A team of researchers from ESSEC Business School and the University of Bath have collaborated on a recent study recently published in the Journal of Marketing, which delves into the dynamics of the “enrichment economy.” This concept revolves around consumers purchasing goods not just for their immediate use or enjoyment but to augment their capital. The detailed investigation is set to appear under the title “The Enrichment Economy: Market Dynamics, Brand Strategy, and Ethics,” authored by Delphine Dion, Roman Pavlyuchenko, and Sonja Prokopec.

In their exploration, the authors reveal how specific markets, especially those dealing in luxury items, provide extraordinary opportunities for substantial financial gains. A compelling example is the “Carhartt x Eminem x Air Jordan 4 Retro” sneakers, which were initially given to loyal fans in 2015. Remarkably, these sneakers saw their value escalate to $10,000 per pair within three years and were trading at over $30,000 each by 2024. In a similar vein, approximately 150 “Tiffany Blue” Patek Philippe watches were initially sold to dedicated clients at $50,000 each. Still, their value skyrocketed shortly thereafter, with the first watch being resold for an astonishing $6.5 million. Since then, the price of this watch model hasn’t fallen below $3 million.

This surge in value over time is a characteristic feature of the enrichment economy. It is built on the premise that certain goods retain and increase value, desirability, and status beyond their initial purchase. Classic examples of such goods include artworks, antiques, and specific luxury items like watches and handbags. According to the study, these goods preserve and enhance personal capital, making them highly sought after.

Delphine Dion explains that the enrichment economy operates under a unique logic different from conventional markets. It is characterised by what the researchers call “enrichment privilege”—a form of preferential access to goods that are likely to appreciate, allowing their owners to resell them at a profit later on. The mechanisms through which this privilege operates are multifaceted, involving curation, association, security, and monetisation of access to these goods.

One crucial aspect discussed is how brands curate access to these valuable goods, selecting a small, carefully vetted group of consumers who are often incentivised to wait to resell their acquisitions. This practice helps maintain the scarcity and, thus, the resale value of these items. Moreover, platforms in the secondary market play a critical role in demonstrating the asset worth of these goods, enhancing their liquidity and transparency, which in turn supports significant financial returns for those who hold them.

Additionally, consumers secure access to these enrichment goods by forging strategic relationships with brands, often through personal connections with managers and sales personnel and by demonstrating loyalty through substantial purchases. Those fortunate enough to secure such privileges can reap extensive personal benefits, ranging from membership in exclusive circles of wealthy enthusiasts to significant financial returns through the resale of these goods.

However, the study also highlights the challenges that brands face in managing these opportunities without undermining their revenues or the desirability of their products. The authors advocate for egalitarianism, transparency, and democratisation in implementing enrichment strategies to combat these challenges. They argue for clear and binding allocation and waitlisting procedures to prevent discrimination and bias, thus ensuring a fair and transparent process for all potential buyers.

Moreover, the study warns of the potential ethical pitfalls in such markets. For instance, Rolex faced a substantial fine for preventing its authorised dealers from freely trading specific watch models, which the French Competition Authority ruled as anti-competitive. This example underscores the broader dangers of unethical practices within the enrichment economy.

In conclusion, while the enrichment economy offers significant opportunities for both consumers and brands, it also presents a complex array of strategic, ethical, and management challenges that must be addressed. The researchers call for a balanced view that considers both the potential benefits and the darker implications of market practices in this unique economic space, urging practitioners and academics to consider these factors in future applications and studies. This comprehensive analysis deepens our understanding of a specific economic phenomenon and sheds light on broader market dynamics and consumer behaviour in the luxury goods sector.

More information: Delphine Dion et al, The Enrichment Economy: Market Dynamics, Brand Strategy, and Ethics, Journal of Marketing. DOI: 10.1177/00222429241275014

Journal information: Journal of Marketing Provided by American Marketing Association