Luxuries goods can be used to refer to a good in which with demand increase then it mean that there will be proportionate increase in income. These goods have high income elasticity of demand meaning that as the people become wealthier they are able to buy more and more of these goods and has the implication that with the low level of income then it will lead to the change in demand of such goods. A luxury brand is seen as a brand in which majority of its products are luxury gods and include creation of brands whose names are associated with luxury, high prices, high quality but it has few buyers because it has to depend on the rate in which the people can be able to purchase such a goods.
The names that are used are to make the differentiation to other goods like the normal goods like for example use of hummer will be a luxury brand meaning that such product can only be bought by those who are able to get high incomes. The luxury goods have high sensitivity to economic upturns and downturns and high profit margins as well as the prices that are attached to such products are very high and have tight brands. These luxury goods have to be advertised so that they can have the importance to balance the emotional and rational communications when a luxury brand has to come to the customers through various brand advertising. (Deborah, 2000, pp57).
Importance of advertising for luxury fashion brands
The use of luxury brands will mean that they will have heavy visual aids which will lead to a sense of emotional connections or a sense of being. The status of owning luxury brands is important for the high net worth consumers as they have the feeling that their class of self-expression has been catered for in the right manner. The advertising has the assurance that those people who are not able to afford such products will not be able to know the expenses of such goods which will be an essential in confirming the status of consumption promises to the buyers. The use of luxury brands there can be connected to consumers on a rational level that has to focus on the purpose of owning that product.
The use of brand image is targeted at making the product known to the targeted group. This is because there is need for the consumers to know the product that is on the market and have know how of the income that will be set for the purchase of such products. This has led to need to have a network that will be used so that it can inform buyers on what is to be sold in the market at a given time. There is a need to attract shoppers so that they can be interested in the upscale products that are provided in the market. This will mean that if a product has been advertised then the company achieved keeping the picture of the product, which will lead to high cash flow, all the time the product enters the market. (Daniel, 1990, pp34).
China has been able to outstrip other countries like Japan as it is seen as the largest single market in Asia pacific in luxury brands. With this growth of the luxury brands in the chain then there is rise in competition where the country’s busiest streets like Nanjing road are experiencing fierce competition from the world’s luxury brands. There is also a warning in China that markets have been saturated for that time but the environment is still positive on the potential entrants. With many Chinese consumers having low levels of brand awareness then there is still the indication that they have low levels of brand loyalty. This means that the sales staff can be a powerful tool that can be used as they have the ability not only to inform consumers of the benefits that result from the luxury brands but they also convince them to purchase such products. (Aldrich, 1989, pp, 67)
The luxury brands are investing large sums of income in markets where they not only promote their brand and products but they also inform the consumers about the luxury and why it is important to pay a premium for the products that are offered for luxury. The willingness of the Chinese media to make promotional events to the public means that they are aware of the benefits that result from such luxuries and need for the consumers to be informed in the most effective way.
There is the experience chance that is created and need to sale the products that are not available in the market they also welcome the window shoppers so that they can know about the products, which will lead to rise in income level of such products. There are many strategies that have to be worked on which involve: the product diffusion lines which entice less affluent and leads to brand recognition to the consumers. These strategies have not been fully considered in the country therefore with changes that will occur in the competition and maturity of these markets then it will lead to need to have this approach so that they can keep people informed.
Some of the luxury brands that are operating in the country are seeking for local relevance creation of products that are centered to consumers in a country this will mean that the country is willing to cater for the basic need of the consumers all that time. (Alice, 1990, pp, 23).
A review of foreign advertising environment in China
With a high population in China it has been able to offer a vast potential market for foreign goods and services. Over the past years china has made progress in opening of the markets to foreign products and investment. The economic and financial reforms have introduced forces in market. China made accession to the world trade organization in the year 2001 so that it could be able to open more markets in US for its goods and services. The government of china was supposed to follow the set rules so that it could fit in this trade agreement and encourage the structural reform in the country. With the years of economic reforms and market opening then there was need for these essential competent for sustainable and balanced economy in the country.
To shift from the planned model has been hard for china but it is getting rewards by sustainable economic growth and improving standards of living of people. The reforms have been difficult in the country because some sectors were relying on the substantial state subsidies and the aging state owned industry is under pressure from the domestic and foreign competition. China has had more competitive economy therefore the need to dismantle of the substantial barriers. The import barriers and other inconsistent applied legal provisions and limitations on market access when combined will result to difficulties for foreign firms to operate in china.
The central government is in control of non competitive sectors in the economy while the provincial and local governments have strongly resisted the reforms that would eliminate protection of the local enterprises this will mean that the central government has been inhibited from the ability to implement trade reforms. The GDP of the country has been decreasing in the year 2001 which has led to the need for the government to have encouragement of private sectors through the increase in civil service wages so that they can be able to help and sustain the retail sales growth but this has not been possible die to the gap that exist between the rural and urban dwellers.
The country has been forced to use import restrictions so that the income between these people can balance and lead to change in economy. For example in 1996 the country has introduced tariff rate quota system for imports that are made on wheat and other products, the quota amounts were not in public announcement and application and allocation procedures were not clear to the people which brought problems to the attainment of the target of this system. In this system the country is able to place quantity restrictions in the amount of these commodities. (Ben, 1998,pp, 45).
Advertising case study: LVMH
The LVMH is the largest luxury company, which is famous for luxury brands like Dom perignnon. It has more than 2,000 retail outlets, which includes 300 plus vuitton stores and other 200 DFS group duty free shops. Over the past years this company has been growing to get solutions for the business through the use of free reports, use of fast pace and moving of activities info and registration which ranges from the plane duty free shops to cosmetics retailing and art auctions. This company has been able to double sales where in the year 2004 it had sales of about $ 11 billion which was seen to be more than four times the sales that were done to its closest rival, save on designer purses and wallets which was up to about 90%.
These off selected models of acquisitions have not been able to generate profits that are required to such companies and the company has been able to generate nearly that profits that resulted from Louis vuitton. The new ventures were risky to the company where the DFS had acquired about $3 billion in 1997 and had lower cost, high ROI, real life SCM case raised for the company to have exposure to the studies for the down turn in travel. With low sales of about 36% in 2004 the analyst expects that this company will loss about $100 million by the end of the year. (Angela, 1999, pp, 56)
The serphora was able to acquire about $270 million in 1998 and expected to have a loss of about $100 million in the same year. With the idea that is sephora can be a profitable company because of the mass selling that it does there is the unlikely hood that it will generate high margins that are related to the LVMH leading business. There was the believe that the DFS was central to LVMH strategy of tightly controlled distribution of its products therefore their was need for this company to be involved fully in the functioning of the LVMH so that sales can be raised. There has been a study that have been carried out so that problems that face the LVMH can be solved such problems like decline in demand for the luxury goods has been on increase this is because the problem is linked to political events and social trends that have been taking place in the country.
Another problem is that these luxury products are liable to counterfeit and need for a country to make changes to the policies that are related to protection of these products. There is the LVMH diversification strategy that is making acquisitions outside the company sector and such sectors lack right knowledge that is required so that they can match the company image. There has been need for SWOT analysis which has led to the following strengths: there is need to have a name recognition that will lead to the company been able to make high sales of this product, they require experience so that they can know how to go about sales and should have public relations so that the product can be sold in the quickest time possible.
The weaknesses that are related to this analysis will involve: the conflict of interest, the diversification and the financial problems and the imitation of these products, which is easy. The opportunities will be to merge and acquire the current increase in wealth and emerging market. There are threats that can be experienced and they include: change in assets of the customers, the economic recession and the competitors in small markets.
Summary of the western luxury fashion advertising in China
There are other luxury brands that are boosting their presence in China so that they can take advantage of the cheap local manufacturing apart from the coach companies and Paul smith. Most of the western brands have made the choice not to change the formats when operating in china as they have the belief that with minor adaptations then it can lead to serious damage to the parent company brand and the global position.
This will mean that such companies are in touch with china companies so that they can retain their operations all the time in the country. With the expansion of the markets then some -brands are moving out of smaller stand alone outlets and the out of hotels to have expansion and introduction of large store formats. Most of the world’s largest luxury brands are expanding their china operations. With this push then it means that there will be expansion of smaller Chinese cities and many of the brands are active in China’s luxury markets and still have plans to expand with boutiques in second and third tier cities.
The path for luxury brands is to set up shop in the primary cluster cities so that they can be able to expand greatly. Many of the luxury brands are finding local or regional partners so that they can get help to navigate the market this will be important as the company will be able to feature in the best cities in the country and more will be sold in that particular place. There are large companies that act as the agents to china and include Hong Kong Dickson concepts, which have representation of brands like brook brothers. In the past years the local Chinese brands were backward but they have been evolving rapidly where the local brands in china have attained retail strategies from foreign entrants and making establishment in good locations, which has led to such companies been able to grow rapidly.
There are few local luxury brands that have merged in the country and these brands have been perceived to be on local scale and have succeed in making the companies have a view of the international markets through their domestic markets. One of the international brands that have been set up is the ports international which has given the advantage in developing its brand and market share in china market. This will mean that such brands will lead to high sales been made to the luxury products as they will be known in the international market. (Alex, 2000,pp, 78)
The china luxury brands have been important to the country because they have led to high sales. In connection to the western luxury brands, they are supposed to make a follow up of the companies that are working in the country so that they can sell their products to the local and regional areas. This will imply that there is a need for the luxury brands to be taught to the people so that they can be able to know the benefits that result from the use of such products and this will lead to the rise in sales.
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