Bag charms, return of the aspirational shopper & niche is the new mass

"I have a brand. Should I start a Substack?"

Hello!

If this feels like I’ve ripped Emily Sundberg’s ‘selfie at the beginning of every letter’ idea – it’s because I have.

I trust you’ve all had a beautiful week. Mine was buoyed by the fact that I had a gorgeous, quintessentially-London weekend. My bf’s mother was in town so we took her to all the hotspots. Sketch, River Café, our local pub, etc.

A personal highlight was dinner on Friday night. We went to this gorgeous East-London restaurant, Brawn in Bethnal Green. When we sat down, the waiter proceeded to tell us that his recommendation was to get a starter and a main each. No small plate. No 8 – 10 dishes to share. I looked at my bf in shock. The death of the small plates is happening in real time…. !!!

The dining highlight was, of course, River Café. A true London icon.

Agenda for today’s letter:

1. Lessons from luxury’s slowdown

2. Navigating the ‘niche’ media landscape as a brand

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Lessons from luxury’s slowdown

The return of the aspirational shopper is via the bag charm

• The luxury sector has slowed

  • To say it’s ground to a halt may be overstating the matter but LVMH’s 5% fall in third-quarter sales and Kering’s 16% decline could say otherwise

• I find this interesting because I believe the luxury sector speaks directly to consumer sentiment and discretionary spend in the industries like consumer, fashion, beauty, lifestyle, consumer start-ups, etc.

  • This could be because the market segments I’m interested in (millennials and Gen Z) are key buyers of the luxury market (Bain expects this cohort will make up 80% of luxury buyers by 2030)

  • Another interesting observation is that while luxury is down, mass retail is up (GAP Inc., Abercrombie & Fitch, etc.) Coincidence? I think not…

• There are many reasons for this slowdown: slow growth (especially in key markets like China and the US), inflation, low consumer confidence & sentiment, lack of novel design, etc.

Of course, some have defied the slowdown – Chanel, Miu Miu, Hermes, I’m looking at you

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The part of the conversation I find most interesting is the impact of the price elevation strategies adopted by many luxury brands…

• Prices across the luxury sector have, across the past few years, been shamelessly increasing

• According to HSBC analysis, luxury has increased its prices on personal goods by 50% since 2019. In other words, what cost $5k in 2019 could now cost up to $7.5k today

• The reasoning behind these price increases is nuanced

• Some will say inflation. Some will say increases in the costs of raw materials.

• But for many, price elevation strategies were intentional (see Burberry, Chanel, etc.)

• This was successful in the short-term - contributing to the post-pandemic luxury boom

• But there’s no doubt, we’re now seeing the long-term impacts of this approach…

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For one, the aggressive price hikes put the ultra-wealthy on guard…

• Did these price increases reflect an increase (or a perceived increase) in value? Some could say, no… it did not…

• As a result, many of the uber-wealthy have become “increasingly sceptical about the “value for money” offered by top luxury brands”, with some wondering “is it even worth it?”

  • (The investigations and allegations at Dior and Armani into the… um… extortionate mark-ups and ‘sweatshop-like’ working conditions haven’t really helped this matter)

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Additionally, these strategies alienated the aspirational luxury shopper – those of us who would purchase the occasional luxury product or two…

• Contrary to the popular belief that 80% of sales come from 20% of customers, a McKinsey report published in April this year has found that aspirational luxury shoppers “account for half of luxury sales”.

• As a result of the sky-high luxury prices, the sector saw this segment withdrawing

• We’re seeing now that alienating this segment of shoppers, whether advertently or inadvertently, has had its impacts…

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Where to from here?

All hail the return of the silly-little trinket!

• There’s been much discourse emerging around re-connecting with the alienated aspirational shopper (from Vogue Business articles to reports at Bain and McKinsey)

• The common thread throughout this chatter is about bringing back the entry-level products that brought value at a lower price point

  • Essentially, it’s saying that appealing to one cohort doesn’t mean you have to alienate the other

• I wholeheartedly agree with this sentiment. I had first come across this ‘plea to the entry-level shopper’ concept at a webinar by WGSN many many months back

  • They had offered that price drops weren’t suitable here (as this would only devalue what’s already out in the market)

  • Rather, we’d be seeing more entry-level trinkets on offer as a way for luxury to get back into the aspirational shopper’s good graces

• A key way in which this is being done today?

  • Bag charms (so here for this!)

  • More beauty (as the average price point is low relative to other offerings)

  • And I’m sure many other gimmicks that bring joy to silly fashion girls like me

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Navigating this ‘niche’ media landscape as a brand

“I have a brand. Should I start a Substack?”