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lecturers really tell us something about how we try to perhaps separate ourselves
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from others get ahead in life try to to increase our social Mobility it's really
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trying to create about trying to create opportunities for ourselves in terms of either economic benefits or or social
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status benefits welcome to the ripple effect the podcast that takes you on a journey through the minds of work and
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faculty I'm your host Dan Looney and in each episode we'll be diving deep into
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the inspiration behind the groundbreaking research that Wharton professors have conducted and exploring
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how their findings resonate with the world today well while retail overall seems to be hitting some headwinds with
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an up and down economy it appears that luxury retail is not sales appear to be strong and companies are even doubling
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down on bricks and mortar footprint that they feel is necessary where does luxury
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retail stand right now with more on that pleasure to be joined by P yam who is an
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associate professor of marketing here at the Wharton School P great to talk to you how have you been and I've been I've
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been great then thanks for having me thank you and so the the where we stand with luxury retail right now it seems
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like there's a lot of interest about this from the public from the consumer right now what do you think is driving
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this this want around luxury retail at the moment in my opinion there's no better way to understand individual
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psychology or consumer psychology than than luxury goods luxury goods on the surface might seem like a a Superfluous
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way of spending your money or simply money burning but it really gets to how we want to see ourselves and how we want
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others to see ourselves it's really about signaling certain qualities or or certain characteristics about ourselves
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to to ourselves again it's signaling to ourselves to some extent at the same
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time it's signaling to others it's a it's a way of trying to to uh consume
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Goods in a way that makes us feel like we belong to a class have some kind of status and at the same
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time make it clear to others or or try to communicate to others that we belong to a certain class so it's it's a really
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meaningful way of trying to understand individuals and Society through the consumption lens and and I know you and
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I have talked in the past about the element to a degree of there being an aspirational element to luxury retail as
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well absolutely so this is nothing new in in the sense that we have of course for centuries we wanted to Signal
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certain things about ourselves or the the desire to belong to a certain class the the you know the whether this is an
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Elite Class whether this is an aristocratic class people always wanted to Signal certain things about
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themselves in the past this was achieved mostly through materialistic consumption
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because that's what the the elite had they had the resources they had the money Torsten weblin had um observed
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that the elite the the rich actually do spend their money their resources in terms of time as well in a very
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leisurely way to be able to Signal certain things about themselves and they do it in a way that is very hard for
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others to replicate or very costly for others to replicate now that used to be the way of living that used to be how we
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signal certain things about ourselves or or desire to signal that we belong to that class perhaps with the objective of
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attaining further social Mobility but with the changes in society and the changes in economics we we see now that
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consumers are no longer relying on very highly materialistic ways of trying to Signal their qualities they are moving
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on to to other dimensions so with the onset of e-commerce how does that play into what the future of luxury retail is
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going to be because there's an element that I mentioned at the top that it seems like there's a connection between
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lxury retail and the want to have bricks and mortar locations to have that experience to be there firsthand how
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does the dynamic of e-commerce then potentially play in so I would say that e-commerce has not been as significant
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in in the luxury markets uh maybe compared to some of the other Goods The Experience Feeling Good Feeling part of
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a a certain class and and signaling that to yourself is a very important part of
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luxury therefore uh the stores the experience that you go when you go into when you walk into a luxury store that
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has been always a part of um luxury con consumption perhaps a bigger part than when you go into a grocery store or when
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you're shopping for let's say books uh so in that sense e-commerce perhaps has
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been a a lesser a lesser maybe less important part of uh luxury consumption but we are now starting to see more and
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more luxury Brands try to integrate at least some elements of sales some elements of experiences into uh into
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e-commerce and even to some of the new technologies some of the new environments including meta worth
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the component of fakes and counterfeits is one that's been around luxury retail
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for a while and certainly companies have tried to uh try to take that out as much
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as they can but it is still there how does that component impact the luxury retail industry in general especially
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when you think longer term and the benefits they may G gain from it at times it's a very important part of
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luxury consumption of course luxury consumption or consumption of luxury goods is it has to be created in a way
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that it's hard to replicate by others by the very definition if I want to show
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that I have the wealth or the status to be able to attain certain Goods it must be again by definition that it's hard
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for others to be able to buy that so counterfeits has been a growing problem in the sense that today's counterfeits
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are are much better much higher quality almost identical to the real thing that The triaa triaa Fakes the the um real
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fake fakes they are actually very much comparable to the real product as a result of that it becomes much harder
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for people to Signal the the status signal their ownership of certain uh Brands certain Goods uh and there are
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really high quality counterfeits in a market so it puts pressure on on Brands it makes it harder for individuals to be
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able to to consume the goods in a way that are meaningful to them what does that imply that means that people are
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now going to look for different ways to to try to Signal their um their status they will look for perhaps different
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ways of consuming goods and one of the ways that they try to consume Goods is perhaps actually perhaps surprisingly
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moving away from consumption or trying to reduce the the amount of consumption luxury goods consumption uh compared to
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what we might have observed in the older days right in the past what again is you
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know the the idea of uh signal conspicuous consumption this is all about money burning this is all about
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buying items that are very hard for others to buy expensive goods and and lovishly consuming those items so having
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many many of these this is an idea of a maximalist type consumption now what we have been seeing more and more in
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especially Western societies a move away from that very levish consumption people
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still do buy luxury goods but they are trying to reduce the number of items that they buy in perhaps a meaningful
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way and still a conspicuous way it's not that they are not trying to show that
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they are buying luxury it's still very conspicuous it's still very much a
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signal of belonging to a certain class but it's a a very opposite very um different Trend than what we used to see
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it's much fewer items sometimes that goes along with buying even higher qualities or or more expensive items and
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with this idea of refraining from consumption or reducing the amount of consumption you are very much doing the
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same thing that you were trying to do before show that you belong to a certain certain class and have certain St but I
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guess for the retailer by limiting the number of items they may have on a particular run of a product they
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obviously add to the value of it just by the number of items that they're actually going to put out on the market
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in the first place yes so for the retailers for luxury managers this of course this these new trends in society
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or how people are trying to Signal their status signal certain qualities about themselves these new trends will have
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implications so of course they might want to focus more on perhaps fewer items in reducing assortment uh at the
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same time changing the price of of the products in a way that makes people makes it easier for people or
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facilitates signaling status signaling for people so we we expect to see of course changes in prices as well as the
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assortment but that being said said this trend also gives a few different ideas for I think luxury goods producers in a
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sense the idea of counterfeit uh counterfeits and their damage has mostly been focused on how perhaps we should
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stop counterfeit users from uh using counterfeits how we should go and and just like uh playing a game Chase every
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single counterfeit now what we see in based on our research is that the damage of coun Fitters go beyond just those
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individuals who switch to counterfeit use the the behaviors the habits the consumption patterns of consumers who
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purely consume luxury goods is also changing so if that's the case a luxury manager has to think even beyond the
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consumers who consume a counterfeit we need to think about how those who never consume counterfeits are changing their
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their behaviors and their signaling and their consumption patterns as well how much do luxury retailers in the scope of
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all of this going on also have to be wary of the brand itself because the brand whatever it is has an innate value
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and in many cases a higher value than some other brands and by that that not necessarily direct connection with
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counterfeits there can be a negative impact on the brand as well correct absolutely yes uh so when there's a
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counterfeit in the market and when that counterfeit is uh simply replicating your product to a very very high quality
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degree and makes produces an identical product it reduces potentially the value of your brand as well because it reduces
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the ability of again people who buy the real thing to to show that they belong to to to a certain class or have certain
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status what do you think are the areas that that luxury retail focuses on as we move forward here knowing where we are
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are kind of as consumers looking for these products uh as we move ahead so I think minimalism is a big growing Trend
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it seems like this becomes a more meaningful consumption from the the lands of the consumers they seem to to
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want to consume perhaps fber items in a more meaningful way more conscious way this also goes along with the with the
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trends of sustainability or and going becoming anti consumers um that's one of the trends
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and and we see Brands I think paying attention to the these new trends a second thing we have as a society moved
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away from trying to Signal values or trying to attain social status Chase social status and social Mobility
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through materialism right we have moved away as a society from becoming this very production manufacturing oriented
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um culture to a much more um service economy oriented uh population Society so with that came different Val values
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of signaling different status groups different signals for instance having education having a better job being able
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to live a different life because material goods are now much more accessible to a broader set of people so
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people are paying attention to again signaling cultural assets their cultural capital they are paying attention to to
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showing that they know um certain things they are much more knowledgeable about the quality of goods and that sometimes
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also turns into what we refer to as quiet luxury so what does that mean that means that a brand um with a big logo
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you know producing a big logo product is perhaps less preferable to those consumers because I want to signal that
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I know something and I may want to to speak to individuals who other few individuals who know the same thing so
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now the the logos are smaller and and the brand names are perhaps much less visible and that's another another Trend
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we see this and an industry executive actually told me at some point that this is a very important way that people tend
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to to signal to themselves um the the quality and and their own values um for example this person mentioned that women
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uh in typically who are going through their careers when they first start the career they have a big job they get this
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sort of achieve this this uh first step in their life and they will go and buy a
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handbag that that has the logo like this big visible logo but as they move further in their career and they
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become more and more successful at some point when they get to that Milestone achievement they will go and buy a
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follow-up handbag and that handbag will be again much more of a quiet luxury that will be much less visible because
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the type of people that they may want to signal that they've achieved something
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is a different group than when they started out or they have um a desire to Signal certain achievements to to
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themselves so this idea of quiet luxury and how consumers move how they change their patterns of consumption throughout
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throughout their life throughout their their consumer life cycle is also very interesting and an important pattern for
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for managers to understand so it also has to impact doesn't it the companies
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themselves when you're thinking about all these components going on and the message that they are trying to send out
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about these products the marketing patterns that they are putting out into the public and and the different avenues
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that they're trying to reach the consumer as well absolutely so if you think of this as segmentation you may
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want to focus on different consumer segments the the consumer who's looking for quiet luxury or the consumer who's
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after minimalism is going to be a different consumer or in terms of their luxury consumption life cycle they will
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be at a different place compared to someone who's looking for the big logo item or the more sort of easily visible
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conspicuous conspicuous items these are I would say um two important uh Trends one of another important trend is again
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as we move away from materialism or consumption of material Goods we are seeking experiences we are moving
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towards experiences uh people are thinking that experiences are are scarce and and they
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are more valuable in some ways to to them in terms of uh consumption value so with that we also see many luxur Brands
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turn to experiences some luxury brands are opening restaurants some luxury brands are are focusing on curating uh
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holiday or or experiences for for individuals that is also in line with what people people are looking for or
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how they are looking to perhaps uh signal their social status seek for social mobility in life that's another
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big Trend that we are observing in luxury markets but it seems like that the the growth that we have seen around
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luxury retail especially in the last few years that's something that's going to
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be with us for a while and maybe to a degree this is kind of a connection with the younger generation right now that
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that's that that component that they're looking for as they grow and and and
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move into different segments of their lives absolutely so I as I mentioned earlier I don't think that there are
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that many products that speak to human psychology consumer psychology or the psychology of an entire society as
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luxury goods uh luxury goods really tell us something about how we try to perhaps
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separate ourselves from others get ahead in life try to to increase our social Mobility it's really trying to create
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about trying to create opportunities for ourselves in terms of either economic benefits or or social status benefits so
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in that sense I don't expect much to change the way that we try to Signal or
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status or signal how we are different from others may change over time we may be focusing more on perhaps in some case
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material Goods in another case experiences in another case perhaps we focus more on signaling or cultural
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capital we want to show that we know something that others do not know we may change the the channel or
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the format through which we show things about ourselves but these are all speaking to the same psychology of again
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trying to to Signal status and there will be price tags that are attached to it because it's hard hard for people to
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to perhaps replicate or or um attain so there's going to be an industry and there's going to be an industrial
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reaction like goods are not going away as we have bigger growing middle class in developing countries the the need for
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perhaps again luxury goods will continue to grow and we'll continue to see signaling in one way or another so we
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talk a lot about this in the scope of the United States but you just opened the door to the larger discussion of how
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this kind of aspirational mindset plays out in other countries around the globe and and it's very similar to what we see
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here in the United States so there there are some parallels and sound differences
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so we have seen a number of countries especially in Asia grow dramatically in in luxury consumption and this is again
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this has something to do with the growing middle class growing number of individuals who now have the means to be
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able to Signal something and the growing Society or changing Society where people
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want to to show that they are different than others or show that they belong to a certain class so uh these elements I
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think these human Psych olog or the potential benefits of why you may want to engage in in luxury consumption are
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are similar but the means through which whether it's these two trends for instance Maximus going out the whole way
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burning money I think some of the the new markets or growing markets are still going through this phas as opposed to
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minimalism and they will probably move towards minimalism as again these countries become continue to become
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maybe moving away from manufacturing to to services or start valuing some of the
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other hard to achieve uh qualities that may relate to education that may relate to having certain careers uh so we'll
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see these changes probably in these countries in these markets as well P great to talk to you again thanks very
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much thank you so much for having me you got a penar yielder I'm associate professor of marketing here at the
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Wharton School thank you for listening to the ripple effect we hope you found this episode informative and engaging
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