Looking back to 2004, according to a Goldman Sachs Report, China represented 12% of global sales in the luxury items market (Bialobrzeski, P, 2007). Even in the recession period during 2009, Chinas experienced an increase of 16% in the sale of luxury items. It is projected by 2015 that China will account for 20% of all luxury item sales worldwide (Leibowitz, G, 2011). That translates into roughly 27 billion U.S. dollars (Atsom, Y., Dixit, V., Leibowitz, G., & Wu, C, 2011).
(Source: Case Study on Demand For Luxury Goods, Ann Langlois Palm Beach Atlantic University
Eric J. Barberio Palm Beach Atlantic University)
Moving forward in 2011, if we had to create a marketing hook specific to the Chinese market, we’d have to title it “The Sky is the Limit”. If we can consider the fact that we are dealing with the third or fourth largest group of millionaires in the world and quite possibly the fastest growing, it would help paint a picture as to how high the sky actually is for this luxury market in China. “Millionaire households jumped 31 percent in 2010 from the previous year to 1.11 million, the BCG Global Wealth Survey released yesterday showed (Balfour, F, 2011). It’s important to note that as sophistication level increases, meaning knowledge of luxury products, what they are, and where to purchase them, so does overall spending. It’s a natural coincidence. Vehicles to increase knowledge are trends such as increased travel overseas which grants them exposure to more products, less censorship of the internet to increase brand awareness, and increased purchasing which allows for more hands on experience, has drastically affected the sophistication of the luxury consumer.
(Source: Case Study on Demand For Luxury Goods, Ann Langlois Palm Beach Atlantic University
Eric J. Barberio Palm Beach Atlantic University)
32 comments:
Luxury is subjective in many aspects as everyone is different in his/her own set of choices and sometimes irrationality takes such an upper hand that people tend to luxuries when they are not in its requirement or want.
Also, it is very important as consumers to be completely aware of the market and have "perfect" knowledge about the markets and it can be done through the vehicles of increasing awarness as specifically mentioned.
Looking forward to hear more from you on the demand of luxury goods, Sir.
Mihir Abhay Bedekar
17BAL089
Luxury is subjective in many aspects as everyone is different in his/her own set of choices and sometimes irrationality takes such an upper hand that people tend to luxuries when they are not in its requirement or want.
Also, it is very important as consumers to be completely aware of the market and have "perfect" knowledge about the markets and it can be done through the vehicles of increasing awarness as specifically mentioned.
Looking forward to hear more from you on the demand of luxury goods, Sir.
Mihir Abhay Bedekar
17BAL089
If demand for luxury is high then people arent acting rationally.Whether a particular good is a need or a luxury is required to be understood by the people. Concept of rationality is needed to be understood. Despite recession, consumption of luxury goods didnt decrease. However a good maybe luxury for us but same may be the need, like cars in urban area is need rather than luxury, so in the survey what all goods were classified as luxury is in question.
Sir, plz tell about snop effect.
Consumption of luxury goods seem to have increased among the burgeoning upper and middle class groups. Verifying the fact that rich are becoming richer and poor are becoming poorer.
Just to add on the facts, now women in China are empowered and have gained economic independence which was earlier dictated by men. Young Chinese women are emulating businessmen and have become the main buyer of these goods. The rise in luxury purchases and luxury goods will rise if women outperform men in academic achievement and business ventures.
17bal053
Trade patterns of luxury goods differ from trade patterns of ordinary goods.Luxuries are less sensitive to distance and more sensitive to income distribution and willingness to buy. Luxury items represent a very specific group of goods and their supply is addressed to particular type of consumers,affluent consumers.Unlike necessities, individuals buy luxuries not only for their intrinsic quality but also to confirm social status.Sometimes luxury market doesn't depend upon income but to confirm social status, to look sophisticated or while following customs.Like in India it's part of our tradition to buy gold without taking one's income into consideration.This irrational behavior wider the gap between rich and poor and subsequently poverty will increase.
17bal072
Luxury goods are seen as anomalies to Law of Demand and the same holds true in this situation , where even after recession the demand increased. It could be argued that increased awareness and reduced censorship lead to this increase but we shall also notice that luxury goods are demanded by those who can afford it and no matter what the economic conditions are , there's always a section of society , which will be in a position to buy these goods.
Vanshika agarwal
17bal117
LUXURY GOODS {or upmarket goods}are goods for which demand increases proportionally as income of consumer rises. That is why they are also called as VEBLAN GOODS or status symbol goods. Luxury goods said to have high income elasticity of demand. As change in their price affects demand of the commodity,however, they have inelastic supply. They are generally independent of the question of quality as they are considered of good quality.It may too include luxury services,say, keeping a housekeeper and often having special luxury packaging to differentiate their product from mainstream competitors.The three dominant trends in global luxury goods market are globalisation, consolidation and diversification. They have led to increase in market of luxury goods,growth of big companies and ownership of brands. these kinds of luxury goods are objects of a socio-economic phenomenon called CONSPICIOUS CONSUMPTION.
Thank You
RITIKA KANWAR
17BBL040
Particularly pointing China gradually designated itself as the global manufacturer over a long period of time .It became a tough competitor when it comes to manufacture at low price. Meanwhile in the long term China gained a good amount of wealth which can be seen in the the way people spend there. They have enough money to buy luxury goods a good phrase used above that SKY IS THE LIMIT and I probably this it so because in the gradual process of mfg hub the money it gained increased the living standard of locals the travelled foreign countries and the brand exposure lured them, this is one of the probable reason other might be that the found themselves enough capable for purchasing. The purchasing power they gained made them less sensitive to price of product and thus it made China a big market for luxury goods.
17bal023
The Chinese only recently started making enough money to splurge. Now, with the middle classes expanding fast and the number of millionaires soaring, they have been catching up rapidly. In a country that is finely attuned to social-status signals, branded goods and sophisticated travel are high on many people's wishlists. Global Blue, a retail-tourism company, found that for 82% of Chinese travellers shopping was a crucial part of their travel plans. Much of it is spent on shopping; Chinese tourists have no problem buying Prada by day but sleeping in two-star hotels by night. Luxury products in China are more expensive than in other countries. Therefore making China the biggest market for luxury products.
17BAL051
Luxury goods are not about needs it is about wants and desires. Luxury goods are price elastic.Price elastic means that when price of a commodity changes its demand changes significantly. But in the present time demand of luxury goods are highly increasing.This is
because of irrational behaviour of consumers.Also having luxury goods became a status in the society. People feel assured of quality when they buy luxury goods and advertising through internet is also a big factor in increasing demand of luxury goods.
Luxury goods are those the demand for which increases with increase in income. These aren't necessities but desires which realise when there is purchasing power with the consumer. Thus, luxury goods have a high income and price elasticity. Because of increase in the number of millionaires there is increase in demand for luxury goods in China. This happens because people need to maintain their millionaire status image and they buy things which have a better quality. However, certain customers buy these goods for possession or just for show off even when it is far beyond their purchasing power.
Amishi Sodani
17BBL004
The facts mentioned clearly depict the increasing economic gap between the rich and the poor in China, or framed more appropriately the rich were getting richer and the poor were getting poorer. And such pattern of demand during recession questions rationality of the consumers.
To add on, luxury goods are income positive i.e. as the income of the consumer increases the demand increases. Also, demand for luxury good varies from class to class i.e. based on the income of the group of people. For example, an air conditioner is a luxury for a person in the middle income group but is a necessity for a person who earns a fairly high income. So the fact that the increasing number of millionaires significantly contributed to the increase in demand of luxury goods, justify this phenomenon.
A LUXURY GOOD is a good for which demand increases more than proportionally as income rises.Luxury goods are said to have high income elasticity of demand: as people become wealthier, they will buy more and more of the luxury good.
China came in top in luxury spending growth globally, with 17% growth from 2014 to 2015, while contributing to 30% of global luxury purchases in 2016.
The rising Chinese middle-class, consisting of households with incomes between USD 9,000 and USD 34,000, have become the fast rising consumer segment in China – they have become the subject of much attention from global brands.
There are several reasons why Chinese consumers prefer to buy luxury goods abroad rather than at home. In China, counterfeit goods are rampant, as intellectual property laws are weakly enforced. Buying luxury abroad decreases the concern of accidentally purchasing counterfeit goods for Chinese shoppers looking for high-quality, authentic products.
Luxury goods are extremely expensive in mainland China because of high import duties, consumption taxes, increasing rental and labor costs of luxury goods stores, as well as inefficient logistics and distribution systems.Now, with domestic growth rates falling to single digits due to a slowing economy, Chinese government efforts to mitigate ostentatious displays of wealth, and increased purchases of luxury abroad, global luxury goods companies need to make adjustments to their existing business models to meet the needs of the evolving Chinese market.
Reha Mohan
17bal101
According to an article the main reasons of increase in demand of luxurious goods in Chinese market is because
1) boasting- they consider these goods to impress their peers and show their status and success to them( according to a research in 2008 70% did so and the trend still continues)
2) self reward-chinese consumers spendore money on self indulgence and self experience spending on these luxurious items
3) self expression- to show their individuality and their personality
4) investment- they consider spending in luxurious goods as safe for future
5) gifting- major reason ( accounted for almost 20% in 2011)
The luxury goods market allows the super-rich to
spend money even when the worldwide economy is down. the sales of luxury
goods have a remarkable tendency to stay consistent or even increase despite tough economic times. This is
due to the fact that the consumers of luxury goods will always have money to spend, even when others don't
Pragati Mishra
17bal038
Luxary goods are those goods whose demand increases wth the inreasement in the purchasing power of the consumers.They are demanded not out of necessity but out of will and desire to posses them.
The elasticity of luxary items is very high most oftently meant for upper class of people.India's impressive growth in sales of luxary goods is a result of number of factors,like a) luxary goods are perceived as an investment ,
b)people beleives them as a medium to show-off their social status in the society.
c)generally ,people beleives that expensive good is of good quality
Demand for luxary goods differs along with the class. A good may be luxarious to one but not for the other. Many small retailers are now targetting luxary customers ,as they have the puchasing power,thus making more profit.But in order to attract luxary customer they have to come up with the inovations as there is continous change in tastes ans preferences.
With the increase in number of millionares, demand for luxury good increases.
Thus,further leading to disparity of income
VARTIKA JAIN
17BAL125
According to me the government should start imposing luxury tax in India as there is a high income disparity in India and this would lead to increase equality which would be better for the country.imposing tax on luxury goods might also affect to elasticity of those products and might lead to rationality in buyer's decision.It also needs to be understood that if there is highly elastic demand there would be a burden to the sellers because of which many sellers would leave the market and that is why the deadweight loss would increase and would result in the loss in terms of revenue to the market.
- Naman Khode 17BAL032
Luxury goods are goods which do not follow the law of demand they are also referred as Veblen effect which means that a decrease of their price decreases their demand. Thus,the elasticity of the demand is high. Thus no matter what price you sell the good it will always be purchased by high class which in my opinion brings equality.
Luxury goods are sensitive to changes in consumer income because they have a high income elasticity of demand. This means that the demand for these products fluctuates directly with the level of consumer income. The more elastic the demand is, the greater the consumer response following a change in their income. An LG can be a normal good at different price levels.
For example, smartphones can be considered luxury goods; therefore, when consumer income rises, people usually choose to purchase a smartphone instead of a flip phone and also spend a proportionate more amount of their income on the new device.
However, for wealthy people a new smartphone is a normal good, i.e. a good whose demand increases as consumer income increases.
The term ' luxury' is a relative concept as any item (like AC), may be a luxury for a poor person but a necessity for a rich person. When a commodity is a luxury its demand is more elastic as compared to demand of other commodities.
In Chinese market inspite in a state of recession, the demand for luxury goods increases as people see these goods as a status symbol, luxury goods are considered to give return in future and also there is a myth that people believes expensive goods are of good quality.
Luxury goods generally do not follows 'law of demand' as when the economy was in recession, there demand increased, which shows exactly opposite of law of demand.
Yash Jain
17BAL121
LUXURY GOODS, are said to be the goods the demand for which increases with increase in income. Increse in demand for these goods during recession indicate irrationality of the consumers. In theory,luxury goods are sensitive to change in income of the consumer with high income elasticity. But here it clearly shows that the use of luxury goods and increase in its demand is not realtive to income but status symbol, lifestyle influenced by the west, etc.
We need to keep in mind that the given facts make it evident that here the rich is getting richer and the poor is getting poorer.As luxury goods is a relative concept, it may be different for different people,majorly based on class. Due to this, luxury goods are defying the law of demand as thier demand is increasing inspite of recession given to the remarkable increase in the number of millionaires,which is justifying the above phenomenon.
Paridhi Rastogi
17bbl035
If we firstly start from gist of the whole article it's about how China is continuously making the world more lined towards the luxury items by promoting them in one or the other way. As very well said in the article that sky is the limit, the extent to which the above mentioned thing has happened can be evaluated . Secondly the author also talked about how accessibility and gain of knowledge has took us from ignorance to knowing the world market but has also left us to choose luxury over normal goods. Its basic attempt to let everyone know about how in changing and developing world everything even if it's luxury it has become so easy and natural to have it that it may slowly turn into necessity .
Naman Sharma 17bal033
Luxury goods are those goods which are meant for the people who have higher disposable income.It is directly related to the income of the consumer and with the proportional increase in the income the demand for luxurious goods also rises.What the producers of these goods are doing is that, they are not just targeting the rich and well off class but they are also targeting the middle class.
Now to further elaborate my point I’d like to exemplify by the case of China-Where people,even though they earn a fairly low income are ready to purchase brands which they normally woudn’t just to maintain the class they don’t belong.This happens mainly with the people(usually Chinese populace)who go to other countries for leisure tours and buy expensive products there. Growing middle-class customers like these people are the demographic that retailers and mall operators aim to attract in a recovering domestic luxury goods market.So even if these goods are meant for the economically well off class,they are not only bought by them but these are also purshased by the mid-level earner.
Luxury goods are those goods which are meant for the people who have higher disposable income.It is directly related to the income of the consumer and with the proportional increase in the income the demand for luxurious goods also rises.What the producers of these goods are doing is that, they are not just targeting the rich and well off class but they are also targeting the middle class.
Now to further elaborate my point I’d like to exemplify by the case of China-Where people,even though they earn a fairly low income are ready to purchase brands which they normally woudn’t just to maintain the class they don’t belong.This happens mainly with the people(usually Chinese populace)who go to other countries for leisure tours and buy expensive products there. Growing middle-class customers like these people are the demographic that retailers and mall operators aim to attract in a recovering domestic luxury goods market.So even if these goods are meant for the economically well off class,they are not only bought by them but these are also purshased by the mid-level earner.
When we talk about china it is one of the developing country, which is the hub or the best market among other countries. China as the hub of manufacturing market exports goods all over the world and at low price compare to other countries market and this is how china is growing wealthy and due to increase in wealth desire or demand increases which leads to increase in luxury goods. As we can see from the fact that even in the recession period during 2009, China experienced an increase of 16% in the sale of luxury items, hence we can say china is one of the country which is growing wealthy constantly
Mayank sahu
17bal029
LUXURY GOODS are those goods whose demamd does not depend on the price of the good but it depends mainly on the income of the consumer.Luxury goods are said to have high income elasticity of demand: as people become wealthier, they will buy more and more of the luxury good.This also means, however, that should there be a decline in income its demand will drop. Income elasticity of demand is not constant with respect to income, and may change sign at different levels of income. That is to say, a luxury good may become a normal good or even an inferior good at different income levels,
This clearly depicts the example given by sir that a car in a metropolitan city may become a necessity for people having high level of income but the same car may be a luxury for people having low income level.
According to my findings from the given article ,it talks about high sales and high purchases of Chinese luxury goods in world .Sales of Chinese luxury goods all over the world increasing from 12% in 2004 to 16% in 2009 in which year 2009 being period of recession gives us a hint about the mentality of people which is that buyers of luxury goods are addictive to such luxury goods because in period of recession demand cannot be high ,but it decrease as whole economy faces slump where there is high unemployment and people with low salaries,it becomes quite difficult to demand for such luxuries. Millionaire households being 1.11 million in 2010 will demand a separate high social status ,high superiority treatment,because of which they buy luxury goods which gives them a high status and treatment.These millionaire households try to get knowledge about luxury goods availability and to buy it even go to far countries ,travelling.Less censorship of internet is a major factor through which such people increase their knowledge about brand .Concluding from the article ,I can say that if things continue like this rich will get more richer and vice versa.thank you.
Shobhit Porwal 17bbl045
Luxury goods demand increase with increase in income.Luxury goods are said to have high income elasticity of demand: as people become wealthier, they will buy more and more of the luxury good. This also means, however, that should there be a decline in income its demand will drop.
Chinese consumers buy more luxury products than those in any other country, accounting for about one-third of global sales. But a decade of rapid growth stalled after 2013 amid President Xi Jinping’s government austerity and anti-corruption campaigns and an economic slowdown.
From 2008 to 2014, the number of Chinese households purchasing luxury products doubled, fueled by growing incomes and greater access to luxury goods. Since 2015, the primary driver of increases in luxury spending has shifted from consumers making their first purchases of luxury goods to incremental spending from existing luxury consumers. This transition means that luxury-goods players need to invest more in building loyalty among existing customers than recruiting new ones.
Tushar choudhary
17BAL115
Luxury goods are a preference because when people start earning more, they tend to shift more towards luxury goods for ex A mobile phone costing around Rs.65,000 and people start thinking irrationally.Even when they are too costly, people with high income prefer to go with luxury goods.
Now speaking of China that is one of a developing countries like India has shown a huge increase in luxury goods. Even in the recession period i.e. 2009, the Chinese market for luxury goods has shown a humongous increase in luxury goods and if the trend continues, many economists predict that in the near future the Chinese market may show a growth of about 20%. Why is that so that China being a developing country is showing a huge increase in luxury goods? Because if you look at the Chinese markets, they give more in much lesser amount like if we take the example of mobile phones, the Chinese companies in a very less amount tend to give more to the consumer whereas if we go to buy a samsung or an apple iphone it will cost almost more than its double and will give the same specifications as th Chinese company mobile would give.
Syed Fahad Saeed
17BAL113
Possession of luxury goods as per the present standards is a reflection of your purchasing power. They are believed to add to your status and worth. Rise in sale of luxury goods is directly linked to the rise in purchasing power of the people. It's only when money exceeds the limit needed to suffice their needs that the additional amount is spent on items which will add leisure or luxury to their life. For example be it be Rolex or titan, watch from both companies will show the same time but if my purchasing power allows I will choose
Rolex over titan for it adds to my status.
Apart from that the article talks about dissemination, mobilisation and access to information through internet. Knowledge of where to spend and easy means to spend that money is what contributes in the rise of sale of luxury goods. Portrayal of products is such that it manipulates your idea of luxury goods. You start thinking that to have that product is a necessity.Undoubtedly rise in sale of luxury goods is an apt reflection of how effectively market manipulates consumers.
Kajal Singh
17bal025
Possession of luxury goods as per the present standards is a reflection of your purchasing power. They are believed to add to your status and worth. Rise in sale of luxury goods is directly linked to the rise in purchasing power of the people. It's only when money exceeds the limit needed to suffice their needs that the additional amount is spent on items which will add leisure or luxury to their life. For example be it be Rolex or titan, watch from both companies will show the same time but if my purchasing power allows I will choose
Rolex over titan for it adds to my status.
Apart from that the article talks about dissemination, mobilisation and access to information through internet. Knowledge of where to spend and easy means to spend that money is what contributes in the rise of sale of luxury goods. Portrayal of products is such that it manipulates your idea of luxury goods. You start thinking that to have that product is a necessity.Undoubtedly rise in sale of luxury goods is an apt reflection of how effectively market manipulates consumers.
Kajal Singh
17bal025
Certainly if one has to compete with China, the knowledge of its already blooming economy and thus the consumption of luxury goods become necessary. There are many factors which helped the same, primarily including high literacy of the population. With the growth of an industry, its awareness as to how to get the products and their usage becomes an essential part. With a rise in economy, individuals gets capacity to spend their money according to their needs. When these needs are satisfied there exists a need to procure certain status in society. When you own things ordinary population does not own or rather does not have the capacity to own, it sends a message that they can bear the cost of necessary goods along with luxury goods which eventually implies that you earn more than ordinary population. When symbolism gets attached to luxury goods, more people aim to acquire a higher status in society and thus imitate others by purchasing more luxury goods. More literacy and digitization means more ways to get acquainted with products, by the means of emails and sms and apps along with their regular notifications. Internet is another way to reach to people globally. This has helped increasing sophistication of luxury consumers.
SHINJANI AGNIHOTRI
17BAL046
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