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Abstract

This study examines how various factors, such as technology, culture, institutions, and business operations, influence the online sales of luxury goods in different regions of the world. Recent ten years have witnessed a phenomenal increase of online sales in a global scope. And we would naturally attribute such an increase to rapid accumulations of wealth in countries that have had strong economic growth as well as deep penetration of the Internet into the daily life of their citizens. However, richness and internet alone may not be sufficient to guarantee success for luxury industry to sell online. On the contrary, existence of online stores may have detrimental effects for some luxury brands on their brand equity and sales. While luxury goods are often considered as art for exclusive markets and could represent one’s identity, philosophy, and lifestyle, Internet are often featured in mass and public access. Moreover, cultural perception also varies: while luxury goods in some cultures are more often acquired as a gift and consumed for personal prestige and status, individuals in other cultures mainly purchase these items for personal pleasure as a reflection of individual attitudes and tastes. To examine the trends of online luxury goods sales and capture key factors that contribute to them, we proposed a comprehensive conceptual framework, PROVI, that consists of five key factors, Penetration of the Internet, Richness of a country’s customers, Operations of business, Veblen effect in culture, and Institutions of market, and evaluated this framework in four countries, China, South Korea, Turkey, and the United States, which represent different culture areas. We collected macroeconomic data for the period between 2005 and 2015 and examined the impacts of penetration of the internet and richness of a country’s customers on luxury goods online sales. We also collected non-numerical evidences, including cases and literature surveys, to analyze the impacts of the other factors, Operations of business, Veblen effect in culture, and Institutions of market, on luxury goods online sales. Our findings show that the sales of luxury goods through online distribution have been increasing, but at different rates for each country. These differences can be explained by our proposed framework, especially through the lens of cultural influences, business operations, and market institution development