#020: Luxury sets the price, price does not set luxury
What we can learn about value from Luxury’s changing landscape
Growing up in a big, female-dominated family, I often found myself fulfilling handbag requests for my fashion-loving cousins.
So when I announced my move to Paris, their excitement was palpable.
“Can you check if they have the green Goyard Hobo bag? It’s sold out here.”
“Can you pick up a Louis Vuitton Keepall 25 for me?”
I love my cousins, but visiting luxury stores solely to satisfy these requests makes me cringe.
Here’s how the experience typically unfolds:
Queue outside with hundreds of tourists, all draped in branded logos.
After an hour’s wait, be greeted by a store assistant with a "you need me more than I need you" attitude, asking in a cold, monotone voice, “What do you want?”
Show the assistant a photo, only to hear, “We don’t have that colour, only black and brown.”
Compromise on the colour and wait again for the chance to pay.
Nothing about this process felt luxurious.
Instead, I felt like a third-world citizen with no taste, begging to exchange thousands of euros for a plastic-looking bag.
So, when I saw Kering’s Q3 results—revenue down 16% and Gucci, its flagship brand, down 25% - I couldn’t help but feel somewhat vindicated.
This decline feels like a call to luxury brands to re-evaluate and reclaim the essence of luxury.
While I’m not an expert in the luxury industry, there are clear lessons from Kering's recent struggles that apply to brands across all industries.
1. Sell the Experience, Not Just the Product
Jean-Noël Kapferer and Vincent Bastien, in their book "The Luxury Strategy", highlight that a true luxury product is about a "qualitative, hedonistic experience made to last."
This highlights customer experience, one that starts way before a transaction takes place. Yet many luxury brands seem to overlook this.
Earlier this year, I decided to buy shoes from a lesser-known French brand known for its timeless craftsmanship. Upon entering the spacious, minimalist-designed store, I was greeted warmly and guided through various styles.
The shop assistant helped me try several colours while engaging in casual conversation: "We’re not as well-known as Louis Vuitton. I’m surprised you’ve heard about us."
When I shared my interest in learning more about shoe care, he introduced me to their in-store shoeshine expert. The conversation was so engaging that I ended up buying not only the shoes but also €200 worth of shoe care products.
For me, it didn't feel like a transaction but more like an invitation to discover the brand’s story and know-how.
For luxury brands, the journey should always feel like this, never like a fight for a plastic bag.
2. Deliver More Value Than Expected
Luxury brands understand that high prices signal quality, yet many seem to forget that while luxury can set its own price, price alone does not define luxury.
A great purchase experience should include an element of “Wow, this is worth every penny,” even at a premium.
Patek Philippe’s slogan, “You never actually own a Patek Philippe. You merely look after it for the next generation,” captures this perfectly. With such products, the price feels like an investment, not an expense.
But lately, I’ve noticed a disappointing trend. Friends and I agree that the quality of products we’ve purchased recently doesn’t compare to similar items bought 10–15 years ago. Even the quality of the paper shopping bags and handbag protective covers seems to have declined.
Kapferer and Bastien’s advice, “Do not look for cost reduction,” is particularly relevant here. Cutting costs at the expense of quality devalues the brand and the experience.
3. Never Sacrifice Long-Term Value for Short-Term Gains
Gucci’s recent slump reflects the risks of prioritising short-term growth over long-term value.
From 2016 to 2019, Gucci’s popularity surged by appealing to aspirational middle-class buyers, leaning heavily on streetwear and logo-based designs.
Yet, as tastes shift toward quieter luxury and the economy downturn, many consumers are rethinking their spending.
This outcome reflects a universal truth: if your strategy deviates from your brand’s core value in pursuit of quick wins, the success may be fleeting.
Building long-term value requires patience, even in the face of short-term temptations.
4. Be Selective About Your Audience
As I often say, not all customers are created equal, and the customers you attract can define your brand’s identity.
Gucci’s focus on younger, logo-driven consumers may have alienated traditional luxury buyers who no longer wanted to associate with an overexposed brand.
The same applies to other businesses, such as private clubs or university education.
The community created can elevate the brand’s value. This explains why, for instance, Ivy League schools offer scholarships to top talent to maintain their prestigious reputation. And private member wine clubs offer discounted membership fees to industry experts, as it elevates the club.
The type of customer can add intangible worth to a brand, making exclusivity a selling point.
5. Maintain an Authentic Supply-Demand Balance
Economists and dynamic pricing advocates argue that price should reflect supply-demand balance, but scarcity needs to be genuine.
During the pandemic, my favourite glassware brand, Zalto, had stock shortages worldwide. Customers were willing to wait, knowing that every piece was handblown, and production was limited due to team illnesses. This was authentic scarcity.
In contrast, artificially limiting production to create a false sense of exclusivity can backfire. Customers are perceptive and quickly see through inauthentic scarcity tactics.
In Closing
While we've learned lessons from the recent challenges faced by luxury conglomerates, the same lessons can be applied well beyond the luxury sector.
In any industry, maintaining authenticity, creating meaningful customer experiences, and prioritizing long-term goals over short-term gains are essential strategies for building resilient brands.
If you work in the luxury industry, I’d love to hear your perspective.
Have a lovely weekend!
Cheers,
Claire
P.S. Thank you, Danny Younis, for sharing your expertise and many interesting readings.
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