Luxury Watches
In order to understand Luxury Watches we must also look into Luxury Goods
Certain manufactured products attain the status of “luxury goods” due to their design, quality, durability or performance that are remarkably superior to the comparable substitutes. Thus, virtually every category of goods available on the market today includes a subset of similar products whose “luxury” is marked by better-quality components and materials, solid construction, stylish appearance, increased durability, better performance, advanced features and so on. As such, these luxury goods retain or improve the basic functionality for which all items of a given category are originally designed.
There are also goods that are perceived as luxurious by the public simply because they play a role of status symbols as such goods tend to signify the purchasing power of those who acquire them. These items, while not being any better (in quality, performance, or appearance) than their less expensive substitutes, are purchased with the sole purpose of displaying wealth or income of their owners. These kinds of goods are the objects of a socio-economic phenomenon called conspicuous consumption and commonly include luxury cars, expensive watches and jewelry, designer clothing, yachts, and large residences such as McMansions, urban mansions and country houses.
Market characteristics
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 independent of 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 clothing, accessories, and luggage. Many markets have a luxury segment including, for instance, cars, wine, and even chocolate.
Luxuries may be services. The hiring of full-time or live-in domestic servants is a luxury reflecting disparities of income. Some financial services, especially in some brokerage houses, can be considered luxury services by default because persons in lower-income brackets generally do not use them.
Luxury brands
Armani is an example of a luxury brand for clothing.
A luxury brand or prestige brand is a brand for which a majority of its products are luxury goods. It may also include certain brands whose names are associated with luxury, high price, or high quality, though few, if any, of their goods are currently considered luxury goods. The automobile manufacturer Hummer is an example of such a brand, as a Hummer automobile is considered a status symbol, even though none of the vehicles in the Hummer line-up meet the requirements to be classified as a luxury car.
Another market characteristic of luxury goods is their very high sensitivity to economic upturns and downturns, high profit margins as well as prices, and very tightly controlled brands. Other guidelines may apply to certain luxury markets such as the luxury vehicle market.
For example, following a nearly crippling attempt to widely license their brand in the 1970s and 1980s, 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 UK 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, including Louis Vuitton, the brand with the world’s first designer label. The LVMH group made a profit of €2bn on sales of €12bn in 2003. Other market leaders include PPR (after it purchased the Gucci Group) and Richemont.
From the perspective of the consumer of luxury goods (those who can afford the ultimate luxuries), seeking those luxury items not generally offered to the general public is what drives them to certain brands. Luxury brands usually do this by offering different product lines: one that is geared toward affluent consumers who also tend to buy from less “luxurious” brands, and more “exclusive” product lines which are geared toward the really affluent consumer who makes their purchases based on the degree of exclusivity a certain product can afford them. The latter group constitutes an “elite”. A rather small group in comparison, they tend to be extremely influential. Once a brand gets an “endorsement” from members of this group, then the brand can be defined as a true “luxury” brand.
Examples include (in alphabetical order): Giorgio Armani, Balenciaga, Hugo Boss, Marcela Calvet, Cartier, Coco Chanel, Ocar de la Renta, Christian Dior, Escada, Fendi, Salvatore Ferragamo, Gianfranco Ferre, Givenchy, Hermes, Carolina Herrera, Ralph Lauren, Missoni, Moschino, Miuccia Prada, Valentino, Versace, Louis Vuitton Movado.
Importance of advertising for luxury brands
There is an important balance of emotional and rational communications when a luxury brand connects to its customers through a variety of brand advertising. Historically, luxury brands, especially fashion brands, use heavy visual aids to help foster a sense of emotional connection - a state of being or sense of being. The status of owning luxury brands is important for the affluent or high net worth consumer, as they feel it expresses their class or self-expression. Advertising also ensures that other people who cannot afford the luxury item are nonetheless aware of its expense, which is essential to conferring the status that the consumption of luxury promises. In other cases, luxury brands can connect to the consumer on a very rational level focusing on purpose or function, such as owning a plane or a private jet, or a fractional owner.
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