Why can a bag seller become the world's richest man, but not a supercar seller? Luxury consumption can be understood on a spectrum. On one end of the spectrum, there are luxury goods that are "functional/experiential", and what you are buying is the ultimate product performance and private experience. Top tier mattresses, high-end audio systems, handmade cashmere sweaters, and luxury cars all belong to this category. On the other end of the spectrum, there are luxury goods of "identity totem type". What you buy is a social identity symbol, a sense of class identity, and a sense of superiority that is seen. Hermes Birkin bags, Patek Philippe watches, and full logo items are all here. It is interesting that the "CP values" of these two luxury goods exhibit completely opposite logic. Functional/experiential luxury goods Why is a Rolls Royce sold for 20-30 million yuan? Because its materials, craftsmanship, and research and development costs are truly astonishing. Hand sewn leather, customized wood paneling, and tens of thousands of engineer hours are all real costs. For consumers, this kind of "expensive" is relatively easy to understand: most of the premium you pay does indeed translate into the product itself. But for enterprises, the profit margin of ultra luxury cars is very limited, and some even sell them at a long-term loss. The reason why these top car manufacturers still exist is because their parent group is nurturing them for the sake of brand prestige, rather than making money from them. And the owners of Ferrari and Lamborghini, you've never heard of anyone who has been the world's richest man. Identity totem luxury goods Why does a Birkin bag sell for one million? Its materials and workmanship are certainly exquisite, but it definitely cannot afford this price. What truly makes it valuable are "scarcity", "distribution mechanism", and "waiting list", all of which are artificially created thresholds and essentially a premium for superiority. This premium has a characteristic: it is ethereal but can expand infinitely. As the wealth of the top wealthy grows exponentially, the price they are willing to pay for "showcasing their identity" also increases accordingly. A package has increased from 500000 to one million, with almost no change in cost, but the profit has doubled directly. That's why the owner of LVMH was able to become the world's richest man by selling boutique products, while the owner selling supercars and top tier RVs has never been in this position. ---- If you think this logic sounds familiar, it's because the NFT craze of the previous cycle has already been perfectly demonstrated once. Bored Ape CryptoPunks、Azuki， What is the essence of these avatar NFTs? It's the Birkin bag of the digital world. The person holding them is not for the purpose of "using" any function, but to change their profile picture on Twitter and declare to the entire crypto community: I am a member of this circle and I am qualified to join this club. This pure identity symbol can be priced at tens of thousands or even millions of dollars. Because its value is entirely based on consensus and scarcity, there is no cost floor, and therefore no price ceiling. On the other hand, what about NFTs that emphasize "practicality"? Once NFT can establish a pricing relationship with real-life products or services, such as redeeming a cup of coffee, a concert ticket, or a physical item, its price is immediately anchored. How much is a cup of coffee worth? It's hard for this NFT to surpass that price too much. This is the same as the logic of physical luxury goods: when the value of products is piled up by actual materials and services, the price will be anchored in a cap, and the space for excess profits is naturally limited. Why do identity luxury goods exist? Most luxury goods that sell identity are essentially games created by the capital circle. Because in the industrial era, there was a cruel reality: the material possessions that ordinary people could obtain were gradually approaching those of the wealthy. Previously, there was a huge difference in photo quality between a mid-range phone and a flagship model, but now the difference is very small. The mid-range model specifications you are currently holding may have been the flagship model three years ago. Another example is transportation. Hundreds of years ago, when you had to go out to find a rickshaw puller, only the wealthy could do it, and the poor could only walk. Nowadays, any ordinary person has the ability to call a taxi, and even use their phone to call a Mercedes Benz to pick them up. When the gap in functionality is bridged by technology, how can wealthy people prove themselves different from ordinary people? The answer is: create a battlefield that is not related to functionality. This is the fundamental reason for the existence of identity based luxury goods. It's not meant to make you use it better, but to make you 'look different'. The functionality of a Birkin bag may not be much better than a bag that costs a few thousand yuan, but it allows you to enter any occasion and let everyone know without saying anything: I am not an ordinary person. And for those who have so much money that they have nowhere to spend, the premium they are willing to pay to distinguish between the two classes of "me" and "ordinary people" is astonishing. This money is for luxury brand printing machines. ----- So, how do you distinguish between these two luxury goods? There is actually a very simple method: Compare it with regular items and see what the premium multiple is. The room rate for a regular hotel is 2000 yuan per night, while for a high-end hotel it is 10000 to 20000 yuan per night, with a premium of approximately 5 to 10 times. A domestic car costs NT $800000, while an imported Benz S-Class costs NT $6 million, with a premium of approximately 7 to 8 times. Affordable blind massage costs 800 yuan per hour, while Mandarin Oriental Spa costs 7500 yuan per hour, with a premium of approximately 9 times. A regular white T-shirt costs 300 yuan, and a white T-shirt printed with the Supreme logo can be sold for 30000 yuan, with a premium of 100 times. A regular bag costs 1000 yuan, and a Birkin bag costs 1 million yuan, with a premium of 1000 times. Have you noticed? Functional luxury goods typically have a premium of less than 10 times. And identity based luxury goods often jump 100 times or 1000 times. Because functional luxury goods, no matter how top-notch, still have a cost ceiling. No matter how good the beds and meticulous the service in a top tier hotel are, the experience it can provide has its limits, and the price can only be so expensive. But status based luxury goods are different. It's not selling functionality, it's' I'm different from you '. And this psychological need has no ceiling. ---- If you are a big shot and really have so much money that you have nowhere to spend it, then forget it. Just buy whatever you want when I don't say it. If you are a dead ordinary person, you must avoid the trap of consumerism. Try to spend money on functional luxury goods as much as possible, because the target audience for identity luxury goods is not you at all. Many people are pitiful, with little money in their pockets but brainwashed by consumerism, thinking that they also need to buy luxury brands to live up to their status. Ironically, these people are not the core customer group of these brands at all, they are just flies attracted to them. You have to tell yourself that the most expensive thing is not necessarily the best thing. Conversely, good things may not necessarily be expensive. If your husband has a whim to buy a Green Water Ghost one day, slap him first and then ask him to upgrade the old refrigerator that has been used in the house for more than ten years. If your wife leans against your waist and wants to buy an LV bag, please coax her and tell her to exchange it for 50 date dinners or 100 six star massage vouchers, and then secretly enjoy the feast and massage yourself. If you understand this, you will see through the entire rules of consumerism. Promise me to be smart, okay?