Term Paper on "Luxury Business"

Term Paper 7 pages (2477 words) Sources: 4

[EXCERPT] . . . .

Luxury Business

"For more than a century, the luxury fashion business was made up of small family companies that produced beautiful items of the finest materials. It was a niche business for a niche clientele. But in the late 1980s, business tycoons began to buy up these companies and turn them into billion-dollar global brands producing millions of logo-covered items for the middle market. The executives labeled this rollout the 'democratization' of luxury, which is now a $157-billion-a-year industry" (Thomas, 2007)

This particular article will focus on the question of whether or not those expensive luxury goods made by cheap labor instead of Italian artisans are still worth the money. What needs to be understood before framing an opinion for or against here is why there is a demand for luxury goods in the first place. Is it because of the quality of these products? Is it because of the status symbol that they project? Is it purely about fashion and accessorizing? What is the core reason behind the popularity of luxury goods? Is it purely on consumer demands that the manufacturers invest in them? There are quite a few researches conducted that have shown evidence of the biggest brands of luxury goods in the world (like Louis Vuitton, Prada, etc.) investing in cheaper labor in developing nations. Researchers assert that "many luxury-brand items today are made on assembly lines in developing nations, where labor is vastly cheaper. I saw this firsthand when I visited a leather-goods factory in China, where women 18 to 26 years old earn $120 a month sewing and gluing together luxury-brand leather handbags, knapsacks, wallets and toiletry cases. One bag I watched them put together -- for a brand whose owners insist is manufactured only in Italy -- cost $120 apiece to produce. That evening, I saw the same bag at a Hong Kong department store with a price tag of $1,200 -- a typical markup" (Thomas, 2007)

Many people believe that it is a complete rip-off to have the branded luxury items when the makers of those goods are the cheap labors in China or India. Furthermore, researchers also argue that if and when the Chinese or Indians can manufacture and provide the same luxury items, why would anyone want to invest in something that costs much more? "How do the brands get away with this? Some hide the 'Made in China' label in the bottom of an inside pocket or stamped black on the back side of a tiny logo flap. Some bypass the "provenance" laws requiring labels that tell where goods are produced by having 90% of the bag, sweater, suit or shoes made in China and then attaching the final bits -- the handle, the buttons, the lifts -- in Italy, thus earning a 'Made in Italy' label. Or some simply replace the original label with one stating it was made in Western Europe" (Thomas, 2007).

The argument that I present is that there are numerous social aspects that influence the preference to pick brands despite the over pricing. The paper will end with a letter to the editor addressed to the New York Times.

It is also important to understand the psyche of the customer who actually prefers buying brand despite the higher pricing. In a recent study by Suk (2009), the researcher asserts that luxury goods have grown to be a fashionable accessory and hence analyzing the purchase of luxury goods is similar to analyzing the fashion trends in the society. The researcher highlights three primary aspects that dominate the purchase of luxury goods from brands despite the higher prices. These aspects are:

Status

Zeitgeist

Copies vs. trends

A. Status

Purchasing brands is viewed as a statement of the social and financial status of the individual. This is one of the main reasons why the purchase of luxury goods from brands is still a growing phenomenon. When treating luxury goods as part of fashion, a study asserts that "the most influential and widely held theory posits fashion as a site of struggle over social status. This is a view most concretely articulated in terms of social class at the turn of the century by Georg Simmel, the German sociologist, who was in turn influenced by Thorstein Veblen's classic work, The Theory of the Leisure Class." (Suk, 2009)

B. Zeitgeist

The other major theory of fashion sometimes goes by the term "collective selection," associated with the sociologist Herbert Blumer. On this theory, fashion emerges from a collective process wherein many people, through their individual choices among many competing styles, come to form collective tastes that are expressed in fashion trends. The process of trend formation begins vaguely and then sharpens until a particular fashion is established. The themes of the trend reflect the spirit of the times in which we are living (Suk, 2009).

C. Copies vs. Trends

Most consumers have a psyche of preferring the original designs (i.e. The branded luxury goods) over the copies (i.e. from manufacturers) as they feel that the copies are of a lesser quality or are deficient of a class that they can only get through using a branded product. In relation to this, a researcher asserts that "some observers assume that the trendy articles are copies: either the exact same article purchased from the same producer, or else a close copy of most elements of the original's design. But such copies play only a limited role in the rise and fall of trends. Participation in a trend -- by a consumer or a designer -- does not necessarily or usually entail copying" (Suk, 2009).

JP in one of his articles for the Salvage Yard (2010) writes how he despises the mass production of dull luxury goods and instead highlights how 'heirloom brand' luxury goods (e.g. The J.W. Hulme Classic Field Oxford Briefcase) should be the primary focus for the masses so that the brands that they do own demand respect and recognition because of who had owned them previously. With regards to what luxury goods essentially represent, JP writes "in the last few years, when ostentatious displays of wealth became a sorry substitute for understated class, it became harder and harder to sift through all the junk. A luxury in its purest form, so the thought goes, is not a necessity; it just makes life more fun to live and delights you in small ways. I think I derive pleasure from certain things because I like that they are well made, have a story behind them, and most importantly are not out there for mass consumption -- I get a small thrill knowing that not everyone has it. You can call it small batch, artisanal, or limited edition -- all would apply" (JP, 2010).

There are many journalists and researchers who do not support the use of cheap labor in developing countries for manufacturing purposes because they feel that the U.S. based companies are more than equipped to not only manufacture the goods but to do making more profits, reducing transportations costs as well as maintain a high standard of quality. One such advocate is Geoffrey James who writes for Sales Machine. He says "I keep wondering when U.S. companies are going to wise up and start in reinvesting the United States, which used to be the envy of the world when it came to high-quality manufacturing. I'm not holding my breath though, because while U.S. executives are busy examining their own polyps, Chinese executives are laughing all the way to the bank, which BTW they now own" (James, 2010).

However, in the same article, James (2010) writes that not all of the products made in developing nations, like China for example, are subpar or below par products. He believes that their technology-driven products are top-of-the-line but are only at competitive quality because the manufacture of such products works under a specified schedule and is tested thoroughly. James has a very low opinion of the products from China overall and says that manufacturing from these countries hence makes no sense for companies from the U.S., which is an economic giant in the global world. He writes "Their top-of-the-line semiconductor fabrication plants are the best in the world, for instance. But that's because every computer chip must be tested thoroughly or it won't work at all. For most stuff -- toys, medicine, consumer electronics, kitchen gear, tools, etc., etc., etc. -- what comes out of China is cheap, in both senses of the word" (James, 2010).

Conclusion

JP in his article also focuses on what the concept of luxury brand has evolved into in today's world. He writes "The term 'luxury brand' gets thrown around a lot today, and as someone in the branding business, I can attest that every brand secretly covets this moniker as a way to charge more for products and services around the world and dupe the masses into even more consumption. Yet, somewhere along the way, I think we lost sight of what true luxury is and… READ MORE

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