Questions About Luxury Goods Industry

Paper Type:  Essay
Pages:  5
Wordcount:  1371 Words
Date:  2021-05-20

What Are the Defining Characteristics of the Luxury Goods Industry? What Is the Industry Like?

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Luxury goods in Economics refer to that particular commodity whose demand and income increases correspondingly. Such goods have a number of characteristics that defines the characteristics of the industry under which they operate. The industries have been identified to possess a high income elasticity of demand. This has been the case since it has been noted that the sales volume of the luxury good is very high and the industry gets wealthier. Thus in case there is as sudden decline in the industry income, the demand will automatically drop during that particular period. Luxury goods industry have established their imaged based on a number of factors that include its geographical location, quality of the products, pricing, limited availability of the products they manufacture and exclusivity. The products of luxury goods industry targets the well-to-do consumers and more often are not a necessity. The prestigious nature of the goods is thus based on the high pricing that the industry offers to its consumers. The brand exclusivity is the contributing factor to the products price sensitivity. Other significant factors that influence the price sensitivity are the emotional sense of the status and value alongside the customer centric marketing that is offered by most of the industries. The luxury goods industry has been classified into three different categories that include the traditional luxury, accessible luxury and the haute-couture.

In understanding what the industry is like it should first be noted that it is worldwide in scope. As of 2005, 82% of the worlds luxury goods market was dominated by United States of America, Switzerland, France and Italy each contributing 14%, 19%, 22% and 275 respectively. An anticipated increase of about 7% was targeted in 2006 owing to the immense income and wealth reported in China and the European countries. Additionally, the alteration in the consumer buying habits was considered a crucial factor. The distribution chains have expanded to include the big box that has attracted the middle-income consumers into the market thus boosting the industry.

What is competition like in the luxury goods industry? What competitive forces seem to have the greatest effect on industry attractiveness? What are the competitive weapons that rivals are using to try to outmaneuver one another in the marketplace? Is the pace of rivalry quickening and becoming more intense? Why or why not?

Competition in the luxury goods industry is one that has been very stiff. The producers are tasked with ensuring new designs and models are produced consistently in order to cope with the ever changing consumer needs and desire for the trending fashion. Nonetheless, a good percentage of the luxury goods available in the market have enjoyed decades of customer royalty, and a reputable brand name. Struggle for retail space has also been a matter of serious concern as witnessed in the case of Nordstrom and Saks Fifth Avenue. Successful partnerships of the luxury goods industries that are leading in production with the real estate companies is another competitive since the producers also run their own retail storefronts. Coach Inc is a clear example that has that has reported very high profit margins in some of its stores that are located along Madison Avenue in New York and in Las Vegas casino. One of the competitive forces that the industry faces is the rivalry that competing sellers and buyers have expressed in the past. This has been a great boost to the attractiveness of the industry.

How is the market for luxury handbags and leather accessories changing? What are the underlying drivers of change and how might those driving forces change the industry?

In 2010, China was ranked in the third position among the worlds leading market in handbags and leather accessories. The wealth level in China and the Indian market grew rapidly during this time and this was expected to be a big boost in the sales of luxury goods that handbags and leather accessories. According to a statistics recorded in 2012, 63500 individuals were approximated to have accumulated a net worth of more that 15 million with an additional 2.7 considered as millionaires in China. This was attributed to the rise in luxury brands that resulted into creation of more stores in China. Counterfeit luxury goods have also been considered to have played a key role.

What key factors determine the success of makers of fine ladies handbags and leather accessories?

The key factors include having multiple retail distribution abilities and designing products that are of high quality and have the potential to meet the expectation o the client. The products must also be fashionable and surpasses the trend in the market. The consumers services offered in the same line also need to be highly skilled and effective in delivery. Additionally, the products must have high aesthetic value and ambiance stores that would attract the customers. In other words, the designs must be clear and eye catching.

What is Coachs strategy to compete in the ladies handbag and leather accessories industry? Has the companys competitive strategy yielded a sustainable competitive advantage? If so, has that advantage translated into superior financial and market performance?

Coach has set out its strategy that entailed coming up with modest designs that have high aesthetic value alongside attractive customer service training programs that all intended at building strong customer relationship. Coach also introduced a mass consumer survey that enhanced its ability to be more creative in meeting the consumer desire handbags that comprised the trimmed fabric handbags, edgier stylish among others. Its strategy to lower its prices hence beating its key competitors by up to 50% has also been a successful determinant of its progress in the market. Coach also has distribution strategies that include the core retail stores that offers most of its products, factory stores that are price oriented, flagship that provides the latest design in the market and departmental stores that offers its popular handbags. Such strategies has made the company to be more global oriented and target high growth rate in the coming years.

What are the strengths and weaknesses of Coach Inc.? What competencies and capabilities does it have that its chief rivals dont have? What new market opportunities does Coach have? What threats do you see to the companys future well being?


Introducing new products on a monthly basis.

Elaborate market research that the company focuses on before it introduce new product in the market.

It has a worldwide distribution channels.

Its ability to outsource production to the low-cost countries.

It relies on high quality leather suppliers hence a sure quality of its products in the market.


Mens products are not enough to meet the demand.

The company has not opened a store in Europe.

Its outwear alongside other luxury categories contributes a very small percentage of its total sales.

The prices offered at the factory stores outperform that offered at its full stores.


The company has established strategic alliances that have lead to outsourcing of more product categories.

Open up a store in Europe and other regions in the Middle East.

The rapid growth of markets such as India and China.


Existence of counterfeit goods in the market.

The competition between the Europeans brands.

Increase in the factory stores may result into dilution of the Companys brand name.

What recommendations would you make to Lew Frankfort to improve the companys competitive position in the industry and its financial and market performance?

Coach should consider expanding its stores in new markets across the globe. Getting established in a new market is much easier as compared to a market that is already established like the European countries. Additionally, the Company can easily grow its brand name and establish customer loyalty at a time when the market is just emerging and the demand is steadily on the rise.

Coach should consider a feasibility study of its stores geographical location, the type of store alongside the sales performance of various stores in different locations.

The company should embark in the production of more of the mens products to meet the demand. The company is very famous on the womens luxury handbags hence discourage men from walking into the stores. This approach could greatly alter the companys image and increase the sale of mens products. l

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