PYMNTS Intelligence Alternate Banner June 2024

Luxury Brands Spend Billions for High-End Shopping Real Estate

Luxury brands like Gucci are reportedly spending billions to stay at high-profile addresses.

As The Wall Street Journal (WSJ) reported Saturday (April 6), these companies are worried that if they don’t snatch up their flagship stores, one of their competitors will purchase the property and evict them.

Last week saw Kering, which owns Gucci and Saint Laurent, pay $1.4 billion for a building on Via Montenapoleone in Milan, considered one of Europe’s “most expensive shopping streets,” the WSJ report said.

This purchase followed the nearly $1 billion Kering spent on a property on Fifth Avenue in New York City in January. Meanwhile, luxury brands in Europe have paid more than $9 billion to buy boutiques on the world’s top shopping locations since the beginning of 2023, the report said. 

Retailers, the report said, are taking advantage of rare properties becoming available due to a downturn in commercial real estate. For example, Kering bought a store on Fifth Avenue from real estate investor Wharton Properties which had been threatened with foreclosure.

The trend is happening as retailers are looking to high-end apparel and accessories to win over the biggest earners, as PYMNTS wrote last month.

The February/March edition of the PYMNTS Intelligence series “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck,” used data from a January survey of more than 4,200 U.S. consumers to get a glimpse of how those across income groups are spending their money. 

The results showed that the highest earners are willing to set aside a substantial piece of their paycheck for clothing and other fashion-related nice-to-haves.

“Specifically, the study found that those who earn more than $200,000 a year spend the greatest portion of their personal income on clothing, accessories and personal care items — 8.5%, versus the population-wide 7.2%,” PYMNTS wrote. “Moreover, consumers who earn more than $100,000 a year were the likeliest to say that clothing and personal care had a high or very high impact on their budget in the last 12 months.”

With that in mind, retailers are targeting this demographic, tailoring their apparel businesses to suit their needs. For example, luxury fashion eCommerce platform Mytheresa reported during its most recent earnings call that it is moving its focus away from “aspirational” deal seekers, in favor of prioritizing shoppers with excess cash on hand, per CEO Michael Kliger’s comments. 

He noted that shoppers in this higher income bracket “have the far better economics” as well as “far better loyalty ratios” and “far higher average order [value].”