AMM Quiz #3 Lecture #2

Key Takeaways from Pyramid

- Premium remains premium for a limited time - Fashion dies every season - Luxury is a way to remain: The engine of luxury is the need to exist, to transcend time. Luxury is a certain control over time.

Luxury is in a tricky place

- middle class growth is a business opportunity byt a tricky situation - mass brands are imitating lucury to meet demand - creates confusion in the market -- frontiers seem porous with brands using codes of lucury like top models/small series

Why do people buy luxury?

- real answers are concealed by social desirability bias - ppl often claim quality/craftmanship/investing - but people really like the way it makes them feel (to show off, have what others don't confidence)

Why do people like luxury?

1) It elevates them 2) It gives them pleasure, beauty ,style in life 3) It gives them products with meaning, with high quality, out of the ordinary 4) Prestigious brands arre known as visas of social distinction. 5) symbolizes "Becoming a person"

History of Luxury

1) Luxury/sumptuary items were used in tribes on occasions to celebrate, honor gods, etc. Since then, luxury has been associated with timeless ness, eternity, and social status. 2) Born in the Renaissance in Europe, but evolved in 19th centrury, when artists became the ones to direct customers. 3) Wealthy people with innovation with tradition (past with future). Fight against time still endures.

Why is the luxury market growing?

1) There are more rich people. In 2010 there were 1,000 Billionares, in 2024 there are 2,781 B. 2) growing gap between extraordinary & ordinary people. The Forbes 400 are world 4.8T, more than double the sum of a decade ago 3) Since 1982, CLEWI has outpaced inflation by 2.3%

Why does the market grow?

1) democratization of luxury 2) broader population desires to posess elements that represent the elevated lifestyle of a priviledged few 3) economic growth enables peopel to move byond needs & embrace aspirations. 4) luxury appeals to people's deepest desires

5 Pillars of luxury

1) scarcity/rarity 2) social status/social gap 3) hedonic and refined experience 4) exceptional performance and quality 5) creative leadership

who will luxury consumers be?

Gen Y & Gen Z will account for 45% of the market by 2025

2019 - 2024 Luxury Market Numbers

In 2019, the luxury market expanded by 4%, reaching $1.3T in value. Although there was a slight decline in 2024, it remained well above pre-covid levels. China was predicted to be a leading market, but lower than expected. US MKT remains robust.

10 Leading Luxury Brands

LV, Hermes, Chanel, Gucci, Dior, Cartier, YSL, Rolex, Tiffany, Prada

One interesting definition from Kapferer & Michaut,

Luxury can be defined as access to hedonistic, very high-quality objects, experiences, and personal services, sold at a price far beyond what their functional value would command, which represent sources of a sense of privilege, taste, and refinement and produce recognition by relevant others, due to the power of the brand.

What is luxury after all?

Need to differentiate between 1) Luxury (absolute meaning) from the happy few to the man in the street 2) A Luxury (relative meaning) for a specific group trading up for more quality and prestige, not the happy few; 3) My Luxury (purely individual), very private, not your luxury; does not imply social comparison : it is intimate and does not create a market

Is there a common definition for luxury?

No commonly agreed definition that clearly separates it from super premium or even mass prestige

Primary Source of Confusion

People think that it's mass - brand - premium- then luxury; But luxury isn't more premium, beyond premium, or more expensive than premium, it's specific and elsewhere

What brands are staying winners?

True luxury brands are remain winners while aspirational luxury brands that need volume are facing challenges.

Luxury is Janus

Two inseparable faces 1) A sociological face: it represents, and publicly incarnates social stratification 2) psychological face: giving oneself a pleasure and dream of exception

Luxury epitomizes

consumption at it's finest offering rare, powerful emotions such as love, power, pleasure, pride, reward, social recognition

What is luxury a hybrid of?

fashon & tradition

How do economists describe luxury?

luxury is close to art

What products make up the majority of luxury market?

82% is automobiles, hospitality, personal luxury goods