LVMH Sees Aspirational Consumers Pulling Back on Luxury Amid Inflation

With the moderately well-off shopper spending differently than the high-earner, luxury brands are seeing aspirational shoppers forced to give up their favorite indulgences.

On a call with analysts Tuesday (April 16) discussing its first quarter fiscal 2024 financial results , luxury giant LVMH shared that it continues to struggle to grow sales with aspirational customers amid ongoing economic challenges.

“Frankly, I don’t think the situation of aspirational customers in the western part of the world is connected in any way with the [products we] offer,” said Rodolphe Ozun, the company’s director of financial communications.

“The question is inflation, which is taking its toll with a particular intensity on this group of customers. … I think as long as inflation is a factor for this group of customers, we won’t do miracles, and basically, we expect only a gradual improvement with this population in the coming quarters.”

Indeed, there are significant differences between how high-income consumers and ultra-high-income consumers make purchases, according to the February/March PYMNTS Intelligence study “ New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck .” The study’s survey of more than 4,200 U.S. consumers found that, among those who make between $100,000-$200,000 annually, shoppers expect to spend 7.7% of their income on clothing, accessories and personal care items. For those who make more than $200,000, that share rises to 8.5%.

Ozun noted that aspirational customers are a “sizable portion of the business,” and in the face of inflation, this group is “certainly under some form of pressure,” leading to “disappointing numbers” for the past “while” among this segment.

Indeed, to reach high-income shoppers, luxury brands are not just competing against each other — they are also competing against mass-market retailers typically associated with lower-earning shoppers. In fact, PYMNTS Intelligence research reveals the majority of Amazon customers make more than $100,000 a year, as do a plurality of Walmart customers.

Plus, the New Reality Check study found that 56% of consumers in that income bracket have cut down on nonessential spending due to retail product price increases, and 28% have cut back on the quality of their purchases for the same reason.

“No doubt that the aspirational customer has to adjust to that new normal,” Ozun said. “It’s not going to take five minutes.”

Additionally, LVMH is seeing digital growth lag behind brick-and-mortar growth. This bucks overall trends in retail, per findings from PYMNTS Intelligence’s study “ 2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar Shopper and What It Means for Merchants ,” commissioned by Visa Acceptance Solutions . The report, which draws from a survey of nearly 14,000 consumers across seven countries, finds that high-income consumers are disproportionately likely to shop exclusively via digital channels. Thirty-four percent of consumers in this group are remote shoppers, versus 29% of the population overall.

Still, LVMH touts its slower eCommerce growth as an indicator of positive trends.

“If products are being sold in stores, we see no necessity to put a lot of them onto the eCommerce, and vice versa,” Ozun said. “So basically, I would view the fact that eCommerce is growing less than stores as a good sign of the health of the store channel.”