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Most Common Luxury Goods To Target And The Price Gap Issue

Jan. 10, 2021 10:37 AM ET
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Seeking Alpha Analyst Since 2020

Welcome to my Seeking Alpha profile! Here I talk about some industries such as sports, video games, cinema, tourism, social media and more. You can also follow my opinions and other content in my blog (https://entertainmentandleisureinsight.blogspot.com/). If you want to contact me, write an email to gonzmontes.1994@gmail.com 

Luxury goods  can be divided into a few categories:

Experiences: luxury hotels and restaurants. In connection with restaurants, there are also few food companies from whom wealthy people are now ordering luxury cakes and expensive chocolates along with other desserts.

Transportation: Luxury cars, yachts, cruises, and private jets. In relation to this, luxury consumers can also buy pretty expensive luxury luggage and other travel accessories different from the typical suitcases.

Real Estate: Luxury houses, castles, and islands. In fact, these luxury houses are often equipped with gardens, pools, and their own garages, which could also be considered as luxury.

Furniture: Collections and antiques of all kinds (being art and furniture the most frequent ones), very high-quality sound equipment, televisions, beds, and alcohol. With regard to alcohol, it is rather frequent to be kept in wineries and includes types such as whiskey, vodka, and very old wines.

Fashion clothes and accessories: luxury firms often offer any kind of clothes, while also the most recurrent accessories, which are watches, wallets, pendants, earrings, sunglasses, and bags. Moreover, jewelry and leather are the most common features and can also be bought by other kinds of goods.

Health and beauty: luxury creams, perfumes, and cosmetics (world-class barbers and hairdressers should also be included here).

Furthermore, other stranger luxury goods I found in my research are fancy pens, firearms, and other things they may be very fond of, such as expensive horses, extraordinary skis, extravagant bicycles, or high-priced computers.

Lastly, it is important to point out lots of luxury firms relate themselves with art, traditionally used as the luxury icon.

On the other hand, customers can also find large price gaps between different locations around the world. You should be aware of this issue not only for your market research but also in case you are planning to consume this kind of goods and you want to spend less money on them.

First, price gaps are more common in developing countries where luxury firms want to expand their businesses. For this reason, you may be able to find some extraordinary discounts in these countries and e-commerce growth enables customers the possibility to compare prices across countries and wait for opportunities. However, e-commerce growth is now also driving luxury goods prices to standards across countries progressively. These price gaps were much more frequent when only physical stores were available, but most of the firms are not completely adapted to the ecommerce environment yet, so consumers still find very attractive opportunities when they travel to countries.

However, margins are currently low and only some more affordable luxury firms such as LVMH can enter these countries, while the most expensive luxury firms may need to wait till the level of income within these developing countries grow enough. One example of this is China, where there are still considerable price gaps above 50% compared to Europe and the United States, though these are expected to be reduced at the same time China's consumption level grows over the next years.

Nevertheless, in this particular case, the price gap will remain above 30% due to the import tariffs imposed when bringing products into China. At the moment, China imposes three taxes: import tax rate, consumption tax rate, and VAT. Consequently, these taxes will be a considerable disadvantage that will decelerate the industry growth in China, where customers will need to get a higher level of income to pay that additional 30% at the same time firms may find it difficult to establish their businesses in China. Therefore, lots of Chinese will continue buying luxury goods while they are traveling to other countries.

Finally, you now know which luxury goods you can focus on in case you want to buy some of them, or even if your purpose is to know more about this industry and support your research.


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