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This article is part of The Luxury Slowdown Survival Guide, a collection of articles that examines the recent industry downturn and the strategies brands may employ to come out of it unscathed.
Why does luxury need the aspirational consumer?
Faced with a cost of living crisis, luxury doubled down on the high-earning customers who were relatively immune and still spending. That’s a fine strategy for some brands already positioned at the highest end of the market — Hermès and Brunello Cucinelli, for instance. But it’s a miss for others: the majority of luxury brands need a base of aspirational consumers that can graduate to more expensive tiers over time.
“The growth of the industry has always been through demographic growth — recruiting new customers every year,” says Bain partner Claudia D’Arpizio, who leads the firm’s luxury vertical.
The luxury market lost 50 million customers in 2024, according to Bain and Altagamma, as the squeezed aspirational customers — typically those earning between $40,000 and $100,000 annually, who might save up for a luxury handbag or buy lower ticket items like logo T-shirts — prioritised necessities over new items. This demographic’s luxury spending declined by 20 per cent year-on-year in 2024, according to global management consultancy McKinsey.
What’s more concerning for the sector now is that inflation is easing. And while the US, the UK and EU economies are recovering, consumer confidence remains low — coined a “vibecession” by US financial educator Kyla Scanlon, referring to the disconnect between positive economic growth and negative consumer sentiment. Overall retail sales in the US rose 1.5 per cent during the same period, indicating a shift towards more affordable alternatives.
The luxury slowdown and the aspirational customer’s decline in spending operate like a vicious cycle. The economic crisis impacts both the brand and the customers, and then the customers pull back while brands push prices up to course correct, which inhibits spending even further. According to a Vogue Business survey of almost 1,000 consumers, 77 per cent agree that luxury fashion items cost more than they did a year ago, and 37 per cent agree that they shop less for luxury than they did a year ago. Two thirds (66 per cent) of respondents say they are more likely to wait for discounts or sales to purchase luxury fashion items than they were a year ago.
D’Arpizio puts the loss of the aspirational customer down not just to price increases, but also the disproportionate effort brands have put into clienteling the ultra-high-net-worth individual. “The top of the pyramid provides resilience and stability because you can activate them in moments of turmoil,” says D’Arpizio. Now, there’s been an overcorrection — brands have been so focused on the top to maintain stability during a slowdown that they’ve forgotten the rest, ironically worsening their situation. “The aspirational customer is still important for these brands — they cannot cope without the middle class and the growth from younger customers.”
Meanwhile, a number of accessibly priced contemporary brands have been winning market share as aspirational customers trade down. “The fact that luxury brands have increased their price in a significant way has left a void that’s been filled by a lot of brands who are now positioned at a much better price point and that come with a lot of innovation, creativity and more interesting placements,” says Joëlle Grunberg, who leads McKinsey’s fashion and luxury division in North America and was previously president and CEO of Lacoste Americas. “Those who have developed an affordable luxury positioning are doing extremely well because the customer wants to have something different with a point of view that they can wear and make a statement. As everyone is repositioning and re-tiering their price points, this leaves space for other brands to come into that segment.”
Luxury risks losing out. “I worry that young customers feel the proposition is no longer interesting so they buy these products secondhand or they downgrade to brands that are considered creative and high quality but have a smarter price,” adds D’Arpizio. Vogue Business’s consumer survey found that respondents under 35 are purchasing luxury products at a higher rate than older consumers, but their increase in spending is primarily through alternative shopping methods: 52 per cent of those under 35 have shopped secondhand (compared to 40 per cent of over 35s) and 28 per cent shop through archive or sample sales (compared to 11 per cent of over 35s).
Prices aren’t expected to come down. So, aside from introducing entry-level products, how can brands win back the aspirational consumer?
The diffusion line dilemma
In previous years, it was popular to have numerous sub-brands or diffusion lines. “Most brands have either significantly simplified their brand structures or completely stopped doing these sub-brands,” says Grunberg. The problem with this strategy is that the consumer can find it hard to see the difference between sub-brands and the main line, which can damage perceptions of the latter in the eyes of the true luxury consumer.
“Customers would see others wearing similar jackets or shoes that were £500 that resembled theirs that were £5,000. The main luxury consumer wants to feel they have something that is more exclusive,” says Dafna Goor, assistant professor of marketing at London Business School. “Brands should consider having a little gap between the aspirational consumer and the absolute luxury consumer to better differentiate them.”
Burberry — which used to have three sub-brands (Prorsum, London and Brit) — is staying away from this strategy for the foreseeable. “I believe that strategy was built during a time of a lot of wholesale, which is not the way the customer shops today. We’re now in an omnichannel era and that model is less relevant,” said Burberry CEO Joshua Schulman during the brand’s strategy update in November.
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There are exceptions. Marc Jacobs’s diffusion line Heaven has widely been considered successful because of its cultural relevance among Gen Z, demonstrated via collabs and its Y2K aesthetic. Ralph Lauren has also maintained its sub-brands while outpacing the market.
Hugo Boss has split its brands into Hugo (aimed at Gen Z) and Boss (aimed at millennials) — both of which have a range of prices, so there’s less risk of pricing confusion. “Both brands follow a 24-7 lifestyle approach, offering a comprehensive range for all occasions but with their individual design codes. Hugo is positioned in the upper premium segment, as is Boss. The Boss Camel line even extends into the affordable luxury segment, for example,” a representative says.
Nevertheless, experts agree that a safer bet is to develop a high-low pricing segmentation by expanding their entry-level products (like small leather accessories, home goods or beauty).
Logo-mania’s evolution
What we consider a luxury is largely based on what’s exclusive. Most experts and executives see the aspirational customer as desiring products that have larger logos or more obvious branding (particularly on handbags and other wealth-signalling pieces). “Logos are very conspicuous, [whereas products without logos] are for people within ‘the group’, with only those who ‘know’ able read it and notice the stitches or cuts,” says Goor.
But it’s not so simple these days. While there tend to be more logos on products for aspirational customers, the quiet luxury trend has complicated things. “You also now have the secondhand market, and that stretches the brand in different ways, which is why it’s more likely that aspirational consumers will buy something intended for the core consumers,” Goor continues.
Most popular contemporary brands have used logos sparingly, instead focusing on strong brand codes. “Brands that are quite successful [in the accessible luxury segment] are quite smart about the way they bring customers in through creative marketing or creating something that’s good quality but unique and at a decent-ish price,” says Jane Hali Associates senior retail analyst Jessica Ramírez. “Those brands have become much more creative or seem to give more attention to detail on their products and connect to the customer.”
Customer experience is key
Aside from pricing and product, the third part of the equation is the customer’s experience of the brand.
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Across the luxury sector, consumers are spending more on experiences than on products. One way to play in this arena is to engage with culture (through sports or music, for instance) to broaden the customer base. “With our brand ambassadors from areas such as sport, music and art, who have a high level of relevance and credibility among young target groups, we create a lot of buzz on social media,” says a representative from Hugo Boss. “This ultimately reflects our digital-first and customer-centric approach, designed to resonate with younger consumers.”
Luxury has also found success in opening restaurants, cafes or hotels — think of the Prada Caffè in Harrods or Ralph Lauren’s famous coffee shops. “There are ways to give the aspirational customer an experience that is memorable, so the consumer-brand connection is established and eventually they might become core consumers,” says Goor.
It’s a safer bet than playing with entry-level prices. “Experiences are interesting [from a psychology and brand-equity perspective]. Of course you can post it on social media, but it’s not durable, so in a way it’s easier to manage in terms of luxury signalling,” says Goor. Though a core customer might prefer a VIP dinner, the price point at a cafè or restaurant isn’t inherently offputting because a croissant is never going to cost as much as a cashmere coat.
There’s also an opportunity to hone in on customer service. “Aspirational customers barely get emails or basic newsletters, and if they’re buying in stores sometimes the sales associate won’t even take their name and email,” says Grunberg. “Brands are now re-tiering their customers and rethinking what more personalised programmes they can give the customer that spends once or twice a year but all put together contribute significantly to the business.”
Don’t make assumptions
New UK retailer Seasons, launched by mass-market brand Next in 2024 and positioned at the premium end of the market, is hoping to scoop up some of luxury’s lost customers thanks to its tight curation of brands and products, and core customer service principles (including buy-now, pay-later, next-day delivery and same-day refunds infrastructure borrowed from Next). “The perception of value is really important to aspirational customers. They won’t continue to spend if they don’t see the value in products. You’ve got to excite customers, they need to enjoy coming to the platform so they’re prepared to invest in a product,” says Seasons director Jade Taylor. Aspirational customers crave curation, she adds, particularly if they’re used to wading through sales or secondhand marketplaces.
Among consumers who have reduced their spending in the past year, the primary reasons are because they feel luxury items are no longer of good value (41 per cent) and because they choose to spend on other things (41 per cent), per Vogue Business’s consumer survey.
It’s a misconception that the aspirational consumer is young and trend-driven, she says. In fact, many aspirational customers are educated on fashion and want a good-quality garment. “People want to buy garments they can wear for longer. The customer is much more aware of the composition of fabrics and sustainability than they were five years ago,” Taylor says.
“Today’s aspirational customer is informed, discerning and desires an experience that blends luxury with accessibility. They want to feel special and wanted, not just through technology, but through a personalised, immersive environment,” says John Durnin, business director at Bicester Village and global retail director at parent company Value Retail, which has bucked the slowdown trend and seen appetite among aspirational customers for personal shopping and VIP events. “Luxury shopping is about creating emotional connections, not just transactions.”
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