In what sounds like a White Lotus plotline, designer brands are now taking rich people on handbag-buying retreats.
Driving the news: Luxury fashion houses like Prada, Chanel, and Louis Vuitton are spending millions to bring their wealthiest buyers — known as very important customers (VICs) — on swanky trips and experiences, from private viewings of Leonardo da Vinci exhibits to snorkeling expeditions in French Polynesia.
Per the Wall Street Journal, there has been an industry-wide shift toward this type of exclusive, experiential marketing. Prada execs have even joked that they have become tourist operators for the wealthy.
Why it’s happening: The luxury fashion industry is in the midst of its first slowdown in 15 years, as the aspirational customers who have long driven growth pull back on spending. With those buyers hesitant to splurge on a $1,000 belt, fashion houses have pivoted to the buyers who don’t typically ask about the price.
It’s easy to see why brands have taken this approach. According to one analysis, the top 2% of luxury shoppers can make up nearly 50% of a brand's annual revenue. Spending among those shoppers nearly doubled between 2019 and 2024.
Why it matters: It may seem extreme to fly out customers for snorkeling trips to convince them they need a new dress, but Prada’s CEO said that for every €1 the company spends entertaining its VICs, they spend about €7 with the brand. Other fashion houses that adopted this schmoozing strategy earlier are getting a 10:1 return on their VIC investments.
Yes, but: This focus on the 1% of the 1% has also alienated a huge chunk of customers. After a three-year period that saw average prices jump 20%, an estimated 50 million customers left the luxury goods market altogether.—LA
