I'm back in 1990

Chapter 1022: The Definition of Luxury Goods

It was almost 11:30 when Chen Yue pointed to the vintage clock hanging on the wall.

"Aren't you hungry? It'll be lunchtime soon, can we go now?"

Upon hearing this, Lin Weiwei exclaimed, "Wow! How time flies!" She then stood up and hurriedly tried to walk outside.

At this moment, Yang Rui saw that the three were about to leave, so she came over.

"You're leaving!"

Tang Ruixuan slung the canvas bag over her shoulder and replied, "Yes!"

Yang Rui returned the remaining coffee beans to Tang Ruixuan, saying, "You can come anytime you want coffee. I won't charge you a processing fee; we just happen to get along well!"

Tang Ruixuan smiled and accepted Yang Rui's offer, but still insisted, "The processing fee must be paid, otherwise I won't have come."

Yang Rui knew that this girl did not come from an ordinary family, so she stopped arguing over these trivial matters.

"Okay, the processing fee will still be charged."

Tang Ruixuan then waved goodbye to Yang Rui, saying, "Goodbye, Sister Yang!"

Chen Yue and Lin Weiwei also said goodbye to Yang Rui.

Yang Rui escorted the three of them all the way to the door.

That afternoon, the auditorium of the University of Finance and Economics, located 200 kilometers away from Jinling University, was packed with students who came to listen to a lecture by Huang Xiaochuan, a world-renowned economist. Among them was Gu Suining, Tang Ruixuan's high school classmate and best friend, who is a freshman at the University of Finance and Economics this year.

Although it was a day off, she arrived early from home. It was a rare opportunity to hear the insights of Asia's richest man in person. Only students like her from the University of Finance and Economics could have such an opportunity, since Huang Xiaochuan was an alumnus of the university, and his legend was everywhere there.

Accompanied by Hong Yongze and Chen Zhe, Huang Xiaochuan stepped onto the podium.

Looking at the densely packed students below the stage, he cleared his throat and said directly: "Good afternoon, students. Today I want to talk to you about a topic that may evoke emotions in many people, but is rarely understood from an economic perspective: luxury goods."

Today I will explain this topic to you from an economic perspective.

There are always people around us who dislike luxury goods, believing that they belong exclusively to the wealthy and have nothing to do with ordinary people. Many even hope that they are as cheap as possible. For example, many people are puzzled or angry when they hear that the cost of Moutai liquor may only be a few dozen yuan, but it costs more than a thousand yuan a bottle. Why?

Why can't an average person afford a bottle of wine with a month's salary? Why should only the rich drink it?

"But I want to tell you, if the price of Moutai really drops, that wouldn't be a good thing." Because this line of thinking is economically untenable, I want to ask everyone here: why can't anyone think about this from the other perspective?

"Wouldn't it be better to let wealthy people spend 3,000 yuan on Moutai liquor that only costs tens or hundreds of yuan to produce? Wouldn't it be better to let them spend more money?"

"First of all, we must recognize that the gap between the rich and the poor is inevitable and unavoidable; this phenomenon will exist in any society."

"But we can use various mechanisms and means to redistribute wealth among different social classes. From an economic perspective, luxury goods are a mechanism for wealth redistribution."

"So, like progressive personal income tax, it is a typical tax on the rich. However, we still need to understand the economic definition of luxury goods. Not everything that is expensive is a luxury. This distinction must be made clear."

"A car worth around 100,000 yuan isn't considered a luxury item, right? But a bicycle worth over 100,000 yuan is a luxury item."

A bottle of Moutai costing over a thousand yuan is a luxury item, but a bottle of medicine costing over a thousand yuan is not.

A phone costing a few thousand yuan isn't a luxury item, but a limited edition is.

"So what is the definition of luxury goods? It is a product whose price is completely out of touch with its production cost, quality, and function, and is completely mismatched."

"It's expensive simply because it's expensive, and consumers buy it just because it's expensive. In short, luxury goods have no cost-effectiveness; anything with cost-effectiveness is definitely not a luxury."

"Although no one has ever said that Moutai is a luxury item, according to the definition of economics, it is a typical luxury item. If you do not agree with my point of view, then I will give you a few more examples."

"You've definitely heard of Balenciaga, right? It's a typical luxury brand. Do you know what kind of bizarre product this company once released?"

Huang Xiaochuan pointed to a trash can not far away: "A trash bag, yes, that's right, just a trash bag. From the outside, it's not much different from a regular trash bag. If you don't believe me, you can search it online."

"Do you know how much this garbage bag costs after being branded with Balenciaga? Let me tell you, it's twelve thousand."

The audience erupted in uproar.

Huang Xiaochuan smiled slightly at the incredulous expressions on the students' faces and continued, "I'm sure you've all seen or used steel wool for scrubbing pots and dishes, right? Let me tell you, Tiffany once released a silver wire bracelet that looks exactly like the steel wool you have at home. Do you know how much it cost?"

The students in the audience, of course, didn't know that Huang Xiaochuan was making an eight-character gesture with his hand: "Eighty thousand."

The audience erupted in uproar once again; this truly shattered their worldview.

Huang Xiaochuan continued his topic: "Most of the students here were born in the 1990s. You may not have seen a type of plastic sandal, but your parents definitely know about them because they have all worn them, and I have worn them too."

"Coolqi has a sandal that looks exactly like the plastic shoes we wore as kids, made of the same material—plastic. Do you know how much it costs? It's alright, only four thousand six."

"And how much do these luxury goods cost? They're almost negligible. Isn't Moutai liquor the same? Its cost is extremely low."

"After hearing this, some might say, 'Hey, after all this talk, isn't all this money going to the luxury goods manufacturers? It doesn't end up in our hands. How can you call it a wealth tax?'"

"Here's something I want to tell you: as long as there's no product that's forcibly monopolized, no matter what industry it's in or how expensive the product is, it's actually very difficult to make huge profits."

The profit margins in the free-market luxury goods industry are far lower than you might imagine. I have some data here for your reference.

"Everyone knows Rolls-Royce is very expensive. But do you know how much net profit their group made in 2009, last year?"

Huang Xiaochuan kept everyone in suspense, and took the opportunity to drink a sip of tea.

"Some people might say, 'Their products aren't cheap! So why haven't they made huge profits yet?'"

"Let me tell you here that most of the profits have been distributed to various sectors of society, such as production workers, designers, GG merchants, prop installers, decoration workers in decoration stores, media, and event sponsors. These sectors have spread the huge profits among themselves."

Because if you're unwilling to share your profits, you won't be able to sell at such a high price.

You think this is incredible, right?

"Let me give you another example. Suppose a domestic car brand sets its price very high because they think that this will attract rich fools to buy their products."

But in reality, wealthy people won't buy them.

"Although the surface logic of luxury goods is that they are expensive, the deeper and more core purchasing logic is that everyone knows they are expensive. I think you all know that Rolls-Royce is not cheap, and that Hermès bags are not cheap."

But if a brand suddenly appears and prices its products an outrageously high amount, would you accept that?

The audience shouted in unison, "No way!"

Huang Xiaochuan laughed: "Really?!"

"That's the reason. Many brands haven't learned to share their money and get others to help them promote their products or, in other words, to brag. They just want to pocket every penny."