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Thinking About Luxury

If you can only sell 100 products in a year, look at the difference the price makes:

100 products at $2 each = $200
100 products at $20 each = $2,000
100 products at $200 each = $20,000
100 products at $2,000 each = $200,000
100 products at $20,000 each = $2,000,000
100 products at $200,000 each = $20,000,000
100 products at $2,000,000 each = $200,000,000
100 products at $20,000,000 each = $2,000,000,000
100 products at $200,000,000 each = $20,000,000,000
100 products at $2,000,000,000 each = $200,000,000,000

You can sell 100 pieces of candy and make some pocket change, or sell 100 fighter jets and bring in hundreds of billions of dollars. The point is at different prices, you make different money.

When I used to own a rave company called HouseOfRave in high school, I was selling glow sticks online at $1.65/piece:

My bulk cost for glow sticks was $0.75/each, and I would sell them for $1.65/each, giving me a gross profit of $0.90 per glow stick:

So even if I sell 10,000 of these glow sticks (which is a lot), I would only make $9,000. Also if I sell LOTS of glow sticks at one time, I’d have to give bulk discounts which means even less profit 🙁

This means I was having to do very high volumes of orders, for relatively little profit.

HOWEVER…..when I began selling disco balls (and became one of the top sellers of disco balls online) I would get a super high margin on them!

My cost was $45/each and I was selling them at $105.95, so my gross profit was $60.95/each!

So if I sold around 150 of these disco balls, I’d make far more profit than selling glow sticks!

This was beneficial because:

  • I’d have to deal with less orders.
  • Margins were high, so providing extra love and support for disco ball buyers was easy (vs a person sending me $1.80 in profit on a glow stick order).
  • I wasn’t competing to sell an easily-available product like glow sticks.
  • The customers who order just 2 glow sticks would often cause the most hassle, whereas people buying 10 disco balls at once were often the easiest.

This was my first taste of selling stuff for a high margin to a wealthier crowd. I started to focus HouseOfRave on selling these high margin items to spend-happy wedding planners and corporate parties rather than poor 16 year old rave kids. You can see why I would prefer to focus on disco balls over glow sticks:

Glow Sticks VS Disco Balls Profit

So instead of handling a massive amount of orders to make the same money, I would only have to make a few.

 

There’s been this enormous attraction for people to sell luxury items. And it’s a very attractive pitch.

If you sell products/services for $10,000/each or more, then you can bring in one million dollars with just 100 sales.

It’s a tempting offer.

This is a Birkin Bag. It’s just a purse:

 

But look at the prices and these Birkin bags START around $13,000+ and go up!

Birkin Bags Are Super Expensive

 

This is a purse that looks like a Birkin Bag. It cost only $69 (and you can barely tell the difference):

 

So why does one bag get $15,950…
…While the other gets $69.99?
Birkin Bags Real Versus Fake

We are now entering the world of Luxury Marketing.

This is how you get a far higher price for a similar product.

If you view the bag on it’s technical merits, the expensive Birkin Bag is pretty much the same thing as the cheap knockoff:

Viewed simply as a purse it’s only worth $69.99:

birkin-bag-fake-knockoff

 

 

However if you view a Birkin Bag as a piece of art, it’s easier to justify the $15,950 price:

birkin-bag-expensive-art

 

 

Look how Birkin Bags are marketed: https://www.hermes.com/us/en/story/106191-birkin/

They are not simply selling a simple purse.
They are selling an exclusive piece of art.
They are selling the concept not the product.

 

– Exclusivity –
Very few people can have these.

– Desire to Belong –
When you own a Birkin Bag you’re part of an elite club.

– Desire to Collect –
This is an item that often appreciates in value.

– Exclusivity, Rareness, Uniqueness –
Self explanatory.

If they were selling the Birkin Bag on its merits as just a bag, they would only be charging a few hundred dollars at most.

However, since this is positioned as a unique piece of art, and that it elevates your status, it can be sold for 100X more.

 

 

These are many “features” that allow businesses to charge more money:

  • Rarity: Only a few will be made, like small batch whiskey.
  • Organic: It costs more money to produce and is better for you.
  • Gluten Free: It costs more money to use gluten substitutes.
  • Exclusivity: If an old product is discontinued. Like classic cars.
  • Handmade: Harder and longer to make things by hand.
  • Fame: If the person/thing is famous and well known.
  • Security: If you provide services that need to be protected. Like a bank.
  • Art: If you claim something is “art” there’s technically no price ceiling for it.
  • Punctuality: If it always delivers on time.
  • Speed: If your product is faster than others.
  • High Quality: There’s always a market for high quality. Like Ikea vs West Elm.
  • More Features: If your product can do more things that are useful.
  • Less Features: Simplifying a product for the user can add value too. Like Apple.
  • Trust: If your product/company are more trustworthy than others.
  • Talent: Some services just have better people.
  • Brand Recognition: If your product has cache. Like Gucci or Louis Vuitton.
  • History: If there is some historical value to the product.
  • Just Charging More: Sometimes you can simply just charge more to appear luxurious.
  • Convenience: Just being in the right place at the right time. Like an airport store.
  • Service: Some products require time-sensitive service. Like web hosting.
  • Monopoly: If you’re the only game in town you can keep prices high.

You can combine many of these features together to create a “Premium” product for the luxury market.

 

 

Obviously stuff like expensive handbags are “luxury” items, but here’s some examples of non-traditional luxuries:

 

 

 

 

As you can see by entering the “Luxury Market” you can often boost the price of a product.

I’ll leave you with a list of things you can add to a product to boost it’s value. These are “features” that allow a business to charge more money:

 

 

Hope this helps you think about your product in a different way!
Sincerely,
Neville Medhora – Ballin Out In Luxury
Rags to riches story archetype

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