Why We’re Bankrolling Luxury Brands: The Spending Habits No One Talks About

I used to think luxury brands were mostly for the ultra-rich. You know…celebrities, tech billionaires, the kind of people who casually drop $50k on a purse like it’s a pack of gum.

But here’s the plot twist you might not have been expecting today, turns out it’s not the super-wealthy keeping luxury brands afloat. It’s us.

Middle-class, working-class, upper-middle-class folks…we’re the ones shelling out for Louis Vuitton bags, Rolex watches, designer sneakers, and all those “status” items. In fact, recent reports show up to 75% of luxury spending comes from the middle and lower classes.

Yeah. Let that sink in while you’re counting down the days until the mortgage is due.

So why are we stretching our budgets, opening credit cards, and sacrificing savings to buy things that technically aren’t “for” us? And what’s really going on behind those luxury price tags?

The psychology of “aspirational” spending

Luxury brands aren’t just selling products, they’re selling a dream.

When you buy a designer handbag or high-end shoes, you’re not just paying for leather and stitching. You’re buying what it represents: success, status, belonging, a little piece of a world that feels slightly out of reach.

And luxury brands know this. They count on it to sell their stuff.

Most luxury marketing isn’t aimed at billionaires, it’s aimed at aspirational shoppers: people who want to feel wealthier, cooler, or more successful than their paycheck says they are.

And honestly, clearly it works.

A 2023 survey found that nearly 40% of Gen Z shoppers had gone into debt to buy a luxury item. And it’s not just young people, across the board, middle-class consumers are spending more than ever on luxury goods, even as inflation eats into budgets and groceries soar skyhigh.

It’s the ultimate “treat yourself” economy.

The real cost of a $4,000 handbag

Here’s where it gets a little wild, so hang in there with me.

That $4,000 Louis Vuitton bag…it probably cost around $200–$500 to make. Maybe even less in some cases.

Luxury goods have some of the highest markups in the retail world, a lot of times 10 to 20 times the production cost.

They’re not charging for materials, they’re charging for perceived value.

You’re paying for the brand name, the logo, the store experience, the marketing campaigns, the celebrity endorsements, the packaging, the exclusivity. The physical bag is almost an afterthought and made at the end as cheaply as possible.

There’s even a term for this: “Veblen goods.” It describes products where demand increases because they’re expensive. The price tag itself makes it more desirable, so the price tag goes up and up.

Basically veblen goods means that the higher the price, the more people want it, even if the actual item doesn’t justify the cost in the end.

The income breakdown

Here’s something not enough people realize as well, most luxury customers aren’t ultra-rich. According to Bain & Company, about 70-75% of luxury spending globally comes from middle-income households.

That’s people making anywhere from $40k to $150k a year, depending on country and region.

In the U.S., it’s often professionals, double-income households, or people prioritizing “investment” pieces even if it means cutting back elsewhere.

Meanwhile, high-net-worth individuals (who actually could buy endless luxury goods without blinking) account for only a fraction of sales.

Luxury brands absolutely love this split.
Why, you might ask. Because middle-class customers are repeat buyers. They save up, they follow drops, they get on waiting lists. They’re loyal in ways the ultra-rich aren’t, because for them, it’s emotional.

A billionaire isn’t “aspiring” to anything, they already have access. They couldn’t care less about lines or waiting for something new to be released. A few billionaires I’ve met or worked for bought tshirts from Costco and were too busy thinking about their businesses to care much about other things. But for everyone else, luxury purchases feel like a milestone.

The debt problem no one wants to talk about

Here’s where it gets a little heavy, but I feel like it needs to be said.

A lot of luxury purchases…are made on credit.

One survey found that almost 40% of U.S. luxury shoppers finance their purchases with credit cards, buy-now-pay-later services, or even take out loans.

And don’t get me wrong, these things might be fine for someone who can pay it off quickly, but for many, it’s debt that sticks around way longer than the designer shoes last.

And let’s be real, no handbag is worth 24% interest. Especially if the price tag is higher than a typical bag you get at Macy’s.

This cycle (feeling pressured to keep up appearances, overspending, paying interest, then repeating) keeps a lot of middle- and lower-income consumers stuck financially, even if they look like they’re thriving on Instagram.
I work in a luxury restaurant and you wouldn’t even believe it when I tell you how many people come in with their EMPTY designer shopping bags and arrange them on the table for the perfect photoshoot before ordering the cheapest entree and leaving without tipping. This is actually way more common than you want to believe.

(Speaking of hidden costs, did you see my post about how microplastics might be sneaking into your drinking water? Yeah… another rabbit hole of hidden things.)

How much does it really cost to make luxury goods?

Let’s peek behind the curtain for some fun in the sun.

Here are some average production costs vs retail prices for popular luxury items:

Of course, some brands use higher-end materials, handmade techniques, or small production runs, but for most big luxury houses, the markup is still truly enormous.

Why do we keep buying it?

At the end of the day, we’re not just buying clothes or accessories. We’re buying feelings of confidence, belonging, social approval, and a sense of achievement. Also a dash of dopamine.

And let’s be honest, sometimes a designer bag just feels amazing to carry.

But it’s worth asking: are we buying because we genuinely love the product, or because we’ve been sold the idea that we should want it?

And if it’s the latter, is it really worth it?

A more budget-friendly “luxury”

If you’re craving that elevated vibe without breaking the bank, there are ways to hack the system:

Buy secondhand. Sites like The RealReal and Fashionphile offer authenticated designer goods for a fraction of retail.

Look for dupes from quality brands. You don’t need the logo for great craftsmanship.

Splurge selectively. Invest in one or two pieces you’ll use constantly, instead of chasing every trend.

Personally? I’ve fallen in love with this sleek minimalist tote bag on Amazon…it’s under $50, looks designer, and holds up like a champ. A vibe without the credit card debt.

The bottom line

There’s nothing wrong with enjoying nice things, seriously, I’m not here to judge you.

Luxury, when it’s thoughtful and within your budget, can be joyful and great as a treat.

But it’s wild to realize how much of the luxury industry’s profits come from people stretching their wallets for brands that aren’t really designed for them in the first place.

Next time you see that $5,000 bag? Just remember: it’s not a $5,000 bag. It’s a $300 bag wrapped in a $4,700 story.

And sometimes, the story costs more than it’s worth.
A lot more.

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