Are the World’s Wealthy Falling Out of Love with Luxury Goods?

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An opinion piece published in the Financial Times on Thursday argues that the wealthy, and many in the “aspirational middle class,” are reconsidering their spending on high-end handbags and expensive sports cars.

Swetha Ramachandran, a global equity manager at Artemis, writes that companies which thrived during the “revenge spending” period post-COVID are now facing a backlash. Chanel, for instance, raised prices twice this year, attributing the hikes to increased raw material costs, according to CEO Leena Nair.

However, Ferrari has managed to stay profitable, with first-quarter revenues up nearly 11% and profits rising almost 15%, despite selling a similar number of vehicles. Ramachandran credits Ferrari’s success to price increases combined with greater personalization options for customers and maintaining supply just below demand, a strategy famously endorsed by founder Enzo Ferrari.

In the U.S., Macy’s CEO Tony Spring noted in May that even high-income customers are becoming more selective when buying luxury items. While sales of luxury handbags and shoes have softened, there is still interest in advanced contemporary products, beauty items, and home goods. Spring highlighted that lower-tier customers prioritize rent and family obligations, whereas higher-tier customers focus on purchases driven by personal interest and passion.

Consumer caution is prevalent, with PYMNTS Intelligence research showing that 83% of consumers are concerned about near-term economic conditions. Additionally, most high-income consumers (earning over $100,000 annually) do not expect their income to keep pace with inflation.

Mid-market retailers are adapting to the rise of the omnichannel consumer. According to the PYMNTS Intelligence study “2024 Global Digital Shopping Index: U.S. Edition,” 56% of shoppers prefer to use digital technologies during their retail journey, reflecting a shift in consumer behavior.