustainable options

Additionally, as more people turn to the second-hand market, luxury fashion brands have struggled to generate revenue. This has led to a significant loss in profit and a reduction in the number of products they produce, as fewer people are buying their items.

How Have Some Luxury Brands Been Able to Maintain Their Clientele?

Taking a look at the luxury industry we can see that not all of the brands have seen a recent decline in the amount of people trying to acquire their products. One example of a luxury industry that has been losing that much clients and is very stable would be the jewelry industry.

According to an article written by the Wall Street Journal, ”Cartier’s owner Richmond has been one of the luxury industry’s more resilient performers this year”. From this we can see how this brand has been able to provide a stable amount of revenue and clientele, and also been able to grow in the market so they are able to reach more people across the world.

John Richmond is a luxury brand offering high-quality fragrances

Looking at the outcomes of Dior and Cartier in recent years, we can see a clear difference. Dior has been losing both revenue and clients, while Cartier has managed to maintain stable revenue and even grow internationally. One key difference is that Cartier has not raised its prices by large amounts, allowing clients to continue purchasing their products. On the other hand, Dior has significantly increased its prices in recent years, pushing customers toward the second-hand market.

The Bottomline

The luxury market is undergoing significant changes as brands adjust their strategies in response to evolving consumer behavior. While aggressive price increases may boost companies short-term profits, they risk alienating a loyal customer base and driving consumers away.

As seen in the cases of Dior and Cartier, pricing strategies play a pivotal role in maintaining or losing clientele. Brands that prioritize balanced pricing and value retention, like Cartier, are better positioned to sustain revenue growth and market presence. Meanwhile, those like Dior must reconsider their approach to avoid further losses in both customers and revenue. This dynamic shift highlights the need for luxury brands to adapt effectively to preserve their long-term profitability and reputation.