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Luxury industry: Investing in high fashion or high return?
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Luxury goods prices rise - a game for the rich.

Galaxy Paris joined discussion · Apr 20, 2023 22:33
The truth about price increases
1. Declining consumption growth and intensifying class differentiation
Compared with the relatively sluggish overall consumption, China's luxury goods market has been rising against the trend. Predominantly driven by changes in the wealth structure.
"M-Type Society: The Crisis and Business Opportunities of the Disappearing Middle Class" When the wealthy end of the M-type society continues to expand, the middle class gradually disappears, and market opportunities and marketing laws are also changing.
Luxury goods prices rise  - a game for the rich.
2. Brand value and identity expression
The brand comes down to rising costs such as workforce, raw materials, and inflation. Luxury brands have a high gross profit margin, generally at least 65%, which can fully cope with the cost increase brought about by inflation. While raising the price of the brand control the number of products and further strengthens the scarcity so that consumers can feel that the brand is a representative of identity and economic strength. In other words, it is the embodiment of brand power.
Gross Porfit(%)
Gross Porfit(%)
3. Hedging against rising purchasing power
Under the influence of the epidemic, the decline in sales and exchange rate fluctuations have made the problem of price differences between different markets more prominent. Leveling the market price difference has become the pricing strategy of most luxury brands in recent years.
Rich man's game
The three-year epidemic has not affected the assets of the rich. On the contrary, due to the restriction of offline consumption, the "unbelievable" increase in wealth is finally reflected in the growth of the luxury goods market.
In 2022, 3 out of 1000 core luxury customers will contribute 82% of sales. Therefore, the brand will focus on serving super customers.
Implicit "bundling sales" cost
It means customers should enrich their shopping portfolio and then get a bag. China is one of the countries with the largest sales of Hermes; Chinese customers always buy some clothes, shoes, or some Hermes leather goods and then get Hermes popular bags. However, it‘s not easy to get a satisfactory bag in Hermers; after 150,000 yuan was "bundled" at the Hermès Shanghai International Finance Store, a consumer did not buy a Constance handbag.
Luxury goods prices rise  - a game for the rich.
Investment products that maintain and increase value
Judging from the transaction situation in the second-hand market, "the classic Chanel is a hard currency, which can preserve its value better than funds and stocks."
Luxury goods prices rise  - a game for the rich.
The "emotional value" of the rich
For luxury brands, it is more important than ever to please some consumers and build an imaginary "consumer despise chain" for them.
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