Thursday, August 09, 2007

The rationale for Elegant Living

I don’t usually comment on company matters, but the launch of Elegant Living magazine and website by Global Sources next month is, in my humble opinion, more of an experiment than an extension of its brand value.

For those who are familiar with the business model of Global Sources, its foray into the consumer market may seem a little odd. However, the foray can be thought of as an inexpensive but real option that provided the B2B company with an opportunity to learn valuable lessons about diversification from a controlled failure.

But is the strategy questionable? Although the new venture is related to the company’s leading management magazine (Chief Executive China) and relied on many of its core competencies, such as publishing and events management, the Global Sources brand doesn’t square with the image of a high-end luxury goods magazine.

Still, the decision to launch Elegant Living must have been a no-brainer since it involves a fixed investment for an uncertain but potentially high return. Diversifying into the consumer market gave Global Sources a shot at entering the booming luxury goods industry which, according to research consultancy Mintel, will be worth $104 billion globally this year, up 7.5% from 2006. Even though experts say only 2% of the population in China can afford luxury goods, that’s 30 million people, or half the population in the United Kingdom. Analysts at Merrill Lynch even went as far as to suggest that China is set to account for 20% of the global luxury goods market by 2009.

Because diversifications are generally more likely to fail than succeed, Global Sources’ relatively small investment to launch Elegant Living is a wise decision that limited its risk.


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