On a Tuesday afternoon, there’s a certain kind of quiet in a high-end store in Hong Kong. The lights remain warm. The leather still has a high-end scent. However, the staff has noticed a noticeable decrease in foot traffic, the regular stream of inquisitive middle-class customers who used to stop by to feel the weight of a wallet they might purchase in the future. The industry is aware that something has changed.
Luxury flourished on a subtle contradiction for almost twenty years. People who weren’t truly exclusive were sold exclusivity. While the truly wealthy supplied the prestige, the aspirational shopper, the schoolteacher saving for a Louis Vuitton pochette, and the young consultant in Karachi or Lagos looking for a Gucci belt on resale kept the engine running. Until the brands themselves decided it wasn’t working, that arrangement was successful. Prices increased. By 2024, a bag that cost $2,000 in 2019 had subtly increased to $4,500. Naturally, the middle took a step back.
It’s remarkable how candidly the industry now acknowledges this. In 2024, there were about 350 million luxury consumers, compared to 400 million two years prior, according to Bain & Company’s annual study with Altagamma. Fifty million people have vanished. Nevertheless, the line continues to curl down the block as you pass Hermès on Avenue Montaigne. The unsettling but difficult-to-avoid conclusion is that, after doing the math, many brands concluded that a small number of wealthy customers were more valuable than a large number of aspirational ones.
It seems like this was inevitable. Locked-down households with stimulus checks and nowhere to spend began purchasing handbags in the same way that previous generations had purchased stocks, creating an odd and almost surreal moment during the pandemic. Because they could, brands increased their prices. They raised them once more after that. Margins skyrocketed. Investors applauded. In the same way that most bubbles feel sustainable until they don’t, it felt sustainable.
Everyone is silently pointing to Burberry as a cautionary tale. The company’s profits plummeted to such an extent that it is now, almost apologetically, lowering the price of entry-level items. Yves Saint Laurent tends to focus on small leather goods and scarves. Five years ago, these actions would have been deemed embarrassing. They appear to be surviving now. Perhaps the recalibration is just getting started.
With each passing season, the division grows more pronounced. Hermès continues to expand despite its waitlists and refusal to offer discounts. Prada appears unaffected by the slowdown as it rides the Miu Miu wave. In the meantime, mid-tier brands and the middle-tier customers they used to cater to are trapped in a sort of retail limbo where they are neither too costly to be casual nor exclusive enough to feel unique. Analysts in the market refer to it as bifurcation. It simply appears to be emptier stores on the ground.
It’s difficult not to feel that luxury has strayed into an odd identity crisis as you watch this play out. It made its current wealth by democratizing desire and enabling common people to own a tiny portion of something exceptional. It now appears determined to reclaim that piece. Whether the world’s richest 1% can truly support an industry this size on their own and whether the next generation of buyers still wants in are two questions that no spreadsheet can answer. The wise investors are still unsure. To be honest, neither are the brands.