The Art of Selling Couture to the Poor: Got Ethics?
Does the fashion industry have an obligation to help the lost and insecure to avoid ruin? Like a magical pied piper dressed in glittering colors, fashion beckons all to twirl and dance in a soft marigold hue. It calls to us, promising to fulfill brilliant dreams and reinforce our place in the world. It allows us to speak to one another without saying a word.
Yet the fulfillment of our desires, both inky black secrets and crystal-clear declarations, come at a price. For many, the price is obvious. For others, the price involves obsession and fantasy. When fashion targets the unwary with laser-like cynicism, then yes, the industry has an obligation to avoid financial and psychological entanglements that can last a lifetime.
Luxury is Everywhere
Although you would think that expensive products from luxury brands would be challenging to find in the typically low-brow allies where I inhabit, you would be wrong.
Take a glance; throughout the world, you will see constant glimpses of grand luxury fashion houses no matter where you tread. Whether you are walking in Northern Europe with its gloom and rain guttering from the sky, the eye-clenching bright suns of Western America, or the dusty plains of Africa. People of all socioeconomic bands joyously display the eponymous initials, famous names, and intricate logos of luxury brands. How is this possible? Did everyone receive part of Elon Musk’s inheritance, and I was left off the list? How is it possible that people with relatively low purchasing power and under economic duress have been introduced to these brands, and more importantly, how have they been induced to purchase that glorious Louis Vuitton chancla?
A rarely discussed fact is that luxury brand profits do not come from the upper-middle-class and obscenely wealthy patrons. Of course, they make money in the old-fashioned way by creating expensive, quality items and selling them to rich people. But what is hidden in the shadows is that these lux brands, perhaps shamefully, also induce people with limited economic means to purchase a bag, hat, or lip gloss, all at a hefty markup. This path to profits has become integral to high-end fashion’s market growth within the last ten years.
The Art of Selling Couture to the Poor. Model: Phil Tiemann, Photographer: Flávio Iryoda.
People with limited or unlimited wealth have every right to purchase whatever they want. That is undisputed. There is a terribly understandable desire for many people to enjoy a bit of luxury. We all want to be seen with respect and have a shred of hope that our daily efforts are meaningful. But is it ethical for companies to convince people with very little money that they should have a piece of these luxury brands, no matter how insignificant, and this act of owning confers upon them a heightened status in life?
Targeted marketing and alliances with sportswear and urban streetwear designers have yielded a treasure trove for these luxury brands. Yet one can see a sly, almost mocking attitude towards their economically challenged customers who have to walk a wickedly spindly road to pay for such a privilege.
Luxury is Meant for Everyone
In places with significant income inequality, people with lower incomes live under great social stress. Their low societal position is more pronounced and has a tremendous psychological cost for many of them. To overcome these feelings of inferiority, some poor people purchase goods that create the impression that they have cash to spare, even when eating chips and sour cream for dinner. And people living in low-income neighborhoods–the relatively well-off compared to their neighbors- look side-eyed and worry that they’ll be misperceived as poor as the chump next door. Consequently, many people in this situation purchase expensive and conspicuous goods to ensure they stand out and are not pitied.
Google researchers recently examined search trends across the U.S. They found that people in states with relatively high income inequality were more likely to search for luxury brands than those in other states. For example, the frequency of Google searches for luxury brands is higher in Mississippi than in Iowa, relative to more generic Google searches, such as “weather.” Basically, poor people living next to heinously rich people are thirsty.
It is amusing and disingenuous when society criticizes young African American men from poor neighborhoods for purchasing Air Jordan sneakers or whatever overpriced athletic shoes are currently the rage. Society might be correct in thinking that such purchases are an economic burden for people already under financial stress. However, such criticisms fail to recognize the utter humanity of wearing luxury goods. I may pat myself on the back for eschewing visible signs of my wealth. But I can afford the courage to forego luxury goods. My status in society is secure, for most people wearing luxury brands emphasize their place in society and a cry not to be ignored.
Selling Couture to the Poor, but at What Cost?
Part of the prestige that makes designer companies valuable is their ability to control the market’s supply and adjust to different demand levels. In this manner, luxury brands create an artificial level of demand, and by creating exclusive baseball caps, small bags, and T-shirts, they provide the public with a way to be a part of the luxury world without needing to spend $100,000 for a Hermes alligator bag.
Designers have been found to produce more supply than needed, like Burberry, for example, and eliminate their surplus through incineration. In the past, they have destroyed more than $100 million of goods. For many brands, it is more favorable to absorb the cost of destroying their products rather than putting them on discount and diminishing the assumed value of the bag.
Designer companies’ cost of inputs is low compared to their product gross margin. According to an experienced leather bag creator, a Saint Laurent shouldn’t cost more than $250 to make, but the public pays $2,500 for it. Knowing this, it is clear that designer companies can destroy their products because the input cost is so cheap compared to the sales revenue size. Additionally, the opportunity cost of incurring economic loss is more significant than selling their product because, in doing so, the brand would lose its prestige. If they did sell at a discount, consumers would strategically wait until the end of the season to get the best price.
Economics of Luxury Marketing to Economically Disadvantaged
Designer collaborations, particularly sportswear collaborations, are everywhere you look. From the Reebok x Anine Bing collection to the endless stream of luxury houses partnering with sportswear giants like Adidas or Nike.
Studies in Europe predict a global athleisure market will reach a staggering $540 billion by 2027. This shift in consumer behavior—a preference for comfort and versatility, further fueled by the pandemic—has led to this impressive prediction. Think about it: how many times have you spotted someone sporting a pair of leggings while doing their grocery shopping, or a hoodie paired with extreme earrings, or sneakers in a club? It’s everywhere.
Faced with a more discerning consumer, luxury houses have identified a strategic goldmine in partnering with sportswear brands. These unlikely alliances offer several advantages: reaching new audiences, mainly the younger, digitally savvy demographic sportswear attracts. They also tap into an increasingly value-conscious market. A 2022 study by Deloitte LLP found that 72% of millennials prioritize experiences over material possessions, and this shift in spending habits is impacting the luxury fashion market.
For the past 40ish years, it has been recognized that a haute couture collection is a loss leader for a fashion house, But these creative and fantasy-laden clothes create a buzz and furor in the fashion world. The fame created by a haute couture collection allows luxury brands to create more affordable leather goods and accessories. For many fashion houses, these product lines make up a significant percentage of their profits; for example, it is estimated that up to 60% of Gucci’s 2023 profits are from leather goods and accessories, while runway clothes only account for 15% of profits.
The Art of Selling Couture to the Poor. Model: Phil Tiemann, Photographer: Flávio Iryoda.
Luxury brands count on exclusivity as a key to their mystique—a typical example of this marketing power is the history of De Beers. De Beers is a hyper-focused marketer, and they have singlehandedly changed the wedding industry. As we all may know, De Beers has a monopoly on diamonds and a severe stranglehold on supply. In the meantime, De Beers has convinced the world that diamonds give the appearance of rarity. While in reality, diamonds are commonly found. De Beers has done a brilliant marketing job, creating an allure and deep desire for the pretty, sparkly rocks.
Although luxury brands do not have this level of monopoly, they make up for that by selling in volume. Selling a large number of accessories and small leather goods provides significant profits and can be turned into another form of advertising if it is done carefully.
Another supplement to volume sales comes from utilizing celebrities to publicly promote designer products to their fans, and they sell a lifestyle along with the goods. Consumers, especially people with low economic resources, are convinced to buy luxury goods to relate to the influencer. In addition, these luxury goods will create the perception of wealth without possessing riches. This type of marketing is quite profitable; for example, in the first nine months of 2023, Moët Hennessy Louis Vuitton had a 14% growth in revenue. This wasn’t accomplished by only selling vintage champagne to rich people.
The Art of Selling Couture to the Poor. Model: Phil Tiemann, Photographer: Flávio Iryoda.
In reality, the majority of profit for these luxury brands comes from accessories such as bags, perfumes, and makeup, which also have significant profit margins. It is a very tight balance that luxury brands maintain. They need exclusivity to maintain an aura of desire, but they also need to sell a lot of t-shirts and lipstick to increase their profits. Nonetheless, if people everywhere were to start carrying Louis Vuitton bags or wearing Tag Heuer watches, the value of those products would go down.
And this is what happened to Michael Kors. In the late 2000s, Michael Kors wanted to expand their sales and “democratize luxury.” The company started to sell through its own retail stores, outlet stores, and department stores. While sales growth was strong initially due to more stores stocking Michael Kors products, the brand’s image was soon poorly damaged. Michael Kors was overexposed – there was too much of it. The company has struggled to recover since then. Why did people want Michael Kors in the first place? Because it was exclusive – it was luxury. However, if everyone’s wearing or carrying it, it’s no longer exclusive and desired.
The Potential Societal Cost
This kind of marketing harms people with low incomes. For example, In New York, the monthly middle-class income in 2019 was approximately $6,500. Shockingly, 24% of people in this income range reported owning a Louis Vuitton item. It’s apparent that designer companies know how to raise revenue, but one must consider the repercussions of marketing a false reality of wealth to the middle class. Their targeted consumers spend their limited disposable income on designer products, making adjusting to the changing economy difficult. Designer companies shouldn’t be restricted, but more clarity should be publicized about the purpose of marketing campaigns.
Marketing is truly powerful in fashion; take a Birken bag, for instance. Most people cannot just walk into a store and buy a Birkin bag, even with cash. The company requires a consumer to buy other Hermes items before considering selling a Birken bag. Think about it: how would you feel if Nike wouldn’t sell you some socks unless you walked into the store decked already in Nike?
The Art of Selling Couture to the Poor. Model: Phil Tiemann, Photographer: Flávio Iryoda.
Luxury brands have created a psychological situation where social status is given through consumption. They prey on people with low incomes and their psychology. In essence, luxury brands target people who want to look rich.
Rich people, in reality, do not desire or even care about showing off their wealth. The rich do not need to prove they are rich. And here is where influencers come into the picture. Brands sell you a costume to look rich, and influencers are used to make conspicuous wealth a desirable attribute. Marketing to people with lower incomes has a significant psychological aspect. They create an artificial desire to be part of the world of the influencers they admire. Thus, lower-income people can feel like they are part of an inner, more exclusive circle. Unsurprisingly, these influencers rarely paid for their luxury clothes, which is ironic and frankly a little sad. Luxury brands have made a mint of preying on insecurity. It is the “Pretty woman effect,” where people are treated shabbily and then overcompensate and spend excessive money on the luxury that excludes them.
This psychological desire to fit in creates the cycle of chasing after luxury items that keep people poor.
Will This Continue?
Luxury brands are having an increasing problem influencing millennials and Gen Z, who tend to value experiences over material possessions. According to a recent report, more than three in four millennials would choose to spend money on an experience rather than buying a product. This challenges luxury goods manufacturers to innovate with new services (such as repair services), experiential marketing, and intangible goods like NFTs.
Ultrafast fashion may also beat the luxury brands at their own game by offering up their styles and trends through cheap alternatives, bypassing the need for a label or logo.
So, will this type of marketing continue? Yes, of course, as long as aspirational consumers are ready to mimic influencers and have a psychological need to appear rich. Perhaps, Instead of targeting the obnoxiously wealthy and aspirational consumers, they should create a wider variety of product brands that do not rely on psychological manipulation. Only by doing so can they thrive and avoid being relegated to history’s dustbin as old-fashioned symbols of vanity and greed.