What: Major luxury brands are expanding their product lines to include more items priced under USD 500, including accessories and home goods, as they face declining demand for high-end products and seek to retain middle-class consumers amid economic pressures.

Why it is important: This strategic shift highlights the growing tension between maintaining luxury brand exclusivity and the need to adapt to changing market conditions, where even affluent consumers are becoming more price-conscious.

Luxury brands are confronting a significant decline in demand for their traditional high-end products, with U.S. spending on top luxury brands falling 6% year-on-year in November. In response, companies are emphasizing products priced at USD 500 and under, such as card holders, scarves, and branded lifestyle items. Gucci has introduced items like a USD 440 pet leash and USD 200 branded sticky notes, while Louis Vuitton offers accessories like a USD 395 canvas bracelet. Burberry plans to reorganize store layouts to highlight "scarf bars" featuring items from USD 450 to USD 1,050.

This strategy aims to appeal to middle-class aspirational customers following sharp price increases, with brands like Chanel and Prada raising handbag prices by over 50% since 2020. However, LVMH's CFO warns against introducing very affordable products that could damage brand exclusivity.

IADS Notes: While the global luxury market faces a projected 2% decline in 2024, brands are adapting their strategies amid declining consumer confidence. This move to expand accessible price points comes as luxury labels seek to maintain relevance with middle-class consumers, though LVMH's CFO cautions against compromising brand exclusivity.

Luxury labels bulk up on lower-priced goods to appeal to the middle-class