After years of aggressive price hikes, luxury brands have pushed customers away, creating a golden opportunity for mid-market fashion. Uniqlo and Zara are capitalizing as sales surge, while LVMH sales slid more than expected. The mid-market segment, defined as apparel priced between $50 and $300, is experiencing the fastest growth in apparel, according to McKinsey. A fifth of luxury shoppers have abandoned high-end stores since 2022, per Bain & Co analysis, seeking more affordable yet stylish alternatives.
To attract these customers, Uniqlo has partnered with JW Anderson, founded by Jonathan Anderson, and Mango has collaborated with Victoria Beckham. Both Uniqlo and Zara are raising prices and gross margins, reflecting growing pricing power. Investors are favoring mid-market brands: five years ago, Fast Retailing’s premium to LVMH was roughly a third on a forward P/E basis.
Now, it is well over double, according to S&P Capital IQ. Luxury companies face a challenge—cutting prices risks brand destruction, especially for those charging thousands for handbags. Quality and cultural cachet may be their last refuge, but with mid-market brands delivering trendy looks at accessible prices, many customers may never return to luxury.
Source: Financial Times Companies · Summarized by HeadlinesBriefing