Want in? What you need to know about this highly competitive, highly sought-after market sector
Consumer spending on luxury goods has risen at double the rate of the global GDP and tripled over the last 20 years at an estimated rate of $260 billion dollars a year, according to consulting firm Bain & Company. Publicly traded luxury companies have outperformed others, making luxury conglomerates the envy of business tycoons everywhere. It’s no wonder many companies are taking a closer look at the luxury space and considering strategies to either expand their footprints or get into new segments.
With new luxury brands entering the local market, many area business moguls are considering entering the game.
That makes sense when you know the United States consumes the highest volume of luxury goods by far, at almost $80 billion – well ahead of Japan (at $20 billion) and China (at $18 billion). So it isn’t just Coloradans who find the luxury consumer products industry attractive. Many foreign companies are making aggressive strides to increase their market share for the American luxury buyer, and U.S. companies are working to expand their market share as well. With revenue growth of 4 percent expected next year, many companies are thinking about luxury brand extensions or spinoffs. But before you go all in on a luxury brand concept, there are things to consider.
IS LUXURY BRAND DEVELOPMENT RIGHT FOR YOU?
With gross margins of more than 79 percent, Cartier and Louis Vuitton make the idea of wanting to develop and own a luxury brand tempting. At a distance, luxury brands have what even the most brilliant and well-accomplished businesspeople crave – a high-margin, high profile, difficult-to-replicate business. But if you haven’t been part of a luxury team, what you don’t see is the grueling, expensive, highly disciplined process it takes to bring such a brand to market successfully and keep it that way. The risks are higher for luxury brands, consumers expect more when they pay more and the competition is fierce. Take it from Broe Real Estate Group – they just entered the Denver market with luxury towers.
To what do they attribute their rare success with a first luxury brand venture right out of the gate?
WHY PEOPLE BUY LUXURY?
Many consumers justify these purchases as high-value, long-term investment. Sometimes they are; sometimes they are not. People buy luxury goods for a lot of reasons, but one thing is certain: the purchase choice is always attached to strong emotions. For others, the motive can be to show off, gain acceptance, or reward themselves.
Michael Contreras, Assistant Community Manager of Broe Real Estate Country Club Towers II & III, is a former owner of a fashion-design company and an expert on luxury-brand marketing. “Enrapturing residents in a full-sensory experience when they enter the property is our core focus,” he says. “From the concierge team that knows our residents on a first-name basis to the complimentary personal trainer and on-staff personal chef, we do our best to create an experience that envelopes them in the beauty, comfort, and convenience that come together to create luxury."
Contreras might make it seem like providing a high-level guest experience is a piece of cake – it’s not.
Stay tuned for additional articles that will reveal what it takes to unlock the secrets to build a successful luxury brand.
Sarah Procopio, President of Thrive Marketing Science, a business intelligence and driven marketing firm. Sarah specializes in loyalty program development and turning around flailing companies and marketing programs quickly. She can be reached at email@example.com or 949.230.7873. This article was original published in the ColoradoBiz Magazine and can be found at https://www.cobizmag.com/Business-Insights/Luxury-Brands-Are-On-Fire/