Faced with a sharp drop in demand for high-end items such as $3,000-plus handbags and $4,000 cashmere coats, luxury retailers are now emphasizing more affordable items such as scarves, belts, purses and home goods at prices that don’t exceed $500.

This movement, notes the Reutersis intended to attract middle-class customers, although this strategy may cut into the companies’ large profit margins.

After two years of sharp price increases – Chanel, Prada and Dior all increased handbag prices by more than 50% in France in 2023 compared to 2020 – luxury brands face the risk of alienating the middle class.

In the US, spending on luxury goods fell 6% in November, the month when Americans traditionally start spending ahead of the holidays, according to data from Citi.

Gifts under $500

Gucci has released a seasonal package that includes a pet leash and a box of sticky notes bearing the company’s logo for $200.

Louis Vuitton, owned by LVMH, offers a card case and bracelet for $395.

Burberry plans to change the layout of its stores to emphasize where it sells cashmere scarves priced from $450 to $1,050.

Cartier wants to bring back its perfume and cosmetics lines, while LVMH is developing cafes and entertainment in general.

Fragile demand after the elections

After the US presidential election, “demand for luxury goods appears fragile,” Citi said in an analysis, underscoring the lackluster US employment data in November.

Analysts point to the decline in sales of luxury goods and attribute it to inflationary pressures on the one hand and a growing interest in spending on experiences rather than products on the other.

Global sales of luxury personal items such as clothing, accessories and beauty products are expected to be flat at constant exchange rates over the holiday season, according to consultancy Bain.

The same company had forecast that global sales of luxury personal goods would fall 2% this year, with a shrinking customer base, especially so-called aspirational buyers, who are more price-sensitive.