The Psychology Behind Luxury Consumption: What You Need to Know
The luxury asset industry has been constantly evolving in the past several decades. Everything from what people consider “luxury” to the definition of the luxury consumer has changed so many times, even the industry itself has a hard time keeping track.
One of the biggest changes the industry has seen, however, involved its consumers.
Nothing has exposed the change seen in consumer psychology like the COVID-19 pandemic, which revealed that everything we believed we knew about luxury consumption was wrong.
Boiling down the huge change the luxury asset industry has seen in the past few years to a single factor isn’t just hard — it’s nearly impossible. However, what we can do is analyzing some of the main trends in luxury that can help all industry participants better understand its consumers.
1. Millennials and Gen-Zers are the main drivers of luxury consumption
The onset of the 21st century has brought a huge change in the demographic makeup of the average luxury consumer. Rather than relying on the well-off, upper-middle-class and middle-aged shopper, the luxury industry of the 21st century is relying on the young and middle class consumers.
According to a report from Crobox, the main drivers behind the luxury industry are Gen-Zers and Millennials, especially high-earning young people that have yet to achieve financial stability. Most consumers have high debt, very little savings, and a full-time job that’s often supplemented with additional income.
This particular demographic also has an almost equal gender split, with women making up 54% and men 46% of luxury shoppers.
2. Young people feel a higher need to be unique
What most psychologists and researchers can agree on is that one of the biggest drivers of luxury consumption is the need for uniqueness. This is based on the “uniqueness theory” popularized by psychologists Snyder and Fromkin in the 1980s, which suggests that the individuals’ desire to be unique has been the main driver of Western culture for decades.
Many young people are drawn to luxury brands as they’re able to use their products to separate and differentiate themselves from the average person.
3. Luxury assets provide prestige and signal wealth
There is a very thin line between using luxury assets to establish uniqueness and signal your belonging to a group, and luxury consumers walk it all the time.
A much larger portion of luxury consumers purchases luxury assets to establish prestige and show that they are part of a larger, well-off group that can afford brand-name clothes, designer bags, and luxury watches.
Just how much consumers will flaunt their wealth through luxury assets will largely depend on their culture. The more toned-down culture of Western Europe will value the inconspicuous brands that stand out with quality. The more extravagant Asian market, however, tends to value flashy items with recognizable branding.
4. People increasingly see luxury assets as investment opportunities
The past few years have brought a totally new type of consumer to the luxury industry — those that see luxury assets as investments. Reports have continually ranked designer bags and luxury watches as better investments than the entire S&P 500 Index, attracting the type of people that otherwise wouldn’t have been the target customers for Rolex watches.
LuxFi has analyzed some factors that push people towards making luxury purchases and has seen the potential in all of them.
While it’s hard to predict what might motivate consumers to purchase luxury products in the future, it’s not hard to predict that they will want a quick, easy, and reliable way to do so. By providing consumers with a trusted platform for their luxury purchases, LuxFi wants to revolutionize the industry and help it play a bigger part in people’s lives.
LuxFi is the world’s first asset-backed NFT marketplace for luxury assets, where people can buy, sell and invest in luxury assets using cryptocurrencies and traditional payments. We eliminate counterfeiting while minting an NFT on a multi-chain blockchain network, with a focus on luxury assets that hold value well and have a high resale value. Leveraging our big data intelligence system and unique algorithm for automated data collecting and data processing, the value of each NFT on our platform is backed by real-world data.
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