The Luxury Industry

Introduction

The Luxury Industry

Luxury goods constitute of a number of products that span across different categories. These include, but are not limited to jewellery, watches, clothing, cosmetics, etc. In the eyes of their end customers, luxury goods hold a very high value and hence command a very high price when compared to their non-luxury counterparts. Luxury goods tend to have very high levels of craftsmanship, quality, design, brand recall, and aura. To uphold these qualities, the goods are selectively distributed. This means their sales are heavily controlled and have exclusive channels so as to maintain their high brand equity.

The industry has been thriving since the pre-industrial era and thus has many prestigious brands that carry the legacy. Since the products carry high levels of craftsmanship and quality, they last for generations, bringing the customer a great deal of emotional value and attachment. Also, the origin of luxury brands have an impact on their brand equity.

Clothing and apparel in general make up a bulk of the luxury goods bought by customers worldwide, with women’s being slightly higher than men’s. Luxury Accessories such as shoes, wallets, and bags come from France. Clothing and Apparel is mostly from Italy and France. However, it is also the most challenging segment. Apparel companies release products in two seasons per year, and so face the challenge of selling out within the period. The luxury watch however business has a majority of it’s manufacturing based out of Switzerland. Another significant sector is that of fragrances. Luxury brand names such DKNY obtain synthetic fragrances from a few dominant chemical corporations. The companies are enticed by high investments in marketing and branding. Some of the star brands in the industry are Hermès, Cartier, Dior, Patek Philippe, etc.

The luxury market continues to face strong growth. This is attributed to factors such as luxury goods being status symbols in society, and are seen as rewards to their customers as they move up the economic ladder. This nature is particularly evident in emerging economies such as Singapore and the United Arab Emirates.

Background

Despite the pervasion of e-commerce in the global market that contributed to the decline of shopping at brick-and-mortar stores, the shopping mall culture in Dubai is as strong as ever. As of 2017, there are more than 70 operational malls in Dubai that offer access to the top luxury brands in the Dubai market.

The indulgent consumer behaviour of Dubai locals contributes to the success of luxury brands in Dubai. Although this hints at a total dominance over the luxury goods market by the Emirati consumers, the vast expatriate demographic which makes up for 92% of the population also has a noticeable presence in this market.

The relative openness of Dubai's economy attracted businesses from all around the world thereby creating more job opportunities. This abundance of job opportunities invites labour migration. The average growth rate in the Dubai population rose during the 1975-2007 period thereafter increasing gradually. By 2007 the population exceeded 1.5million. The main reason for this relative growth is the net inward migration along with the natural increase of population. Currently Dubai’s population is around 2.5 million wherein 92% are expat and migrant workers. The majority of the expatriate population include the South East Asians followed by Americans, British, Canadians, Australians, Africans, Iranians, Russians, Italians, etc. A section of these expatriates contribute heavily to the consumption of luxury goods.