Why does luxury work?
- Elasticity of demand approaches zero as you ascend Maslow’s hierarchy of needs… consumers have an increasing willingness to pay any price as you move up Maslow’s Hierarchy of Needs. Self-actualization has almost inelastic demand. Self-expression also has highly inelastic demand.
Segments of luxury (2024)
- Cars (40% of market), personal goods (25% of market), hospitality (15% of market)
- Total 80% of market
- Fine wines and spirits, fine dining, high-end furniture and houseware, fine art, private jets, yachts, luxury cruises
Drivers of luxury
- VIC (very important customers) and tourists drive luxury
- (2024): In absolute value, tourists’ spending on luxury items is almost back to its prepandemic levels, but with a share of only 30% of global luxury purchases, compared with 40% in 2019, there is still room for growth
Lipstick effect
- In economic crises, consumers shift high-end luxury spending to lower-end luxury categories… beauty segment does really well
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