LUXURY GOODSLuxury goods are products with a demand that is directly related to consumer income which means if consumer income increases, they will purchase more of these goods and if consumer income decreases, they will stop purchase for these goods.
Demand for luxury goods in Malaysia happen in different location and income group. Most of the products are being found in premium shopping in Kuala Lumpur, Penang and Johor. These locations is where the highest demand for luxury goods which most premium outlets are also established within these locations. Luxury goods are use by the persons with high income.
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This is because the price of luxury goods are so high for persons with an average income. The persons with an average income cannot afford to buy those luxury goods. Luxury brand pricing strategy is finding the right balance between exclusivity and availability and also on being able to provide consistency across various countries and product ranges.
The price of any product from a luxury brand must reflect the key messages of any luxury brand is quality, heritage and exclusivity. This is different from premium brand pricing where the product is freely available to those willing to pay the price. Luxury goods are said to have high income elasticity of demand because as said before that if people income increases, they will buy more luxury goods and if the income decrease, demand for luxury goods will drop. Income elasticity of demand is not constant with respect to income, and may change sign at different levels of income.
This means a luxury good might be a normal good or even an inferior good at different levels of income. For example, a wealthy person stops buying luxury cars for his or her automobile collection because the person wants to start collecting airplanes. With this income level, the luxury car would become an inferior good. Some luxury products have been claimed to be Veblen goods that are with a positive price elasticity of demand.
A Veblen good is a luxury item which price does not follow the usual laws of supply and demand. Usually, the higher the price of a particular good the less people will want it but for luxury goods such as very expensive watches or cars, the items will become more desirable as it grows more expensive and less desirable should it drop in price. Veblen goods are not similar with Giffen goods which is also rise in demand as the price increase.
Giffen goods tend to be staple food items, the demand increase is because of poverty.Although the term of luxury good is because of the goods’ quality, they are generally considered to be goods at the highest of the market in terms of quality and price. Classic luxury goods include high fashion clothing, accessories and luggage. Many markets have a luxury segment including such as automobile, yacht, , watches and jewelry.Luxuries also can be services. The hiring of full-time or live-in domestic servants is a luxury reflecting disparities of income.
Some financial services, building a house can be considered luxury services by default because persons with lower income will do not use them.https://en.wikipedia.org/wiki/Luxury_goodshttps://www.myaccountingcourse.com/accounting-dictionary/luxury-goodshttp://lexicon.ft.com/Term?term=Veblen-goodhttps://www.wealthx.com/intelligence-centre/exclusive-content/wealth-x-institute/2018/luxury-brand-pricing-strategy-consistency-key-brand-success/https://www.giiresearch.com/report/eo275253-luxury-goods-malaysia.html