Luxury good

From Freepedia

In economics a luxury good is a good for which demand increases more than proportionally as income rises, contrast with inferior good and normal good. Luxury goods are said to have high income elasticity of demand: as people become more wealthy, they will buy more and more of the luxury good at an increasing rate.

In popular culture and the public imagination, certain goods have become bywords for luxury. These include Beluga caviar, Rolls Royce cars, luxury yachts, and so on. Such items are often regarded as status symbols as they tend to signify that the purchaser has significant wealth. Luxury goods are are commonly bought by consumers who seek to reinforce their self-image through the products' association with luxury and wealth.

Some luxury products have been claimed to be examples of Veblen goods, with a positive price elasticity of demand: for example, making a perfume more expensive can increase its perceived value as a luxury good to such an extent that sales can go up, rather than down.

Although the technical term luxury good is independant to the goods' quality, they are generally considered to be goods at the highest end of the market in terms of quality and price. Classic luxury goods include haute couture items such as clothing, accessories, and luggage. However many markets have a luxury segment including, for instance, cars, wine, and even chocolate.

A luxury brand or prestige brand is a brand associated with luxury goods. The markets in luxury-branded goods are characterized by very high sensitivity to economic upturns and downturns, high profit margins, and very tightly controlled brands.

For example, following a nearly crippling attempt to widely licence their brand in the early 1990s, the Gucci brand is now largely sold in directly owned stores. The Burberry brand is generally considered to have diluted its brand image in the early 2000s by over-licensing its brand, thus reducing its cachet as a brand whose products were consumed only by the elite.

LVMH (Louis Vuitton Moet Hennessy) is the largest luxury good producer in the world with over fifty brands. It made a profit of €2bn on sales of €12bn in 2003. Other market leaders in include the Gucci Group and Richemont.

Contents 1 Locations 2 See also 3 External links 4 References

Locations

Like other sectors of the retail market, luxury goods retailers like to cluster their stores closely together in order to create a shopping "destination". In the case of luxury goods, these areas are generally in the old and extremely wealthy areas of major world cities. Some of these well-known areas are listed below

• PC Hooftstraat, Amsterdam
• Via Condotti, Rome
• Sloane Street and Bond Street, London
• Rodeo Drive, Beverly Hills, California (Los Angeles area)
• Madison Avenue and Fifth Avenue, New York
• Place Vendôme and the Triangle d'Or, Paris

See also

• Wealth effect
• Designer label

External links

• Explore luxury - a catalogue of the websites of many luxury brands

References

• March 2004 on the state of the luxury goods market from The Economist

Types of goods (edit) collective good (social good) - private good - common good - common-pool resource - club good - public good - global public good - Accounting good Rivalrous good and Non-excludable good complement good vs. substitute good free good vs. scarce good durable good - non-durable good - intermediate good (producer good) - final good - consumer good - capital good. Giffen good - inferior good - normal good - luxury good - Veblen good - superior good search good - experience good - post-experience good - merit good - credence good