This paper examines whether high-priced luxury goods remain worth their cost when manufactured using inexpensive labor in developing nations rather than by skilled artisans. Drawing on research by Thomas (2007), Suk (2009), and others, the paper investigates the social and psychological factors driving consumer demand for luxury brands — including status signaling, collective fashion trends (Zeitgeist), and the preference for originals over copies. It also considers critiques of outsourced manufacturing and the blurring of authentic craftsmanship. The paper concludes with a letter to the editor arguing that "luxury" is a culturally and personally relative concept, shaped primarily by consumer perception.
The paper effectively uses a three-part theoretical framework drawn from Suk (2009) — status, Zeitgeist, and copies vs. trends — to organize its central argument. This move of borrowing an established academic taxonomy and applying it systematically to a consumer behavior question is a useful undergraduate technique for imposing analytical structure on a broad topic.
The paper opens with a framing quotation and a series of rhetorical questions that define the inquiry. It then works through three named social factors driving luxury purchases before engaging critics of outsourced manufacturing. A discussion of consumer perception and the knockoff market follows. The piece closes with a personal conclusion and transitions into a letter-to-the-editor format that recaps the argument for a general audience — an unusual but effective structural choice.
"For more than a century, the luxury fashion business was made up of small family companies that produced beautiful items of the finest materials. It was a niche business for a niche clientele. But in the late 1980s, business tycoons began to buy up these companies and turn them into billion-dollar global brands producing millions of logo-covered items for the middle market. The executives labeled this rollout the 'democratization' of luxury, which is now a $157-billion-a-year industry" (Thomas, 2007).
This paper focuses on the question of whether expensive luxury goods made by cheap labor — rather than by Italian artisans — are still worth their price. Before forming an opinion on this question, it is important to understand why there is a demand for luxury goods in the first place. Is it because of the quality of these products? Is it because of the status symbol they project? Is it purely about fashion and accessorizing? What is the core reason behind the popularity of luxury goods, and is it purely consumer demand that motivates manufacturers to invest in them?
A considerable body of research has shown that the biggest luxury goods brands in the world — including Louis Vuitton, Prada, and others — invest in cheaper labor in developing nations. As Thomas (2007) documents: "Many luxury-brand items today are made on assembly lines in developing nations, where labor is vastly cheaper. I saw this firsthand when I visited a leather-goods factory in China, where women 18 to 26 years old earn $120 a month sewing and gluing together luxury-brand leather handbags, knapsacks, wallets and toiletry cases. One bag I watched them put together — for a brand whose owners insist is manufactured only in Italy — cost $120 apiece to produce. That evening, I saw the same bag at a Hong Kong department store with a price tag of $1,200 — a typical markup."
Many people believe it is a complete rip-off to purchase branded luxury items when those goods are produced by low-wage workers in China or India. Researchers further argue that if Chinese or Indian manufacturers can produce the same luxury items, why would anyone invest in something that costs significantly more? Thomas (2007) explains how brands obscure their production origins: "Some hide the 'Made in China' label in the bottom of an inside pocket or stamped black on the back side of a tiny logo flap. Some bypass the 'provenance' laws requiring labels that tell where goods are produced by having 90% of the bag, sweater, suit or shoes made in China and then attaching the final bits — the handle, the buttons, the lifts — in Italy, thus earning a 'Made in Italy' label. Or some simply replace the original label with one stating it was made in Western Europe."
The central argument of this paper is that numerous social factors influence consumers' preference for luxury brands despite their higher prices. The paper concludes with a letter to the editor addressed to the New York Times.
It is important to understand the psychology of customers who prefer buying branded goods despite the premium pricing. In a study by Suk (2009), the researcher asserts that luxury goods have grown into fashionable accessories, and analyzing the purchase of luxury goods is therefore similar to analyzing fashion trends in society. Suk highlights three primary aspects that dominate the purchase of luxury goods from brands despite their higher prices:
Purchasing luxury brands is widely viewed as a statement of social and financial status. This is one of the main reasons why the purchase of luxury goods from brands continues to grow. When treating luxury goods as part of fashion, Suk (2009) observes that "the most influential and widely held theory posits fashion as a site of struggle over social status. This is a view most concretely articulated in terms of social class at the turn of the century by Georg Simmel, the German sociologist, who was in turn influenced by Thorstein Veblen's classic work, The Theory of the Leisure Class."
Another major theory of fashion is sometimes described as "collective selection," a concept associated with the sociologist Herbert Blumer. According to this theory, fashion emerges from a collective process in which many people, through their individual choices among competing styles, form collective tastes that are expressed in fashion trends. The process of trend formation begins vaguely and then sharpens until a particular fashion is established. The themes of a given trend reflect the spirit of the times in which people are living (Suk, 2009).
Most consumers psychologically prefer original designs — that is, branded luxury goods — over copies from other manufacturers, feeling that copies are of lesser quality or lack the class associated with a recognized brand. In relation to this, Suk (2009) argues that "some observers assume that the trendy articles are copies: either the exact same article purchased from the same producer, or else a close copy of most elements of the original's design. But such copies play only a limited role in the rise and fall of trends. Participation in a trend — by a consumer or a designer — does not necessarily or usually entail copying."
JP, writing for the Salvage Yard (2010), describes his distaste for the mass production of generic luxury goods and argues instead that "heirloom brand" luxury goods — such as the J.W. Hulme Classic Field Oxford Briefcase — should be the primary focus, so that the brands people own command respect and recognition based on their heritage and previous ownership. Regarding what luxury goods essentially represent, JP writes: "In the last few years, when ostentatious displays of wealth became a sorry substitute for understated class, it became harder and harder to sift through all the junk. A luxury in its purest form, so the thought goes, is not a necessity; it just makes life more fun to live and delights you in small ways. I think I derive pleasure from certain things because I like that they are well made, have a story behind them, and most importantly are not out there for mass consumption — I get a small thrill knowing that not everyone has it. You can call it small batch, artisanal, or limited edition — all would apply" (JP, 2010).
Many journalists and researchers do not support the use of cheap labor in developing countries for luxury manufacturing. They argue that companies based in the United States are fully equipped to manufacture goods domestically while generating more profit, reducing transportation costs, and maintaining high quality standards. One such advocate is Geoffrey James, writing for Sales Machine: "I keep wondering when U.S. companies are going to wise up and start reinvesting in the United States, which used to be the envy of the world when it came to high-quality manufacturing. I'm not holding my breath though, because while U.S. executives are busy examining their own polyps, Chinese executives are laughing all the way to the bank, which BTW they now own" (James, 2010).
Perhaps the most important factor to consider is the role of consumer perception in sustaining the luxury goods market. Those who perceive branded luxury goods as an expensive but status-conferring purchase will continue to buy them; those who do not share that perception will not. Many consumers also justify premium pricing on the grounds of product quality, whether or not that belief is empirically supported.
The conclusion, in simple terms, is this: luxury is a relative term, defined entirely by the cultural and personal perceptions of individuals. This is precisely what makes any argument about its worth so complex — it involves the social and behavioral dimensions of how ordinary people form, hold, and act on their perceptions, and how readily those perceptions can be influenced.
James, G. (2010). Made in China = Piece of Junk. Sales Machine. Retrieved November 1, 2010, from http://www.bnet.com/blog/salesmachine/made-in-china-piece-of-junk/12336
JP. (2010). A made in America story — since 1905 | J.W. Hulme Co. The Salvage Yard. Retrieved November 3, 2010, from http://theselvedgeyard.wordpress.com/2010/09/25/a-made-in-america-story-since-1905-j-w-hulme-co/
Suk, J. (2009). The law, culture and economics of fashion. Stanford Law Review, 61(5), 1147+.
Tiara. (2010). How do copycats affect small fashion lines? College Fashion. Retrieved November 1, 2010, from
Thomas, D. (2007). Made in China on the sly. The New York Times. Retrieved November 1, 2010, from http://www.nytimes.com/2007/11/23/opinion/23thomas.html
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