The “Quarantine 15” weight gain or surge in floppy-eared pup adoptions are overshadowed by the newest COVID-19 trend, which is all about flashy cars and designer duds. It also comes with a hefty cost.
You can call it revenge spending or a case of “you only live once” – but luxury goods report record sales despite continued supply-chain snares and surging inflation. There is also global uncertainty from the pandemic.
Cartier, a fine jeweler, reported last week a 30% increase on sales for the third quarter of 2021, compared to the same period in 2020. Prada, an Italian fashion house, earned 8% more than in 2019, pre-pandemic. Louis Vuitton, Dior, and BMW all have released earlier-than-expected reports in mid-January boasting sales that have far surpassed those in 2020, and even outpaced pre-pandemic sales.
So, why do consumers spend so much on ultra-luxury products?
“In the initial days of the pandemic the government did a tremendous job supporting disposable income. However, even without lockdowns, a lot people avoided using face-to–face services. According to William Dickens (Northern professor of economics), spending on entertainment, travel, and restaurants fell like a rock.
“With disposable income maintaining, people had plenty of money to spend on a luxury lifestyle during pandemic. Dickens cites particular items that can be purchased online, such as stuff you can order from the web.
Dickens says that the constant confusion caused by the delta-omicron COVID-19 strains kept travel, and restaurant spending off the agenda throughout 2021.
Rolls-Royce is a classic statement vehicle that has been associated with wealthy drivers in their golden years. The company reported record-breaking sales of luxury vehicles last year, surpassing all previous years in its 117-year history.
Torsten Muller-Otvos, CEO of Rolls-Royce, credited COVID-19 during an interview with The Financial Times.
Muller-Otvos states that many people saw people die from Covid in their communities. This makes them realize that life is short and they should live it now, rather than waiting until later. Roll-Royce has been able to take advantage of that.
Christie Chung, Mills College professor of psychology, said that the pandemic had changed how many people spend their money.
When we look at the pandemic, we see that people begin to question, “What is meaningful to them?” People started doing things that were a bit different to their normal routines. Chung says that people began to question whether they should spend their money on something they have always desired.
Chung suggests that luxury purchases are not about revenge spending. This is a term that describes a buying spree after two years of saving for the pandemic and missing experiences.
Chung says that people realize they want to use their limited resources to make things more meaningful.
According to Oxfam International’s Jan. 17 report, the sudden surge in spending on designer clothes and high-end automobiles is another indication of the pandemic. It has further exacerbated an already deep division between those who make a living wage and those who are ultra-wealthy.
These are the trends that we are seeing. “The wealthiest billionaires have increased their wealth in an incredible way, but that’s not even close to what average consumers experience in terms of income,” Yakov Bart, a Northeastern marketing professor and affiliate at the Global Resilience Institute at Northeastern, says.
According to Oxfam, the 10 richest men earned approximately $1.2 billion per day since the outbreak of the pandemic. According to the report, over 160 million people have been forced into poverty in the past two years.
Bart says, “That’s where luxury consumption is concentrated.”