The Changing Face of Luxury

The Luxury Goods market, once a domain exclusively accessible to society’s upper echelons, has experienced a noteworthy transformation in the last decade. No longer just for the super-rich, an expanding array of consumers now seek occasional indulgence in opulent goods and experiences. Categories like watches, jewellery, handbags and even limited edition toys have transcended their role as mere luxury items, collectibles and heirlooms; gaining recognition as sound investments in their own right. Simultaneously, consumers are demonstrating a growing interest in premium apparel and alcohol, to name but a few, driven by a burgeoning consciousness of sustainability and ethical product sourcing. 

Crucially, the dynamic influence of Millennials and Gen Z cannot be overlooked in reshaping the luxury market. According to Forbes1, Millennials now account for a substantial 32% of total luxury expenditures, with Gen Z contributing 4%. This generational impact is predicted to grow even more significantly by 2025 given that the oldest Millennials are now in their 40s and Gen Z are beginning to enter the work force.   

Not More, But Better

Much like the evolution occurring in Luxury Goods, other industries have experienced their own transformations over the last decade, driven by changing consumer behaviour and expectations. In alcohol, for example, the observation of consumers drinking less on fewer occasions but trading up has become common knowledge across the alcohol industry; prompting brands to reassess their strategies and prioritise premiumisation. However, while many have attempted to ride the wave of premiumisation, only those that have treated them as more than just an exercise in increasing prices have succeeded. 

From Retail to Resale

But as marketers and pricing teams scramble to maximise the opportunities presented by changing consumer habits and preferences (against a backdrop of global inflation), the biggest insights to be found arguably lie outside of retail. The secondary market is gaining significant traction, especially among younger generations who have grown up buying and selling on the likes of eBay and Depop.  

2020 and the many challenges it brought saw the Sony PlayStation 5 sell out within hours across the world, at both online and bricks and mortar retailers — and so the ‘Flipper’ was born. Not a new phenomenon by any means, but one that became far more mainstream at this time was the idea that in-demand products could be bought at retail and re-sold for quick profits (sometimes at markups 50-100% more than RRP).  

And so, in the face of premiumisation, where better to look for consumer price sensitivity and sought after propositions than the world of auctions, where a mix of bidding mechanics, supply and demand economics and arbitrage provide a transparent view of what consumers are prepared to pay for a given product at any given time? 

Unlocking Auction Insights

We know that achieving a “premium” designation for a product involves more than just attaching an appropriate price tag. A premium product needs to be substantiated, whether by product attributes, ingredients, scarcity or even storytelling. Nevertheless, determining the right price involves a multitude of considerations: making informed and inspired decisions imperative.  

The challenge lies in understanding what consumers truly want, and ensuring there is a clear and compelling expression of that value proposition (and why it’s better than lower-priced alternatives).  

That sounds straightforward and plainly isn’t, so how can auction data unlock that superpower?

Consider online auctions such as eBay and Sotheby’s: these platforms offer a wealth of near real-time data covering details such as what’s being listed, when, how much it’s listed for, how much it sells for, and how that compares to retail prices over time. Now, envision the ability to decode these behaviours to unveil the key drivers of value. There are scenarios where the most coveted products in a category are relatively simple — a PS5 is a PS5 after all (though PC gamers may disagree). But what about product categories where there are many more alternatives with more nuanced product attributes — say luxury watches, fashion, or even alcohol?  

The Auction Hype

COVID-19 lockdowns invariably led to huge disruption for us all, affecting everything from supply chains for raw materials through to distribution channels and accessibility. As consumers, the world all but shutting down for weeks or months on end presented extra time and disposable income, some of which was used for exploration and experimentation. Sales for some products (DIY, baking utensils, loo roll) went through the roof, while others slumped to all-time lows. It was a crazy and unpredictable time, and “new normals” are still yet to be fully established. 

Some used this time and cash surplus to investigate new income streams — side hustles and crypto investing grew in interest, and similarly others ventured into the auction market for the first time. In some cases, the secondary market became the only way to obtain products for which new supply at retail had dried up. In others, the allure of flipping and quick profits drove investment speculation. Regardless of the motivation, across a number of asset classes this newfound interest has persisted even after traditional retail businesses reopened following the end of the pandemic. According to The Auction House’s own data, in 2021, their sales increased by more than a third (37.9%) compared to the pre-Covid year of 2019, from £440 million to over £600 million. 

Millennials have emerged as prominent auction spenders, making up an impressive 43% of the user base for Barnebys2 (an online auction search engine). At the same time, The Auction House3 has witnessed a remarkable 441% surge in the number of 18-24-year-olds engaging with the group’s online offerings.

Watches, vintage attire, jewellery, classic cars, fine art, rare books, high-end fashion and accessories all seamlessly find their place in the auction room. Consumers of all ages and genders are often more than willing to make substantial investments in items within these categories. Whether they view these purchases as investments, pieces of history, or one-of-a-kind treasures that cannot be replicated with a mere imitation, these product categories consistently hold a special allure for Luxury consumers.

From Auction to Action

One of the most significant advantages of using auction data to shape your pricing strategy is that it offers consumer-driven product valuation. This approach has dual benefits. On one hand, consumers unequivocally communicate the exact price point they are willing to pay for your product and where their limit lies. On the other hand, it provides valuable insights into how much consumers value your competitors. This treasure trove of information extends beyond the confines of the auction room and has the potential to drive significant decision-making in the retail landscape, from pricing to inventory, and propositional claims to innovation. 

Auctions simply provide an often-untapped feedback loop that can tell you not only if you have secured product-market fit (as retail sales do), but what the real value of your product is. They can also shed light on the changes you should make to increase that perceived value and justify any planned premiumisation activities. 

Auction data can also assist brands in comprehending which aspects of their products consumers find appealing and are willing to invest in. Are your products consistently appearing on auction sites for less than RRP? Conversely are competitors’ products selling above RRP? What’s the difference between their product and yours — is it a genuine ‘feature’ difference, or simply the way it’s described? How is this tracking over time? Can you identify latent consumer demand, or emerging changes in demand? How should you price new innovations in your pipeline based on the hammer price of existing propositions in the market? 

These are just some of the questions we have been able to tackle since adding auctions data to our list of insight sources. 

The Road Less Auctioned

Addressing the elephant in the auction room – it’s important to acknowledge that not all products or brands are naturally inclined toward white glove auctions. However, even for those that don’t fit the premium mould, there are valuable ways to leverage auction data. 

The solution is quite straightforward: consider platforms like eBay and Vinted. These sites capture bidding data for a wide range of products, not exclusively premium ones. Businesses can harness the wealth of information available on these platforms to gain insights into pricing valuation, helping them make informed decisions even if their offerings don’t fall into the premium category. 

A Winning Auction Plan

Beyond the secondary market, brands like Nike and The Macallan increasingly look to auctions as a viable route to market; grabbing headlines to fuel their respective hype machines and ensuring the see-saw of supply and demand is tipped in their favour. But for retailers and brands alike, the data contained within has the potential to play a multifaceted role in the modern business landscape, offering invaluable insights into consumer valuation, facilitating pricing strategies, inspiring innovation, and delivering crucial competitor intelligence. When strategically integrated into a brand’s toolkit, auction data becomes a powerful driver of informed decision-making and strategic excellence. By fully utilising the insight offered by auction data, forward-looking brands can chart a course for success in the ever-evolving market. They can adeptly cater to their customers’ needs by crafting products that possess the qualities their consumers seek out. This strategic approach allows them to command premium prices while ensuring customer satisfaction across the board. 

Fulfilling customers’ needs, at a price that delights, and blazing a trail into your desired pricing bracket – it’s a marketer’s dream.