When Luxury Loses Its Luster: How Democratization Affects Traditional Luxury Consumers

Abstract

ABSTRACT Luxury brands have traditionally embodied exclusivity and status, yet increasing accessibility is transforming consumers' perceptions. This trend, driven by the rapid democratization of luxury goods, is causing a paradigm shift in how traditional luxury consumers ascribe value to luxury brands. While these strategies may boost short‐term sales, they risk eroding brand positioning and alienating core consumers. Will traditional luxury consumers wear democratized brands with pride as accessibility and availability increase? Will they continue purchasing democratized luxury used by lower‐status consumers? Guided by network effects theory, we show across four mixed‐methods studies that democratization reduces purchase intentions—particularly when low‐status consumers adopt the brand—and increases abandonment intentions. This study advances luxury branding literature by identifying democratization as a novel negative network externality influencing luxury consumption. We reveal consumer's pride of ownership as a psychological mediator which diminishes when democratization erodes exclusivity. Further, we establish boundary conditions by revealing how status‐based consumption and rarity principles influence consumer responses and can moderate democratization's effects on purchase and abandonment intentions. Managerially, our findings will help brands to counteract democratization's potential risks through status and rarity‐driven campaigns, such as scarcity‐based strategies, limited editions or premium‐tier differentiation.

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