“Loud” versus “quiet” luxury in supply chains with risk attitude and counterfeit considerations

Abstract

In response to the trend of quiet luxury and the proliferation of counterfeits, luxury brands must reconsider their branding strategies, deciding between loud and quiet branding. Given the high demand uncertainty for luxury products, luxury brand operations face high risk and it remains unclear how risk attitude of the luxury brand shapes the optimal branding strategy. In this paper, we develop game-theoretical models within a two-tier supply chain (manufacturer and brand) to study the optimal luxury branding strategy and its implications for both the supply chain and consumers. We analytically find that the negative effects of counterfeits and risk attitude of the luxury brand jointly affect the optimal branding strategy. Specifically, when (i) the luxury brand is risk-seeking and the ratio of consumers’ status disparity is comparatively low, or (ii) the luxury brand is risk-averse and the ratio of consumers’ status disparity is comparatively high, the loud (quiet) branding strategy is more likely to benefit the luxury brand (manufacturer). Furthermore, we extend our analysis to incorporate two additional factors: (i) a consumer segment without conspicuous preferences and (ii) anti-counterfeiting technologies. We uncover that the results remain robust under these extensions. To validate our analytical findings and seek more industrial inputs, we conduct a post-analysis discussion with an industrialist knowledgeable about the luxury sector. We discover that most of our results are supported by real-world scenarios. Therefore, our research not only expands the theoretical understanding of luxury brand operations in supply chain management but also offers luxury brands useful insights for crafting effective branding strategies.

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ORCID for Xiaoyan Xu: orcid.org/0000-0003-4565-5986

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