Luxury goods companies all have one thing in common: their hefty price tag! Everything costs a bomb but isn’t that kinda the point? The whole appeal is the fact that since it’s soo expensive it feels uber exclusive. It makes you feel special. And it gives you status. The s-word that pulls us in every. Single. Time. It’s got us hooked by the collar.
We wanna feel rich. No, it’s more than that. We wanna look rich. We crave status. We crave recognition. And that’s precisely what these companies feed off. And make oodles of money from. There are 2 types of people: those who try to look rich and those who actually are rich. Now guess which one is gonna go and buy a Louis? Yup, the first one. The rich guy has nothing to prove. Course rich people buy luxury, duh. But they don’t have anything to prove. They buy luxury to feel luxury. Because they can. The other buy it because they can’t!
They have a complex (and ego) the size of a 3-storey house so they buy stuff with money they know they don’t have all to prove to people they have it? We’re funny creatures.
So who are the big buyers of these pricey goods??
Say hello to your main buyer of luxury goods: HENRYs aka high-earners-not-rich-yet. I suppose it’s the last word that’s the most important. (Read here why they’re yet to be rich!) Anyway, these guys are conspicuous about their consumption.
They wanna show off. But the funny thing is they aren’t really rich at all. They have high debt, low savings and work their butts off. All to get that fat paycheck and spend 99% of it (if not 110%). These guys make up 35% of the luxury goods market which is set to soar to 50% by 2025! Nuts. So let me get this straight, you earn loads but you practically end up living broke since you’re busy proving (and spending good money to do so!) that you’ve got money?
Boring alert: block your eyes. Back in high school, in my econ classes, we learnt about these odd things called “veblen goods” – these are stuff that when price goes up, people want more of them! Never in my wildest dreams would I have thought I’d be writing about them, but here we are! Anyway, that’s exactly how luxury goods work. The more they cost, the more people want them.
Luxury goods companies have basically cracked the code of how we work. We want what we can’t have. We want what’s that bit out of reach. Luxury purchases unlock that (priceeeey) release of dopamine that hits us with such force. Spending a crazy amount on one purchase gives us a feeling of power. Like we own the world. You know that feeling. Strutting to the till, whipping out your credit card to pay big bucks for something. It feels damn right amazing. But, like every feeling, it fades. And our bank account is starting to feel hungry!
What I find really interesting about a chunk people who buy luxury goods are the ones who came from nothing. The ones from poor families. What I’ve seen is if you didn’t have it growing up, you’ll want to spend as your form of revenge. Of showing people (most like yourself) that you finally “made it”. Our upbringings shape so much of our spending and it can almost become a second skin.
A family friend of ours grew up poor. When was an 8yo, she heard her mum and dad crying that they couldn’t afford to heat the home. Fast forward, she grew up to a super successful biz owner – one who also has an obsession with luxury! She has a walk-in closet just for her shoes. She has a gazillion pairs, from her Jimmys to her red-soled Louboutin’s. She’s got ‘em all. Thinking about it, the amount she’s spent on them is probably 4X my life savings!
But her past has wired her that way. That is her form of revenge spending. She can’t help it. And unless you had that experience, growing up poor, you won’t be able to understand it. Not fully anyway.
The price of a good is mostly the things you can’t see
When you buy a bag for some crazy amount, you know the leather and bits of glitz isn’t worth nearly that amount? 90% of it is the brand! You’re literally paying for the brand. There’s this guy who goes by “Tanner Leatherstein” (his real name is Volkan Yilmaz btw) who’s made dozens of TikTok Insta vids literally him chopping up luxury leather goods into bits from a Chanel wallet, a Louis Vuitton belt to a Prada Saffiano shoulder bag (whatever that is).Okay, he’s not a total monster. He doesn’t shred them to bits for his own enjoyment, he does it to figure out how much these things actually cost.
He chops up this Bottega Veneta Arco Mini tote (with a cool $2,500 price tag). It has an insane amount of leather, 4X the amount you’d apparently find in a normal bag that size. He estimates there to be 18 sq ft of lambskin. The cost? $130 for the leather, probably another $120 for labour and the accessories. Max $250 to make a bag like this. And you’ve got people paying 10X that amount! See how clever it all is?
I was at the airport a couple months ago and stepped into a moncler store and tried on a few jackets. Just for fun! I thought, people actually pay close to £1,000 for a padded, waterproof vest?? You’re paying for the logo. The status. Yeah, you kinda feel like a million bucks but you should feel like a million bucks anyway because you are amazing and are a one-off exclusive piece!
But, if I am going to play devil’s advocate here (just for a moment!) – it’s 100000X better when you buy stuff you can least afford. It’s the paradox of spending. When you buy a fancy shmancy purse for $2,100 and you know you’ve kinda blown your month’s wages on something so small it’s practically the size of a bagel, it actually feels better than when you’re swimming in cash. Then, $2,100 is a smaller % of your spare change and it doesn’t have that same sweat and sacrifice involved as it did in your early (and poorer) days.
So, dare to splurge a little. But on occasion! Do it because it’ll never feel this good. Not that I’ve tried this. I’m way too scared I’ll have buyer’s remorse. The closest I ever came to designer swag of this level was when my dad bought me a Louis Vuitton scarf for my 21st bday and internship prezzie all wrapped in one. But a few months later we got robbed. And the nasty buggers stole my scarf.
Luckily, the insurance covered me for it but I chose not to buy a replacement. I felt worried every time I wore it, scared that if it got dirty I’d be chopped sushi. I also felt uncomfortable with it branded across my neck. Am I glad I had a robbery? Hell no. Am I glad my gorgeous (sentimental) scarf got stolen? Erm, no. But designer stuff that, I just couldn’t fully enjoy. Yup, I wished I’d have worn that scarf every moment I had. Saddest part was I must’ve only worn it a handful of times.
People splash out to make them feel confident, happy and good. But all this stuff does not come from anywhere external. Remember that it’s what’s on the inside that truly counts! You be you. Let your confidence come from within. That kind of happiness will last. And will feel way softer than any silk hermes scarf you can possibly get your hands on.
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.