In economics, a luxury product is a commodity that is bought more expensively than in proportion to its production cost, so that expenses on the item become a greater percentage of income than ordinary consumption. It is the difference between what a person pays for a luxury article and what they could buy with the money they make. For example, the U.S. dollar is worth about seventy cents to each one-thousandth unit of the article’s price. That means that the articles people pay for have a markup of two or three times the article’s price. In today’s economy where most people have jobs and are responsible for their families, this markup is illegal.
Luxury goods can be made by anyone who can build them, which is why there are so many different luxury goods businesses around. This means that the supply is relatively constant and the number of suppliers is very low. Each business has to figure out a way to price their products so that it brings in enough profit to cover overhead, allow for inventory, rent, taxes and still allow for the product to be built. It also means that the margins are extremely small. The luxury goods market is also highly competitive which means that only the best and most skilled builders will survive.
There are several different types of luxury product categories. One of the most profitable, and therefore, most coveted, products in the luxury goods category are luxury automobiles. Cars have superior speed, superior gas mileage, superior design and superior engineering. Because they are so desirable, they command very high prices. Because of their value and the need for them, any new venture into the luxury automobile market should be backed with as much venture capital as possible, or else it will fail miserably.