Researchers from ESSEC Business School and University of Bath published a new Journal of Marketing study that examines the enrichment economy, where consumers use goods to increase their capital.
The study, forthcoming in the Journal of Marketing, is titled “The Enrichment Economy: Market Dynamics, Brand Strategy, and Ethics” and is authored by Delphine Dion, Roman Pavlyuchenko, and Sonja Prokopec.
Investors are on the lookout for markets that offer unprecedented opportunities for massive financial gains. Take, for example, the “Carhartt x Eminem x Air Jordan 4 Retro” sneakers, gifted to loyal fans in 2015. Within three years, the value of the shoes soared to $10,000 per pair and by 2024 they were selling for over $30,000 each. Similarly, about 150 “Tiffany Blue” Patek Philippe watches were recently sold to lifelong clients at $50,000 each. Just a few months later, the first watch was resold for a whopping $6.5 million and the price of the model has not dipped below $3 million ever since.
This trend is part of the enrichment economy, which is based on goods that can be used to preserve and increase one’s capital. Enrichment goods gain in standing, monetary value, and desirability long after they are originally purchased. Some of the most enduring examples of enrichment goods are artworks, antiques, and select luxury goods such as watches and handbags.
This new Journal of Marketing study explains how the enrichment economy works. It focuses on the luxury watch market, where the enrichment economy has been soaring for years.
Dion says that “we find that the enrichment economy follows a logic distinct from conventional markets. Accessing enrichment goods is a form of privilege. We call it enrichment privilege and define it as an opportunity to purchase enrichment goods from the source in order to resell them later at a premium.”
How Privilege Shapes the Market
Enrichment privilege shapes the enrichment market through four key market processes:
- Curating the enrichment privilege: Brands curate access to enrichment goods on the primary market. They grant the privilege of acquiring enrichment goods to a small and well-vetted group of consumers who are incentivized not to resell their watches right away. In doing so, brands constrain the circulation of enrichment goods, which props up their resale value.
- Assetizing the enrichment privilege: Second-hand market platforms highlight the worth of enrichment goods as assets and foster market transparency and liquidity. This allows watch enthusiasts to make massive financial gains long after the original purchase.
- Securing the enrichment privilege: Consumers secure their enrichment privileges by strategically courting the brands. This includes giving gifts and building personal connections with managers and salespeople. In addition, consumers lavish the brands by spending huge sums on goods with limited financial gains.
- Monetizing the enrichment privilege: The few consumers who manage to secure enrichment privileges can expect a multitude of personal gains. They can get access to an exclusive club of high-net-worth watch enthusiasts. They can pass the watches on as inheritance. They can make quick financial gains by flipping the watches.
The Challenge for Brands – and Potential Solutions
The enrichment economy poses a challenge for brands: How does a brand manage enrichment opportunities while preserving its revenues and desirability? “We encourage practitioners to consider egalitarianism, transparency, and democratization when implementing an enrichment strategy” says Pavlyuchenko.
- Egalitarianism. Waitlisting and allocation should be binding and clear. The goal is to avoid situations where consumers, having joined a waiting list, remain uninformed for prolonged periods, leading some of them to desperately spend money to increase their standing in the brand’s eyes. Also, brands. should track how many enrichment goods are purchased by each client, which will help prevent retailers and boutiques from favoring a select few clients at the expense of a broader community.
- Transparency.Brands should eliminate personal biases from their allocation and waitlisting processes to ensure fair and transparent access to enrichment goods. They should allow customers to log into their accounts to see their position and receive regular updates on their expected wait times. New customers should be able to see which lists are open and a free spot on the waiting or allocation list should guarantee a fair opportunity to join it.
- Democratization. Brands that deal in enrichment goods should examine their consumer profiling programs. These programs are susceptible to discrimination on dimensions such as race, economic status, or simply not fitting into the “brand aura.” Brands can make enrichment markets more democratic by rethinking how consumers present their interest to the brand.
Prokopec continues with, “our analysis highlights the danger of unethical retailing practices in the enrichment economy. For instance, Rolex has been fined $100 million by the French Competition Authority for preventing its authorized dealers from trading certain watch models freely.”
A note of caution for marketers: Second-hand platforms create massive enrichment opportunities. This prompts consumers to invest into the primary market in search of goods to resell. The vicious cycle continues as consumers keep reinvesting their earnings and creates a “dark side” of the economy. Practitioners and academics are urged to consider both the “light” and the “dark” sides of the enrichment economy in future applications and studies.
Full article and author contact information available at: https://doi.org/10.1177/00222429241275014
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The Journal of Marketing develops and disseminates knowledge about real-world marketing questions useful to scholars, educators, managers, policy makers, consumers, and other societal stakeholders around the world. Published by the American Marketing Association since its founding in 1936, JM has played a significant role in shaping the content and boundaries of the marketing discipline. Shrihari (Hari) Sridhar (Joe Foster ’56 Chair in Business Leadership, Professor of Marketing at Mays Business School, Texas A&M University) serves as the current Editor in Chief. https://www.ama.org/jm
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Marilyn Stone is Director, Academic Communities and Journals, American Marketing Association.