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see also: Marketing, strategy , Exports , Import Export business models, export subsidy , Competitive Advantage, strategy , barriers to innovation , market entry , Spain market entry for cachaca , barriers to entry , 5 forces analysis
Luxury goods are one of the few truly "global" brands that are able to gain from global efficiency in marketing and producing the product exactly the same in any market that they enter. Without needing to tailorize (Localization) the products to meet local tastes, the companies are able to significantly save money on local costs. But, very few products are truly able to do so. Think Rolex.
note that even Mercedez Benz is forced to localize.
Recent News
MORE than any other industry, the luxury-goods business needs people to feel good about spending money. So at a recent conference in Moscow, Bernard Arnault, the head of Moët Hennessy Louis Vuitton (LVMH), the world's biggest luxury-goods group, went to great lengths to dismiss investors' fears about the impact on the industry of America's credit crisis, a possible recession and the weak dollar. Indeed, Mr Arnault said he expects the industry's sales almost to double in the next five years, thanks to strong demand from emerging markets and the creation of new wealth across the globe.
AFP
Looking a bit wobbly
After a depressing period at the beginning of the decade when the terrorist attacks in America, the outbreak of SARS and the war in Iraq reduced international travel and people's appetite for frivolous things, the industry has had three excellent years. According to Bain, a consultancy, sales of luxury goods grew by 9% in 2006 to €159 billion ($200 billion) and will reach about €170 billion this year, which would be double the 1996 figure. Europe remains the biggest market, with about 40% of sales, though the strongest growth is in China, Russia, the Middle East and some Latin American countries.
Can the industry really double again in half the time? Analysts at Citigroup say that Christmas will be good this year for luxury-goods firms, but they are more cautious about next year because of worries about falling demand in America. It is tempting to think that luxury goods are isolated from the broader economy, because customers are rich enough to ignore it, says Luca Solca, a luxury-goods analyst at Bernstein Research. But the industry's expansion into a broader “aspirational” market, by selling to the merely affluent, makes it susceptible.
And as luxury firms expand in Asia and the Americas, they will continue to suffer currency woes. Most of the industry's production is in the euro-zone, mainly in France and Italy. Even the optimistic Mr Arnault complained at his firm's recent annual meeting that the euro had reached “incomprehensible” levels against the dollar and the yen. Luxury companies could shift more of their production to countries with weaker currencies and cheap labour (ie, China), but some customers—especially Asian customers—want the elitism and craftsmanship associated with products manufactured in Europe.
At least sales in emerging markets are growing fast. But Melanie Flouquet, a luxury analyst at JPMorgan, an investment bank, says that this growth is not enough to offset a slowdown in America. Chinese and Russian consumers account for around 7% and 4% of global luxury sales respectively, compared with 16-18% for Americans. Even so, European firms are sticking to their plans in New York, America's fashion capital. Gucci will open its biggest shop in February in Trump Tower, a shiny skyscraper on New York's Fifth Avenue. Ermenegildo Zegna will also open a shop on Fifth Avenue next year. And this week Dolce & Gabbana re-opened its spruced-up shop on Madison Avenue.
Claudia D'Arpizio of Bain thinks luxury makers need to follow Giorgio Armani and segment their customers more carefully with different product lines at different price ranges. She predicts that the industry will see solid growth rates of up to 10% a year in the near term. This means that the industry could double in ten years—by which time China is likely to account for more than a quarter and maybe as much as a third of the world's consumption of luxury goods. Yet Mr Arnault's rosy prediction seems unlikely to come true. As Americans tighten their purse-strings, over-optimism is a luxury even this industry cannot afford.
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Selling just one product at a time (for luxury goods)?
We first covered "a deal a day" websites in 2006. Since then, the concept has proliferated, with niche and regional players joining the field. Nonetheless, Ideeli, which is due to launch next week, caught our eye.
Like Woot and others, Ideeli creates buyer excitement with deep discounts and by only selling one item at a time. Unlike Woot, Ideeli is members-only and new users need an invitation to sign up. Members are alerted by email when sales start. Premium (1st Row) members also receive a cell phone alert and have access to sales one hour earlier than 2nd Row members. The subscription service provides an additional stream of income for Ideeli—1st Row members pay USD 7.99 per week, billed to their cell phone. While in testing mode over the past 6 months, 10 percent of members chose to sign up for 1st Row access.
Besides making money through subscriptions and on items sold, Ideeli is also supported by sponsors looking to promote products. Brands can sponsor weekly giveaways or have Ideeli include samples with customer purchases.
The New York venture is focusing on the female market, selling luxury handbags, sunglasses and jewellery for 50 to 90% off the original price. As Ideeli puts it: "It's like a sample sale, but no getting elbowed."
Website: www.ideeli.com
Contact: support@ideeli.com
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