How to navigate the luxury paradox to win back aspirational clients

In the face of market headwinds and slowing growth, luxury maisons can unlock new ways to deliver value to their clients.

In brief

• Rising incomes and emerging market growth have fueled the rise of luxury for decades, but maisons face significant headwinds from economic uncertainty.
• Rather than perceiving uncertainty as a setback, maisons have an opportunity to understand what their clients want and adjust their value propositions accordingly.
• The EY Luxury Client Index has surveyed 1,600 luxury consumers across 10 global markets to understand what maisons can do to secure future growth.

For decades, the luxury sector has enjoyed double-digit growth, reaching a global value of €363b, according to a recent report by Reuters. This has been fueled by rising incomes and rapid wealth expansion in new markets, especially Mainland China. But the world is changing. Geopolitical sands are shifting, exposing luxury maisons to tariffs and trade tensions. The economy in Mainland China, which has long been a key source of growth for luxury is softening, leading to more subdued spending. The luxury sector as a whole is experiencing a slowdown, sparking profit warnings across the industry. Last year Bloomberg reported that European luxury firms alone saw a US$240b fall in their valuations over the course of a few months¹. Luxury needs to adapt to this change.

To understand how to adapt, luxury maisons are seeking to understand their clients more. This includes not just the high-net-worth individuals who support their business but the aspirational consumers who have been the key engine of their growth in the past decades. However, this also flags the age-old paradox that luxury maisons have always struggled to balance, which is: The more desirable a brand becomes, the more sales grow, the more people wear brands, the less desirable the brand becomes.

As part of a study examining 1,600 luxury consumers spanning ten key luxury markets and including a range of higher income groups, the EY Luxury Client index has sought to unlock exactly what luxury clients want: from the products they buy, the channels they use and the brand values they engage with.

What motivates luxury clients?

Using insights from these segments and from different market dynamics, EY teams identified several key factors that can drive aspirational purchasing from luxury clients for maisons to consider.

Quality is the essence of luxury, but status still holds sway

Luxury brands have long been built on the quality they promise. This is not going to change any time soon and 71% of luxury clients are primarily driven by a desire to own high-quality products. It seems that when looking at whatever might need to change for luxury maisons, one thing will always have to remain the same: Luxury brands need to deliver on the quality their price point promises. Beyond quality, status also remains a key consideration, but at a much lower degree of importance. Buying luxury fashion as a mark of status is seen as a key purchase driver for 32% of those surveyed. However, there is greater variation in the importance of status among different segments and geographies. For example, 42% of “prestige aspirational” luxury clients and 44% of Mainland China-based clients indicated that they buy luxury fashion as a mark of status.

Sustainability over price, especially if it reflects innovation

Luxury maisons are increasingly repositioning their brand purpose to align with mounting social and environmental concerns, which aligns strongly with sustainability as a factor that influences purchase decisions. Nearly one-third (31%) of luxury clients rank sustainability among the top five factors influencing purchase. Although this was less important than other purchase considerations (sustainability was ranked eighth overall, behind factors like fabric quality, brand heritage and craftsmanship) it was still seen as a more important consideration than price (which was ranked at ninth overall). This reflects an important overall difference compared with other consumer surveys EY teams have conducted in non-luxury categories, where sustainability traditionally becomes less important in times of price sensitivity. Despite the headwinds, luxury clients still make purchases based on purpose above price. This sentiment was strongest in the UK (43%) and Mainland China (37%). Environmental considerations also increase with purchase frequency: 42% of “beyond aspirational” luxury clients ranked sustainability among their top five factors. More than two-thirds (69%) of this segment value sustainable packaging, and 63% look for products that use innovative materials as sustainable or ethical substitutes.

A quality-price disconnect drives clients away; flexibility can help retain them

Despite price being less important, the economic realities affecting many luxury clients are hard to ignore. Tougher economic conditions today, and potentially in the coming years, could weigh further on the price elasticity of luxury goods. Discretionary spending is usually the first thing consumers sacrifice when economizing, and the degree of protection felt by luxury maisons because of their high-net-worth clients could become more exposed if prices keep going up in times when economic growth is hard to come by. This means that it is no surprise that almost two-thirds (62%) of luxury clients have considered buying a luxury product in the last year but decided against it, primarily based on price. Older Gen X clients appear to be the most price sensitive, with 38% citing high prices as a key reason to drop a luxury purchase. But dropping a luxury purchase is not always the end of the journey. More than half of clients in Japan and the UK would prefer to delay their purchase and buy later. In Mainland China, instead of waiting, half of clients seek flexible payment options to buy the product, compared with just a quarter who will opt for alternatives such as high-quality dupe — which copies the design of a luxury maison product without the logo. Maisons have the opportunity to retain these clients with flexible payment options, which is much more likely to lead to a conversion where products are initially seen as unaffordable. 

In-store shopping remains most rewarding, but artificial intelligence (AI) features can improve online experiences 

Three-quarters of luxury clients made their most recent luxury purchase at a brand store. Offline stores remain the preferred shopping location for 53% of clients, but one-third also take an omnichannel view, that spans both digital and physical channels. These channels are significantly preferred to the 12% of clients who only make luxury purchases online. This, however, does not mean digital channels are unimportant. One-fifth (20%) still go online to visit brand websites to access international brands beyond their own country and 20% of clients also use online channels to access a wider selection of products. Equally, online channels are more important for younger generations with 17% of Gen Z buying more online compared with just 10% of baby boomers and 41% of Gen Z taking a multichannel approach compared with 24% of baby boomers. Maisons can take the opportunity to upscale the online shopping experiences through more rewarding online shopping experiences like AI-powered features such as personalized product suggestions and enhanced product visualization.

Maisons only offer experiences to selected clients, but many are willing to pay extra for valuable experiences

Over two-thirds of clients spending less than €5,000 in a year have not been offered any kind of experience in the last 12 months. This may be a significant missed opportunity for maisons, because a striking 70% of clients (including 47% of clients spending less than €5,000 per year) said that if a maison did not offer them a complimentary experience alongside their purchase, they would still be willing to pay to enjoy one. This was most notable among Gen Z (79%) and clients in Mainland China (84%).

Certified pre-owned (CPO) products open new market opportunities

The power that maisons have in being able to refurbish and, most importantly, authenticate pre-owned products for resale represents a significant opportunity to manage cost concerns among clients without losing brand cachet. Thirty-eight percent of clients also purchase luxury products second-hand, and many of those who do not are worried about the authenticity of pre-owned products found on third-party platforms. More than half of all clients indicated they would be willing to purchase CPO products sold directly by maisons.

What growth opportunities exist for maisons?

Based on these findings and wider findings from the EY Luxury Client Index, there are five key areas that maisons can focus on today to help ensure that their business is meeting its client needs tomorrow:

1. Strengthen quality and its perception among clients

Quality in luxury is non-negotiable and is an evergreen expectation among luxury clients. Those who are deterred by price will base their decisions on a perceived disconnection between the price of an item and the quality they expect. Logo visibility is often seen as a mark of quality assurance as much as it is of status. Maisons must overcome any misconceptions over quality using innovative materials and product communications that focus on reinforcing the connection between the product and its provenance, especially if sustainability can be reinforced as part of the messaging.

2. Reframe the sustainability narrative

Sustainability is no longer a trend; it is an expectation for luxury clients. A low-impact approach to manufacture, packaging and distribution is becoming essential to the identity of luxury products. Yet for many clients, sustainability messaging feels generic, technical or even performative. Maisons have an opportunity to restructure the sustainability narrative — not just as a set of obligations or certifications, but as a reflection of enduring values: quality, longevity, preservation, refinement and respect for craftsmanship. Making sustainability part of the brand will reframe sustainability as something luxurious — a marker of connoisseurship, not compromise.

3. Create a truly luxurious online shopping experience

Almost half of luxury clients now purchase online. Interest in online shopping is particularly strong in the UAE while older generations are also interested in the technology features offered as part of the online shopping experience. Maisons have an opportunity to reimagine digital platforms not simply as a channel of purchase, but as an extension of their identity. The future of luxury lies in creating digital journeys that are as emotionally rich as they are technologically advanced.

4. Urgently consider certified pre-owned (CPO)

Many luxury clients are apprehensive about buying pre-owned products due to concerns about authenticity that stems from a lack of trust in third-party platforms and sellers. Maisons can easily capitalize on this by selling curated pre-owned products under their own banners and certifications, which will alleviate concerns regarding quality and authenticity. In inflationary times these offerings can be an effective way to attract younger or first-time customers who are price sensitive as well as aspirational clients who want to collect heritage products. Pre-owned pieces supported by storytelling can drive long-term loyalty and revenue that can make reselling and repair services a strategic pillar of the future luxury ecosystem.

5. Explore new services and business models

When faced with budgetary constraints, a significant proportion of luxury clients are looking for alternatives, many of which they may find outside the core offerings provided by maisons. Maisons should explore and assess the business potential that emerging models such as rental, subscription, flexible payments and pre-ordering offer. Rentals and subscriptions provide opportunities to earn increased revenue from the same piece, limiting production and maintaining a degree of exclusivity and desirability while optimizing the Maison’s environmental footprint.

Summary

Despite the economic headwinds faced by luxury maisons, in surveying 1,600 of their clients globally, the EY Luxury Client Index has established that significant growth opportunities remain, without compromising on exclusivity and brand cachet. These include doubling down on quality, making sustainability a part of the brand, building online luxury experiences, leveraging pre-owned markets and developing new business models such as rentals or subscriptions. Collectively these efforts will help sustain maisons through periods of price sensitivity and economic uncertainty, as well as building resilience into their value propositions for the future.