Business and finance

Louis Vuitton - A Luxury Mecca

When one thinks of Louis Vuitton, the first thing that comes to mind is an expensive luxury brand of supreme quality. LV is a true definition of aristocracy and elegance and kindles a utopian dream, a tantalising illusion. It is the best seller in the top range of luxury brands which produces high-quality, fashionable products. Established in France in 1854, Louis Vuitton started as a retailer for travelling bags. It opened the first store in Oxford Street, London. Louis Vuitton Moët Hennessy, usually abbreviated as LVMH, was the conglomerate founded in 1987 owing to a merger between Moët Hennessy and Louis Vuitton. Its headquarter is in Paris, France. Bernard Arnault, the President, owns 48% of LVMH. Today, the brand has a strong presence in categories like leather goods, handbags, ready-to-wear garments, jewellery and other accessories.  Since the very beginning, Louis Vuitton has attracted the support of customers who primarily belong to the upper echelons of society. The brand's mission is to represent the most refined qualities of the occidental art of living around the world. It firmly believes that fashion must follow the customer or die. Thus, it has stepped up its value proposition over time to provide a bespoke experience to its clientele, which adds to its dynamism. Louis Vuitton is one of the few fashion brands that started avant-garde fashion without compromising on traditional values. It won't be an exaggeration to say that LV is the holy grail of those seeking luxury.  The current rise of Louis Vuitton is not a coincidence but instead can be attributed to an effective business model. It has always tried to counter mass production with limited edition series. This means that not everyone will have the same bags, and customers, therefore, get to enjoy fantastic exclusivity.  Limited editions help to create an instant buzz. Because of the scarcity, waiting lists become longer and longer, and the products become even more desirable. The brand has worked in collaboration with various artists who have created their limited edition lines. This series helps the brand in connecting with new and younger audiences. Louis Vuitton uses the principle of special order, which allows the consumer to order merchandise tailored exactly for him and his preferences. LV maintains and controls its distribution and sales.  If it were to allow a large chain store, it undoubtedly would garner more sales in the short run. However, it would damage the brand image and its rarity due to it being easily available. Production efficiency is another crucial factor of LV's thriving business model. The production is completed through teamwork, and the employees are trained to be autonomous and multi-skilled so that the problems related to the product can be solved timely with their knowledge and experience. The whole production process is done in-house, including the manufacturing of raw material, which guarantees superior quality. This is not only rare in the industry, but it also requires a huge financial outlay. LV perpetuates the image of handmade quality. The brand is a true example of superior craftsmanship in an age of cheap mass production. The success of Louis Vuitton's business model can also be accredited to its first-mover advantage in Japan. Louis Vuitton entered Japan in 1977 and saw the Japanese economic boom. The company realised that Japanese consumers demonstrated a fascination with and passion for luxury.  The Japanese culture of expressing social status through luxury goods together with the beauty conscious women demanding quality products helped ignite the rage of luxury shopping in Japan. LV began to collaborate with Japanese designers and combined fashionable elements with its heritage to offer fine quality products. This helped nurture an addiction of the Japanese to luxury and enhanced brand loyalty to help sustain profitability. With the company strategies becoming immensely successful, LV became the industry mogul in the Japanese luxury market and acquired a 28% share in the nation's market. Louis Vuitton has successfully distinguished itself from other competitors by following a unique marketing strategy that is not utilised by most of its peer luxury brands. It has established a unique brand character that has created a high-standard barrier for others to compete. The LV monogram is high on recognition, and thus, people prefer to carry the monogrammed merchandise since it is associated with fame and reputation. This highlights the great importance that the brand attaches to a consumer's psychology. LV does not have a second line to sell products that have a lower cost than the mainline. It only sells high-priced products and ignores those consumers who cannot purchase the high-priced items in the mainline. Although this could be called a haughty attitude, there is a logical reason according to the theory 'Product-out or Lord's business', which means the company would produce the item in limited quantity to satiate the desire of the buyers for prestige.  The high price that the brand commands is not only justified by its superior quality but also by a high degree of exclusivity. While looking at LV history, one can see that not once in 166 years its prices were reduced. “Why LV is never on sales” is a frequently asked question. This is because the brand knows the adverse effects of price reduction. For instance, the customers would wait until the brand goes on sale, which would reduce its exclusivity. Thus, it fixes the price to stimulate customers' demand at once and prevents them from postponing their purchasing habits.  Louis Vuitton pursues excellence that goes far beyond the supreme quality of its products. It encompasses the layout and location of its stores. It opens these stores only in the most prime locations since it would make the customers feel proud while buying the products. Louis Vuitton shops are distinctive and unique, which offer an experience in itself. It has always rejected mass advertising. It accentuates publicity in newspapers and magazines that last longer than 15-30 seconds of normal television advertisements. It produces catalogues, which, unlike other free ones, carry a charge. These catalogues contain immense information and sell out completely, which is only possible due to Louis Vuitton's unique stature. LV provides its customers with the opportunity to have their damaged products repaired. This helps to develop trust and brand loyalty and sustains the strength of the brand. This strategy has rarely been found adopted by any other brand in the industry.  While the fashion industry is still experiencing the colossal ramifications of COVID-19, Louis Vuitton surprisingly has raised prices by a few percentage points over the last year.  The affordable mask, which is the new life-saving accessory, just got its extravagant counterpart, that is, the LV mask. Clearly, it is not for the masses but a luxury layer of pandemic protection added by the aristocrats. The fashion house announced Wuhan, a culturally rich Chinese city, as the first stop for its new global travelling exhibition. This shows the rise of China as the new luxury hub post COVID.  There has been an intriguing change in consumer behaviour in the Chinese markets post lockdown. Many wealthy Chinese consumers are switching their spending from international travel to luxury purchases. During the lockdown, their pent-up spending desires are now being unleashed, a concept that is popularly known as revenge shopping. LV has been able to weather the lockdown thanks to the ever-growing consumer appetite for dresses and monogrammed bags. It is interesting to note that not all brands can afford to raise prices in such times. The ability to charge a higher price during such a crisis is a manifestation of brand power.  Louis Vuitton was one of the first brands to reset and streamline its business model to face the challenges posed by the pandemic-led lockdown. Realising the troubles caused by the brick-and-mortar closures and tourism plunge, the brand turned its focus to the digital realm and reinvigorated its online presence. The brand undertook a 360-degree marketing and advertising campaign to remind the customers of the traditional and intrinsic value of its products. For its Spring 2021 collection, Louis Vuitton launched an animated film, followed by live touring runway shows. The brand took over 100 million impressions on its social media posts for the event. LV has begun a partnership with a video game company producing a collection of outfits inspired by one of the company's online games to instil a desire of developing unique virtual personas in the minds of the young audience.  The biggest threat that Louis Vuitton faces today is counterfeiting. This new epidemic for the brand has diluted the brand essence and its market share. LV can overcome this menace by making its supply chain transparent and monitoring the movement of its products right from manufacturing to the promotion and beyond. Educating the consumers to recognise the difference between legitimate products and fakes by providing a visual guide will also help curb counterfeiting.  The brand now needs to channelise its energies in new directions by expanding into kids clothing or household paraphernalia, where it can take advantage of its pre-established image of superior craftsmanship and command higher margins. It can increase its market size by either investing in emerging wealthy markets like South America and the Indian subcontinent.  LV needs to make itself more attractive to the millennials and generation z by incubating innovative marketing and branding strategies. The brand needs to recalibrate its operations by going green, which would serve as a hedge against rising costs and contribute to sustainability. It needs to show a sense of responsibility and empathy in this hour of crisis for the consumers to embrace it. Revamping the brand image and retaining an insatiable desire for innovation is required to ultimately remind the public that brands like H&M and Zara do not have the elegance and class which Louis Vuitton commands and how it feels a class apart to own a genuine LV product.  -Abhinav Gupta Abhinav Gupta is a first year Bachelor of Commerce (Honours) student in Shaheed Bhagat Singh College, Delhi University. Inquisitive by nature, he loves to explore and learn new things.

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