I just had an AHA moment: the Horizontalization of Luxury is an offshoot of Aggregation Theory

I just had an AHA moment, one of those moments when two seemingly disparate and disconnected ideas come together with renewed clarity. I love these moments.

The connection: The Horizontalization of Luxury , one of my macro themes for 2024, seems to be a natural extension of Ben Thompson's Aggregation Theory .

Aggregation Theory is a topic I have studied and spoken about for nearly a decade; ever since its originator Ben Thompson shared his observations with the world. The core insight of Aggregation Theory is that in a world with reduced cost of distribution and reduced barriers to entry (and to storytelling I would add) power and influence in the business world accrue to those who control demand (and the societal narrative I would add).

I first started speaking and writing about the Horizontalization of Luxury only about 8 months ago based on observations I made across the travel, hospitality, dining, entertainment, jewelry, and retail industries. And even in that short period, this trend has only accelerated. We have seen watch brands go into residential living, fashion houses go into the Food & Beverage sector, we have seen hotel brands launch home decor lines, and so much more.

At first glance these seem like whole new offerings and lines of business being launched by the various luxury brands; some more naturally adjacent to the core business than others. But upon further thought it becomes clear that the Horizontalization of Luxury is not a new and independent theory but rather a natural offshoot of Aggregation Theory . As I said 8 months ago in my first writing on the topic:

This is the Horizontalization we are seeing...Luxury brands moving horizontally and translating their brand story from one product category to another; and consumers seem to be loving it!... Because at the end of the day, luxury brands sell stories and feelings, and these stories are becoming ever easier to transport from one product category to another because consumers are not buying the products but rather basking in the story.

My AHA moment helped me take this insight one step further. Since the brand story is THE key element of the products value (yes, you can buy a very similar purse for much less but it does not come with the same logo and thus the story you tell yourself and others tell about you) it is by its nature a zero marginal cost good that can be transmitted (retold) with no marginal cost.

But it's not quite this simple. Most of these luxury brands are unlike Google and Facebook whose story also has zero marginal cost to tell but just as importantly, unlike these luxury brands, whose core product offering has a zero marginal cost to produce/operate for a given user and whose platform is infinitely extendable (there is no effective limit to how many people can use Facebook). Whereas of course a watch brand, fashion house, and luxury hotel do not have the benefit of an infinitely extendable product.

This is where the horizontalization kicks in. These luxury brands, powered by the inherent ability of narrative to spread infinitely, are selling the brand story over and over again and doing so with products that are both more extendible to new customers (home goods, spa and wellness products, music and content, etc.) and products that deepen a brands share of wallet and earnings from its most devoted fans (residences, around the world trips, collaborations with car brands and other 'toys', etc.).

This is where the aggregation is taking place. Luxury brands are aggregating demand for a story in a way that mere 'consumer products', 'clothing brands', or 'hotel chains' never did before. Consistent with Aggregation Theory in the purely digital world, my Horizontalization of Luxury theory demonstrates how these luxury brands have learned the lessons of aggregation and found their own zero marginal cost 'product' to sell and aggregate demand around; their narrative.

That's it for now. I am still working through my Horizontalization of Luxury theory and its connection to Aggregation Theory; a theory that outlines one of the most systemic economic power shifts in decades. Said simply, luxury brands sell stories and feelings, not products, and these stories and feelings look a lot more like zero marginal cost digital goods than like the traditional hard-to-create and maintain goods of luxurys' past.