Luxury Goods - Wikipedia, The Free Encyclopedia

20/05/13 Luxury goods - Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Luxury_goods 1/5

The Mercedes-Benz S-Class is a luxury

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Luxury goodsFrom Wikipedia, the free encyclopedia

Luxury goods are products and services that are notconsidered essential and are associated with affluence. Theconcept of luxury has been present in various forms since thebeginning of civilization. Its role was just as important in ancient

western and eastern empires as it is in modern societies.[1] Withthe clear differences between social classes in earlier civilizations,the consumption of luxury was originally limited to the eliteclasses.

Contents

1 History2 Semantics

3 Economics4 Socioeconomic significance

5 Market characteristics

6 Luxury brands7 Market size

7.1 Luxury bans

8 Market trends

9 Luxury department stores

10 Luxury shopping districts11 See also

12 References

13 Further reading

History

With increasing "democratization",[2] several new product categories have been created within the luxurymarket, aptly called "accessible" or "mass luxury". These are meant specifically for the middle class (in thiscontext, sometimes called the "aspiring class"). Because luxury has now diffused into the masses, defining the

word has become difficult.[3]

Semantics

In contemporary marketing usage, Prof. Bernard Dubois defines "luxury" as a specific (i.e. higher-priced) tier ofoffering in almost any product or service category. However, despite the substantial body of knowledgeaccumulated during the past few decades, researchers still have not arrived on a common definition. Many otherattempts have been made to define it using the price-quality dimension stating higher priced products in anycategory count as luxuries. Similarly, researchers have also compared goods in terms of their uniqueness. Prof.



Jewellery made of gold (or other precious

metals) or containing precious gems is a

textbook example of "luxury good",

especially as the purity of the gold and the

size of the gems increases.

Jean-Noel Kapferer takes an experiential approach and defines luxury as items which provide extra pleasure byflattering all senses at once. Several other researchers focus exclusively on dimension and argue that luxury must

evoke a sense of belonging to a certain elite group.[citation needed]

Economics

In economics, a luxury good is a good for which demand increases more than proportionally as income rises,and is a contrast to a "necessity good", for which demand increases proportionally less than

income.[citation needed] Luxury goods are often synonymous with superior goods.

Luxury goods are said to have high income elasticity of demand: as people become wealthier, they will buy moreand more of the luxury good. This also means, however, that should there be a decline in income its demand willdrop. Income elasticity of demand is not constant with respect to income, and may change sign at different levelsof income. That is to say, a luxury good may become a normal good or even an inferior good at different incomelevels, e.g. a wealthy person stops buying increasing numbers of luxury cars for his automobile collection to start

collecting airplanes (at such an income level, the luxury car would become an inferior good).[citation needed]

Socioeconomic significance

Several manufactured products attain the status of "luxury goods"due to their design, quality, durability or performance that areremarkably superior to the comparable substitutes. Thus,virtually every category of goods available on the market todayincludes a subset of similar products whose "luxury" is markedby better-quality components and materials, solid construction,stylish appearance, increased durability, better performance,advanced features, and so on. As such, these luxury goods mayretain or improve the basic functionality for which all items of agiven category are originally designed.

There are also goods that are perceived as luxurious by thepublic simply because they play a role of status symbols as suchgoods tend to signify the purchasing power of those who acquirethem. These items, while not necessarily being better (in quality,performance, or appearance) than their less expensivesubstitutes, are purchased with the main purpose of displayingwealth or income of their owners. These kinds of goods are the objects of a socio-economic phenomenoncalled conspicuous consumption and commonly include luxury vehicles, watches, jewelry, designer clothing,yachts, as well as large residences, urban mansions, and country houses. Also see positional good.

Market characteristics

Some luxury products have been claimed to be examples of Veblen goods, with a negative price elasticity ofdemand: for example, making a perfume more expensive can increase its perceived value as a luxury good tosuch an extent that sales can go up, rather than down.

Although the technical term luxury good is independent of the goods' quality, they are generally considered to begoods at the highest end of the market in terms of quality and price. Classic luxury goods include haute coutureclothing, accessories, and luggage. Many markets have a luxury segment including, for example, automobile,wine, bottled water, tea, watches, jewelry, high fidelity, and chocolate.



Armani is an example of a luxury brand for

clothing.

Luxuries may be services. The hiring of full-time or live-in domestic servants is a luxury reflecting disparities ofincome. Some financial services, especially in some brokerage houses, can be considered luxury services bydefault because persons in lower-income brackets generally do not use them.

Luxury brands

A luxury brand or prestige brand is a brand for which a majorityof its products are luxury goods. It may also include certainbrands whose names are associated with luxury, high price, orhigh quality, though few, if any, of their goods are currentlyconsidered luxury goods.

For example, following a nearly crippling attempt to widelylicence their brand in the 1970s and 1980s, the Gucci brand isnow largely sold in directly-owned stores. The Burberry brand isgenerally considered to have diluted its brand image in the UK inthe early 2000s by over-licensing its brand, thus reducing itscachet as a brand whose products were consumed only by theelite.

LVMH (Louis Vuitton Moet Hennessy) is the largest luxury good producer in the world with over fifty brands,including Louis Vuitton, the brand with the world's first designer label. The LVMH group made a profit of 2bnon sales of 12bn in 2003. Other market leaders include PPR (after it purchased the Gucci Group) andRichemont.

A rather small group in comparison, the wealthy tend to be extremely influential. Once a brand gets an"endorsement" from members of this group, then the brand can be defined as a true "luxury" brand. An exampleof different product lines in the same brand is found in the automotive industry, with "entry-level" cars marketedto younger, less wealthy consumers, and higher-cost models for older and more wealthy consumers.

The advertising expenditure for the average luxury brand is 5-15% of sales revenue. This rises to about 25%

with the inclusion of other communication such as public relations, events and sponsorships.[4]

Market size

The luxury goods market has been on an upward climb for many years. Apart from the setback caused by the1997 Asian Financial Crisis, the industry has performed well, particularly in 2000. In that year, the world luxurygoods market which includes drinks, fashion, cosmetics, fragrances, watches, jewelry, luggage, handbags

was worth close to US$170 billion and grew 7.9 percent.[5] The largest sector in this category was luxurydrinks, including premium whisky, Champagne, Cognac. This sector was the only one that suffered a decline invalue (-0.9 percent). The watches and jewelry section showed the strongest performance, growing in value by23.3 percent, while the clothing and accessories section grew 11.6 percent between 1996 and 2000, toUS$32.8 billion. North America is the largest regional market for luxury goods: unlike the modest 2.9 percentgrowth experienced by the Western European market, the North American market achieved growth of just

under 10 percent.[citation needed] The top ten markets for luxury goods account for 83 percent of the market,and include Japan, China, USA, Russia, Germany, Italy, France, UK, Brazil, Spain, and

Switzerland.[citation needed]

In 2012, China surpassed Japan as the world's largest luxury market.[6]



Luxury bans

In July 2010, the United States Department of Energy banned the sale of luxury showers that use more than 9.5

liters of water per minute.[7]

In February 2013, China banned advertisements for luxury goods on its official state radio and television

channels.[8]

Market trends

The three dominant trends in the global luxury goods market are globalization, consolidation, and diversification.Globalization is a result of the increased availability of these goods, additional luxury brands, and an increase intourism. Consolidation involves the growth of big companies and ownership of brands across many segments ofluxury products. Examples include LVMH, Richemont, and PPR, which dominate the market in areas rangingfrom luxury drinks to fashion and cosmetics. Leading global consumer companies, such as Procter & Gamble,are also attracted to the industry, due to the difficulty of making a profit in the mass consumer goods market.

Luxury department stores

Since the uprising of the 'luxury brand' in the 1800s, department stores dedicated to selling all major luxurybrands have popped up in most major cities around the world. Le Bon Marche located in Paris, France iscredited for being one of the first of its kind, but also Neiman Marcus, Selfridges, Harvey Nichols, Saks FifthAvenue, David Jones, KaDeWe, Harrods and Holt Renfrew are seen as some of the most influential andhistorical. Most big fashion houses & jewelers from Chanel to Tiffany & Co. have boutiques located inside thesemassive stores.

Luxury shopping districts

Another phenomenon of the luxury market are "Luxury Shopping Avenues". Certain thoroughfares like Leeds'Victoria Quarter, Milan's Via Monte Napoleone, Rome's Via Condotti, Tokyo's Ginza, Moscow's TverskayaStreet, New York's Madison Avenue and Fifth Avenue, Chicago's Michigan Avenue, Beverly Hills' RodeoDrive, Paris' Champs-lyses, Avenue Montaigne and Rue du Faubourg Saint-Honor, London's Bond Streetand Sloane Street, Mexico City's Avenida Presidente Masaryk, So Paulo's Rua Oscar Freire, Prague'sPask street, Toronto's Bloor St., Dsseldorf's Knigsallee, Lisbon's Avenida da Liberdade, Melbourne'sCollins Street, Singapore's Orchard Road and Frankfurt's Fregass area are some places where most luxury

brands tend to be concentrated.[citation needed] These retail districts concentrate luxury good stores that aremanaged by large corporations, while conventional and independent retailers are pushed out because of

increasing rent and real estate prices.[citation needed]

See also

Commodity fetishism

Designer label

Luxury real estatePositional good

Veblen goods

Wealth effect



References

1. ^ "Defining luxury: the conundrum of perspectives" (http://beta.luxurysociety.com/articles/2010/05/defining-luxury-the-conundrum-of-perspectives). Beta.luxurysociety.com. Retrieved 2010-08-09.

2. ^ Wong, N. Y., & Ahuvia, A. C. (1998). Personal taste and family face: Luxury consumption in Confucian andWestern societies. Psychology & Marketing, 15(5), 423-441.

3. ^ "What is luxury?" (http://www.pauravshukla.com/what-is-luxury). Paurav Shukla. 2010-05-14. Retrieved2010-08-09.

4. ^ Okonkwo, Uch. Luxury fashion branding: trends, tactics, techniques (http://books.google.fi/books?id=a_6CublRtYwC&lpg=PA145&ots=99kkoCrh7h&dq=advertising%20expenses%20in%20luxury%20goods&pg=PA145#v=onepage&q=advertising%20expenses%20in%20luxury%20goods&f=false) . Page 145.

5. ^ The World Market for Luxury Goods. Global Market for Luxury Goods. Nov 1, 2001, March 5, 2007(http://www.library.yorku.ca/eresolver/?id=984257).

6. ^ "China bans television ads for bling" (http://edition.cnn.com/2013/02/08/business/china-bans-luxury-product-ads/index.html?hpt=hp_bn5). Retrieved February 15, 2013.

7. ^ Power, S. Wall Street Journal "A Water Fight Over Luxury Showers" July 21, 2010(http://online.wsj.com/article/SB10001424052748704913304575371462611463490.html)

8. ^ Inocencio, Ramy (February 8, 2013). "China bans television ads for bling"(http://edition.cnn.com/2013/02/08/business/china-bans-luxury-product-ads/index.html?hpt=hp_bn5). CNN.Retrieved February 15, 2013.

Further reading

Chadha, Radha; Husband, Paul. (2006). The Cult of the Luxury Brand: Inside Asia's Love Affair

with Luxury (http://books.google.com/books?id=4os0UbTuFngC). ISBN 1-904838-05-7.Heine, Klaus: (2011) The Concept of Luxury Brands

(http://www.conceptofluxurybrands.com/concept-of-luxury-brands). Luxury Brand Management,

No. 1, ISSN: 2193-1208

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Luxury Goods - Wikipedia, The Free Encyclopedia