The market for the luxury-goods industry is on the decline. Recent reports show that a higher unemployment rate, coupled with consumer fears, has decreased the amount of money the average household spends on both essential and nonessential items, but espe

The given argument states that the luxury goods market will be the first to decrease in the present economic climate, necessitating that luxury retailers instead shift their focus to lower-priced markets. This argument as currently given relies on crucial assumptions that, if proven incorrect, would damage the soundness of the argument. Primarily, it must be shown that a lower average household budget devoted to luxury goods will indeed lead to economic repercussions for the luxury goods retailers, and moreover that by shifting their focus, luxury retailers can fare better in the current economic climate.

First, the argument assumes that the luxury goods markets find their greatest dependence on average households, when in fact they may cater moreso to luxury classes that can afford these items. The average American household has little need for goods such as Rolls Royce cars. Indeed, considering the average metric of Rolls Royce cars purchased per household over a fifty-year time period gives very little indication about the economic upturns and downturns spanning this era. This is because the vast majority of Rolls Royce cars are purchased by the top 1% of the upper class in the U.S., a class which is affected the least by economic downturns due commonly to the spread and safety netting of their wealth. Hence, the Donald Trumps and Jeff Bezos’s of the world should not adjust their purchases of Rolls Royce cars in response to economic slumps that primarily affect the middle and lower classes. As a result, the number of Rolls Royce cars purchased can remain approximately the same throughout various economic climates, even if the average American household is less likely to purchase a Rolls Royce during a recession. Consequently, we observe that even if the average household spends less money on luxury goods, this does not necessarily have a bearing on the total luxury goods spent, which is a metric that is better studied by measuring the spending habits of the wealthy class.

In addition, the argument does not take the population growth into account: even if the average household is spending less on nonessential items, a high growth rate in population could mean that a higher total amount of money is being spent on luxury items even if each household spends less. The population of the U.S. has been not only growing, but accelerating in recent years. It is also not clear how great the magnitude is in decreasing funds spent on luxury goods by the average household. If the average amount spent by household on luxury goods only decreases slightly, and the population growth is sufficiently large, then the total amount spent on luxury goods (equal to the number of households multiplied by the average amount spent on luxury goods) can actually be increasing. If this were true, then the luxury goods retailers would have no reason to fear the decrease in average household spending on luxury goods, provided that the total income received by the retailers is remaining constant or increasing. Hence, additional information in the form of the population adjustment is needed in order to understand just how drastic the economic situation is for luxury goods retailers.

Finally, the argument assumes that by refocusing their attention to lower-priced markets, luxury retailers can better weather the inclement economic climate, an assumption that may in fact be proven incorrect. In general, the process of switching a company’s focus from one retail sector to another can in fact require a tremendous cost in terms of money and capital. For instance, if the Rolls Royce company instead switches to selling family-sized minivans, considered an essential good to a number of middle class families, the company will need to invest in new advertising, new structures and facilities to sell a potentially higher quantity of cheaper cars, and will need new expertise in order to attract customers from an entirely different class of people. The costs involved in making this switch may simply not be worth the cost of momentarily weathering through the current economic hardship, even if it is costly to the luxury retailers. In particular, it is no guarantee that the current economic climate will endure for a sustained period of time, making it more risky to switch industry focus just to compensate for a momentary economic plight. Hence, more information must be known as to the status of the economy and whether the switch in retail focus would really be worth the costs associated with it, in order to determine whether the argument is valid.

Altogether, we have shown how the given argument falls short on multiple levels that require additional support. While the given research supports the idea that less money is spent by average households on luxury goods, this does not necessarily imply that less money is spent in total on luxury goods. Moreover, the argument makes a hasty recommendation for the luxury industry to follow which neglects the associated costs, and in fact may be more detrimental in the long run. Additional research is therefore necessary to support the given argument.