“Luxury”, lavish and elegant as it sounds, so has been the growth trajectory of the industry: grand and exemplary. It was in 1920s, when the word about luxury houses got out. Since then, the industry has made its way from streets of Milan and Paris to almost every metropolitan city of the world; not to forget that Christian Dior bags are a common sighting in every second social media influencer’s instagram posts.
The revenue generated by the luxury goods market currently amounts to US$354.80 billion in 2023 and is expected to grow further at a rate of 3.47% annually (CAGR 2023-2027) (Statista, 2023). What makes them so special that even a small consumer base has made this market grow tremendously?
Let us first understand the meaning of luxury goods. Normal goods follow the law of demand, that is, price and quantity demanded of a commodity are inversely related. Luxury goods on the other hand are goods whose demand increases with increase in their prices, also known as “Veblen goods”. The reason behind this is rooted in the simple consumer psychology of buying goods that allow people to display their wealth and purchasing power. Moreover, it has been argued that luxury brands are not products but mere mind-sets. It is the target consumer who makes a brand luxury in nature.
Coming back to their special nature, there is no doubt that these luxury brands had the first mover advantage and an exclusivity which was unmatched. The intricacy and craftsmanship made them so expensive that only the high gentry could afford, thereby making them some kind of trophy for the middle-class. Over the years, they have built such firm consumer loyalty and reputation that many of them are getting away with increasing prices and deteriorating quality of their products. No surprise, the consumers have gotten so blinded that they fail to notice the real reason behind huge profit margins. So what, it’s Chanel after all!
A word we commonly see today, “sustainability”- meaning efficient utilisation of resources in such a way that it doesn’t hamper their availability and accessibility for the future generations – has made its way to the fashion and luxury industry. Luxury industry is characterized by its aura of scarcity and exclusivity with production and sale of only a few units. This makes it look sustainable enough, right? Consider the example of haute couture (houses or designers that create exclusive and trend-setting pieces for women), a growing unit under the industry. Hours of labour are put in and valuable resources are used to produce one product, but how many wears does it get? One or two? Clearly, very few of such pieces are made but the value of one such piece may be more than ten times of the value of clothes that we generally wear, indicating a sheer wastage of resources and manpower. Not to talk about the materials used in the production; practices of obtaining pure leather and silk remain a different controversy.
It’s time these brands realise what true sustainability is and how it can be brought about, be it by improving demand forecasting to produce smaller batches, by using bio-degradable material or by any other innovative means. Recently, many designers like Stella McCartney and Eileen Fisher made statement on the runways with organic, cruelty-free, recycled and upcycled material showing there is long yet promising path for ideas of ethics and sustainability in luxury industry.
Constantly changing dynamics of economies and consumer behaviour requires constant changes in all industries and for luxury brands to thrive and not jeopardise their legacy, they must move along the curve or just shift to another one!
References:
1. Will Kenton (2021, February). What Is a Luxury Item (aka Luxury Good)? Definition and Examples. Investopedia.
2. Frank Schab (2020, October 28). How Luxury Brands Differ From Non-Luxury Brands.
3. Niranjan Rajadhyaksha (2011, March). The Curious Economics of Luxury Brands. Livemint. https://www.livemint.com/Home-Page/W8eexIwEwMoy6zTb1n5vGO/The-curious-economics-of-luxury-brands.html
4. Global Powers of Luxury Goods 2021 Breakthrough. Deloitte.
5. Walter Loeb (2022, June 13). The Lasting Allure Of Luxury Fashion Brands. Forbes.
6. Trinetra Paul (2022, June 2). Gucci, Stella McCartney and 8 other sustainable luxury brands you should know about.
7. Dana Thomas (2022, February 20). Inside The Luxury Fashion Industry’s Big Sustainability Push. Vogue.
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