Luxury is an enigmatic and elusive concept. Derived from the Latin term ‘luxus’, luxury is a state of extravagant living that serves little purpose in consumers’ lives except to fulfill dreams. And those dreams don’t come cheap. In that sense, luxury can be referred to as one end of the product continuum, where the beginning consists of basic, indispensable products and at the opposite extreme are the inessential but desirable luxury items.

It is a necessity that begins when the necessity ends. Luxury has been a thriving business, particularly in the last two decades, and has grown into a €1 trillion sector encompassing automobiles, clothing, food, hospitality and even yachts - a small sector that still sparks people’s imagination.

The concept of luxury has evolved from rare pearls and spices in the 17th century to products of superior craftsmanship like Dior and Gucci during the 19th and early-20th century.  More recently, luxury has become an embodiment of those brands which go beyond the material and functionalities to offer a high degree of non-functional associations and invoke a world of scintillating fantasies.

However, luxury is a complex phenomenon and very subjective in the sense that it often depends on the context that a consumer is situated in. What might be luxury for one, can be perceived as normal or even inferior by another. 

Luxury brands are purchased by consumers who seek to signal high levels of wealth and social status. People pursuing extrinsic aspirations tend to prefer luxury to reap the benefits stemming from refinement and a lavish lifestyle. These aspirations drive consumer behaviour towards the purchase of luxury goods for expressing economic superiority and enhancing self-esteem. 

Extrinsic aspirations are never static and evolve to a higher level when one achieves the desired status. The perpetual restless ambition in each inferior class to elevate themselves to the status of those immediately above them causes fashionable luxury to spread like wildfire. Luxury brands are the access fee required to enter a restricted club of owners characterised by a sophisticated taste and sense of style for the prosperous consumers. 

The Conspicuous Consumption Theory states that people who engage in conspicuous consumption often do so to emulate the scheme of life in vogue in the next higher stratum. Social emulation is generally publicly demonstrated since status is granted by the society. Through conspicuous logos and designs, the consumers feel that they virtually belong to the brand and hope that the aura of the designer of the brand also extends to themselves.

One dimension of luxury brands is functionality which comprises quality, aesthetics, rarity and history. Strict quality control is essential in the production of luxury goods to ensure longevity and provide the older generation with the pleasure to pass them on to their progeny. These products can get repaired and gain even greater value over time instead of ending up in the garbage. The aesthetic value of a product pertains to the amusement derived from seeing the product without consideration to whatever utilitarian function it might perform. When the product alternatives are similar in functioning and price, consumers refer to the aesthetic facet of colour, style and design that creates beauty.

A luxury product is inspirational and desired for its enchanting imagery and the values and symbols that it conveys. The aura of a luxury product is due to its inaccessibility to the average consumer. Intensive distribution not only negates the idea of luxury, but also would conflict with the expectations of customers as the reputation of a luxury brand can get eroded if too many people own it. For instance, as soon as refrigerators or washing machines started getting produced on a large scale, they lost their status of being luxury items. Historically, rarity was caused due to the use of materials that were naturally scarce like gold and silver. 

However, today's rarity stems from the luxury incumbents’ trials to create artificial shortages, limited series and selective distribution in order to make the target group believe that they are elite and the brand is a part of their own identities. The most successful and renowned luxury brands have a long history that transports customers back to a mysterious and attractive period in the past. Although some younger brands like Armani and Versace have managed to enter the luxury universe, it is still vital for brands to build a sense of exclusivity around long family traditions to evoke lasting images in people’s hearts. 

Another crucial dimension is that luxury brands need cult products that exude timelessness. Brands like Cartier and Tiffany often produce exceptional, unique pieces sold at extraordinary prices to create an instant buzz and thereby, harvest the benefits of fame and prestige. Fragile fashion businesses sell products at full prices as soon as the season begins, but they need to be heavily discounted as soon as the fashion fades away. Luxury brands overcome this socially constructed obsolescence of renewing wardrobes every year by creating classic pieces that are essentially the soul of luxury. Luxury requires time and luxury sells time. True luxury never offers rebates or discounts. 

The paradox of luxury marketing manifests itself most strongly in the premium pricing strategy. All products in the luxury niche are, without exception, exorbitant. 

A high price automatically restricts access to luxury products and is justified in the consumer’s mind because of outstanding craftsmanship, technical excellence, and flawless service. Luxury customers do not shop based on price. Instead, they value the distinctive experience, design and quality. For them, price is not a measure of value, it rather creates value. 

Over the years, there has been a change in the ways luxury brands have targeted their consumer groups, from traditionally focussing on only the wealthiest consumers to now launching new product lines or product extensions aimed at targeting middle-class consumers. This trend is known as ‘Democratisation of Luxury’.

For instance, Marc Jacobs has opened their secondary line called Marc by Marc Jacobs, Balmain’s new product line is called Pierre Balmain and so on. These days luxury retailers are also collaborating with more affordable stores to offer a taste of their brand to the consumers in the middle of the wealth spectrum. For example, Versace, Stella McCartney and Karl Lagerfeld have collaborated with H&M to reach a wider audience.

In spite of increasing their volume, these luxury brands have successfully been able to nourish feelings of rarity and privilege by partnering with avant-garde artists to endow the limited collections with additional value so that purchasing priority becomes a competitive goal among the clientele. 

In Asia and Latin America, there has been a spurt in affluence and an upward trend in luxury consumption. Airports worldwide are transforming into luxury commercial hubs and provide an experience of the world of entitlement to travellers. 

The newly-rich consumers are zealous to enter the world of conspicuous consumption and pleasures, hoping to catch up with their Western counterparts. They have a greater desire to examine their emotional side and less guilt about spending money. Unlike patricians who had little need to demonstrate their status, these newly rich people crave attention and power that luxury brands can provide. They want their success to be visible in the form of palatial mansions and gorgeous vehicles. Their Lamborghinis and Ferraris do not stay in garages for they need to assert their superiority and fuel imitation desires in the society. The excursionists, that is, the ordinary people from the upper-middle class cannot buy penthouses or a Prada suit, but they might occasionally buy a small product such as a pair of socks from Armani or a watch from Ralph Lauren to satiate their hunger for desirability. 

Luxury has drawn its own set of criticisms from communities all over the world. Luxury is evidence of a non-egalitarian society and betrayal of community values and therefore, attracts moral condemnation. Critics argue that intrinsic aspirations should be given a priority to curb materialism and hedonism. The Chinese government has banned luxury advertisement billboards on streets to avoid the blatant proof of the burgeoning gap between the haves and have-nots.

A modern avatar of moral criticisms in the form of sustainable development has also sparked huge controversies. The advocates of sustainable development claim that sales of luxury products endanger rare species and ingredients while also promoting acrimony in society. The alternative argument is that luxury promotes true sustainability by lasting forever unlike fast fashion which gets dumped after the season or high-tech businesses that thrive on planned obsolescence. 

Today, luxury brands face many challenges. Counterfeit products are creating a price upheaval in the market since the same brand is available at a cheaper price. An increasing tendency is seen among the consumers to buy these lesser-priced goods associated with the same level of pride and stature. 

The rise of the internet and social media has given free access to bloggers and influencers to evaluate the products and services and portray the brands according to personal judgements. Luxury brands thus get compared with mass-market brands based on the number of likes and followers on social media or the number of products sold on eBay. 

The focus is gradually shifting from fancy details of a traditional luxury product to brand principles and conscious intent. Businesses need to demonstrate authenticity in all touch points and focus on diversity and inclusivity. The new luxury consumer is mindful and so the brands need to understand his motivational factors towards their products in order to develop better marketing strategies and navigate the future.