2. What is competition like in the luxury goods industry?
2. What is competition like in the luxury goods industry?
Coach Inc is a high end handbag and accessory manufacturer that has been around since 1941. Throughout it’s existence, Coach has enjoyed a respected position in the luxury goods market. They have achieved this standing by consistently providing their customers with quality stylish at a deeply reduced price. Currently the company is dealing with changing market conditions such as new entrants, changing customer base, and emerging markets. Coach is in the process of altering its competitive strategy to meet the needs of the changing luxury goods industry.…
The profit potential that exist in the luxury goods industry could be better understood through an analysis of Porter’s five forces model. Starting with the threat of entry, the industry is unlikely to have new entrants because of the sustained competitive advantages of the existing successfully luxury brands. Leading companies such as Coach, Michael Kors, Salvatore Ferragamo, Prada, and etc. all have brand name recognition due to their success and popularity. According to the article, “To be unique and exclusive you cannot be ubiquitous.” (Gamble, 2015, C-81) For instance, Coach, Inc. strengthened their brand by becoming a leader in their accessible luxury segment by focusing on being unique in this market. Coach, Inc. and the other popular brands, have strong personal identifications because of the strategies they put in place. For this reason, new entrants to the market will have trouble attracting consumers who stand strong with the popular brand because of their loyalty. The power of suppliers within the industry for the luxury good market is low as the industry is not very concentrated. Materials to produce luxury goods, such as leather, are supplied in various countries throughout the world. For Coach, Inc. the case states, “All of the company’s leather products were manufactured by third-party suppliers in Asia.” (Gamble, 2015, C-71) Since Coach and the other…
Deluxe: How luxury lost its luster, by Dana Thomas, brings a hard hitting, raw look at the world of luxury and the mass demand of luxury that has occurred. The book was published by the Penguin Group in 2007. Luxury is defined by Thomas as truly special, and was only available to the aristocratic world of wealth and old money in western culture. Luxury signified an experience and lifestyle that denotes royalty, fame, and fortune. However, with large companies owning the former family-owned luxury producing businesses, profits are the main goal not the production of luxury. Thomas reveals the unfortunate demise and rise of traditional luxury companies. Wherever she looked, it seemed as though everyone owned some kind of luxury product. She asked herself, when did brands such as Chanel, Gucci, and Prada become so widely used and available to anyone anywhere? Thus, the beginning of her research into the world of luxury and her book, Deluxe: How luxury lost its luster.…
Coach’s supply chain enables to provide customers a variety of comparable luxury goods respect to quality and styling at relatively cheaper price than competitors. (Accessible luxury)…
In recent years, the number of wealthy households, especially in Eastern Europe and Asia increases at a high pace. With an increase in total households with assets of more than $1 million by 7 %, this number has been expected to rise by another 9 % in 2009, reaching more than 10 million households all over the world. This of course increases the demand for luxury goods in those emerging countries. China for example is expected to be the world's largest market for luxury goods in 2014 if they keep their current pace of growth. These new markets offer great opportunities for Coach Inc. to increase their global brand awareness, sales and market share while further increasing their total number of especially full price stores, which is their main focus compared to wholesale and factory outlets.…
The luxury goods industry has a high level capital requirement, brand loyalty and recognition by consumers, the exclusive access to suppliers and distribution along with economies of scale, all make it difficult for new firms to enter the industry. Capital investment restricts entry to the industry as a large investment in marketing is needed to attract customers and to increase brand recognition. In additional suppliers and distributors have exclusive contractual agreement with manufacturers, thus creating a strain for new firms to build their supply chain. However there is an increase threat from internet based companies.…
Coach incorporated a differentiation focus strategy to make luxury goods (luxury handbags) industry more attractive for itself. Coach entered into agreements with other companies providing rights to them to manufacture and market Coach Brand products. Royalties from such integration helped Coach to boost up their sale by 4 to 5 % in year 2006. The vital part of their business strategy was a business model focusing on frequent launch of their new product which in turn attracted their best customers to visit the stores frequently. This business model was accountable for enormous rise in numbers of handbag sales from 2002 to 2006. “Seventy percent of Coach’s 2006 sales came from products introduced within the fiscal year”(p.106). Coach was specialised for the service to their customer which involved replacement or refurbishment of the handbags without considering the age of the bag. On the other side major competitors weren’t able to cope up with Coach’s service criteria. Promotions through catalogs was their virtuous way of marketing contributed to build brand awareness and also promoted store traffic. The idea of generating revenue from factory stores fortunately became a success business model for Coach. “Coach’s factory stores had outperformed full-price stores in terms of comparable store sales growth during 2005 and 2006, with comparable factory store sales increasing by 31.9 percent during 2006 and comparable full-price store sales increasing by 12.3 percent during the year”(p.109).…
1. What are the defining characteristics of the luxury goods industry? What is the industry…
In this paper, I mainly analyses Burberry’s performance and describing some of the companies’ background. Besides that, I also did some research on the structure and the competitiveness of the luxury fashion industry.…
According to industry observers, luxury brands tend fare better than mass market brands during times of economic hardship. It is agreed, that in general luxury products are based on basic…
1. Market Worth and Composition: By 1999, the worldwide luxury goods market was worth $60 billion, with a sales growth rate of 6% per year. Overall, the sector was mainly composed by 35 companies, which accounted for about 60% of the market, plus a “competitive fringe” of smaller companies. Among the top players, six of them had revenues over $1 billion, the majority (15 to 20) had revenues from $500 million to 1 billion and the rest lied within the $100 million to $500 million dollar range. Products: The typical portfolio of a luxury goods company comprised seven main product categories: leather goods, footwear, high-end apparel, silks, watches, jewelry, perfumes and cosmetics. Most of these luxury companies were pursuing a differentiation strategy, by proposing different types of products that shared the same spirit of luxury and exclusivity with the brand, but tended to focused on just two or three of the categories mentioned above. Target clientele: The typical consumer of luxury goods ranges from wealthy and discerning women aged around 30-50 to younger (especially Asian and Japanese) girls, beginning around the age of 25. Ownership structure: Most of the luxury companies in the industry were Italian or French family-owned, single-brand firms (like Gucci, Armani, Prada, Chanel and Hermès). Louis Vuitton, which in the 1990s was already owned by the LVMH Group, represented one big exception. LVMH was a multinational conglomerate with a wide product portfolio, which included, aside from leather goods and…
With a GDP growth rate of more than nine percent, India is one of the fastest growing economies in the world. The population size exceeds one billion, including around 83,000 dollar millionaires (2005), recording the world’s second fastest growth in the number of high-net-worth consumers. Luxury brands like Louis Vuitton can take advantage of a steadily increasing upper class and a more and more affluent middle class. Moreover, 51 percent of the population is under 25, which gives brands the possibility to educate its future customers and shape their fashion tastes. Along with the fact that the luxury products market is growing 20 percent annually, all these factors make the Indian market extraordinarily attractive for Louis Vuitton. In contrast, 87 percent of the population has an income less than $2.50 a day. The countries per capita income is well below the unit price of the products sold by Louis Vuitton and the enormous diversity of culture, people and languages, combined with high customs duties and high tariffs make it difficult for companies to gain ground in this promising economy. Considering both positive and negative aspects, I believe, that the Indian market comprises manifold business opportunities, especially in the rapidly developing segment of luxury products. A similarity all luxury brands share is the ambition to showcase its brand personality through an elite store design and highlight its reputation by the exclusivity of the surrounding areas. When Louis Vuitton entered India by opening its first store in a leading Indian luxury hotel, it found the right ambience for its products, but had to handle the limitation of space and the increasing rental costs. Having a store in a luxury mall would offer the same exclusive environment at a cheaper price and the possibility of image spillovers from other luxury stores around. Moreover, as the luxury mall model is new in India, it would arouse public…
distinguished by uniqueness, brand imagery and high price levels—the main guiding principles of the luxury…
For luxury product and brand in the past three decades, Chinese market is unprecedented booming. From Pierre Cardin dominate early, later Louis Vuitton Illustrious, to each proliferation of luxury brands, the Chinese luxury high-end consumer tasted bud grow vitality and enjoyed the excitement noisy fanatical pursuit of luxury brands. While luxury product appears to be the public think that is only a small number of people can have the products, but according to the China 's current level of economic development and consumer purchasing level has been able to provide basic guarantee for the development of the luxury industry.…
Coach was found in 1941. It is manufacture of high quality leather product and accessories. The U.S. based luxury handbag and accessories manufacturer has been able to achieve extraordinary growth rate, which its sales has grown annual rate 20% between 2000 and 2011, and net income has increased from $16.7 million to $880 million. A luxury goods industry where market characteristic tends to be highly sensitive to economic upturns and downturns, the ability to establish and maintain brand loyalty through various strategies is one of the most vital factors. Coach’s huge success has been largely attributable to its focus on quality and stylish products which respond to consumers’ needs based on its extensive marketing research. Its “affordable luxury goods” price strategy also helps drive growth by appealing to a wide range of consumer, while at the same time, correspond with changes in middle-income consumer behavior. In 2012, Coach operated 345 full-price retail stores and 143 factory outlets in North America, and 169 stores in Japan and 66 stores in China. . The products are sold through direct mail catalogs, on-line store, e-commerce websites as well.…