The $1,000 ‘micro’ handbags luxury brands are pinning their hopes on

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Subscribe to enjoy similar stories. To spot a potential comeback story in the luxury goods industry, look for the brand with the smallest handbags. Luxury companies have a lot riding on the “super mini" purses and $1,200 wallets on a chain they launched in recent collections.

What looks like a frivolous trend is part of a push to win back middle-income shoppers and fix wilting share prices. Demand for luxury goods is weak now that consumers in China, Europe and the U.S., who together make up around 70% of global luxury sales, have all turned cautious at the same time. But brands also overplayed their hands during the pandemic by raising the price of their goods so high.

On average, luxury products are 55% more expensive today than they were back in 2019, HSBC estimates. It is harder for middle-income shoppers to find a luxury handbag that costs less than $2,000, so they are showing up less in brands’ stores. Luxury companies sorely miss these customers.

Although they don’t buy the biggest-ticket items, middle-income shoppers purchase in big volumes as a group. More than half of all global luxury purchases by value are made by 330 million or so people who spend less than €2,000 a year on expensive handbags, clothing and jewelry, according to Boston Consulting Group—equivalent to $2,237 at current exchange rates. Sidelining these spenders has backfired the most for brands like Burberry and Gucci that didn’t have a superwealthy clientele to begin with—at least not in the same league as Chanel or Hermès.