Identifier: TFG:4835
Authors: Shevchuk, Dariya
Abstract:
In the last few years, an important shift has been produced in the luxury consumption behavior. The customer has modified its buying patterns and is becoming more open to sustainable consumption alternatives. Therefore, the new shape of the consumers priorities, is prompting the luxury fashion market to change its sales strategy. By using a stylized model from the literature, this research aims to study the impact of the rent-to-own strategy on the luxury fashion firm’s profits maximization, and consequently, its contract preferences. We applied a sequential game to three different rental contracts: wholesale contract, agent contract, and acquisition contract. Our findings prove two main points. A luxury brand firm will not be interested in letting a rental market arise with the agency contract. The brand will choose to only serve the traditional market. We also prove that giving a second chance to buy the product has a positive effect on both the wholesale and acquisition contract firm’s profit. The analysis shows that the decision choice over contracts between selecting one contract that the other, mainly depends on the consumers’ valuation level. When the market highly values the item, the firm will be interested in owning a platform or choosing a wholesale contract, and consequently, offer a rental and rental and purchase option. Nevertheless, if the costumer lowly values the item, the firm will choose to not enter to the rental market. If the company is capable of efficiently own a rental platform, the acquisition contract will show a positive outperforming opportunity for the firm. The luxury brand, instead of losing the segment of consumers that are starting to be environmentally and sustainably conscious, will attract these consumers by offering a rental service.
Repositori URV