Is It A Cost Pressure Or A Marketing Strategy To Increase The Price Of Luxury Goods?

Entering the 2011, the world's topic seems to be "price increase".

Every year the world's major fashion week is luxury brand.

Globally, prices of raw materials have generally risen, and luxury goods have more reasons to raise prices.

Data show that leather prices rose by 5% to 10% last year, mainly due to the shortage of sheepskin supplies.

According to insiders, the rise in crude oil prices will drive prices up in all industries, with the leather industry rising faster than other industries.

Experts also pointed out that many tanning enterprises are in the state of small profits or zero profits. On the surface, orders are coming, and profits have been suppressed to the lowest level.

According to the international brand

Since the financial crisis, more and more international luxury brands have shifted their production lines to China.

Therefore, the shortage of labor and the rise in labor prices are also one of the reasons for the rise in the price of luxury goods.

This rising price is not only affected by the price of food, energy, cotton and other kinds of global raw materials, but also by the rapid economic growth of emerging market countries such as China.

China is a big country of luxury consumption. In 2010, China's luxury goods sales increased by nearly 30%, the highest growth rate in the world.

Goldman Sachs has predicted that the number of people willing to spend luxury goods in the next 5 years will rise from 40 million to 160 million.

Data from the World Luxury Association show that 30% of the profits of luxury brands come from Chinese consumption every year, while 60% to 70% of consumption is generated by Chinese people buying extravagance abroad. Such a large amount of capital flows out, making the Chinese government want to regulate and control policies from the perspective of luxury tax, golf and ball games, high-end watches, etc. the tax rate is 30%; alcohol, cosmetics and other tax rates are 50%.

This has become another incentive for the domestic luxury market to rise in price.

The customs Order No. 54 has undoubtedly dealt a severe blow to overseas purchases of luxury goods.

The rise of luxury goods is also partly due to its international operation strategy.

For general products, product prices are made up of factors such as production cost, R & D cost, marketing cost, sales cost, management fee, exchange profit and loss, reasonable profit and premium.

But the pricing principle of luxury goods is far beyond the traditional pricing thinking. The fundamental attribute of "high price" is the embodiment of the spiritual value of luxury goods.

Take LV as an example, it controls all aspects of the value chain, both the brand owner, the manufacturer, the wholesaler, the agent and the retailer.

The direct consequence of rising prices is to earn rich multilayered profits.

The main purpose of the international luxury brand operation strategy, such as LV (Louis Vuitton) and Gucci (Gucci), is to establish a sales network in such a strong consumer market in China.

Rising prices can provide enough profit margins for emerging markets and compensate for losses that have been lost due to the global economic crisis.

In addition, the consumption elasticity of luxury goods is also very high, and the rise in prices often leads to the loss of consumers.

However, this rule seems to be unable to be confirmed in China.

It seems that China's new rich class does not take the price increase of a luxury item less than a few hundred yuan or tens of thousands of yuan as a matter of fact.

Expert analysis said: "once the price of luxury goods rises above 30%, it will be 15% times the annual regular price adjustment.

However, because China's luxury market is still rising, even if the price is adjusted by 30%, the annual consumption of the Chinese market next year is expected to exceed 10 billion yuan.