Luxury

Many stats showed that the economy is recovering, or at least, the consumers believe it is. Not only the normal sales markets are getting doing better than before, the consumers are also willing to spend on luxuries. LVMH said “profit rose 73% to €3.03 billion on revenue of €20.3 billion last year” (Wall Street Journal). This news also claims that those luxury brands have opened many new markets like China, India which have offset weakness in traditional markets like US and Europe. Those areas’ sales “rose 12% and 14% respectively” (Wall Street Journal).

All those luxury products are inelastic supply, which made them easier to get recover from the economic crisis because there are few products can replace them, and their buyers are tend to have higher incomes which will been less influenced by the economics crisis. Those luxury costs, however, are very low compare to their sale price. Also, because of its inelastic demand, those products are tend to keep their prices even during the crisis time. However, the situation will be different for those products with elastic demand.

For those luxury brands, the expanding geographic reaching definitely helps its growing profit. Since luxury products are not necessaries for people, only the new markets will help them to gain more profit quickly, especially during the recovering of the economic crisis.

The consumers’ confidence is a very important factor of the retail market. However, if the economic is not at the recovering position at this point, the consumers will realize by time. Then the retail sales will go down again. So the most important question is, if the economy is really doing welling now? Are we at the recovering point or we just believe we are? The employment rate of US falls to 9% recently, which is a good thing, but there seems still do not have enough evidence to believe that this is the recovering point. Only stats in the long term will tell if this recovering is real or not.