How the pandemic forced the expensive luxury brands to justify the value
The COVID-19 pandemic had a huge effect on everyone’s lives. During this period, when countries were under lockdown, streaming services came to the rescue and helped people to maintain their sanity. However, streaming content has overwhelmed so many people during the pandemic that brands struggled to connect. In particular, this was applicable to the marketing of expensive luxury goods such as Brioni, Audemars Piguet, Bugaboo, Patek Philippe, and more.
People are drawn to items that they can show off. This phenomenon in economics is termed “conspicuous consumption.” Due to the pandemic, the rich missed out on parties and cultural events where the wealthy could show off and be seen by others. The article discusses the concept of conspicuous consumption and how it relates to the spending habits of rich people.
This article covers:
1) What is Conspicuous Consumption?
2) Evolution Of Conspicuous Consumption
3) How has the pandemic impacted luxury brands?
4) Will consumers change their conspicuous consumption behavior?
What is Conspicuous Consumption?
Conspicuous consumption is the act of buying goods in order to display wealth or status. This can be done in order to impress other people, or even to impress oneself. This type of consumption can come in many forms, including jewelry, cars, clothes, cosmetics, and more. It is generally done by people who have excess disposable income. The term was coined by sociologist and economist, Thorstein Veblen. It refers to the practice of purchasing goods and services for the purpose of displaying wealth or earning social status.
In many ways, conspicuous consumption acts as a social currency. The more expensive something is, the higher status it has. This phenomenon is especially apparent within the rich and the ultra-rich class where there is a lot of competition and where members must keep up with one another with regards to their lifestyles and social statuses.
Conspicuous consumption can be seen as a consequence of rational choice theory because people buy goods to make themselves feel better about themselves rather than for any functional use they may have.
The Evolution Of Conspicuous Consumption: From Rome To Today's World!
Conspicuous consumption goes back centuries and is evident in many cultures around the world. The Romans were the first to adopt this type of behavior when they started wearing clothes embroidered with pearls and precious stones. They did this in order to make sure that everyone knew who was rich and who wasn't, but also they wanted their adversaries to know what was coming for them if they attacked. As the digital age progresses, conspicuous consumption is increasingly found on social media, online streaming services, and video games.
Furthermore, conspicuous consumption has become increasingly prevalent in marketing messages for advertisers who want to sell products that are expensive or otherwise out of reach for most people.
Impact of COVID-19 on sales of expensive luxury goods
Chris Olshan, global chief executive of the Luxury Marketing Council, quoted
“Why do I put on a $200,000 timepiece if I have a clock on my microwave and haven’t left my house in four months?”
According to him, brands are being forced to explain why a new product is worth their attention and money. Taking an expensive watch as an example, he mentioned,
"It has to be something more than just another Swiss watch. Even if you tell your customer that you can get rescued off an island if you press a button on the watch, the customers don't care. A product's value must be supported by something more."
The Swiss luxury watchmaker Audemars Piguet, that had plans to launch a $161,000 watch linked to a Marvel character in 2020, decided to try something it had not done before. To reveal the character, the company staged a virtual event.
This trend raises a question: “what's the need for $30,000 watches or $5000 handbags when you are a small thumbnail on zoom?
Source: Bain & Company
Will consumers change conspicuous consumption behavior?
Consumers might not change their consumption behavior as conspicuous consumption has been a part of the human lifestyle for centuries.
The main question for marketers trying to sell a luxury product is whether or not people will change their conspicuous consumption behavior. It’s an important question because, if people do change their behavior, it would hurt the luxury market. For example, the market could suffer from higher demand for lower-priced goods and services, or people could focus on status through other means such as paying off student loans or donating to animal charities while spending less on clothes and accessories. According to Mckinsey's (2020) report, luxury brands need to navigate the crisis by transforming the value proposition and business model for the future.
Due to COVID-19, the world has experienced an economic slowdown, but there are ways to make the most of the situation. As of 2021, brands are emerging from this crisis stronger by remembering lessons in resilience learned in the dark days of 2020. This crisis may have transformed the luxury industry, but it will continue to grow.