Luxury goods

With increasing accessibility to luxury goods,[4] new product categories have been created within the luxury market, called "accessible luxury" or "mass luxury". These are meant specifically for the middle class, sometimes called the "aspiring class" in this context. Because luxury has now diffused into the masses, defining the word has become more difficult.[5]

Whereas luxury often refers to a certain types of products, luxury is not restricted to physical goods; services can also be luxury. Likewise, from the consumer perspective, luxury is an experience that has been defined as "hedonic escapism."[6]

"Superior goods" is the gradable antonym of "inferior goods". If the quantity of an item demanded increases with income, but not by enough to increase the share of the budget spent on it, then it is only a normal good and is not a superior good. Consumption of all normal goods increases as income increases. For example, if income increases by 50%, then consumption will increase (maybe by only 1%, maybe by 40%, maybe by 70%). A superior good is a normal good for which the proportional consumption increase exceeds the proportional income increase. So, if income increases by 50% then consumption of a superior good will increase by more than 50% (maybe 51%, maybe 70%).

In economics terminology, all goods with an income elasticity of demand greater than zero are "normal", but only the subset having income elasticity of demand > 1 are "superior".[7]

Some articles in the microeconomics discipline use the term superior-good as an alternative to an inferior good, thus making "superior goods" and "normal goods" synonymous. Where this is done, a product making up an increasing share of spending under income increases is often called an ultra-superior good.

Secular Rococo luxury or treasure binding for a book, using techniques from the making of gold boxes, in gold, mother of pearl and hardstone, Berlin, 1750–1760. By this time such lavish bindings were unusual.

Though often verging on the meaningless in modern marketing, "luxury" remains a legitimate and current technical term in art history for objects that are especially highly decorated to very high standards and use expensive materials. The term is especially used for medieval manuscripts to distinguish between practical working books for normal use, and fully illuminated manuscripts, that were often bound in treasure bindings with metalwork and jewels. These are often much larger, with less text on each page and many illustrations, and if liturgical texts were originally usually kept on the altar or sacristy rather any library that the church or monastery who owned them may have had. Secular luxury manuscripts were commissioned by the very wealthy and differed in the same ways from cheaper books.[8]

"Luxury" and "luxury arts" may be used for other applied arts where both utilitarian and luxury versions of the same types of objects were made. This might cover metalwork, ceramics, glass, arms and armor, and a wide range of objects.[9] It is much less used for objects from the fine arts, with no function beyond being an artwork: paintings, drawings, and sculpture, even though the disparity in cost between an expensive and cheap work may have been as large.[10]

Luxury goods have high income elasticity of demand: as people become wealthier, they will buy proportionately more luxury goods. This also means, however, that should there be a decline in income, its demand will drop more than proportionately. The income elasticity of demand is not constant with respect to income and may change signs at different levels of income. That is to say, a luxury good may become a necessity good or even an inferior good at different income levels.

Some luxury products have been claimed to be examples of Veblen goods, with a positive price elasticity of demand: for example, making a perfume more expensive can increase its perceived value as a luxury good to such an extent that sales can go up, rather than down. However, Veblen goods are not synonymous with luxury goods.

Although the technical term luxury good is independent of the goods' quality, they are generally considered to be goods at the highest end of the market in terms of quality and price. Many markets have a luxury segment including, for example, luxury versions of automobiles, yachts, wine, bottled water, coffee, tea, foods, watches, clothes, jewelry, and high fidelity sound equipment.[11] Luxuries may be services. The hiring of full-time or live-in domestic servants is a luxury reflecting disparities of income. Some financial services, especially in some brokerage houses, can be considered luxury services by default because persons in lower-income brackets generally do not use them.

Luxury goods often have special luxury packaging to differentiate the products from mainstream competitors.

Originally, luxury goods were available only to the very wealthy and "aristocratic world of old money" that offered them a history of tradition, superior quality, along with a pampered buying experience.[12] Luxury goods have been transformed by a shift from custom-made (bespoke) works with exclusive distribution practices by specialized, quality-minded family-run and small businesses to a mass production of specialty branded goods by profit-focused large corporations and marketers.[12] The trend in modern luxury is simply a product or service that is marketed, packaged, and sold by global corporations that are focused "on growth, visibility, brand awareness, advertising, and, above all, profits."[12] Increasingly, luxury logos are now available to all consumers at a premium price across the world including online.[13]

Global consumer companies, such as Procter & Gamble, are also attracted to the industry, due to the difficulty of making a profit in the mass consumer goods market.[14] The customer base for various luxury goods continue to be more culturally diversified, and this presents more unseen challenges and new opportunities to companies in this industry.[15]

There are several trends in luxury:[16]

• Democratization of luxury. Also known as masstige (from mass-prestige), is a marketing strategy that aims to make brands prestigious while retaining its affordability. [17]
• Globalization: Consumers in some countries are becoming wealthier, thus new markets are opening for luxury marketers.[18] Reports by consulting agencies like McKinsey predicted that East Asia will become the world’s largest personal luxury goods market, and China will consume half the global market value of luxury goods.[19][20]
• Consolidation: Consolidation involves the growth of big companies and ownership of brands across many segments of luxury products. Examples include Kering, LVMH, and Richemont, which dominate the market in areas ranging from luxury drinks to fashion and cosmetics.[21]
• Luxury brand collaborations. This marketing strategy demonstrates the potential of unexpected partnerships and co-branding opportunities between luxury brands and an unconventional partner seemingly at the opposite end of the design spectrum.[20] Collaborations include pairings of luxury brands like Fendi x Versace but also pairings with streetwear brands including skateboarding brand Supreme x LVMH, with celebrities such as Bad Bunny x Adidas, anime characters like Doraemon x Gucci, and now video game franchises like Fortnite x Balenciaga.[22] The collaborations are often limited edition collections.

The luxury goods market has been on an upward climb for many years. Apart from the setback caused by the 1997 Asian Financial Crisis, the industry has performed well, particularly in 2000. In that year, the world luxury goods market was worth close to $170 billion and grew 7.9 percent.[23] The United States has been the largest regional market for luxury goods and is estimated to continue to be the leading personal luxury goods market in 2013, with a value of 62.5 billion euros. The largest sector in this category was luxury drinks, including premium whisky, champagne, and cognac. This sector was the only one that suffered a decline in value (-0.9 percent). The watches and jewelry section showed the strongest performance, growing in value by 23.3 percent, while the clothing and accessories section grew 11.6 percent between 1996 and 2000, to $32.8 billion. The largest ten markets for luxury goods account for 83 percent of overall sales, and include Japan, China, United States, Russia, Germany, Italy, France, United Kingdom, Brazil, Spain, and Switzerland.

In 2012, China surpassed Japan as the world's largest luxury market.[24] China's luxury consumption accounts for over 25% of the global market.[25] According to the Global Wealth and Lifestyle Report 2020, Hong Kong, Shanghai, Tokyo and Singapore were four of the five most expensive cities for luxury goods in Asia.[26] In 2014, the luxury sector was expected to grow over the following 10 years because of 440 million consumers spending a total of 880 billion euros, or $1.2 trillion.[27]

The advertising expenditure for the average luxury brand is 5-15% of sales revenue, or about 25% with the inclusion of other communications such as public relations, events, and sponsorships.[28]

A rather small group in comparison, the wealthy tend to be extremely influential.[29] Once a brand gets an "endorsement" from members of this group, then the brand can be defined as a true "luxury" brand. An example of different product lines in the same brand is found in the automotive industry, with "entry-level" cars marketed to younger, less wealthy consumers, and higher-cost models for older and more wealthy consumers.[30]