Luxury leaders have obviously many challenges in the marketplace. I will mention, in my opinion, the most important one. Luxury leaders must protect scarcity because there is always a desire to sell more by producing more items and/or lower prices. These are quick fixes, which might hurt the luxury position by becoming too popular. Product and brand inflations are serious concerns. It is quite rare that a luxury brand might move from the luxury sector to the premium sector - or even to fast fashion.
Let us say that there is a brand, which has a turnover of 50 million euros but by lowering prices it could easily generate a turnover of 70 million euros, in short-term. It does not matter if the brand sells less in future because it will protect scarcity but there is always a temptation to generate huge turnovers and profits. Some business leaders who do not have any previous experience from the sector might do these sort of errors, just because they want to have nice track records, which are telling of fine results. But good results might be bad results if you look carefully enough, especially in the luxury industry. In premium and fast fashion sectors, it is expected to generate a growing number of turnover and profits. A luxury brand can also grow but it has to be sustainable. Therefore, every luxury leader must be extremely careful how luxury brands are generating more revenue and profits.
Published in Luxury Sales Academy.