Why do people buy luxury goods?

In class, we’ve learned about the demand curve for normal goods: when the price goes up, the quantity demanded goes down; and also the demand curve for inferior products: when the price goes down, people stop consuming them. This led me to think about the demand curve for luxury products: when the price goes up, more people want to buy them. What motivates people to purchase those expensive goods when they already have much cheaper alternatives? I believe there are a variety of reasons behind it.

First of all, luxury brands are not only expensive, but they are likely to be exclusive and sophisticated. Some people purchase luxury bags because they are eye-catching and of high quality. For instance, a high-end designer-bag may cost over $1000 and there are plenty of less expensive substitutes, but still, a luxury bag tends to have top-notch material and special design. (people who buy them believe so)

For some people, luxury brands represent a sense of success, accomplishment, and social status. They feel good and proud about their buying experiences because luxury seems “exclusive” and it is a status symbol. Indeed, in the luxury industry, “experience and perception are far more important than utility.” For instance, Valentino Spring 2015 Haute Couture is a high fashion women’s clothing collection. “Today only 2,000 women in the world purchase couture clothes and only 200 are regular customers.” Often, designers will loan clothes to super models and celebrities for publicity. Because it is custom-made and it requires delicate hand work, luxury clothing cannot be mass-produced and it gives a sense of uniqueness.

lvmh-hermes

There are also some people who just love luxury labels and they buy luxury just for the “labels’ sake.” They purchase overpricing goods just for the luxury logo. According to an article in Forbes.com, “Luxury Brands and Evoking Feelings of Competition.” Feelings like competing with your friends, colleagues, and even strangers are universal. Suppose that your friend has a new sports car, it may sound silly, but it may result in increasing your luxury spending. Thus, these kinds of competing feelings play a vital role in today’s advertising/marketing techniques such as celebrity endorsed products.

In addition, different backgrounds and cultures resulting in people from different countries have different values and attitudes towards luxury. For example, researchers from University of Delaware concludes that American consumers generally buy goods for “self-fulfillment,” rather than please others; while Germans and Italians focus on function, “placing emphasis on quality standards over prestige.”

Nowadays, luxury goods are more accessible. You don’t have to go to luxury boutiques, but rather Neiman Marcus, Nordstrom, Bloomingdale’s and varied online stores are provided luxury goods. Or you even can buy luxury via Amazon. Gucci for example has made Amazon their official authorized online retailer.

People value luxury goods for varied reasons, not only because of their exclusivity and display of owners’ wealth and prestige, but also due to the increasing accessibility of most luxury goods and their ability to stir up competitions among friends and acquaintances.

Articles:

http://www.economicsonline.co.uk/Competitive_markets/Demand_and_income.html

http://www.forbes.com/sites/arieladams/2013/05/23/luxury-consumers-value-products-not-buying-experiences/

http://www.infoplease.com/spot/fashionside1.html#ixzz3QZSqeckK

https://aytm.com/blog/research-junchttps://aytm.com/blog/research-junction/building-a-brand-based-on-emotions-competition/tion/building-a-brand-based-on-emotions-competition/

http://www.udel.edu/udmessenger/vol21no1/stories/research-briefs.html

http://www.vogue.com/slideshow/9073685/valentino-spring-2015-couture-runway/#1

http://www.luxurydaily.com/98pc-of-affluent-consumers-shop-online-unity-marketing/

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