Keep in mind that I won't even wear a watch because I don't like dangly things, so I won't even pretend to understand what sorts of people go for the typical sorts of luxury item.

1 you can just dial a number, you keep a hardcopy list of phone numbers of common contacts 2 phones get the ability to show caller ID, just the number, not any associated name 3 as part of becoming portable, phones include a simple contact list showing names and numbers that you can select to dial 4 the contact list is used, along with caller ID functionality, to show the name of the caller 5 the contact list gets the ability to store address book style information also, which is not directly related to any other feature of the device (the phone). 6 the contact list is maintained portably outside the device, allowing integration with additional services 7 the phone gains the ability to communicate via IM 8 the contact list is used to store unified information for all contacts, IM and phone, and not have separate lists independently in each phone feature.

At any earlier stage, the later stages seem like luxuries until the majority of devices have that feature; then it's not a luxury anymore, it's a necessity. Who's going to buy a smart phone these days that doesn't have some kind of unified contact list? Not having it would be a major hindrance, but lack of hindrance, utility, doesn't make it a luxury or not.

There's a pop culture definition of luxury, as you point out, like dangly watches, that serve no purpose other than to show off. That's the most baroque kind of luxury. There's also a more pragmatic, utilitarian luxury that is not absolute but changes based on the market and availability. Few people would consider the utility of an indoor outhouse to be a luxury, despite the fact that its main purpose is also served by an outdoor outhouse.