An Empirical Analysis of Category Extension in the Online Luxury Fashion Market

Abstract

The purpose of the present study is to reveal the actual circumstances of brand extension in the luxury fashion market by shedding light on category extensions and their relationship to the pricing strategies of each fashion brand. To perform a comprehensive empirical analysis of luxury fashion products, the study analyzed 308,154 unique products from 2,513 individual brands sold on online platforms. The study further estimated product sales according to brand category and sub-category. The research results reveal how estimated sales for clothing, bags, footwear, accessories, and jewelry confirm the fact that horizontal brand extension for luxury fashion brands result in increased sales. Furthermore, the estimated sales by sub-category reveal a complementary relationship between flagship products and affordable products. These complementary relationships enable a diagonal brand extension that prevents brand dilution and cannibalization. In short, the results reveal how effective brand extension reflects brand equity, which in turn is useful for the growth of emerging brands. Existing studies on the brand extension of luxury fashion products were limited to a consumer-centered approach, but the present study is significant in that it quantitatively analyzes brand extension for luxury brands in the online market.