Why do we buy – and keep buying – Luxury Goods?

Nearly 60% of luxury consumers say that quality and durability are the main reasons they purchase luxury goods, according to Bain & Company.

Luxury brands trade on the fact that their products last longer than standard category items. A reputation for being reliable and long-lasting is part of the value proposition that justifies a higher initial outlay. This is supported by many luxury brands offering long warranties and ongoing courtesy repairs as part of the service. Luxury brands can’t afford to pay lip service to durability. It must be – in many cases, quite literally – stitched into the fabric of every product. A Hermès, Louis Vuitton or Dior handbag is crafted by artisans who possess a deep knowledge of their materials and craft. They know how to work the leather so that the result is not only beautiful, but is also incredibly strong, durable, easy to care for and reparable. This is what consumers pay for – an item that can serve as a companion, sometimes for a lifetime.

Durability also helps present the luxury goods industry in a positive light when it comes to talking about environmental impact. Whilst the business model of fast fashion is based on consumers continually replacing goods, the luxury sector offers a much more sustainable alternative through its focus on durability.

Based on McKinsey research, 65% of luxury consumers buy luxury items to fulfill a long-term desire or goal.

The wealthiest, most successful individuals tend to be the biggest consumers of high-end category goods or services. This applies across the board, from recognizable luxury consumer categories like cars, watches, fashion, jewelry, food and beauty, all the way to areas like hospitality, sports, health, education and financial services.

Whatever the category, high-end goods and services are designed to deliver the best possible experience to the user. These are experiences that don’t just live up to expectations – they supersede them. Luxury is all about creating the ‘wow’ effect.

The combination of patronage by the rich and famous, and the reputation for delivering exquisite experiences, makes buying luxury goods aspirational. Design houses and service brands know the importance of word-of-mouth for public awareness and brand equity. The aspiration to wear or use the same products and services as affluent and prominent individuals is a powerful motivating factor in purchase decisions. Even if you already belong to the upper echelons of society, we all still want to follow and keep up!

Established luxury brands amplify the aspiration factor via careful media and PR activity, which these days include partnerships with carefully selected influencers that match the values – the DNA – of the design house.

New brands can also substantially benefit from influencers and can quickly penetrate a market by utilizing a strong direct-to-consumer strategy, disrupting the positioning of well-established design houses.

The journal of Consumer Research indicates that 70% of luxury consumers believe their purchases reflect their personal identity and social status.

Our relationship to societal identity is complex. As we’ve noted, luxury is often linked to success - it's the most direct and clear expression of it.

As consumers, we often make purchases that give us the sense of being unique and that help us to craft our own identity. Luxury purchases fit with people’s sense of themselves as being distinguished, climbing the social ladder, and rising above the masses.

Yet, alongside wanting to be unique, our social instincts mean that we also want to be part of circles and identify with likeminded others. Luxury goods can fulfil this need too. It can be the circle of Rolex owners, the Louis Vuitton clique, the Hermès set, and so on. They might be exclusive groups, but they are groups nonetheless, and they offer the promise of fulfilling our social aspirations. One minute it could be talking about Rolex watches with a fellow wearer, and the next minute it’s an invitation-only kite surfing weekend. We’re prepared to pay a premium to open doors to the circles we want to be a part of.

According to a recent report, 55% of luxury consumers are inspired by the creativity and exclusivity of luxury brands.

Luxury goods and services definitively inspire their users. They generate an emotion – a sense that is both physical and intellectual.

The quality of the craftmanship, the ergonomics, the perfection of the materials, and the usability all affect our senses in a unique and personal way.

Most design houses build very close relationships with artists and art in general. They then create exclusive limited editions, pop-up retail experiences, and will ultimately be tempted to build their own foundations like Pinault, Louis Vuitton and Cartier have done.

This focus on art collaborations helps to draw in both the money and attention of Hyper Luxury individuals – those who can spend more than $50,000 on the purchase of a luxury good, event or hotel stay – as they are more likely to be influenced by a collaboration of this kind as opposed to an influencer campaign. Of course, the investment for the design house is significant, but the payback is considerably more long-lasting, as the impact of this focus on the brand’s equity is typically substantial.

It’s also important to note that aspirational and inspirational strategies are clearly not mutually exclusive and can be combined in an effective way to benefit luxury brands.

According to a Knight Frank Luxury Investment Index report, many luxury assets like classic cars, rare whiskey, and art have outperformed traditional stocks over a 10-year period, making them a viable investment option for some.

Luxury goods still have a value after usage, and for some goods categories, this value can even increase – think luxury handbags, high-end watches and jewelry.

There are two kinds of luxury buyers with this ‘investment’ mindset. The first type will consider that, after a period of use, the goods can be sold and replaced by a new one, making a saving on the new purchase and sometimes also providing a positive margin. The second type will not use the goods and will instead keep them in a safe place for a period of time before reselling for a profit.

Second-hand is a significant trend in the luxury goods industry. To date, design houses have failed to control or manage the second-hand market with any sense of mastery. But there is growing recognition amongst most design labels that they should be in control of the second-hand market in order to guarantee their IP (intellectual property), their product quality, their brand equity... and, of course, their potential revenue.