Why Luxury Brands Are Grappling With the Price-value Equation

Luxury brands are facing a critical challenge in reconciling aggressive price hikes with consumer perceptions of product value and quality. Following a post-pandemic spending surge, affluent shoppers are increasingly scrutinizing whether high-end goods justify their premium costs, leading to a shift in purchasing behavior. This realignment is forcing major houses to return to the fundamentals of craftsmanship and transparency to restore trust and maintain their market positioning in a selective environment.

Industry experts and analysts report that the luxury sector is currently navigating a difficult disconnect between price and perceived value. Achim Berg, founder of FashionSights, notes that the remedy involves a return to core luxury values such as genuine craftsmanship, durability, and restraint. This shift comes as consumers become more selective following a period of rampant price hikes and publicized lapses in quality. Luca Solca, luxury analyst at Bernstein, emphasizes that at luxury price points, everything must be perfect to maintain the brand's magic, describing luxury as essentially a business of details where any failure breaks the consumer's trust.

Major luxury groups are already responding to these pressures by publicly committing to quality elevations. During a Kering Capital Markets Day, leadership highlighted plans to renew the price architecture for Gucci and Saint Laurent to ensure perceived value aligns with cost. This includes strengthening quality standards for leather goods and improving supplier selection, despite the increased costs associated with these supply-chain enhancements. Other brands, including Dior and Jacquemus, have similarly signaled a focus on quality improvements over the past year to justify their current market positioning and address what consultants describe as a value-for-money catch-up.

Data from Agility Research & Strategy underscores the severity of consumer frustration, revealing that two-thirds of affluent individuals believe brands raised prices without corresponding quality gains. This sentiment is highest in Japan at 81 percent and reaches 70 percent in the United States, while China shows a lower but still majority dissatisfaction at 51 percent. Consequently, 47 percent of wealthy handbag buyers have begun purchasing from premium brands positioned below traditional luxury houses. With iconic handbag prices rising 50 to 70 percent since 2019, brands must now contend with greedflation accusations and social media scrutiny regarding production standards to prevent a broader withdrawal from the category.