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Many luxury good makers are experiencing sales surges. For example, LVMH enjoyed a 20 percent sales increase in the last quarter of the year, and its Louis Vuitton label alone earned $7.88 billion for the year. Gucci’s owner, PPR, reached a 22 percent increase, and the brand’s sales of $4 billion appear to leave room for growth.

The surprise is not just that these companies are performing so well in a struggling global economy. It also stems from the source of these sales: China, Brazil, and Indonesia, primarily. Of PPR’s 900 stores worldwide, half are in Asia. In particular, men’s fashion, shoes, and watches are doing especially well in that region.

Thus another surprising trend seems to be emerging: First-time luxury buyers are mostly men. In response, PPR bought the Italian suit maker Brioni in November and has started a new line of men’s fashion and accessories, along with men’s-only boutiques offering Gucci, Bottega Veneta, and Balenciaga labels.

For some of these luxury goods, the sales increase was rather unexpected. They have had trouble keeping up with demand. Hermes cannot produce enough Kelly and Birkin bags—even though they cost thousands of dollars.

More mundane, low-end consumer product companies wish they had such problems. Instead, they struggle as low income consumers continue to make discerning choices about every product they buy. And luxury makers like Tiffany & Co. that moved into selling moderately priced silver items have not done as well as they expected.

Discussion Questions:

  1. Where are luxury makers looking for growth?
  2. Why did the gamble of selling lower priced offerings fail for some luxury companies?

Source: Christina Passariello, “New Rich Fuel Luxury Boom,” The Wall Street Journal, February 17, 2012.