What does the future hold for luxury brands? The challenge now is to win back both wealthy and aspirational clients. Price, discretion and perceived value are the three levers available to brands. According to Bernstein, betting everything on VICs has been a kind of collective hallucination: it simply couldn’t work at the scale the industry has reached.
Farewell to the glory days
Luxury may no longer grow at the pace of the past thirty years (an average of +6–8% per year). The sector is having to reckon with widening social inequality and the progressive erosion of the middle class. This latter phenomenon has led to a stronger focus on the price–quality ratio of products and to a shift in preference from handbags to jewellery, precisely because jewellery is perceived to hold greater value.
Betting everything on VICs
According to Bernstein analysts, the very wealthy account for a significant share of revenues: just 2% of customers generate one-third of global luxury sales. Yet VICs (Very Important Clients) alone are not enough to sustain the industry at its current scale. If brands focus solely on the ultra-rich while excluding an ever-growing number of people, then sales — as well as social and cultural relevance — will decline. In a society where inequality is set to increase, “luxury shame” would only become more pronounced. Luxury would shift from being an aspiration to becoming a target. For this reason, brands have no choice: they must achieve commercial success at both ends of the market.
How to do it?
Bernstein highlights three aspects to watch closely. First, price depth — the difference in order of magnitude between a brand’s highest and lowest commercially relevant prices. Second, discretion, since quiet luxury may prove not to be a passing trend but rather the embodiment of wealthy consumers’ desire to go unnoticed in an increasingly hostile environment. Finally, perceived value in the eyes of consumers. Bernstein also points to “the multiple supply disruptions of recent months” as a factor capable of straining luxury brands’ craftsmanship narrative and undermining perceived value. And on that front too, jewellery comes out on top.
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