Owning a Chanel bag, a pair of Balenciaga sneakers or a Cartier bracelet may be the dream of many. But are they really worth the hype?
When we hear the word “luxury”, we think of the sparkle of chandeliers; we think of the purr of a sports car engine; we think of…gold-plated staple pins? Don’t we?
But what makes these coveted items worth so much more than the average ceiling lights, the average family car and the good old staple pins that you can get a dime a dozen? Well, as they say, the devil is in the details, and the value is in the label of luxury.
What is luxury?
A luxury item can be defined as products or services that are not considered essential to everyday life and are associated with affluence. As people’s income increases, so does the demand for things that one couldn’t previously afford while trying to meet necessities.
Luxury items are those whose demand increases with their prices.
And what isn’t?
Non-luxury items are those whose demands are higher when incomes are low. Often these are items of lower quality, making them more affordable for those with fewer earnings. In the domain of fashion, these would be well-known fast fashion brands, like H&M, Forever 21, Urban Outfitters, Zara, Levis, Abercrombie & Fitch, etc. These brands are massive global franchises and extremely popular due to their high affordability, allowing people to easily access to the latest trends. Their clientele mainly constitutes individuals from lower or middle-income backgrounds, making these brands the go-to for most clothing and apparel needs of these groups.
The allure of (artificial) exclusivity
Luxury items often gain their appeal from the fact that they are difficult to acquire without a certain amount of affluence and influence (or connections).
The famous exotic leather Hermes bags are extremely expensive (pushing US$10,000 for a second-hand purse). But more so, they are extremely exclusive. Without the money or the network, potential buyers once had to be on a waiting list for up to six years before they can even get their hands on their own Berkin or Kelly purse.
They are certainly not within the means of the public, making them a status symbol—something widely coveted, but not easily acquired. Exclusivity is valuable; even if that exclusivity is a created myth.
Anyone who has watched the Leonardo DiCaprio-starred 2006 movie Blood Diamond knows that diamonds are not a naturally rare substance. The supply of diamonds in nature are far exceeding the demand. Some justify the high cost of diamonds with mining difficulty and the rarity of finding rough or even colored diamonds that are high quality enough. These concerns aren’t baseless but can be remedied with lab-grown or manufactured diamonds, which are indistinguishable from natural diamonds, significantly cheaper, can be created flawless and more eco-friendly.
Massive corporations, like De Beers, who have had a monopoly over the diamond trade and supply since the 1800s, would only release enough diamonds to meet annual demand. This creates an illusion of rarity so that the market will not be flooded, and the prices will not go down. The artificially-reduced supply inflates costs, which is something that luxury jewelry brands, like Cartier, Piaget and Tiffany & Co., still benefit from. Thousands of unsold diamonds remain in storage for years before they ever see the light of day.
Diamonds are nearly indestructible, but many other unsold apparels facing an infernal fate are not as lucky. Luxury brands have come under fire for torching unsold inventory of luxury goods, including Burberry, Chanel and Louis Vuitton.
Brands, like Burberry, claim that the immolation of these goods can be used to create thermal energy in an attempt at “energy recovery”. However, the energy “recovered” from these projects does not compare to the energy used in creating the burnt items.
Others, like Richemont, the Swiss parent company of Cartier and Montblanc, openly admitted that they had destroyed more than US$500 million worth of watches to keep them from being resold.
Refusing to sell a product at a reduced price despite the ample inventory creates a forced exclusivity for designer brands, even if the alternative is to destroy it altogether.
Value vs valuation
Popular purse brand Coach has recently declined in popularity after too many sales made them far too accessible to be considered exclusive. The brand tried to rectify this by adding more expensive items to their inventory and cutting down on online flash sales. Another well-known luxury handbag brand Michael Kors faced a similar decline in the luxury market when overexposure and increased accessibility lead to a decline in sales.
In short, what make these handbags a luxury is the reputation of the brand that is selling them but not the actual cost of producing the item.
Many luxury brands claim that the high prices of their products come from the craftsmanship of a handmade item, as opposed to mass- and machine-produced items. For instance, the crocodile and ostrich leather in the case of Hermes bags or the precious stones and metals in Cartier jewelry. But that’s not always the case.
The Italian eyewear company, Luxottica, has a major monopoly on the sunglasses market by making sunglasses for other luxury brands, like Chanel, Polo, Tiffany, Coach and Ray-Ban. While exact markups are unknown, their designer shades can retail for around 20 times the cost they took to produce. Many of the company’s cheaper glasses can have a very similar look to the more expensive, branded pairs. All one is really paying for is the brand’s logo.
Simply put, when products are affordable, they cease to be a luxury, unless advertised otherwise by the brands that sell them.
Matters of image
Luxury goods are commonly associated with three categories of people: the old-money rich, the Nouveau rich, and the wannabee rich.
The old-money rich…
- Have inherited their wealth and have been affluent for at least three generations.
- Don’t require validation of their wealth.
- Luxury for them is the ability to afford comforts.
- Usually prefer bespoke over branded.
- Tend to invest in tailored items that are high quality and will last a long time.
- Understand the “less is more” concept of luxury and opt for clean, classic silhouettes instead of trends or flashy logos.
- Not the primary patrons of mainstream high-end brands, as the products marketed are affordable for them and thus are not considered luxuries.
The new-money rich…
- Have acquired their own wealth instead of inheriting it.
- The primary clientele for the majority of the luxury goods market.
- Luxury items have symbolic value and are viewed as the reward of hard work and success, even if the item has little to no practical utility.
- Gain a sense of stability and control from having enough to spend on frivolities.
- Tend to be entrepreneurial, younger and more recognizable with their more street-style approach to luxury, diversifying the luxury product market to include other options, like hoodies, tracksuits and sneakers.
- The primary demographic promoting the mainstream idea of luxury.
The wannabe rich…
- Often not genuinely affluent but hoping to create a facade of success and riches that may not exist.
- Often not in a financial position to be able to afford luxury items.
- Tend to make poor financial decisions, like buying liabilities on credit, that they do not have the financial means to repay, incurring massive amounts of debt.
- This kind of rash spending deeply impacts their chances of accumulating any real wealth or savings.
- Purchase luxury goods in order to leverage social and cultural capital by associating with certain brands.
- Very concerned with the appearance of a luxury brand or item, regardless of the item being genuine or a dupe.
- Show off the luxury items on their social media in an attempt to gain validation.
This artifice of luxury has created a whole market for dupes or fakes, to blend an emulation or envy of aesthetic taste with material desire. Fast fashion retailer Shein’s masterfully created dupes have been the catalyst of much internet comedy at the expense of both the luxury brands being imitated and consumers attempting to pass off the imitation as a legitimate product.
According to the CEO of The Business of Fashion, Imran Amed, 2020 was the worst year in the history of modern luxury, preceding which, the annual revenues for the luxury fashion market topped US$380 billion. However, by the first half of 2021, profits for some of the biggest names were up as much as 40% on pre-pandemic levels, making record profits.
The demands of luxury goods have quietly made themselves felt, despite the economic devastation caused by the pandemic. Well then, are luxury goods worth it? The sales numbers certainly seem to think so and consumers are not always the most rational of beings. This fascination for what is luxurious brings a saying to mind:
But wealth only whispers.”
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Banner image courtesy of Unsplash