Luxury goods millionaires? Really?

[Deleted85763]

I have been hearing about numerous luxury goods manufacturers/sellers who are millionaires. These goods range from wines to shoes to clothing. For example, a number of these companies sell shoes, casual sneakers, priced at US$2000.00! These sneakers might be made with calf leather or other expensive material but I can't believe they are that much better than sneakers that sell for $200.00 Are enough people buying these luxury items to make the sellers rich? Obviously they are but I just don't get how they do something like this.

 

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[mdot]

People buy for all sorts of reasons. For example they could be buying the status that comes with name brand luxury shoes rather than buying the material and craft to make the shoe.

I watched an episode of dragons den where this guy's business was making gilded and diamond-set dog collars for like $X0,000. I think they put one on Drake's dog and brought it in for the pitch. Clearly you aren't buying a collar, you are buying a demonstration to anyone that sees you that you are on the same level as Drake.

 

[ElleMg]

People buy for all sorts of reasons. For example they could be buying the status that comes with name brand luxury shoes rather than buying the material and craft to make the shoe.

I watched an episode of dragons den where this guy's business was making gilded and diamond-set dog collars for like $X0,000. I think they put one on Drake's dog and brought it in for the pitch. Clearly you aren't buying a collar, you are buying a demonstration to anyone that sees you that you are on the same level as Drake.

I missed that episode! They actually brought his dog in for the pitch?! I wonder how much they paid Drake to do that, or if he agreed to do it for a lifetime supply of diamond dog collars or something

 

[Ing]

if you have 500 a month, you buy shoes for 20.
If you have 4000 a month, you buy shoes for 200.
And if you have 50000 a month, you need to buy shoes for 2000+

different earning areas need different burning areas!

 

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[Jobless]

Say you manage to sell a luxury shoe for $2000, with gross profit of $1800, as it costs $200 to produce ($1000+ cost if reseller, wholesaler, scalper, authorized dealer etc). There are many reasons why it is this way. The shoes are subjectively better, not objectively. Customers have preferences, not checklists.

What do you think it costs to acquire a new customer that 1. can afford it and 2. is interested in the shoe? If you do not know, how much do you think it costs to find out through market research? How much will the cost be on marketing through social media influencers, fancy store in prime location, product development (you need new designs, limited editions, trends)? Charismatic sales people that convince customers it's a good idea to spend their paycheck on a handbag? Will these top sales people prefer to work in your store rather than the Ferrari dealership?

The customers may not be normal ones that watch TV or scroll facebook. You may need to host costly events, give out free merchandise, sponsor celebrities, fashion, sports events etc., before there is any word-of-mouth or organic growth. Even if the brand becomes established and highly profitable, you can lose it all because you failed to innovate and keep customers interested, or economic downturns outside your control. People will also copy your brand and designs, legally and illegally, meaning IP protection costs for you.

You are competing against enormous luxury brands that benefit from low costs due to scale, and products that basically sell themselves due to strong brand. Taking any product and slapping their brand/logo on it allows it to sell for far more.

You will not be able to outspend established brands in marketing. A better idea would be to manufacture for them, innovate their marketing or get a license to use their brand in some way (unlikely if a luxury brand).

To build a new luxury brand you could focus on a category of products not normally associated with luxury, or establish a genuine reputation through quality first, rather than status/name. People buy luxury brands mainly in search of status or attention, but also for the quality.

 

[FierceRacoon]

Either way you have to create value. You have explained yourself that the value is not in the product but in the brand. Put the same amount of effort into creating a brand, and after 1000s of hours you will probably understand how it works.