The nature of surging sales in luxury goods

Antoine Danchin says nature provides clues to sector's robust growth despite global downturn

PUBLISHED : Friday, 19 October, 2012, 12:00am
UPDATED : Friday, 19 October, 2012, 2:12am

Despite the global economic crisis, sales of luxury goods are surging worldwide. Why? While marketing has contributed to the rise, the market's robust growth is actually rooted in biology.

Discussions about the structure of human thought have long been dominated by the view that reality is composed of four elements: space, time, matter and energy. But recently, a fifth element, information, has entered the debate. And information is crucial to understanding the fundamental drivers of luxury-goods consumption, and thus to predicting the market's future.

While animals use colourful displays to signal fitness and strength, humans use luxury goods to demonstrate economic health. But, more than a symbol, buying luxury goods could indicate future success, owing to the selective advantage that showing off provides. In nature, competitors perform, and the most compelling, beautiful spectacle wins.

For most animals, males are the performers. Given that females bear offspring, an unobtrusive appearance is more advantageous in nature. But humans are social creatures with no natural predators, so female competition is more widespread.

Effective display is costly. Developing complex, vibrant plumage demands significant energy and genetic resources. Genes are difficult to maintain, requiring subtle and energy-intensive correcting processes.

Likewise, purchasing luxury goods requires substantial financial resources. This cost dictates the display's competitive impact. Today, selection is effective only if a striking appearance is obtained at a very high price - and that price is known. Indeed, an expensive item with no identifying characteristics has less competitive impact than a recognised brand.

False information, such as counterfeit goods, jeopardises the competition-based selection process. Animals commonly use mimicry to capitalise on knowledge - or fear - of another's strength. But mimicry's success in nature depends on the ratio of the original to the ersatz. If there are too few of the original, its protective value vanishes. Similarly, nobody would display a symbol of wealth if it were too common. Therefore, assessing whether luxury goods will maintain their impact, and appeal, requires monitoring the extent of counterfeiting.

Given that luxury goods provide individuals with a competitive advantage, higher luxury-goods sales could indicate a brighter economic future for a country. In a time of crisis, countries in which luxury goods play their selective role effectively are the safest bets for productive investment.

Antoine Danchin is an honorary professor at the Faculty of Medicine of the University of Hong Kong. Copyright: Project Syndicate/Institute for Human Sciences