Everybody wants to be a premium brand in a tough economic environment

• “The luxury customer, the affluent consumer, has become more and more important to every single partner that we talk to,” Nick Van Sicklen, founder and CEO of luxury marketing agency Interluxe Group, told me in May. “Whether you’re a watch brand or a hotel or a tourism destination, people want the higher spenders — the people who can travel farther, stay longer and spend more.” 

• “Consumers are spending selectively,” Belardi Wong President Polly Bickel Wong told me during a conversation in June, in which we chatted about consumer sentiment. “Even outside of our own data set, all of the other industry data we’ve seen, definitely for the last year, [has indicated that] there have been fewer people buying, but those who are are spending more.”

Even in boom times, you’d be hard-pressed to find a CEO that doesn’t want to go after high spenders. But there are some factors that seem to be making more brands go after a more premium customer with a greater sense of urgency.

• We are increasingly living in a K-shaped economy. Moody’s data shows that “spending by the top 10% grew 62% between the third quarter of 2020 and the third quarter of 2025, more than any other income group.” 
• Higher-income shoppers have a reputation for being more brand-loyal. A 2018 study from Morning Consult showed that among people with at least $100,000 in annual income, 29% of respondents said they tend to be loyal to specific brands, compared to 19% of overall respondents. 
• This notion has been challenged, however, in the age of tariffs and sustained inflation. The personal luxury market decreased 2% in 2026, according to Bain & Co research, as luxury shoppers grew frustrated by continued price hikes. Half of all luxury shoppers now consult the secondhand market before buying new, according to Bain & Co. 

I asked some of my sources: Does it feel like every brand is trying to go after a luxury customer right now? They said, generally, yes, but they couched it in a few different ways. 

• “Where we try to help our companies with is: How do you find your right consumer?” Mike Duda, managing partner at the investment firm Bullish, said. “And, what’s more, how do you lock into them? Because if you do, they tend to be more brand loyal, at a time when brand loyalty is declining, and they tend to tell other people about [your product].”
• He said there’s also growing desire to go after customers who aren’t drawn in to a brand by discounts. “How do you attract a consumer that is not as sensitive to 20% off, or buy-one, get-one free?”
• Meanwhile, Aaron Luo, founder and CEO of bag brand Caraa, told me, “We’ve been intentionally building out this strategy for the last three years … to go after the premium customers.” 
• Caraa sells everything from backpacks to baby bags to weekenders to bags designed for specific sports, like tennis and pickleball. To give a glimpse into Caraa’s pricing: Its large Stratus backpack typically goes for around $270. 

In Luo’s eyes, there is a difference between a premium customer and a luxury customer.

• A premium customer has a combined household income of $500,000. “She’s somebody who likes to shop premium and luxury brands, including [Maison] Goyard, Dior, Gucci. But she also has canvas bags that she wears on a day-to-day basis,” Luo said.
• It’s a customer who cares about function, not just fashion. 
• With premium customers, he said, “We want to compete based on quality and based on design. You are paying a premium for our designs.”
• Meanwhile, a luxury customer, in his eyes, is more driven by status and logos. “It’s always about the overall design aesthetic: Is this interesting?” Luo said. ” And is this logo good enough for what I want to wear?” 
• He also thinks creating a luxury brand is a multi-generational game. “You have to have a pretty deep war chest to be able to create a romance around the brand over time,” he said.

How, then, has Caraa sought to go after a more premium customer? 

• Investing more in R&D first and foremost, Luo said. If premium customers care more about product quality and design, that meant Caraa had to focus even more on that. 
• Luo estimated that Caraa is probably spending close to 3X on R&D and marketing, compared to what it spent four years ago. (Inflation, of course, has also played a role in that.)
• “Design is very costly because of the different iterations and sampling costs that come with that,” Luo said. “We’re spending a lot more because we want to capture that premium customer.”
• Caraa has also invested in more collections designed for specific sports that attract more affluent individuals, such as tennis and fencing. 
• Key to these collections are small touches that show Caraa understands these core audiences. As Luo previously told Modern Retail’s Julia Waldow, the brand’s fencing collection, for example, is designed to carry everything fencers may need during a tournament that could last for several hours.

Luo argues that brands can’t reach higher-income customers through marketing alone — it takes multiple product cycles to establish a brand as more premium in the customer’s eyes. 

• “You cannot go to an AOV of $120, … to an AOV of $350 or $400 overnight,” he argued. 
• “If your product doesn’t resonate with [a higher-income customer] because you have been perceived as a discount brand or value brand, a customer is not gonna buy your stuff.” 

In other words, it takes a war chest of spending. That explains how a company like Wayfair has been able to more successfully build out a new luxury platform.

• “We launched Perigold in 2017 with a simple thesis: The U.S. has roughly 15 million high-income households that together spend more than $100 billion a year on their homes,” Wayfair CEO and co-founder Niraj Shah said during the second-quarter earnings call. “Prior to our entry, this customer had no real digital destination that matched the way she actually wants to shop.” 
• Since luxury customers care so much about service, Wayfair built free white-glove delivery into the Perigold model. 
• Physical stores have also been key to spreading the word about the Perigold brand. Wayfair has opened two Perigold stores within the past year, in Houston and West Palm Beach. 
• “About 20% of our store staff are trained designers, offering complimentary design services, both in-store and virtually, and those stores are already showing us average order values even higher than what we see online,” Shah said.