The price of Digital: Is luxury fashion becoming increasingly unattainable?

This article was originally written by Demi Karanikolaou in Greek for Harper’s Bazaar Greece. You can find it here.

We all thought that digital media will be democratizing luxury fashion. So why is it that luxury goods are becoming more elitist than ever?

Luxury has long been associated with exclusivity. Popular movies of the 2000s portrait fashionistas,high society ladies and celebrities as the only few that took part in this conversation. Pictures and information about such items was scarce in the pre-social media age, with designer handbags being reserved for celebrities and usually being spotted in some tabloid or fashion magazine. Everything however was set to change with the domination of social media. Suddenly even the rarest of luxury items were flooding everyone’s feed, turning many into luxury enthusiasts. The democratization of luxury had begun, or so we thought. As new consumers saved up enough money to buy the items they lusted after, they noticed that their beloved items were steadily becoming more and more unattainable thanks to constant, big price increases. 

Websites and social media became the means that allowed many people a peek inside the elitist world of luxury fashion. Constant information about those items flooded people’s Instagram feed through celebrities and influencers and suddenly an illusion that everyone owns a classic Chanel flap bag or a Cartier love bracelet was created. This, of course, comes as a result of the algorithms that big tech players like Google, Facebook and TikTok are known to use. Based on user behaviour data, these algorithms consistently show the user more content related to what they previously liked. This Increased product exposure has turned many into aspiring luxury consumers, something that e-commerce makes easier than ever. Luxury houses, initially sceptical about digital and e-commerce have now embraced them, making their full product catalogs and prices available for everyone to see. Indeed According to Bain and Altagamma, online commerce is expected to become the leading channel for luxury purchases by 2025, with younger generations expected to drive 180 percent of growth in the market from 2019-2025. Before jumping on the most expensive items, new consumers strive for mid-range offerings from luxury brands, which have become alarmingly popular on social media. Louis Vuitton’s beauty pouches for example, were constantly exposed on social media and turned into de facto clutch handbags, allowing people to own a luxury piece for a much lesser price. This type of overexposure, goes against the fundamental rules of a luxury business model and has forced some fashion houses (Eg: Bottega Veneta) to delete their social media accounts aiming for exclusivity and authority over their brand narrative. The urgent need for exclusivity is pushed further by constant price increases that make luxury products only attainable by a select few.

When questioned about their price increases, luxury companies are typically quick to blame inflation, cost of materials or the pandemic. Indeed inflation is traditionally taken into consideration for the prices of goods but usually only increases them by 5-6%. While luxury price increases had started long before the Covid19 crisis hit, the latter has admittedly had a big impact. The general economic uncertainty is definitely a factor, but for luxury brands, the severely impacted tourism sector that makes up for 20-30% of their revenue has been a catalyst. Almost no in store sales during lockdowns have also been very impactful for houses like Chanel, who typically do not sell online and in order to make back some of the losses, the limited stock that luxury companies had during this period became more expensive. Additionally, luxury goods have historically been cheaper in France. However, following pressures from the Chinese government to reduce the price gap between regions (in an effort to push Chinese spending on these goods on the Mainland) prices have been unified across globally, pushing everything up instead of down.

Apart from all of the above, brand image management seems to be the main driver for price increases. With digital media overexposing luxury brands, consumers are starting to feel that everyone can own a luxury handbag or watch. Simply put, luxury companies need to have unattainable star products that not everyone can own, in order to get the majority of consumers to purchase their mass -lower priced- offerings, aspiring to the dream of luxury. If anyone could save 2k in order to purchase a Chanel flap bag, nobody would be as inspired by their 50 dollar face powder. Going a step further, mid range products got discontinued by many, while YSL & Prada have not only raised their prices, but also chose to not be included in any third party retailer discounts in order to manage the amount of people who can own their items and avoid oversaturation (eg: Burberry plaid in the 2000s). Competition is also forcing some of the houses that might not have considered price increases before to do so now, if they want to maintain the same luxury narrative & positioning as the likes of Chanel, Dior, Cartier etc. However, successfully raising prices, while maintaining clientele, is something that only the strongest players can do. 

For now,  price increases seem to be an excellent solution for luxury executives, but the trend might actually carry some big future risks. Despite the fact that certain companies have been able to successfully get more expensive even during the pandemic, there is always a possibility that there will be a point that pricing will no longer make sense ,even for their most dedicated clients. If that happens, houses might need to drop their prices, resulting in the devaluation of their brand image (eg: Mulberry), which will confuse customers and put the brand’s future at stake. The disruption that digital exposure is bringing to the luxury business model will be a big issue in the future. Luxury goods will continue to only be desirable when they are less accessible and so brands will need to find ways to keep the people engaged or willing to spend on all of their price levels. The fear that certain popular products might oversaturate the market is forcing luxury brands to limit their availability by any means possible. Digital technologies gave us the opportunity to see inside the illustrious world of luxury goods in a very democratic way. However luxury and democracy were never meant to go hand in hand, so someone needs to pay for this clash of titans. Consumers have been forced to take this responsibility for now, but as digital technologies get increasingly important this might eventually change.