B (5:11)

Wow.

A (5:11)

Yeah. And at the same time, there are 50 million fewer luxury buyers and customers in the world than there were two years ago. That's data from Bain. So that means essentially there are fewer luxury customers. There's 50 million fewer people, but they're buying things that are 60% more expensive. So each individual purchase is worth more to the brand. So they don't mind as much if it's a smaller subset of people. I will pause there. I mean, you've written about this recently. What are your thoughts on that? Top end?

B (5:41)

Yeah, it's interesting because it's not just going to be luxury brands now that are going to be catering to those ultra high end kind of customers. The exec that I spoke to, Nusi CEO for Malone Sullier, Andrew Wright, is kind of incoming. A time where the brand typically kind of served a wealthier kind of middle market. You know, someone who's kind of buying shoes for special occasions. And then they had a small subset which was kind of a very exclusive customer. And now they're kind of pushing into that more by offering a kind of like custom shoe order from Harrods. And so they're leaning into that. They're leaning into private clients, especially with custom shoes. It means that they're basically kind of tending to a wider category for footwear. They're not just thinking about their main models, they're thinking, okay, well we want something which is a little bit different and a little bit more customized to their customer. And I think that that's what we've been covering over the last couple of years as well with the luxury briefings. I think we've done a couple of packages in the past where we've seen that the luxury side of things has only kind of evolved. Like my Teresa keeps pushing into experiences. There's a lot of kind of interest in making VIPs felt, understood, valued. Those kind of things are so important with VIPs that I think that we're going to see more brands actually catering to those customers or offering something special to them. Whether that is kind of purchases with experiences or kind of super high end products. Especially for department stores, I think that that's something that we'll see even more. If the K shaped economy Continues.

A (7:27)

Yeah, definitely A lot more focus on clientelling I could see happening. I've heard this many times over the years. But the super, super high end customer, they want to walk in and have someone have their name written down in a notebook, not in a computer system, and recognizes them as soon as they come in and walks them through the whole thing. It's a lot more high touch. It obviously takes a lot more investment, but also ultimately, hopefully that person will spend a lot more. There was a concept I've been thinking about a lot recently is from gambling. There's a term called whale, which is basically. You've heard of that, Zofia. It's like most people who gamble, gamble a little bit and maybe they lose a little money and then they have a drink at the bar and they leave the casino or whatever. And then there's a small group of people who spend thousands and thousands and thousands of dollars and just can't help themselves. And like that's where a casino makes its money is from those handful of people who, who just fork over tons of money. The same term is used also in like various predatory, like mobile games. If you've ever played like a Candy Crush type thing, it's like, and you're like, who is buying, you know, $10 worth of gems to play Candy Crush, whatever it is. It's like most people aren't, but 1% of people are and they're spending so, so, so much money. So that concept is well known in business, not just in fashion. We could talk about the sustainability of that idea, but maybe we save that for our third topic of kind of discussing the winners and losers here. But anyway, to go back to your point, I think you're right that the focus on clientelling experiences those kinds because you can only raise prices so much. I mean, you can raise prices as much as you want, but it's like there are other things you can do to focus in on that rich customer beyond just raising the price. It's like having more one on one time, like more, you know, personal shoppers and account managers and you know, people who are like, when they walk into the store, there's like a team of people ready to, you know, serve this.

B (9:31)

Customer, do their bidding.

A (9:33)

Yeah, exactly. Exactly.

B (9:35)

Yeah, I think there's going to be more of that and some of the stuff that we covered earlier with this year with kind of specialty retailing, like some of these boutiques now are going into furniture or like opening up, you know, exclusive kind of handbag locations. Like that's something that's catering to a very high end customer. You know, there's private entrances if you know, like the Chanel second floor for private appointments. Like that's the kind of environment that brands would be setting up for these customers. And I think the other winners, I guess from the luxury boom with the K shaped economy are going to be the kind of premium resale consignors. So Realreal and others, maybe those in the watch space too would also benefit because a lot of these wealthy households will be cycling out handbags and watches to make room for new ones.

A (10:30)

Yeah, I also wonder if that will make it tougher for newer luxury brands to kind of like emerge or become, you know, break into the system. Because so many of the like most popular luxury brands are decades old or over a century old or something and they're very established. And if you are one of those like super high end customers and you've got, you know, however much money you're going to spend, are you going to do it with like a newer independent luxury brand that's just emerged? You might, if you're like, if they have a lot of buzz and you're very fashion conscious or maybe you just go to Chanel. It's like everyone knows Chanel. You know, it's good. Like, you know, it has prestige. It's like that's like the safer bet. I don't know, I could see that being an issue as well. But that's already really hard for new luxury brands to crop up anyway. So maybe that will, will not really change that much.

B (11:24)

No, I agree with that. I think that there is an opportunity for, for those kind of younger luxury brands, especially in the pursuit of originality when you know a lot of stuff is going to be kind of AI create too similar. I think that everyone doing the same quiet luxury does get a little bit boring. But on the other hand, luxury customers also want to have goods that they are, have hold value. So you know, we've seen like a rise in investing in jewelry. I'm going to say that, you know, a lot of that will be similar across categories and a lot of that is kind of reliant on old names. You can't get quite as much money for a new luxury brand than you would for, you know, a Chanel bag, for example.

A (12:06)

Yeah. I also want to say one more thing. Not just luxury. I wanted to also touch on like premium brands who are not necessarily luxury but they are pricey, if that makes sense. I had a story out this week. I talked with Red Wing, which is an American Brand that makes work boots. They're extremely high quality boots. They're not that cheap. They're like the cheapest is like $300, but they could be up to like 500 or more. But they're not like luxury in the sense that they're very functional. They're worn by tradespeople and construction workers and they last for forever. And they're made in the usa. So all of that, I think of luxury as the price is kind of marked up for brand reasons and prestige. And I don't think this brand is like that. But they are not cheap. They did raise their prices like 15% this year. And I think a brand like that is in a unique position. Chanel raises prices. I keep bringing up Chanel because I feel like they're known for this, but they raise their prices just on a whim with no explanation given. And they don't need to because it's like their profit margin is so huge. Red Wing or a brand like that, the pitch is not it's luxury, it's prestigious. Everyone's going to be like, ooh, you're wearing Red Wing. The pitch is they're good boots that will last forever that you can like go to work in. And I feel like they are also kind of pressured to raise prices or, you know, they actually did a collaboration this year with Fendi which is kind of pushing them into a little more luxury, fashiony kind of place. Just because that's who's like, you know, who is buying stuff right now. But I do wonder about how a brand like that will handle a K shaped economy because I know, I feel like I'm repeating myself. I don't think they're luxury in the same, like cultural sense, but, but from like a price perspective, they are priced kind of on the higher end. So how do they convince their non luxury customer? Like, I imagine there's a lot of people who buy Red Wing who have never bought, you know, Gucci or whatever. Probably there's a lot of overlap too, but I'm sure there are people who haven't. And how do they convince that customer that like you need to keep buying our stuff and the price is going to go up, but it's still worth buying. Even if you're everywhere else, you're cutting back. You know what I mean?

B (14:27)

Yeah, I mean, I think it's actually what you just said. I mean, the fact that it's made in the USA is a big selling point I think for a lot of customers now still thinking about the quality of boots. That's going to be a factor that is important. If they have repair programs, that's something a lot of luxury brands have brought in. That also boosts the value because it means that, you know, you can have. It's like a Le Creuset pot, you know, you can have it for life and just get it repaired again and again. So it's not just a one off purchase, it's almost like an investment. I think that's very relevant.

A (15:01)

Is there anything else you want to say about this top end before we move and talk about some of the bottom end of the K?

B (15:07)

No, let's move down and let's see what's happening in the lower end.

A (15:10)

And then when we get to, when we finish talking about that, we can synthesize and talk about some of the, the overlap. But yeah, so at the bottom end of the K, the complete opposite, we have brands and customers who I think are being pushed downward. I almost think of it as like two treadmills, like facing away from each other. If you're above, you're kind of like incentivized to move up. If you're below, you're incentivized to move down. But there are obviously like, there have been layoffs by the thousands across the US that we've talked about. It's funny, like the jobs reports, the federal government is like, oh, we don't have the data, sorry. Which is I think very suspicious. But like everyone I know, you know, anecdotally, but everyone and anyone I know who is looking for a job is like, it is the worst it's ever been. I think it's pretty rough out there. Like I've said many times, wages have stagnated for like decades in the US and then you have brands who are the opposite of the luxury brands where their pitch is it's a good price, it's affordable. So now their incentive is if their customer is pulling back even more, do they have to push lower to meet them? You know what I mean? I have some examples I want to talk about, but I can let you start. What are your thoughts on this end of the chart?

B (16:29)

Yeah, I mean, I think because we've been speaking for quite a few years now about fast fashion and ultra fast fashion, the reign of Shein and Temu. It's kind of almost like we're past that now. And I think a lot of customers are not really looking for just items which are as cheap as possible, but they're almost like shifting categories. And I think that right now, especially with how Bad things are economically, it's not even the opportunity to have a clothing haul. It's like I don't really want to have a clothing haul because I want to have small treats or we're prioritizing essentials or we're really in debt. So I think that there's, there's less of a connection I think between kind of wanting apparel nowadays. I think especially kind of post pandemic, it's only really like essentials that you're going to be investing in. I think the brands that typically do well in these kind of mid or mass market lower ends of the KKK economy is the, you know, the gaps calls, you know, even Zara sometimes or Mango. Those are the brands that are going to be doing well where they're still kind of high street but not necessarily like a sheet nor a temu.

A (17:44)

Yeah, no, I think you make such a good point. I hadn't thought about this, but there's a limit to how much cheaper you can go before you just stop buying that thing at all. If you're buying handbags, you could buy a cheaper handbag or you could just not buy buy a handbag at all. But you mentioned like treats and stuff like that and I'm glad you did because I wanted to mention a great example of someone who is down in this bottom end of the K shaped economy and is thriving is TikTok shop, which is they sold third quarter of 2025, they sold $19 billion worth of merchandise and for reference, eBay sold 20 billion and eBay is like 30 years old and TikTok shop is two years old. TikTok shop has become huge and so much of the product, like you can get luxury stuff through TikTok shop. There was a Bloomberg story the other day about people buying $11,000 handbags through TikTok shop. But I think a lot of the product is super cheap. Sometimes the sourcing of it is a little sketchy, but it's very impulse buy centric. It's like I can't even think of a good example. You could buy a little T shirt with a funny graphic on it or something. Things that you're probably not considering these purch super deeply and comparing prices and features. You're probably seeing a TikTok and there's a link and you press it and buy it. It's like they make it very easy and the price is so low that you're like who cares? Like you're not even thinking about it. And I think that's the kind of thing that probably, if people at the lower end of the spectrum are buying, it's probably going to be essentials and then stuff like that. Like something that's like literally a couple dollars that they can just buy without really thinking about that much.

B (19:32)

Yeah. And I think that that's got a lot to do with the entertainment aspect of TikTok. It's like, okay, we have live shopping, so that's something which kind of mixes entertainment and shopping. And all of the videos are shoppable. So essentially it's not really a considered purchase. Like you mentioned, it's almost just like you're watching a video, you see something nice and therefore. And I think without that entertainment link, no one would be buying these things, which is quite interesting. Again, comparing it to Shein and Temu, because that one was very shopping focused. It didn't really have that entertainment value as much. And now, just because of that entertainment ad, TikTok chop is doing that well.

A (20:13)

Yeah, I think you're right. The narrative and storytelling element, again, it just adds to the ease of just buying something without thinking too much about it. You mentioned Shein and Fast Fashion. We don't have to spend long talking about them, but they're all growing as well. Shein's revenue in the UK is up 32% this year, I think. I'm not sure what it is in the US but it's growing around the world and I think that's part of it. I also wanted to mention Nordstrom, which I think is another good example. Nordstrom obviously has lots of premium brands, but Nordstrom Rack has been performing super well. I talked about this on our recent joint podcast with the Glossy Beauty Podcast and modern retail. They have a full section of the Nordstrom store in Manhattan dedicated to under $100 gifts. And not in the Nordstrom Rack. This is in the regular Nordstrom store. That's like there for the holidays. They have this installation. It's all things under $100. It feels very much aware of the fact that people are stressed and spending less and they're like, here's the spread of kind of. I mean, they're more expensive than a TikTok shop. Impulse purchase. But it is a little bit like stuff you can just grab. You know, it's not too expensive. It's pretty easy. Yeah. So I feel like they're leaning into that as well. Obviously through Nordstrom Rack, but through the main store as well.

B (21:36)

Yeah, I think you've seen that with TK Maxx in the UK does very well during these kind of Times because of the fact that their discounting is so heavy. I think a lot of brands that are offering meaningful discounts, you know, will be winning in the K shaped economy because customers will be essentially looking you across brands for whatever's the best basic. And I think what we kind of mentioned with the luxury end is that a lot of stuff ends up looking similar. You have that on the lower end too. If there's five different brands offering you a white T shirt, you're going to go for the one which is most likely going to be cheapest. And I think that customers, especially now with the access to AI shopping tools, will be doing a lot of cross checking to make sure that they are getting the best possible value for their buck. And all of that middle ground is essentially getting squeezed either top towards more luxury and high end items or kind of more downwards. But I think most customers will be mostly shopping across the bottom end with some items maybe in the top end. So things like handbags for example. Brands like Coach do very well with that because even though that's a higher ticket item, it's not necessarily a luxury purchase and something that people still see as worth the value. I wanted to kind of also mention the kind of importance of rental. Sorry. And resale models as well and kind of how much those ones are going to be important for that affordability angle. You know we've seen on the kind of resale side of things, Vinted Depop they are all doing very well in Europe and I think that's the same for like US counterparts. It's just a very good environment right now for resale because so many people are looking for items that they know are probably going to have an inflated price in store. If someone else is selling it peer to peer, why not buy it there?

A (23:35)

Yeah. Resale and rental I think are absolutely seem primed to be winners in this scenario and that's actually a good segue. Let's talk a little bit about winners and losers. Who else we think might do well in this scenario we already mentioned? TikTok Shop I think is clearly doing great and probably will continue to do great. One thing I think is a concern is like so the constant trade off between the top and bottom ends of American society economically is that there's very few. Like the 1% is the 1% because there's only one of. They're a small minority for luxury brands. I mean obviously if you can cater to an ultra wealthy customer that's great because they have lots of money to spend. But it is a Little bit like eggs in one basket type scenario. You know, if you're really reliant on a very small slice of customers, you're also more vulnerable to any fluctuations in that, that slice. So for example, I'm thinking a luxury brand, probably one of the most likely things is there's some credibility damaging thing. Like we've talked about many recent probes or investigations by regulators into how certain luxury brands are made. If you're, if you're a luxury brand and your whole thing is wherefore like this very discerning wealthy customer and then an investigation comes out that shows that your product is made, you know, in this cheap way that can damage your credibility with that small slice. And if those people leave, like that's all you have, you don't have a lot of backup kind of customer segments to lean on. So that's just a hypothetical. That's like one possible concern I think of going really hard on that direction of the K. What do you think?

B (25:22)

Yeah, I agree with that. I think it was Federica from Bain who also said that it's going to be a really tough environment for luxury brands in the coming year. Because what you said earlier right at the beginning of the episode, it was about the luxury customer group has actually been getting smaller over the years. And so if that group continues to get smaller and the purchases don't increase, basically your customer acquisition gets down to almost zero. You're relying on the customers you have and even they probably won't be buying an insane amount of luxury goods. So are you happy with that level of accessibility or is that push into exclusivity kind of damaging your wider perception or is that's something that you want? You know, there's a lot of brands as well that have been growing slowly and that's something that they're absolutely fine with. But because luxury has shifted to a more kind of mainstream model over the last 10 years, you know, especially if you're thinking about LVMH or I don't know, even Prada. Like those customers are aware of the brand because of the amount of marketing and kind of films and even the kind of E Commerce, all of that was relatively accessible. If that door now closes, it's going to be a very different kind of perception of the brand and it might damage things even more. There's no kind of accessible entry points right now for a lot of customers. Everything has to be over $100 or 100 pounds and customers just really can't afford that. So yeah, I think that for Luxury, it is a little bit of a worrying time still. And even though the luxury economy in general is supposed to improve, I don't know if there's going to be enough of an improvement to battle it out against this, this new kind of economic reality.

A (27:13)

Yeah, I also feel like the structure of the K shaped economy is kind of just fundamentally unstable. And so even if luxury brands are right now kind of doing well with the super wealthy client and they see income and wealth inequality growing and they're like, great, our customers are getting more money, it's like that might be good in the short term, but if that leads to a more unstable economy that fluctuates wildly and lead salt source at all sorts of strange political and cultural and economic events, that's like maybe not good long term. The other I wanted to mention quickly, just because we talked about it a little bit before the recording like a week ago, companies like Quince or Italic, whose whole thing is get the luxury product, but it doesn't have the brand on it, so it doesn't have the luxury markup. I could really see them kind of going either way, like either doing well in this scenario because people who can't afford the luxury buy it or not because they're kind of still not super cheap. Like their whole thing is like some of those bags or whatever you can get from Quince, they're cheaper than a Chanel bag, sure, but they're still not super cheap. I think they're probably doing well though. I was looking it up. Their quints specifically, their revenue is over $700 million this year. They just raised 200 million in fundraising and hit a $4.5 billion valuation. So it seems like things are going well there and there's confidence. So maybe they are banking on this scenario being good for them.

B (28:41)

Yeah, I mean, I think it will be because again, any opportunity to cut out a middleman for customers will be seen as a cost saving and they still want quality goods. I think in the west in particular, you've been kind of plagued by a lot of very kind of badly made apparel, badly made shoes, accessories. And people are just a little bit tired of having to buy the same things over and over instead of investing in something that does stand the test of time. And I think that there's going to be a bit of a push from brands into those categories, the heritage items that they're really well known for, the items that have that durability value. And I think that brands or companies like Quince or Rise and Fall Italic all of those are going to be the winners in this sense because they're offering that quality. And as long as that holds up, because obviously that's something that's also been under question this year, then there's no problem.

A (29:40)

Yeah, we're just about out of time. But I want to end with one thing that Charles Gora, who's the founder of Rebag, told me a couple months ago. We were talking about prices and the economy and some of this kind of stuff. And he was saying even the wealthiest clients, the wealthiest customers who come into Rebag, quibble about price. They'll be spending $10,000 or more on a bag and they're still like, can I get it for $100 cheaper? He told me this to illustrate the point that people are always sensitive to price changes. Even really rich people don't want to part with their money if they don't have to. So I don't know. I think there's a lot to unpack here. All of these things. We've sort of touched on a lot of this in various episodes over the last year or two because they've all been swimming around for a while and I'm sure we will talk about it more. But as always, we will be covering both ends of the K and hopefully the two ends converge back into some sort of other letter. Maybe we'll be doing an R shaped economy in a coup couple years. I don't know. This was a great conversation. Zofia, thank you for joining and for sharing your insight.

B (30:50)

Thank you, Danny. It was a pleasure.

A (30:57)

And thank you for listening to the Glossy Podcast. Don't forget to give us a rating and a review on Apple Podcasts or Spotify, wherever you listen to this, because that helps us out so much. And don't forget to subscribe to the Glossy Podcast to hear interviews with industry insiders and week in review segments where we break down the news. The new episodes come out every Friday. Until the next time. Thanks for listening.