According to the Burberry official weblog, they have shared
one of their latest news on May 31, CLICK ME FOR MORE INFO which announced that Burberry is embarking
on a store opening spree in Brazil and Mexico this year as the British brand
targets up-and-coming luxury markets.
Burberry is a British luxury fashion house which
distributing fashion clothing, fashion accessories and perfumes. In British, using a Burberry is very common
especially its iconic trench coat. And now, Burberry has announced their latest
product, the new automatic power reserve watch. Burberry can occupy so many
areas of fashion because their demand is very huge and stable. As title,
Burberry is a 156 year-old global luxury brand. It has a huge number of loyal
followers since last century. Many consumers are willing to buy their products
because their own preferences, the population of Burberry and also the iconic,
an icon that state your wealthy and your fashion sense.
Due to demand is high and stable, producer have set a high
price for their products to maximize their profit. It is because the demand for
Burberry is inelastic which means that the price up will only decrease a little amount of quantity
demanded, but will increase greater the quantity supplied and the total revenue
will increase too.
The graph at above has showed the price elasticity of
Burberry is inelastic. It is because when the price of Burberry luxury has
increased from P1 to P2, the quantity demanded of Burberry luxury decreased but
the quantity of Burberry luxury in market has increased from Q1 to Q2. And
because the percentage decrease in the quantity demanded is less than the
percentage increased in price, therefore it is inelastic.
Besides the loyalty of consumers, the substitution is one of
the reasons why the quantity of demanded is increase. Hermes and Chanel
luxuries are very expensive and not many people can afford them. According to
the substitution effect, when the relative price of a good or services rises,
people seek substitutes for it. Therefore, Burberry has become substitutes and
the quantity demanded increase. On the other hands, there also have consumers
who cannot afford to buy Burberry luxuries, will seek for another substitutes
which they willing and afford to buy. Such as Coach and Carlo Rino, the price
of them is slightly higher than other normal goods but cheaper than luxuries.
They are more suitable for those who cannot afford luxuries but request
something better than inferior goods, such as night market goods.
According to the law of supply, when other things remaining
the same, the higher the price of a good, the greater is the quantity supplied.
However, Burberry has made a different decision which many other luxuries
companies will do so. They decided only produces limited goods due to the quantity
of products in market more than the quantity of demanded in market, the price
of goods will fall. Therefore Burberry
luxuries produce in limited quantity to make sure they can always sell at a
high price to earn maximum profit.
Because of the population of luxuries, the quantity demanded
for normal goods or inferior goods will decrease and by that time government
will set up tax on luxuries. When an item is taxed, its price might rise by the
full amount of the tax, by a lesser amount or not at all. If the price rises by
the full amount or by a lesser amount than the tax, buyers have the burden of
the tax, which means that they have to pay more. It will decrease the quantity
demanded of luxuries because the price is rise and according to the law of demand,
higher price the good selling, lesser quantity of that good is demanded. Those
consumers who cannot afford the higher price will look for normal goods as
substitution of luxury. At the end the quantity demanded of normal goods
increase.
However, the tax elasticity of demand and supply on luxuries
is always inelastic. It means buyers always pay the greater amount of tax or
perhaps entire tax. It is because when consumers afford to buy a luxury, they
will not mind to pay a little more on tax. They just aim to get what they want
to, the tax was not a big deal for them. In fact some of the wealthy consumers
willing to pay more tax to show their wealth they are. Therefore normally
producers of luxuries will just move all the tax to let consumers to pay it.
Because of
the tax, price of Burberry luxury has increased from P1 to P2, and the demand
has decreased from D1 to D2, the quantity has decreased from Q1 to Q2. Due to
the percentage decrease in quantity is lesser than the percentage decrease in
price, therefore Burberry luxury is an inelastic demand.
Different from any other categories, Burberry usually
doesn’t face any problem of shortage. First of all there are many substitutions
in market that is selling same kind of goods with them. Such as Louis Vuitton
and Prada are also selling fashion clothes, accessories and perfumes. Besides
that, they might happy to see the shortage happens therefore they can raise the
price of goods to maximize their profit. And the shortage will give social an
opinion that Burberry luxuries are very hot and selling fast all the time. It
might increase the quantity demanded of Burberry luxuries.
Burberry also working hard on propagates their population.
They hire celebrity to promote their goods, such as advertisement, short video,
and so on. Next, they are having company celebration among the year, by
celebrating they had hit the new highs, broke last year’s record and others.
Beside that Burberry will also sponsor goods to charity as charity bazaar to
collect funds or donate an amount of their profit to those orphanages. Of
course they will organize a fashion show to let the world know their latest
products. These all things are spreading their name to the world to increase
their population. It is helpful to increase their demand and maximize their
profit.
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