Very interesting responses! For me, a luxury item is something that is not very essential, or if it is an essential, it is at a price point far beyond what a similar version would cost.
For instance, a Burberry scarf is luxury to me, because you could get another scarf that is just as warm, with a similar fabric and design, that does the job just as well but for a much lower price.
The same goes for many luxury makeup brands. I can get the same quality and same general shades of eyeshadow, for instance, without having to purchase Dior or Chanel.
I guess what I'm seeing is that for me, luxury means that at the end of the day, you are paying more for a name than for quality. The same quality, function, longevity, etc., can be had at a more modest price point.