Customers are quitting luxury brands as price hikes go too far

Luxury brands have lost about 50 million customers in two years. Second-hand websites and lower-price competitors are welcoming defectors with open arms.

- Carol Ryan

Demand for luxury goods is expected to be flat in 2024 at constant exchange rates, according to consulting firm Bain, but things aren't stable below the surface. Luxury brands have lost more than 10% of their usual customer base since 2022, Bain estimates. It is the first time in memory that the sector's shopper numbers have shrunk. For the past three decades, brands have focused on attracting new middle-class consumers to expand their sales—a "democratization" of luxury that helped triple the size of the business.

Price increases have reversed this long-term trend. The cost of the average luxury product has risen sharply since the start of the pandemic, albeit with big variations across brands. True, some customers would have pulled back anyway as inflation ate into their disposable incomes. But millions of others have been priced out.

"Finding regular size handbags at less than $3,000 from reputed brands has become virtually impossible," says Luca Solca, luxury-goods analyst at Bernstein.

Expensive brands aren't only selling to fewer people, they are selling far fewer products. The number of units sold by the luxury industry this year is expected to be 20% to 25% lower than in 2022, according to Bain. Strip out more-affordable categories such as cosmetics and sunglasses, which are still in demand, and volumes might be down as much as a third for products such as handbags and shoes.