Luxury item market Essay
The luxury product I will be trying to sell will be watches. The watch market is an affluent one with the Swatch group and Rolex dominating the market, however there is a higher market of watches which fall under super luxury category which is way beyond what my target market can afford. The price range of my watches are aimed at people who have spare income and would like to have a nice timepiece to add a bit of class to their attire. My company will be based in the UK and will source as much of my materials for the UK as much as possible. The company name is Craven Watch Specialist LTD.
I am going to use the SLEEPT analysis (Socio-Cultural, Ethical, Environmental, Legal, Political, Technological) to analysis the market that I will be entering to ensure I get the best possible start. I will be sourcing my watch straps and batteries for the UK for LBSLondon (www.lbslondon.co.uk) and my watch faces from a seller on the website Made-in-China (http://ininwatch.en.made-in-china.com/product/pbdmKiWJaQVz/China-Watch-Heads.html). I will be pricing my watches in the £2000 – £5000 as there will be many dfferent watches in my product list although I will eventually release more watches
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The first main issues that affects my company is the recession, the recession has hit the UK hard and has forced many people into re-evaluating their spending meaning that many people have decided to cut down on luxuries that they have been buying. According to Mintel (see infographic overview in the appendix) the watch and jewellery market shrunk by 1% between 2007 and 2009 but ‘Mintel forecasts that sales of watches and jewellery will increase by 8% between 2011 and 2016 to achieve a value of £4.6 billion (Clifford 2011)(see figure 3 of appendix to view forecast figures).
This means that entering a company in the market now is the best time, if Mintel are correct the market is on the rise a will see unprecedented sales figures and this in turn means that companies will be making more money which could create further jobs to meet the demand and this will also help towards the economic recovery of the UK. Unfortunately recently the BCC have lowered the predicted rate of growth for the UK meaning that the recession is not yet finished and people will still be struggling for the spare cash to be able to buy the luxuries they want. ‘The BCC expects UK GDP growth of 1.1% in 2011 (down from 1.3%) and 2.1% in 2012 (down from 2.2%), and consumer spending to fall by 1.0% in 2011 (double the previous forecast of a 0.5% fall). UK prospects will improve gradually, with GDP strengthening in 2012 and beyond, rising to 2.5% in 2013.
The forecast also predicts annual CPI inflation of 4.4% in 2011 (from 4.5%) and 3.0% in 2012 (from 2.7%)’ (BCC 2011). With these predicted figures it looks like the money issues of the UK will not be easing for a while meaning that the first few years of business may be stressful and possibly may even lead to a massive loss, but after this the UK economy will be on the up and this may lead to a massive spike in sales which will be used to recoup losses and used to develop more products that can be sold while the market is inflating.
Hopefully the economic downturn will not affect people’s reasons to buy luxury products as gifts as people still like to wear watches (see figure 1 of appendix). Mintel reports this accounts for around 50% of the UK market (Clifford 2011) and they also say that around 35% of the market would consider buying a watch for some else (see figure 2 of appendix), this means that the watch market is still healthy and can still be exploited to make a profit and make a big name for a company.
Another issue that may affect my business is the importation of goods into the UK. With importation laws constantly changing it may become an issue if the laws change to prevent my suppliers being able to send my products to me. If this happens I will be forced to look elsewhere for my product meaning that I will have to spend more time and effort to find a new supplier which could lead to me not being able to get my product out on time meaning that customers may decide to go elsewhere. Currently the laws for importing from china are quite lax meaning that I can bring my products in with relative ease however I will have to pay import tax and import duty to have them brought into the UK and they will then have to be checked over by revenue and customs to ensure they don’t not contain any illegal substances or materials and are fit to be sold in the UK.
If revenue and customs do not clear my products for sale in the UK I will again have to find a different supplier in turn again costing me money. When importing from a different country I must ensure that I don’t pick a supplier that has already been found guilty of any importation infringements as this will become a massive issue when trying to import the goods I have bought if this is the case revenue and customs may take the product under investigation and seize the product for a long time meaning that I cannot use the stock I have ordered meaning that I will not be able to proudce my product on time, this will have an adverse effect on my customer relations and may cause them to go to another company meaning that I will lose money and will have wasted a lot of time.
To get around the time scale that revenue and customs may take I can put my products in Inland Clearance Depots which means that I can have them stored in the UK and cleared to be used without having them checked over for a long time as I have willingly let my product be checked this means that my products will arrive on time and be ready to be turned into a watch to be sold immediately.
VAT increases are another issues that will affect my business, the UK government has recently put the VAT up from 17.5% to 20% meaning people are spending more on essential items than ever before which means that the luxury items they may want are even more expensive and further out of reach then before. With the VAT increase this has had a massive effect on the luxury product market as peploe no long have the money to spend and would rather spend the money on things they need instead of things they want. With the company being new in the market and not yet having a big name, the company may find it hard to entice new customers to buy the product if they are highly priced. With the start of the economic recession coming the an end this will be overcome able as people are starting to get more money to spend and will be willing to spend again as the economy is becoming stable again.
In conclusion to my report I believe that may company can make it into the market and the products I will be selling can become popular. With the market becoming stable and the growth that is predicted it is a great time to be entering a new company into the market. The company is feasible and can make a healthy profit if marketed and set up in the right way and areas.
BCC (2011). http://www.britishchambers.org.uk/zones/policy/press-releases_1/bcc-reduces-growth-forecasts-for-2011-and-2012-but-expects-uk-prospects-to-improve-gradually.html. BCC. CLIFFORD, Emma (2011). Watches_and_Jewellery_Retailing__Executive_Summary. Mintel. CLIFFORD, Emma (2011). Watches_and_Jewellery_Retailing__Infographic_Overview. Mintel. CLIFFORD, Emma (2011). Watches_and_Jewellery_Retailing__Issues_in_the_Market. Mintel. CLIFFORD, Emma (2011). Watches_and_Jewellery_Retailing_-_UK_-_September_2011(presentation). Mintel.