Managing Innovation and Entrepreneurship in the Luxury Market

Cite this


Innovations in business are not often excepted properly because of numerous reasons. However, the innovations in the sphere of accessories and fashion are encouraged by the increased demand for originality and good taste. Hence, in order to define the success if the idea associated with accessories, finery, and clothes, a thorough market and business analysis will be required. The paper is aimed at reviewing the most important components of the business success such as industry analysis, grounding of materialism theory as well as social class analysis.

Industry Analysis

The global luxury market offers whales of services, however, luxury rent is not available for most people. Hence, the offered innovation will have to refill this gap. Considering the amount of luxury brands, it should be emphasized that the luxury items will never lose their popularity. This is explained by the fact that people will always wish to look elegantly and have refined accessories. This is explained by the materialism concept, in accordance to which people prefer the material representation of wealth instead of ethical and cultural values.

Luxury market is regarded as a steadily developing sphere of business activity; however, it is mainly oriented at sales and design innovation. All the other innovations, such as sales modifications and market analysis innovations are not associated with the necessary components of business development. In accordance with the researches by White and Griffiths (2010), the global market development of the luxury industry is rather intensive, as the sales volumes in 2008 were close to $ 430 billion, while in 2009, this parameter was close to $ 485 billion. These changes indicate the changes in consuming capabilities of the target audience, however, the specification of the market emphasizes that this parameter is closer to spending habits rather than consuming capabilities. The actual reason for growth rates decrease are stated by Hemphill and Suk (2009, p. 1147):

The markets are very jittery, and luxury stocks are taking the biggest hit, said Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris. Investors are nervous about Europe with its current economic problems, and there is some concern about Australia as well. Luxury makers have a lot of business in these markets. Europe’s major stock indexes fell for a third day on concern that efforts by Greece, Portugal and Spain to reduce their deficits will further hurt their economies and slow down the global economic recovery.

In spite of the forecasted decrease of luxury sales in 2011, the popularity of the top brands will not decrease, as the target audience of this fashion sector prefer brand name instead of quality or comfort. In general, this is explained by the social class concept, which claims that people are often treated in accordance to what they wear, while the quality or luxury of the clothes are defined in accordance with the recognizable trade mark. Hence, the brands that have already conquered their audience will not experienced sufficient losses. In accordance with the expected growth rate (Figure 1), the luxury industry in Australia will experience some difficulties in November 2010, however, these will be associated with the crisis of the luxury industry mainly. This crisis is explained by the expression concept, in accordance to which few companies are willing to manufacture branded accessories that will be available to a broad audience, hence, the target audience of these companies have to resort to fake brands, thus, making companies experience essential losses. On the other hand, the opportunity to rent the luxury accessories and clothes would help the consumers save money and have the refined clothes for the required period.

One of the key aspects of business performance is the five forces competitive analysis. Porter’s matrix should be focused on the following aspects:

  • Threat of new entrants
  • Intensity of competitive rivalry
  • Threat of substitute products
  • Bargaining power of consumers

These factors are analyzed in accordance with the traditional approaches of competitive analysis. Threats of new entrants may not be significant, as luxury industry is rather restricted one, and the luxury rent services segment is not too attractive. However, few entrants may influence the pricing policy essentially, thus, decreasing the incomes of the Bag and Image Company. The customers’ loyalty will not be changed as they will be looking for something that suits them, hence, the better choice – the higher is the customers’ loyalty.

The rivalry may be intensive only if competitors are able to implement reliable and effective innovations. The luxury rent segment is not developed properly, hence, there are numerous capabilities for innovations. The same may be stated of the threat of substitute products, as all the other substitute services are linked with inevitable purchasing of the required goods. The bargaining power will be analyzed in the market analysis chapter.

The luxury industry in Australia is subjected to the same development and growth rules as the global industry is. Moreover, the manufacturing networks and retail channels are closely linked with Australian market; consequently, it is difficult to separate the Australian sector of this industry for the proper analysis. Nevertheless, it should be stated that the Australian sector of the luxury industry is inevitably associated with the aspects of global industry development and growth processes.

In general, the key defining point for the target audience is the status symbol. Luxury goods may be attributed to specific statuses and divided into several groups in accordance with the status of their target audience. Consequently, this diversification is closely associated with the importance of creating the proper structuring of the target audience (Crane, 2007). In spite of the fact that this concept is not used widely, it may be an essential addition to the materialism concept, self concept, and expression concept.

Market Analysis

As for the potential growth capacities as the important market analysis aspect, it should be stated that the growth depends mainly on the size of the target audience. In accordance with the reseaearch performed by Baum and Mezias (2009), the target audience of the entire luxury industry is up to a million people. This is the clear notification of the fact that the industry has not still used its entire development potential, as the actual size of the consumers’ basis is less then 30% of the target audience.

The expected population level in Melbourne is close to four million people. Luxury manufacturers have to focus on the two thirds of female populaiton, as in accordance with dempgraphic studies, such factors as age, income, employment status and personal attitude towards luxury are the most crucial for defining the target audience. However, less then a half of female populaiton have an opportunity to purchase luxury goods, while the rest would have an opportunity to rent the necessary items on-line or in corresponding shops.

In accordance with demographic studies, the age range of the target audience is 21 – 55. Females of this age range are mainly interested in purchasing or renting luxury accessories. The income level should be $ 3 000+ monthly for females had an opportunity to purchase these accessories, refineries and clothes withoiut resorting to fake brand names. (Chenciner, 2008) However, if rent opportunities are available, this level may be lowered essentially. As for the employment status, there are no precise limits, as up to 95% of females wish to have luxury goods independently on their employment. Location is the siginificant restricting factor, however, the properly aranged delivery service, as well as the on-line order form will make this factor totally insignificant within the borders of Melbourne.

As for the psychgraphic factors of the target audience, it should be emphasized that the analysis of this type is more complex, however, these factors are less important (Godley and Williams, 2009), as the psychographic image of the audience may be changed by the type and character of the promo campaign. Considering the fact that such aspects as attitude towards a brand name and the realized importance of using the good are the factors that are defined by personality, the statement by Godley and Williams (2009) is quite reasonable. The primary factors can not be influenced and changed by the manufacturer, hence there is a need to focus in the stated factors.

Marketing Mix

Considering the importance of the place, it should be emphasized that the actual necessity to find the proper place for the luxury rental store is defined by the demographic parameters of the target audience. Considering the experience of luxury goods stores, they are mainly located in business centers districts and large stores with high population density. (Busser and Sadoi, 2003)

Te key competitors of “Bag and Image” prefer opening stores as close to the target audience as possible. These are:

  • Melbourne, Central Business District
  • Russel st, as the most busy street of Melbourne CBD
  • Large stores and trade centers
  • Close to places where the city bohema prefer gathering
  • Close to places where the representatives of the target audience work

Hence, the actual importance of the place may be also defined by the selling plans and marketing performance of any company, nevertheless, physical stores can not be located in the houses of the target audience, while on-line stores and services have such an opportunity.


The actual importance of innovations in luxury industry is closely linked with the necessity to widen the target audience independently on the social status, income levels and geographic location of the audience. The most important factor is the willingness of the audience to look better and having the luxury goods, refineries and accessories at least for show.


Baum, J. A., & Mezias, S. J. 2009. Localized Competition in the Australian Luxury Industry. Administrative Science Quarterly, 37(4), 580.

Busser, R. & Sadoi, Y. (Eds.). 2003. Production Networks in Asia and Australia: Skill Formation in the Fashion Industry. Sydney: Routledge Curzon.

Chenciner, R. 2008. Madder Red: A History of Luxury and Trade : Plant Dyes and Pigments in World Commerce and Art. Richmond, England: Curzon.

Crane, D. 2007. Fashion Design and Social Change: Women Designers and Stylistic Innovation. Journal of American Culture, 22(1), 61

Godley, A., & Williams, B. 2009. Democratizing Luxury and the Contentious “invention of the Technological Chicken”. Business History Review, 83(2), 267.

Hemphill, C. S., & Suk, J. 2009. The Law, Culture and Economics of Fashion. Stanford Law Review, 61(5), 1147.

White, N. & Griffiths, I. (Eds.). 2010. The Fashion Business : Theory, Practice, Image /. Oxford: Berg.


Expected Luxury Industry growth rates
Figure 1: Expected Luxury Industry growth rates

Cite this paper

Select style


BusinessEssay. (2022, December 3). Managing Innovation and Entrepreneurship in the Luxury Market. Retrieved from


BusinessEssay. (2022, December 3). Managing Innovation and Entrepreneurship in the Luxury Market.

Work Cited

"Managing Innovation and Entrepreneurship in the Luxury Market." BusinessEssay, 3 Dec. 2022,


BusinessEssay. (2022) 'Managing Innovation and Entrepreneurship in the Luxury Market'. 3 December.


BusinessEssay. 2022. "Managing Innovation and Entrepreneurship in the Luxury Market." December 3, 2022.

1. BusinessEssay. "Managing Innovation and Entrepreneurship in the Luxury Market." December 3, 2022.


BusinessEssay. "Managing Innovation and Entrepreneurship in the Luxury Market." December 3, 2022.