1.

Premiumization
- How luxury brands create value (strategy)
Luxury started as a niche, limited to the happy few, the only ones who could afford
it. Although these images come spontaneously to mind when consumers are asked
what the word luxury evokes (IPSOS, 2014), modern luxury is very different: It is an
actively growing sector, targeting an expanded clientele. Luxury brands have
adopted "abundant rarity" strategies (Kapferer, 2012) characterized by feelings of
exclusivity more than actual exclusivity and by artificial rarity tactics (limited
editions, capsule collections). This is also why luxury brands have changed the focus
of their investments, moving from production to the creation of memorable retail
experiences, to personalized services and to attaching symbolic capital and prestige
to the brand name itself through communication, social influence, social networks,
celebrities, brand ambassadors [...]
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Most luxury brands have developed specialized product lines (e.g. Armani has
Emporio Armani, Armani Exchange, Armani Jeans and Giorgio Armani) to cater to
different market segments. Researchers refer to this concept as the
“democratization of luxury” (Kapferer and Bastien, 2012), “mass affluence” (Nunes
et al., 2004) and “bandwagon luxury consumption,” which signifies that “consumers
buy certain categories of luxuries as these are very popular” (Kastanakis and
Balabanis, 2012, 2014).
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In modern luxury, the brands have accumulated a symbolic capital which does not
merely rely on the product uniqueness and preciosity but on the desirability of the
brand as a whole. Social statements are made by wearing the logos of known
brands: Social recognition is not conveyed by a bag unless its brand is recognized
even by non-buyers.
In modern luxury, brands have become crucial because the more one sells intangible
values beyond functional ones, the more these intangible values must be certified:
Only the fame of the brand can guarantee them.This is why luxury business is a
brand-building business: Once established, trust, reputation and desirability can be
leveraged to expand the product base, as well as the consumer base.
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- Buying motivation and social unequality associate with social value (refer to Asian
Market)
In highly unequal societies, belonging to the wealthy class used to be traditionally
expressed through conspicuous consumption, as already argued by classics such as
Veblen (1899), Simmel (1904) and Bourdieu (1979). Research on consumer behavior
has confirmed that the so-called Veblen effect had an impact on consumption until
today (Leibenstein, 1950; Mason, 1981; Tian et al., 2001; Kastanakis and Balabanis,
2012), although the luxury market has transformed from a niche orientation
addressed to the happy few into a fast-growing global industry (Donzé and Fujioka,
2015). Ordabayeva and Chandon (2011) argued that increasing equality led to more
 conspicuous consumption by the bottom-tier consumers because it could fulfill a
desire for greater position gains.
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The need to belong is deeply rooted in human nature. Therefore, people constantly
strive to maintain positive social relationships (Tajfel & Turner, 1986), as a lack of
these can lead to physical and psychological suffering (Baumeister & Leary, 1995).
One of the prominent strategies people employ to foster affiliation is through their
consumption behaviour (Belk, 1988). For instance, studies indicate that individuals
seek to acquire the brands, and especially luxury brands, used by their membership
groups as well as their aspirational groups (Escalas and Bettman, 2003, Shukla,
2011), while tending to avoid brands associated with out-groups (Berger and Heath,
2007, Escalas and Bettman, 2005). The associations and meanings attached by
reference groups can help individual members to create their identities (McCracken,
1989) by integrating these brands into their self-concepts.
- Rejection is a common yet painful social experience representing a fundamental
threat to social survival which leads to severe negative consequences (Mead et al.,
2011, Williams, 2009). Due to the importance of actual or possible social rejection,
even the slightest form of manipulation can still evoke the detection of rejection,
leading to negative consequences (Williams, 2009). The behavioral responses to
personal rejection can manifest in either positive responses such as fostering
affiliation, or negative responses such as aggression (Lee & Shrum, 2012). For
example, rejected individuals are found to be willing to tailor their spending
preferences to gain acceptance from new social partners (Mead et al., 2011), or to
self-indulge in conspicuous consumption (Lee & Shrum, 2012)
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Wiedman et al. (2009) proposed an integrated tri-partite model of these key values
created by luxury. They distinguish functional, individual (luxury for self) and social
values (luxury for others). Functional values remind that unlike art, luxury products
have also to be extremely well performing. Individual values refer to self-identity
values, hedonic benefits and liking materialism. Social values are fulfilled by luxury
conspicuousness.
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Based on the seminal work of Vigneron and Johnson (1999), a broad range of studies
has been carried out recently on luxury consumer behavior. Most of them focus on
social factors, such as hedonism, group conformism, status-seeking, perception of
the self (Hirschman and Holbrook, 1982; Lichtenstein et al., 1993; Batat, 2019; Brun
and Castelli, 2013; Hudders and Pandelaere, 2013; Wiedmann et al., 2009) and
cultural specificities (Atwal and Bryson, 2014; Hennigs et al., 2012; Lu, 2008; Wong
and Ahuvia, 1998).
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The luxury sector has grown because today, more people want a share of this luxury
dream, even exceptionally (Nueno and Quelch, 1998; Silverstein and Fiske, 2005). In
the modern society, consumption is held as a source of happiness (Baudrillard,
 1998): It is normal that its most extreme production as well as experience be held as
an access to dreams, under the umbrella of a highly desirable brand.
Another well-known luxury scale (Dubois et al ., 2001) identifies three factors
underlying luxury: distinction, elitism and hedonism. The first factor is measured by
items such as "This is a brand to dream", the second by "This brand represents
luxury" and the third by "It is a real pleasure to own this brand".The glamour factor is
constructed by the celebrities believed or known to be buying the brand. They are
themselves very mediatized and contribute to make the brand: Audrey Hepburn
made Tiffany and as Grace Kelly made Hermès. Together with the elitism factor (the
brand being associated with very high ticket special items, inaccessibility), these VIP's
build the "prestige level" of the brand.
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Identifiable luxury brands such as Louis Vuitton and TAG Heuer, purchased for their
popularity, are relevant in this case, as they personify status which categorizes the
buyers within a certain social class.
According to Wong and Ahuvia (1998), western consumers indulge in luxury brand
consumption to illustrate their personal preferences and personality; on the other
hand, Eastern consumers purchase luxury goods to conform to their reference
groups. Consumers in Eastern cultures purchase luxury goods for the symbolic
meanings that they hold and to show that they are affluent and wealthy (Park et al.,
2007).
The social context exerts its influence on the purchase of foreign luxury brands
(Hung et al., 2011). Further to this, conformity is linked to collectivism (Hofstede,
2001; Triandis et al., 2001). Consumers tend to conform to enhance their
interdependent selves by purchasing luxury goods (Lascu and Zinkhan, 1999). On the
other hand, consumers with independent orientation do not derive their motivation
from external factors, and are internally motivated; thus independent orientation
discourages bandwagon luxury brand consumption.
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As cities expanded, and the thirst for luxury increased, they also became the point of
reference for cultural change (Dewald 1996, p. 133) and for finding events,
entertainment and more, so that new ways emerged for old and new elites of
asserting their social and cultural leadership. In the same time, against the
background of the metropolitan life role-playing and fantasy could become key
elements of an individual’s social behaviour (Gundleand Castelli2006, p. 29). If the
key of desire appears as a useful tool for managing the perception of luxury among
the consumers in the eyes of luxury brand managers, at the same time it seems to
appeal to the main feature of the typical middle class mentality.
- Frustration: Bargaining power of buyers
o Inability to consume
The relationship between luxury, fashion and wellbeing is complex. As the
statistics above suggest, fashion may be complicit—with other socio-cultural
factors—in encouraging dissatisfaction with one’s appearance and lifestyle.
People who focus most on their appearance, wealth, status and possessions
tend to be less happy than those that don’t (New Economics Forum 2006, p.
 31), as this tends to reflect a need for the validation of others. Links between
social media usage and feelings of inadequacy have been well established, as
well as those between feelings of inadequacy and of stress (Abel et al. 2016,
p. 34). As social media is an important communication channel for luxury
fashion brands, which present a dream lifestyle that indelibly associates
luxury with beauty, status and perfection, it may feed the insecurities of
consumers who purchase items they may not be able to afford in a cycle of
desperate aspiration and self-gratification (Wu et al. 2015, p. 19; Abel et al.
2016, p. 34; Kapferer2010, p. 42). In a study by Kennedy and Bolat (2017),
subjects reported feelings of anxiety if they did not get enough likes on social
media and looked for products that would bring them the most likes: those
were usually luxury items. Luxury consumption may therefore be understood
to be part of the problem.
However as consumer values shift, with increasing emphasis placed on
personal health and growth, and more concern for ethical, political and
environmental issues, there is an urgent need for “luxury with good
intentions” (Gutsatz and Heine 2018, p. 409). As Gutsatz and Heine (2018)
imply in the following quotation, this should not be just another marketing
strategy but rather a sincere acknowledgement by luxury brands that they
should have a positive impact on society:
There is a growing desire for authentic products that are good for the
environment and especially for personal health, while at the same time also
being good for the people involved. (Gutsatz and Heine 2018, p. 409)
A new methodology is needed for future luxury fashion that is more
ambitious than simply doing less harm to people and planet, but rather one
that is pro-actively positive in every possible way in how it conceives and
creates luxury goods. Luxury is the perfect arena in which to explore and
resolve new, holistic approaches to sustainable fashion design—where the
costs of research, development, prototyping and production are unlikely to
be a prohibiting factor to consumers and where a high premium is placed on
beauty and uniqueness (Kapferer2010, pp. 41, 45; Maisonrouge 2013, p.
119). And where luxury leads, others will follow.
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o Self-expression needs
Fashion and gender in modern society are interdependent phenomena. Also,
fashion includes the tendency for social subjects to demonstrate gender
characteristics to some extent, deliberately emphasizing them and giving
them the opportunity to realize their identity to the fullest, as they wish.
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- Frustration: Threats of new entrants
o Sharing culture
However, alternative practices of sharing and of having access to luxury
fashion – without fully owning the products – have flourished over the past
few decades; however, they have received little attention with respect to the
consumer self–object relationship (Lawson, Gleim, Perren, & Hwang, 2016).
Overall, the ‘sharing economy’ is expanding worldwide, with 66% of
consumers stating they are ready to ‘share’ goods, 22% ready to ‘share’
 clothing items, and 21% ready to ‘share’ cars.1 PwC (2014) estimates that the
scope of global ‘sharing’ activities will expand from $15 billion in 2014 to
around $335 billion in 2025 (Godelnik, 2017). Specifically, the global online
clothing rental market is anticipated to expand at a CAGR of around 10% by
2023–2026, with the female segment remaining dominant.
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o Counterfeit (China market)
The luxury goods industry is a flourishing and ever-growing market. With the
value of the luxury market growing, many designer brands have become
targets for counterfeit producers, and consumers' decisions to purchase fakes
instead of originals have developed into a worldwide crisis (Jiang and Cova,
2012). The Report on European Customs Enforcement of Intellectual Property
Rights (European Commission, 2013) states that luxury brands suffer the
most. In 2012, the most counterfeited product category was handbags and
wallets, reaching US$500 m of seizures worldwide (World Customs
Organization, 2013).
Considering counterfeits as a sign of brand desirability (Wang and Song,
2013). In addition, as various scholars state (Bloch et al. , 1993; Cheung and
Prendergast, 2006; Wilcox et al. , 2009; Yoo and Lee, 2009), customers may
look at fake consumption as an attempt to assume a particular personality
and social traits (imagery block) to gain social approval. The more a genuine
consumer is aware of these attempts, the more he or she may be personally
conscious of possessing these desirable social and personality traits him- or
herself (Cordell et al. , 1996; Park et al. , 2010), and the more he or she is
inclined to feel positive sensations related to being consistent with a socially
desirable profile (feelings block).
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Asia is known as the world’s center of both counterfeit goods production and
consumption, with China often seen as the primary culprit (Predergast,
Chuen, & Phau, Citation2002).
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2. Globalisation: China market

For an emerging country, the presence of luxury stores is a signal of the country's
economic growth and of the emergence of a middle class willing to access to the
best that the consumer society can offer.
If mature countries still remain the dominant luxury markets because of their high
purchasing power (USA, Japan, Europe), then the long-term future of luxury is
elsewhere in these emerging countries. It is predicted that China could become the
Number 1 country of the luxury sector in 2020, because of the considerable size of
its middle class, wanting to enjoy life after decades of deprivation (Bain & Company.,
2014) and who travels now outside China.
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 China’s luxury goods market is still expected to keep on growing in China despite the
slowdown of the last years. Chinese consumers’ appetite for luxury brands is still
present and in particular in new geographic areas of mainland China is growing as it
is growing their digital experience in luxury purchase (Rovai, Citation2016).
Chinese consumers, in particular the “new rich” segment arising from the new
Chinese young digitally-savvy middle-class, and the younger upscale digitalised
luxury segment, which is defined as individualism and indulgence
(https://www.tandfonline.com/doi/full/10.1080/08961530.2019.1710736) have
become one of the main consumers’ segments, showing their newly acquired status
or rewarding themselves and their family and focusing on a new online purchasing
experience.
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In particular, they seem to pay particular attention to specific issues related to the
changes of the Chinese luxury landscape, namely, a meaning and perception of
luxury that is embedded in the past, but is responding to the changing public
sentiment; the influence of new regions in China that represent an increasingly
significant market opportunity for long-term luxury brand sustainability; and, the
increasing significance of heritage and country of origin, which enable international
luxury brands to connect with current, but also prospective Chinese luxury
consumers (Rovai 2015, 130). These factors are to be taken into account in
understanding the changing nature of the different typologies of luxury(ous)
experience contemporary consumers are looking for.
In this perspective, it is also important to point out that Chinese culture and way of
thinking insist on concepts of rites and harmony as inspired by Confucian thought. As
a consequence of this, the experience with luxury goods is generally lived and
interpreted as an affirmation of individualism and distinction, reflecting at the same
time the structure of social dynamics. Such a traditional interpretation of the
relationship with goods and services is also related to the concept of inequality
between individuals and the spiritual forces existing between them. In this
framework, luxury goods participate in a ritual hierarchical pattern in which status
and social obligations are reflected. Besides, they represent the character and spirit
of each individual (who can afford them), since traditional Confucian culture does
not consider luxury as something superfluous or frivolous (Rovai 2015).
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China accounts for 6.7% of LVMH's sales.
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- Social impact:
o Boycott
Recently, luxury fashion brands have been the target of several high-profile
consumer boycotts in China. In 2018, Dolce & Gabbana was boycotted over an
advertising campaign for the Chinese market which was widely decried as
“racist.” In 2019, Coach, Givenchy and Versace faced boycotts over perceptions
that they had contradicted China’s territorial claims. In each of these cases, rapid
apologies by the brands concerned were not enough to quell the controversy,
and today they remain an active target of anti-consumption in China.
 Chinese luxury consumers represent almost a third of the global market for
luxury goods, set to rise to 44% by 2025 (McKinsey & Co, 2017). More than ever,
it seems, this immense market is willing to punish brands for perceived social
infractions.
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Chinese consumers have also boycotted some American brands as a show of
support for China in its continuing trade fight with the U.S. In a June survey, 56%
of Chinese consumers said they have avoided purchasing an American product to
show support for China's position in the trade war. That poses a significant risk to
U.S. companies, since three out of four Chinese consumers say they often buy
products from American businesses, according to Brunswick Group's opinion
research practice.
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o Focus more on value
Consumer behavior nonetheless appears as significantly differentiated and is
regarded as an effect of the rapid expansion of luxury consumption. In more
economically advanced regions, Chinese customers still adopt a highly
knowledgeable and refined approach towards the purchase of luxury brands
(Rovai 2015) and they are able to spend long time looking for the best
solution in terms of money invested and expression of their own personality
and individuality: this process of information research and evaluation can last
up to 2–3 months before the actual purchase (Panchout 2013).
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o Refer to buying motivation, personal, health growth, environmental, political,
ethical concern
 Threats of new entrants
o More towards sustainable fashion
There has been an increasing amount of criticism directed at luxury brands
for their lack of transparency in their supply chains, as well as accusations
that they exploit animals and workers (Dekhili & Achabou, 2016; Athwal
et al., 2019; Kapferer, 2017), creating growing tensions among luxury brands.
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o Additionally, people who care about sustainability are more likely to shop at
thrift stores (Yan, Bae, & Xu, Citation2015)
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o Thrift shopper
 Second-hand shopping is gaining popularity globally. In the U.S.,
approximately 1 out of every 5 shoppers regularly visits thrift stores
(Tully, Citation2012). Consumer decision-making is a complex process
(Ajzen, Citation1991). The TPB, which has been widely used to
understand consumer behaviour, assumes that consumer behaviour is
 not a spontaneous action but the result of planned behaviours (Smith
& McSweeney, Citation2007). According to the TPB, attitude toward
the behaviour, subjective norms (SN), and perceived behavioural
control (PBC) influence consumers’ behavioural intention. Both
consumers’ behavioural intention and PBC are predicted to lead to
actual behaviour. In the context of second-hand shopping at non-
profit thrift stores, it is posited that purchase intentions at thrift
stores are influenced by the following three antecedents: (1) attitude
towards purchasing at thrift stores, (2) SN, and (3) PBC (Ajzen,
Citation1991). The TPB further explains that consumers’ beliefs about
behaviours influence their attitudes toward such behaviours (Ajzen,
Citation1991; De Groot & Steg, Citation2007; Pagiaslis & Krontalis,
Citation2014).
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10.1080/17543266.2019.1611945
 Chinese who cares more about environment may shift their buying
behavior into more sustainable choice instead of choosing luxury
brand
3. LV has been defined as the flagship of LVMH
- Product extension for mass
Recently, the purchasing power crisis and the rise of the low-cost and hard discount
phenomena have incited more and more brands to compete on price (Kapferer,
2004). Likewise, the democratization of the luxury sector has attracted more price-
sensitive customers to lower-end products (Lipovetsky and Roux, 2003; Kapferer and
Bastien, 2009).
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As Mundel (2017) explains, high-end brands expanded their offering by selling more
affordable items, enabling brands to capitalise on the trading-up phenomenon that
as occurred within the middle class. This has been happening due to democratisation
of luxury, which sometimes is accompanied by a wide range of firms, tagging the
masses (Truong, McColl & Kitchen 2009; Twitchell 2002), which are driven by a
continuous increase of the aspirational consumer segment (Granot et al. 2013). One
of the main segments in this new luxury, according to Granot et al. (2013; Kastanakis
& Balabanis 2012; Silverstein & Fisker 2003a) is old luxury brand extensions: are
lower-priced versions of luxury goods or services, extending their offer line, to
provide accessibility, thus selling low-end versions, cash cow items, and at the same
time marketing aspirational, high-end versions. A good example is Louis Vuitton,
which is providing product lines at an accessible price.
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 Dilution of core value and Lose attractiveness to the elite
While this business strategy has proven to be lucrative, in recent years, industry
experts began questioning whether the industry has gone too mass because of
globalization, social media, and economic recession (Pike Citation2016). Such an
industry trend may not only damage perceived exclusivity and uniqueness of luxury
brands, but also destroy the cultural and historical value they have established for
society.
 From a business viewpoint, making luxury more accessible to the masses could
eventually result in losing not only the elite, but also the masses. Amaldoss and Jain
(Citation2005, Citation2008) introduce a concept of uniqueness and conformity by
consumers of luxury brands. The elite customers value exclusivity and uniqueness,
and the masses conform to what is accepted by the elite customers. As a luxury
brand becomes more and more accessible to the masses, at first it can enjoy the
scale of economy (positive spillover effect), but its attractiveness to the elite
decreases, leading to a decline in high-end luxury sales (negative spillover effect).
The process further continues. As fewer and fewer elite customers purchase the
luxury brand, its attractiveness to the masses eventually decreases because it is no
longer accepted by the elite (negative feedback effect).Footnote1 Thus, by going too
mass, a luxury brand will lose both the elite and the masses in the long run, and it
will be very challenging to re-establish the luxury brand image.
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 Consequences
Research in the past few years has increasingly focused on brand dilution effects in
various forms (Cleeren et al., 2017, Dessart et al., 2020). For example, studies have
reported negative emotional responses (Baghi & Gabrielli, 2019), negative brand
attitudes (Ahluwalia et al., 2000, Ferraro et al., 2013), negative word of mouth and
purchase intention (Baghi & Gabrielli, 2019), anti-consumption and anti-brand
activism (Cambefort and Roux, 2019, Dessart et al., 2020), brand avoidance
(Khamitov et al., 2020) and lower consumer-based brand equity (Veloutsou,
Chatzipanagiotou & Christodoulides, 2020).
Additionally, within the luxury domain, studies have documented the negative
impact of vertical downscale line extensions (Dall'Olmo Riley et al., 2013, Magnoni
and Roux, 2012) on consumer-brand relationships, brand attitudes, evaluations and
purchase intentions. For instance, Shin, Eastman & Mothersbaugh (2017) show
conditions under which brand dilution can be managed among millennials through
introduction of limited edition offers. Similarly, Park, Im & Kim (2020) highlight the
greater effects of brand dilution among consumers with high levels of brand
engagement, particularly within the social media context.
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II.