In 1941, Coach Inc. was founded in a loft located in Manhattan, New York. Inspired by the baseball glove, it was the driver behind the soft, yet strong and durable leather. Not until the 1960s did Coach start manufacturing handbags when they introduced their first collection which consisted of 12 different styled bags. Then in 1985, the company was acquired by Sara Lee Corporation. Following this acquisition fifteen years later, Sara Lee Corporation decided to spin off Coach through an initial public offering in 2000 to focus on its food and beverage industry (Wikinvest, 2008).
1. What are the defining characteristics of the luxury goods industry? What is the industry like?
The definition of a luxury good is a product that gives great ease and comfort. It adds pleasure or comfort, but is not absolutely necessary (Merriam-Webster, 2008). Some characteristics of the industry include superior quality, brand recognition, and is said to have high income elasticity of demand. As people become wealthier, they tend to buy more luxurious items. However, this also means that as the wealth declines, as does the demand for these items.
The luxury industry can also be looked at as a status symbol. Conspicuous consumption leads to increasing demands for luxury good items and it is a growing industry with the global luxury goods market growing 9% per year (Business Wire, 2007). Advertising has a lot to do with it, especially Americans who are being constantly bombarded with advertisements on a daily basis. While finding exactly how many advertisements American see a day is nearly impossible, some studies have shown the number to be between 150 and 3,000 (Mortar, 2006). This leads to more consumers being exposed to or being told which items or brands are ...