Building Income Through Luxury Goods

In economics, a luxury product is something that is affordable and of high value to those who need it most. In most cases, the luxury good loses its value when the people who need it the most increase their demand. Economists call this phenomenon “trickle-down effect.” In economics, a luxury product is a good that increases in value more than percentage pace as income increases, so that expenses on the good automatically become a smaller percentage of total income. But if the people who need the luxury goods increase their demand even more – say, from five hundred people who need five hundred luxury watches to one hundred people who need one hundred luxury watches – then the price of the goods immediately increases.

For example, the luxury watches mentioned above are relatively expensive. But if all the consumers in the group start spending five hundred times the amount they would for an entry-level watch, then the price of the luxury item starts decreasing. This process, of course, also has the potential of increasing the supply of luxury items to consumers, thereby reducing the profitability of the manufacturer of the luxury item. And sometimes it has the potential to destroy a brand.

So, what does all of this have to do with influencers? When luxury items like watches and shoes, or other brands of prestige like art and architecture, are promoted heavily via social media, what happens? Influencers and marketers sometimes come into conflict with one another, because the two parties believe that social media should be controlled in order to prevent this “trickle-down effect” from occurring. Sometimes, the influencers are not thinking about the brand in terms of its revenue potential, but rather are promoting the brands of the influencers themselves.

What does all of this mean for the future of luxury goods? If Instagram is any indicator, then the future of influencers may look very different to what we’ve seen in the past. Celebrities are now getting involved in the business of selling luxury goods. They are making their own personal brands, which are becoming available to consumers. Many of these brands will be made available to regular everyday people, who will then be the brand ambassadors for the products. In the meantime, this allows the influencers to make money off of their endorsement.

Luxury brands need to start looking towards their fan base in order to sustain themselves in this digital age. The fan base for these luxury brands can lead to a substantial increase in sales, but it has to be done in a way that maintains the sustainability of the brand. Luxury goods have a high resale value, but they also create waste, which needs to be reduced. By creating luxury goods that appeal to the notion of conspicuous consumption, the luxury industry can greatly increase its profit margin.

When manufacturers of luxury goods understand the impact of their advertising on consumers and the ramifications of their brands being associated with waste, they can use that information to improve their products. By reducing their advertising expenditures, they will reduce their environmental impact while building their brand at the same time. Even though this sounds like a simplistic concept, it is actually very important to the sustainability of luxury goods. Consumers want to have choices when it comes to where their next purchase is coming from. They want to feel like they are in control of what is going into their bodies. If you take away the opportunities for consumers to control the way their luxury items are made, you are decreasing their ability to feel like they have some sort of control over the things that are happening in their lives.

By focusing on the idea of conspicuous consumption and making sure that luxury goods are produced using processes that decrease waste and create a superior product, the luxury industry can increase its income through those extra sales. The more income that a manufacturer makes through sales of superior products, the more money they have left over to reinvest back into their brand. This means that luxury items become more affordable, meaning that consumers will feel like they are getting more for their money. Luxury items become even more appealing as income increases, because it becomes harder for poor quality products to maintain their price tag.

As a brand name becomes more recognizable and as income increases, so too does the power of their marketing campaign. Luxury brands spend millions of dollars each year marketing their company and their goods. These marketing campaigns become synonymous with excellence and prestige. When consumers associate a luxury brand with those things that only come with money and a lot of it, they will subconsciously start to associate those things with that perception. As consumers, it is our job to make sure that they are making the association.