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1. What are the defining characteristics of the luxury goods industry? What is

the industry like?

In a modern life, the standard of living gradually improves, so people consider carefully

to make right decisions when choosing specific type of good which not only meets their

normal needs but also satisfies the higher expectation of them in their consumption.

The concept of Luxury goods is given to indicate the commodities which respond to the

high requirement. A luxury good is a product that gives great ease and adds pleasure,

but is not absolutely necessary. In economics, it is stated that the luxury good is a good

for which the demand increases more than proportionally as income rises, and is a

contrast to a necessity good, for which demand grows up less than income. The luxury

goods have more than necessary and ordinary characteristics compared to other

products of their categories.

The characteristics of the luxury goods industry are classified into manufacturing,

concrete and abstract characteristics. The manufacturing and concrete characteristics

means the tangible value of products, which could be observed directly. On thecontrary, the abstract characteristics equal intangible value, which seems to be one of

the most important features that makes the difference of luxury goods. To be more

precious, some defining attributes of the luxury goods industry involve superior quality,

brand recognition and high income elasticity of demand.

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The first point which would be considered is the superior quality. In the industry, the

target customers are the segments who have much more higher expectations while

deciding to consume a specific good. As a result, the manufacturers virtually use the

most premium materials to ensure their products have the best quality as possible as

they can.

In addition, the luxury goods industry is characterized by brand recognition which refers

to the identification of specific brand by its properties. On other words, a brand would

have its own strategy to make it unique in the market. When people could distinguish a

brand without being explicitly exposed to the company's name, but rather through

visual signifiers like logos, slogans and colors, the brand recognition is most successful.

In general, luxury brand relied on creative designs, high quality, and brand reputation to

attract more customers and build the brand loyalty.

About the elasticity of demand, the luxury goods industry is said to have high incomeelasticity of demand, which means that the wealthier people are, the more luxury goods

they would buy. Moreover, the consumers choice of a luxury good is not only for their

satisfaction but also to improve their self-esteem rather than for convenience. Thus,

income elasticity of demand is not constant with respect to income and may change sign

at different levels of income, which means a luxury good can be a normal good or even

an inferior good at different income levels.

The market for luxury goods includes three main categories: haute-couture, traditional

luxury, and the growing submarket accessible luxury. Haute-couture, whose targets

were very high-end custom product offering that catered to the extremely wealthy,

was at the top of the market. Traditional luxury has leading brands including such

fashion design houses as Prada, Burberry, Hermes, Gucci, Polo Ralph Lauren, Calvin

Klein, and Louis Vuitton. Some of these luxury goods makers also broadened their

appeal with diffusion lines in the accessible luxury market to compete with Coach and

other lesser luxury brand. Luxury goods manufacturers believed diffusion brands lower

profit margin were offset by the opportunity for increased sales volume and the growing

size of the accessible luxury market and protected margins on such products by sourcing

production to low-wage countries.

Coachs array of products included ladies handbags and leather accessories. Coach

channels of distribution involved direct-to-consumer channels and indirect ones. It has

full-price stores and factory store in U.S. Both of them were equally brand loyal, but

there was a distinct demographic difference between the shopper segments. Therefore,

the drastic change of luxury goods industry at different levels would affect significantly

Coachs retail distribution.