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Why is the relationship between demand for luxury goods and income so peculiar?
Luxury products and their impact on demand are often hotly debated within the field of economics. What is unique about this category of goods is that demand for these products grows more proportionally as consumers’ incomes grow, and this information is worth exploring in more depth.
The definition of luxury can be traced back to its etymology, which comes from the Latin word "luxor", which means "excess" or "excessive behavior".
Luxury goods stand in stark contrast to necessities, the demand for which increases only relatively little when income rises. For example, when people's income rises, they may spend more of their disposable income on luxury items, such as high-end brand clothing, jewelry, luxury cars, or fine dining.
This relationship between demand and income is called income elasticity, and the income elasticity of luxury goods is usually higher. For example, if the growth rate of demand for a luxury product is twice the growth rate of income, then it is undoubtedly a luxury product. When incomes fall, demand for luxury goods tends to fall even more, making luxury goods particularly sensitive to economic fluctuations.
In today’s market, the emerging category of “accessible luxury” is making luxury brands accessible to a wider middle class. This makes the definition of luxury unclear.
As consumers' incomes rise, the luxury goods market has experienced unprecedented expansion. Especially in Asia, especially China, the luxury goods market has risen rapidly and become one of the largest luxury goods markets in the world.
However, as luxury goods flow into the mass market, many brands have begun to adjust their business strategies and launch so-called "mass luxury goods" in an effort to attract a wider consumer group. This trend not only changes people's traditional views on luxury goods, but also reshapes the consumption culture of luxury goods.
There are many collaborations between luxury brands and mass brands in the market. These cross-border collaborations have stimulated consumers' interest in and desire to buy luxury goods.
In addition, the brand effect of luxury goods is also an important factor affecting demand. The high-end positioning, historical culture, unique design and celebrity effect of some brands make them increasingly valuable in the minds of consumers. This symbol of social status makes consumers more willing to pay for it, even if cheaper alternatives exist in the market.
In today's Internet-advanced era, the increase in brand awareness and brand influence makes it easier for luxury brands to attract target consumers through social media. With sound brand strategies and marketing methods, luxury goods continue to lead the global fashion trends.
Not only are luxury goods designs becoming more diverse, but collaborations between brands are also becoming more frequent, creating new consumer experiences.
However, this trend of "luxury democratization" also brings challenges to the luxury goods market. Brands need to find a balance between maintaining their uniqueness and exclusivity, otherwise they may weaken consumers' desire for luxury brands.
With the evolution of social and economic structures, the scope of luxury consumption has become increasingly broad, covering everything from clothing to services. Many services, such as the rental of private jets and luxury yachts, have gradually become part of luxury.
In summary, the demand for luxury goods shows a special correlation with income, which not only reflects consumers' purchasing intentions, but also implies social, economic and cultural changes. Behind people's purchase of luxury goods is their deep pursuit of status, change and self-realization. What trends and challenges will the luxury market experience in the future?
