Factors Affecting Movement Of Luxury Goods Marketing Essay

The idea of luxury is not new and will get its roots in many great civilizations of the traditional world. Luxury has always been consociated with prosperity, uniqueness, exclusivity and authority. Luxury products with their high complex superiority, workmanship, uniqueness, quality, high prices are always targeted into the elitist of the culture, who derives value from other exclusivity, brand history, service and top quality pricing. Luxury goods are also believed to concurrently gratify their emotional, mental needs and emphasize their esteem, prestige and communal position. These high net worth folks are generally price insensitive and are usually very faithful to these brands. Value of the blissful luxury goods comes from either of their operation or for the modus-vivendi they task.

Antoni et al. 2004, has recommended three features for a brandname to need to be successful in the blissful luxury market. Included in these are:-

Excellence

Brand Aura

Desirability

In Economics, for luxury goods if the purchase price rises, the demand also improves. They are likely to have high income elasticity of demand i. e. as people's income escalates the demand for luxury goods also boosts.

The seed products of the present day luxury industry were laid in Europe through the Industrial Revolution. During this time period, some European entrepreneurs created high quality products which symbolized the supreme lifestyle of that period. The modern luxury industry advanced because of the need of these businesses to look for markets overseas, to increase their customer bottom scheduled to limited probable in the home market segments. (Antoni et al. 2004)

The business design of the blissful luxury sector will involve providing high-quality, high price and exclusive products to customers at the top end of the riches spectrum. Their business design is dependant on meeting customers' targets and selective distribution. According to LVMH, the business enterprise model of luxury industry includes building, creation & marketing of premium products using the services of exclusive designers, latest innovations and technologies to create extremely high quality products that meet customer's demands and anticipations. Selective circulation ensures quality service, experience, choice, cover and trust, which the consumers repay back with the loyalty.

Current Situation of the Global Luxury Industry

The global luxury industry encountered a slump during the global financial meltdown. During the recession the luxury industry experienced negative progress with results of 8% decrease for the year 2009. The decline in income was due to the fact of tensing of budget and decrease in spending. Because of the tough economy, around 1125 billionaires lost 50% with their wealth as the richest people lost 10 Billion USD globally. However, because of the global economy expected to develop at 4. 2% rallied due to the fact of high development in India and China, the blissful luxury goods industry is poised for restoration. Matching to Bain Consulting's spring and coil 2010 upgrade on "Luxury goods worldwide market analyze", the global luxury goods industry profits is expected to rise by 4% from

*source Bain Consulting

153 million Euros in 2009 2009 to 158 million Euro by 2010. Progress however will primarily be fuelled by rising marketplaces because of growing overall economy and rising incomes as contrary to the stagnant and saturated developed marketplaces.

For the year 2010, China and India are expected to expand at 15%, US at 4%, Europe at 3 % while Japan is likely to show a decrease of 3%.

Factors affecting activity of Luxury goods

Traditionally the target customers of luxury goods have been high net price individuals who stand for the elite category of the society and constitute the higher end of the riches spectrum. In the past decades, the market for luxury goods was typically limited by developed economies like US, Europe and Japan. However the real expansion in the sector has been caused because of globalization, enhanced communication, minimizing of entry obstacles, new marketplaces and starting of the world economy. Globalization has led to the starting of the world current economic climate to players across geographies and thus an increase in business opportunities with opening up of new marketplaces and new horizons.

*source Bain Consulting-Luxury goods worldwide market study

Generally luxury goods companies have targeted countries with high GDP growth, lower barriers to admittance, high FDI purchases; strong IPR security laws, suitable retail infrastructure. High GDP expansion is specially being seen in emerging markets like BRIC countries. These market segments are indicative of a growing young consumer course with growing disposable earnings who are wanting to try these brands. It has been observed that there has been a strong occurrence of luxury brands in countries with high GDP growth like in countries like Hongkong, South Korea and other SE Asian economies; nevertheless the growing focus is now on BRIC countries particularly India and China.

Global luxury sales are located to be spread based on the concentration of prosperity around the world. Europe makes up about 40%, US-28%, Asia-24% and the remaining 8% across the rest of the world (Nueno and Quelch, 1998).

The activity of luxury goods is also depended on the social adaptability of a country. For instance in India, high sales in american styled branded attire for women might not exactly be observed. Tourism also takes on a significant part.

Lifecycle of Luxury goods

The development lifecycle of the luxury goods is normally high due to designing process, production process, sourcing of high quality materials, and making products based on the customer's targets of design and superior quality.

However the merchandise lifecycle and durability varies across different sections. For example, luxurious products like cosmetics and clothes generally have a shorter product lifecycle typically for a season since changes popular trends are very recurrent and the segment is highly competitive too.

However almost all of the other segments like automobiles, pieces, wines, earrings generally have higher product lifecycle. Usually luxury goods are characterized for their high quality, price, aesthetic value and high durability. Because the sector is highly competitive and brand collateral plays an enormous role, marketing and constant innovations are essential to avoid saturation in expansion.

Margins

The luxury goods industry is normally characterized by high margins and they're so huge that, B Arnault, LVMH's CEO within an interview advised that: "Luxury is the sole sector that can offer luxurious margins "(Capital, May 2010).

Since the blissful luxury goods carry a premium price to them, and has high income elasticity of needs, the income on these goods is generally high and can go upto 60% on certain items. The quantity of the goods is usually very low since most of these products are manufactured remember a niche band of buyers. Therefore the margins per product are incredibly high. Recently, many of the luxury brands have pruned their operational costs by moving some of their processing activities to low priced countries like China. This has also resulted in many companies experiencing high margins per product. The margins on the standard goods are usually 20-25%, while for luxury goods it could be of up to 60%.

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