It is surprising to note the continuation of high-end consumption nowadays. Examples abound of the very expensive goods being purchased.
For instance, a solid platinum toothbrush was sold for $4,200. Luxury automobiles are in high demand, and multi-million dollar houses and condos continue to be built and are snapped up by enthusiastic buyers.
Buyers of these products obviously are very wealthy. To understand the motives of these customers is important as general retailers report that their sales have grown only modestly in recent years.
These affluent buyers appear to operate in violation of normal practices. Economic law and logic simply imply that the high price of a good means that consumers would buy less of it.
This we could call “Veblenitis,” named after Thorstein Veblen, an economist in the previous century who authored The Theory of the Leisure Class, an analysis of capitalism, in which the term “conspicuous consumption” was coined.
He observed that the wealthy build huge mansions in exorbitant locations to signal their wealth.
Still, rich people find ways to spend money efficiently. In other words they do not make a purchase simply because the price is high; certainly these people are not foolish and are not willing to throw money away.
For instance, the grand car offers something extra to lure buyers, such as greater comfort, more leg room, heated seating and so forth.
The more expensive coffee and wine presumably taste better. The average buyer cannot afford to satisfy palates in that manner.
Luxury goods are prospering in the current era because so many can manage purchases that the middle-income customers cannot afford. Oil paintings are bought because of their scarcity and, therefore they will appreciate in price reflecting general inflation, as do expensive houses.
Expensive retailers are willing to offer services that the run-of-mill stores do not provide, such as better fitting, prompt delivery and money-back if the product is unsatisfactory.
In other words, the affluent are the same as the rest of us.
They are pleased to display their wealth, but in essence they are not fools. They recognize value, but can afford to pay handsomely for that.