Luxury Brands don’t sell to Rich People

In a world where status is often measured by the logos we wear and the price tags we flaunt, luxury brands have carved out a unique niche from this obsession. These brands promise exclusivity and quality, appealing not only to the wealthy but also to those who aspire to join their ranks. However, for many, these luxury brands are far from being symbols of affluence; they often serve as financial traps for life.

Take a look at these two bags. Can you guess which one costs more? You probably thought of the middle one because it has a Louis Vuitton logo on it. But the costliest bag among these three is this one on the left from Dior. It costs somewhere around $30,000, even though it looks similar to a $100-$150 bag.

Real cost of Dior and Armani bags

Recently, an Italian prosecutor carried out an investigation into the factories of Dior and Armani. The investigation revealed that Dior pays just $57 per handbag to its suppliers, which it then sells in stores for $2,800. Similarly, Armani’s bags, initially bought for $100 from suppliers, are resold to the brand for $270 and subsequently priced around $2,000 in stores. So are you paying for the quality or just the brand?

Why luxury brands are not for rich people?

You might think that luxury brands are tailored for the rich, but the evidence suggests otherwise. Most people who purchase these luxury goods are not wealthy but rather belong to the middle class. They stretch their budgets, max out credit cards, or even take on debt to afford these symbols of status. This pursuit of luxury becomes a cycle of financial traps, where looking rich is more important than actually being rich. For such people, luxury brands become a form of manufactured exclusivity, where owning a product is less about its utility or intrinsic value and more about its ability to project social status.

People who are actually rich have a lot of wealth; they don’t have to prove to the world that they are rich. But the people who aren’t successful are the prey of these luxury brands. A luxury good is a non-essential product; you can live without it. But there is satisfaction in owning a luxury good. This gives you a sense of accomplishment. So, people who want to look rich rather than actually being rich are the perfect customers for these brands.

Luxury brand’s marketing strategy

These luxury brands excel in not only creating desirable products but also in cultivating a narrative that ties consumption to identity. When you buy from luxury brands, you are not only buying goods, but you are also buying the lifestyle associated with the brand. This narrative of luxury brands is reinforced through glossy celebrity advertisements and a carefully curated brand image. Once you get into this mentality, then you are trapped because, to show off your lifestyle, you keep buying these luxury goods.

Luxury brands do not treat you well

Some of these brands do not even treat their customers properly. For instance, what would you normally do if you went to any store and the store people insulted you and did not treat you properly? You will probably never even go to that store again.

But things are different for these luxury brands. There was a viral story of a woman who took her mother on a shopping spree after being treated poorly by a sales associate due to their perceived lower status. Now, instead of rejecting the brand for its arrogance, they retaliated by purchasing thousands of dollars’ worth of products from the same brand. This behavior highlights a psychological phenomenon: when excluded by high-status groups, it can increase an individual’s desire to prove their worth through consumption. This is a pure psychological tactic exploited by these luxury brands.

Making themselves super exclusive

One of the things that makes these luxury brands valuable in the eyes of people is their exclusivity. Some luxury brands have taken exclusivity to the next level. As with Hermes, you cannot just go to their shop and buy their Birkin bag. You have to have a buying history with them. To get this Birkin bag, you have to regularly buy other items from their store, like the scarf and makeup. This way, Hermès ensures that their products remain exclusive and are not easily accessible to everyone.

On top of that, there is a years of waiting to get these Birkin bags, and when they are available, you can’t even choose the color. You have to take what is available. This exclusivity strategy makes brand-crazy people even more obsessed with the brand and acquiring their products. In the name of exclusivity, these brands are just making people recurring customers who will mindlessly buy anything from them just to look rich.

People who are truly wealthy, like Steve Jobs, despite his immense wealth, famously adopted a minimalist wardrobe without any designer logos. This simplicity can be seen in many of the world’s richest individuals, such as Bill Gates and Mark Zuckerberg, who prioritize functionality over flashiness. Their wealth speaks for itself.

Psychology of luxury brands

When we come across the word luxury, we immediately think that it is something exclusive that no one else has. And we, as humans, want to be different from others. This exact human behavior is exploited by these luxury brands. The sales of luxury brands have seen significant growth, especially after the pandemic. After the pandemic, every other industry was struggling to survive, but the luxury brand industry was not one of them.

This industry does not suffer as much from the economic crisis as others. The reasons for this are economic and psychological. The economic reason is simple: rich people who can afford these brands are their customers, and most of the economic changes do not even affect them. They can afford it, so they buy it.

The psychological reason is the bigger one and has made a significant impact on sales, which have grown since the pandemic. The psychological reason is that you are buying status. The more expensive the item is, the higher your status.

Which is why it’s not just rich people buying rich people things. According to GlobalData, Americans with a household income of less than $50,000 make up about 27 percent of regular luxury consumers.

How luxury brands use influencers?

Top luxury brands understand that customers seek more than a product. They are more about experience and making you feel sophisticated, high-class, and part of something big. In the digital world of social media, influencers play a pivotal role in shaping perceptions of luxury fashion. Influencers, seen as trend-setters, significantly impact consumer preferences and brand appeal when they promote high-end goods. Social media platforms have become essential for luxury brands to connect with and engage their target market.

Influencers, with their large followings and perceived authority, profoundly affect consumer attitudes and behaviors. People know that most of these influencers have risen from nothing and are similar to them. People can relate to them more. So, these influencers have a huge impact on the sales of these luxury items.

Why luxury brands are expensive?

One of the important things these brands apply is price-value bias. The concept of price-value bias is simple, and it says that customers appreciate an item more as its value goes up. That’s why you can see these brands can sell those $57 handbags for $2800. Almost fifty times its original value. This is the perceived value of the brand by the customers.

Now, when people buy such products, they do not even hesitate to show them off. In the clothing industry, most of the clothes from these luxury brands have their huge logo plastered over them. It’s like you are walking an advertisement for the brand. The huge price you pay for the logo of that brand.

Should you buy Luxury Brands?

Overall, if you have disposable income, then buying these luxury brands makes sense. You should buy it and enjoy your purchase. But for those who flock to get these luxury items by taking out loans or maxing out credit cards, it isn’t a favour for their financial future. It would be wise to work on being financially rich rather than just looking rich. To be financially rich, you need to learn to invest. If you want to secure your financial future? Start investing today! Investing is a skill you can master with the right guidance. Don’t wait and subscribe to our newsletter now for exclusive tips and insights.

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