More ‘True,' Less Aspirational Luxury Is The Next Priority For Luxury Brands

Forbes

8 hours ago

TOPSHOT - A model presents a creation by Hermes for the Women Ready-to-wear Fall-Winter 2024/2025 ... More collection as part of the Paris Fashion Week, in Paris on March 2, 2024. (Photo by JULIEN DE ROSA / AFP) (Photo by JULIEN DE ROSA/AFP via Getty Images)
Democratizing luxury by making it more accessible to so-called 'aspirational consumers' has been the ticket to maximize growth in the luxury market since the global recession of 2008-2009.
Between 2009 and 2019, the personal luxury goods market nearly doubled in size, reaching $332 billion (€284 billion). Post-pandemic, it got another burst of growth, advancing from $342 billion (€293 billion) in 2021 to $431 billion (€369 billion) in 2023. But then it slowed to $423 billion (€364 billion) in 2024, according to Bain.
The dynamic industry growth from 2009 through 2023 has come at a cost. 'In a race for scale, some of the soul of luxury was lost, as much of the industry traded exclusivity for reach, exchanging stability for volatility,' wrote BCG senior partner Filippo Bianchi in the latest BCG and Altagamma 'True-Luxury Global Consumer Insights' report.
Aspirational Luxury Falls
In 2025, the luxury market is looking down the barrel at its first major slowdown in 15 years, excepting the Covid years, and BCG puts much of the blame on brands' overemphasizing the aspirational consumer segment.
A sizeable 35% of aspirational luxury consumers, defined as those who spend less than about $6,000 (€5,000) per year, have pulled back on luxury indulgence, diverting spending to savings and investments, wellness, second-hand luxury and trading down to more affordable fashion.
'The segment that previously fueled growth is now revealing its fragility. Around 50% of these consumers now feel financially vulnerable,' Bianchi continued.
Brands that are most dependent on aspirational luxury are in the crosshairs. 'Brands with a client base comprised of more than 50% Aspirational consumers are seeing the steepest declines, underperforming sharply over the past 12 months.'
While BCG doesn't name names, one doesn't have to look far to find suspects. LVMH's fashion and leather goods segment, anchored by Louis Vuitton, fell 5% in the first quarter and Kering, led by Gucci and Yves Saint Laurent, was off 14%.
Polarized Results
Luxury brand performance is increasingly becoming polarized, with more brands falling behind than pulling ahead. That gap will continue to widen, as Bain forecasts up to a 5% decline in the luxury market by the end of the year.
Nonetheless, luxury brands continue to rely on marketing to the weakening aspirational consumers, who generated some 60% of the market's revenue in 2024, largely at the expense of alienating the most empowered consumers at the top of the luxury consumer pyramid.
Those at the top spend over €5,000 on luxury per year and produce 40% of luxury market sales, according to BCG. And the very top-tier clients, defined as spending €50,000 or more annually, make up greater than half of that or 23% market share.
'To succeed in the years ahead, brands must refocus on top-tier clients and return to the fundamentals of what true luxury really means,' Bianchi advises.
Brands that have stayed true to luxury fundamentals are reaping the rewards, like Brunello Cucinelli, which ended 2024 up 12%, as well as Prada (+13%), Hermès (+9%) and Richemont (+8%) in the most recent quarter.
How Luxury Brands Are Failing Top-Tier Clients
Based upon a survey of 7,000 worldwide luxury consumers and qualitative research with top-tier customers, BCG has identified four primary ways that brands are falling short in serving their very important customers' expectations and needs:
Some 60% of luxury consumers feel overwhelmed by excessive marketing and generic mass communications. In brands' efforts to attract attention through marketing, they are attracting the wrong kind of attention: turning key clientele off and causing them to disengage.
'What they value is not outreach, but tailored interation – built around their personal context, taste and lifestyle,' BCG advises. The call is for more person-to-person clienteling, which can be aided by AI, yet AI is no substitute for the personal connection.
An overwhelming 80% of luxury consumers feel alienated by overcrowded, impersonal retail environments and prefer interacting with luxury brands in exclusive, dedicated retail spaces that offer privacy, calm and high-touch service. It's hard – if not impossible – to deliver client intimacy at scale, but that is what these very important customers expect.
Luxury products are most highly valued for their craftsmanship and quality, yet 89% of luxury consumers believe they are not getting it. Product excellence suffers from increased industrialization in the industry and its focus on volume production rather than on ultimate quality and value.
Top-tier clients expect the brands they interact with to recognize and treat them as the very important customers they are. Some 70% believe they are not correctly identified as such across channels and regions.
Much of the blame is placed on brands' CRM systems and how they are segmented and targeted. Brands need to do a better job in their data analysis to refine their segmentation models so very important customers are recognized and treated as such.
Realign To Top-Tier Clients
The way forward for luxury brands is to return to luxury's first principles. Unfortunately, many brands have veered from its core values in their pursuit of growth fueled by aspirational consumers.
'The luxury brands that will win in the years ahead will be those that have the courage to center their strategy around the core, delivering excellence to the clients who define what true luxury means,' Bianchi said.
Luxury brands must return to what has always made luxury exceptional: personal relationships and recognition, special client experiences and ultimate quality.
Bianchi concluded: 'To meet and retain top-tier clients, brands must recalibrate – not through scale, but precision; not through ubiquity, but intimacy. In doing so, they'll take a crucial step toward building a strong luxury industry by returning to what made it exceptional in the first place.'
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