Editor’s note: This article was first published in August 2010, during Spain’s economic crisis; the prices quoted, from €4.50 set menus to €12,500 designer dresses, and the description of restaurants and nightlife reflect that time.
Perhaps we sometimes get it wrong when it comes to positioning a business. Most businesses are aimed at the everyday consumer, which has some drawbacks: the pressure to cut the margin on a product prevails, and that damages the business’s profitability. We shouldn’t forget that there is another kind of customer, one who isn’t looking for deals or discounts but for exclusivity, glamour and distinction. This kind of customer is the VIP consumer.
According to official sources, the number of people with more than a million euros in their bank account has not fallen; on the contrary, it has risen. While the middle class has become poorer as a result of the crisis, the upper class has become even richer, so it would be a good idea not to forget this segment when thinking about a business.
Clothing shops
While most clothing shops need to run offers such as two-for-one or 30% discounts, cutting into their profitability, shops catering to an exclusive market have no trouble selling a pair of shoes for €900 or designer dresses for €12,500.
Pet services
Obviously, someone struggling to pay their mortgage is not going to take their dog for a massage or to the grooming parlour, yet in the VIP market these are highly sought-after services.
Restaurants
Restaurants are empty even when offering set menus at €4.50 per person, not to mention price cuts of more than 40% on the à la carte menu. While bills of more than €100 have practically disappeared at traditional restaurants, at luxury restaurants a typical bill is €1,400, and you sometimes have to book a week in advance.
See also: New profitable businesses in the wellness industry
Coffee shops
Coffee is one of the products with the highest profit margins. You could say that a kilo of coffee yields a return of 900%. Exclusive coffee brands and speciality aromatic coffees, sold at a good price, would yield a return of 2,500%.
Nightclubs
I live in an area where the crisis has hit this part of the entertainment sector. Botellón (groups drinking in the street) is common at weekends because of the price of drinks in pubs and nightclubs, where you now often see offers such as “Buy one drink, get the second free” or “Entry €3 with a free drink”. In the end, the nightclub that does best is the only one that doesn’t offer discounts. It still charges €10 at the door and is always at full capacity. If you go there, you know you’ll find a somewhat more VIP crowd than elsewhere, so it has a well-earned reputation.
When you’re thinking about a business, analyse how well off the people in your city are and how many places specialise in luxuries for a select clientele, because building a reputation with this kind of customer can secure us one of the most profitable businesses there is.
These businesses aren’t profitable everywhere. Just as you need to do market research before buying a franchise, the same applies here. These businesses are designed for big cities, or else for attracting this kind of customer to where you live by offering a different, exclusive service.
It’s also true that a business aimed at this kind of customer can sometimes make it easier to obtain financing, if we know how to fit it properly into a business plan.
Further reading
- Business opportunities in times of crisis
- A spa as a highly profitable business
- Advertising sales representative as a business
- How to start a business with no money
- The advantages of starting a business in a crisis
Featured image: daveynin, CC BY 2.0, via Wikimedia Commons.
