As I noted several weeks ago, the Lipstick Index reveals when consumers can’t afford to buy actual luxury products, so they spend more on small luxuries, like expensive coffee or lipstick.
EMARKETER now reports that consumers are adjusting their spending priorities in today’s still “murky” economy, and “looking for luxury brands that can sell them more than a status symbol.”
A new report by Team One’s Global Affluent Collective shows that 88% of high-income consumers currently “define status by knowledge rather than material possessions.” These shoppers “want to support [businesses] that offer them additional value, like knowledge, connection, or experiences,” or as the Collective labels it—a “worth mindset.”
Buying goods for them is not about fancy logos or accumulating more stuff, but about what’s “longstanding.”
The report says that well-being, emotional fulfillment, and personal growth are the top drivers of luxury purchasing decisions for modern high-income consumers. And that retailers selling luxury items should move away from external validation and toward “internal transformation.”
As an example, Tahni Candelaria, the director of cultural anthropology at Team One, cites Gucci, saying it has “become stale because they’ve said, ‘This is our logo, and let’s put it on everything that there ever was…and we can rely on it because we’re Gucci.” She adds that this just plays “into a stale perception of status.”
Higher prices lead to erosion of trust
Sky Canaves, an EMARKETER analyst, says rising costs are hurting luxury [companies] consumer retention and trust.
She explains: “[Consumers] don’t see why a handbag should be 70% more than it was five years ago when it’s essentially the same product. There’s no new quality, no new innovation, and that…is hitting the luxury sector pretty hard.”
Today’s consumers have become more skeptical, not trusting why the price of goods has increased so much in a relatively short time.
Even more, Canaves says, “People are really questioning, ‘Oh, but do we have to believe this anymore? Do we have to have faith in these institutions, and is the news telling us the real thing? This is seeping into relationships with luxury brands.”
Building lasting customer relationships
While this report focuses on well-known luxury businesses like Gucci and Chanel, there are valuable lessons for small business owners as well. For instance, Candelaria advises businesses to stop trying to create “short-term buzz,” and focus instead on building “sustainable relationships with…consumers.”
A luxury brand cited in the report as doing it right is Grand Seiko, “which invites its consumers to events with panels on watchmaking, craftsmanship, and design.” You can adapt that concept to your business by hosting discussions about what’s relevant to your small business, such as hot trends in your industry, the best books to read now, or how to glam it up for the holidays on a budget. Restaurants could focus on topics like creating affordable meals your family will love or special holiday treats.
Rieva Lesonsky is President of Small Business Currents, LLC, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
Photo courtesy Carlos López via pexels
