Luxury Goods Consumption
“During the last few years, the luxury market has sustained constant growth. In spite of the September 11 attacks and other events disruptive to global trade, the luxury market has grown from $20 billion in 1985 to $68 billion in 2000”(The Economist, 2002). Nowadays, more and more people know about famous brand products and are interested in luxury goods. The conception of luxury has exited since long time ago; Edward Twitchell Hall Jr, a famous American anthropologist said: “Luxury is things you have that I think you shouldn’t have.” In other words not everyone can afford luxury products that include expensive famous brand accessories such as watches, shoes, bags, clothes, cars and furniture. There are three factors that cause people to buy luxury goods: increasing wealth; social status, and brand effect.
Following the fast economic development the number of millionaires in the world increased rapidly. In 2004, there were 8.3 million millionaires in the world. The market research reporters predicted that in 2006 there would have over 27 million consumer...
People are often deceived by some famous brands, which they will buy as useless commodities to feel they are distinctive. People require brands to experience the feeling of being special. People spend their money to have something from famous brands, like a bag from Coach or Louis Vuitton which they think they need, yet all that is just people’s wants. Steve McKevitt claims that people give more thought on features or brands when they need to buy a product, “It might even be the case that you do need a phone to carry out your work and a car to get around in, but what brand it is and, to a large extent, what features it has are really just want” (McKevitt, 145), which that means people care about brands more than their needs. Having shoes from Louis Vuitton or shoes that cost $30 it is designed for the same use.
Veblen’s work was, and continues to be, quite controversial; however, his dissections of human behavior as it relates to social structure and consumption were far from inaccurate. Interestingly enough, it seems that his theories have even become increasingly accurate over time, as proved by the way conspicuous consumption and “Veblan effects,” have both played a significant role in changing not only the luxury fashion industry as a whole, but also in changing the image and symbolic nature of the luxury good.
The 80’s were a decade of great change. It became obvious that there was a widening between the classes. The middle class was disappearing and people took different approaches to dealing with this fact. One way of life that became synonymous with the 80’s was being a young, urban professional, or what people at the time coined a Yuppie. Due to the widening wealth gap, it became essential to market products as either upscale and downscale. Producers were forced to place their items in one frame of reference of the other, fancy of frugal. To sell items with the high price tag advertisers played on the yuppie habit of compensatory spending. Yuppies did not want to be confused with low class or middle class, so they spent in order to show their status to the world (Ehrenreich, 229).
The Millionaire Next Door gives us an eye opening view into the lives of millionaires and their life styles. Normally we have the impression that most millionaires are the ones who live the most visible wealthy lifestyle, drive the fastest cars and have the big houses on the lake. The Millionaire Next Door looked into these people's lives and we come to find that most of them live the same life we do. One of the main points of the book is how Millionaires live well below their means, they also believe that financial independence is more important then displaying high social status. The book also focuses on how most millionaires are self made and not wealthy from their prior generation.
Six years after deciding to be an independent public company in late 2000, Coach Inc.’s net sales had grown at a compounded annual rate of 26 percent and the stock price had increased by 1,400 percent due to a strategy keyed to a concept called accessible luxury. Coach crafted the accessible luxury category in women’s handbags and leather accessories by differentiating themselves on price, but matching competitors on styling, quality, and customer service. The accessible luxury strategy mirrors a focus (or market niche) strategy based on low costs. Coach concentrates on a narrow buyer segment and outcompetes rivals by having lower costs than rivals and thus being able to serve niche members at a lower price. Management believed that new products should be based on market research rather than on designers’ instincts. Coach utilized extensive consumer surveys and focus groups to gain insight in the market, and ultimately a competitive advantage over competition. Coach’s $200-$500 handbags appealed to both middle class consumers who now were able to afford a taste of luxury, as well as affluent consumers with the means to spend $2,000 on a handbag on a regular basis.
How does one earn the title of wealthy? Authors Dr. Thomas J. Stanley and Dr. William D. Danko have studied how people become wealthy for over twenty years. They have conducted research, written books, conducted seminars, and advised major corporations on whom the wealthy are and what are the characteristics of the affluent in America. The research for The Millionaire Next Door was comprised of personal, as well as focus group interviews, with more than 500 millionaires. A survey of 1,115 high net worth and/ or high income respondents was also compiled. The authors define the threshold for being wealthy as having a net worth of $1 million or more. This is one distinction that the authors make in comparison to what most Americans might perceive is the definition of wealth. As opposed to what most Americans in our society believe, a measure of an individual’s material possessions does not necessarily equate to being wealthy. According to the authors, wealth is what you accumulate and not what you spend. Based on the author’s definition of wealth, only 3.5% of American households meet their criteria for status as a millionaire. Of this small percentage, 95% of millionaires have a net worth between $1 million and $10 million. The authors chose to focus on this segment of millionaires because this level of wealth can be attained in one generation and by many Americans.
Luxury goods are not the necessities but are very much desirable to people which is supported by a share of money income. They are not easily available and affordable for everyone but due to the coming up of competition in market this has been changed. Nowadays, every individual wants to raise their self high and wants to be different from everyone. Since, the times have changed luxury goods have become more affordable for middle class consumers. Whenever we open our social media accounts such as Instagram, snapchats or news on internet or be it the reality shows, it is full of rich people showing off their dresses, bags, accessories etc. Such news put an impact on our inner thinking about our need to look and feel good through rich possessions. Several manufactured goods have become luxury goods as they are designer, durable and better quality. These goods are considered as luxury goods by the consumers because they play a role of status and class for those who showcase or owns them. These items are not necessarily better than less expensive substitutes are purchased with the main purpose of showcasing their wealth. These kinds of goods are object of socio-economic phenomenon which includes watches, jewelleries, designer clothes and accessories, large
Kapferer, J., & Bastien, V 2009, The luxury strategy: break the rules of marketing to build luxury brands. London: Kogan Page.
For one, luxury can be defined through good health. For another, luxury can be defined through comfort. To many, luxury is defined through lavish possessions such as cars or jewelry. Regardless of how we perceive luxury, there is a journey behind how we achieve it. Cartier produced an exquisite commercial to celebrate the brand’s history. With the worldwide icon, the leopard, we went through the odyssey of Cartier’s history. The commercial started with a leopard statue of diamonds and jewels coming alive which symbolized the birth of the legacy of Cartier, the start of the odyssey. Then we start watching the leopard visit significant places of Cartier’s history: China, India, and France. All these places are important to the luxury industry. After the journey across different continents, we finally arrive in Paris where Cartier was founded, where
The high pressure luxury brand industry has evolved over the last few decades from a small and selective to a multibillion dollar arena offering significant potential and growth opportunity for the luxury brands that compete within its realm. With many luxury brands competing for over $225 billion (The Economist, 2009) in revenue each year it is easy to see how strategy plays an important role.
Dubois and Czellar (2002) refer to luxury brands as those goods that can offer comfort, beauty and refinement. On the other hand, a prestige brand is referred to as a brand that has achieved a definitive level of accomplishment, either in the quality or performance. O’Cass a...
For several decades, as if, a typical undergraduate dream has been characterized with few major steps – getting prestigious high education, taking or buying a diploma, and consequently becoming a successful rich careerist with intuitively main goal to consume as much as possible in order to boost one’s utility at highest potential level. In this way of thinking, development of personal individualism and pursue of human values are left behind the curtains. Everything that can be seen on the scene of our being is mass consumerism, which slowly, gradually, but surely is transferring us into a hedonistic consumer society. According to an article in European Journal of Marketing, “A consumer society is defined as one directed largely by the accumulation and consumption of material goods. The term "consumer society" is used in a pejorative sense, coming from the perception that such a society will inevitably be hedonistic. It is the search for instant gratification that we traditionally associate with hedonism….”(41 Issue: 2007). In our way to gain deep pleasure, we are over purchasing items and gadgets which once were thought to be extreme luxuries. Most of the times, we are interested in what kind of IPhone we possess, whether to buy a tablet or a laptop, are we are driving more expensive and fancy car than the others, what is more fashionable – a pair of Armani jeans or a pair of Dolce and Cabaña trousers.
By 2002, Moet Hennessy Louis Vuitton was the world’s largest luxury products company, enjoying annual sales of 12.2 billion euros. LVMH carries the most prestigious brand names in wine, champagne, fashion, jewelry, and perfume. Upon entrance of this luxury product industry, LVMH was aware that they produced products that nobody needed, but that were desired by millions across the world. This desire in some way fulfills a fantasy, making consumers feel as though they must buy it, or else they will not be in the moment, and thus will be left behind.
-Status symbols: Sophisticated customers who value the distinctive, exclusive collection seem to value the corporate-branded version of luxury. –Philip Martiz, chairman of the board
“Despite worldwide softness in the sale of luxury goods, LVMH has cemented its position as the world’s largest and most profitable player in the category. To stay there it must keep its customers loyal and its brand strong and find new markets worldwide” (Hazlett C. 2004). That is why in its mission they state to represent the most refined qualities of Western “ art de vivre” all around the world. Their objective is to be the leader in the luxury market, continuing to transmit elegance and creativity. This poses some major challenges, the main one is to keep being the leader in the luxury market through a sustainable growth. The main problem to achieve it is the high dependency on three main countries, France, Japan and USA. This becomes a threat because if there is an economic downturn in one country it affects LVMH directly that is why.