Monday, February 4, 2013

LV Slows Down Expansion

Louis Vuitton, the world's biggest luxury brand in terms of sales, is planning to dampen its expansion worldwide and focus on high-end products to preserve its exclusive image, said Bernard Arnault, Chairman and CEO of parent LVMH.

The brand known for its LV-embossed handbags – which generates more than half of LVMH's operating profit – has been opening stores in the past decade in places as remote as Mongolia. It is now in 50 countries with more than 460 shops and yields more than 7 billion euros in annual sales.

Arnault said publicly for the first time that the brand's wide footprint risked making it too commonplace. Certainly the last thing LV wants is to be just another luxury brand!

Instead of opening new boutiques, he said, Louis Vuitton will expand existing ones, as well as offer customers a more personal relationship. It has even started offering customers made-to-order bags in exotic skins and created invitation-only spaces in its shops.

Analysts said Arnault's comments mean Louis Vuitton would probably not open shops for some time, a strategy that helped boost revenues in the past.

It is worth pointing out that LVMH Moët Hennessy Louis Vuitton, the world's leading luxury products group, recorded revenue of €28.1 billion in 2012, an increase of 19% compared to 2011. The Group owns more than 60 brands but it is heavily reliant on the high profit-margin Louis Vuitton, which accounted for 30 per cent of group sales last year, according to Mintel, the consumer research company. LVMH itself does not break out figures for Louis Vuitton from the rest of the fashion and leather goods division, which last year generated half of LVMH’s sales and profits – but the brand enjoyed double digit revenue growth and exceptional profitability in 2012. Also, according to Financial Times, Asia generated 35 per cent of group sales last year – making it the single largest contributor.

Creating luxury brands is a challenging marketing exercise. It requires heavy investment in marketing communications, excellent product/service quality, but above all these brands have to try to remain fashionable, which is notoriously difficult. So far, LV has got the formula right.

Manchester City and Liverpool draw 2-2 in an EPL game that embodies everything we love about football – non-stop action and great goals. But really, the Reds deserved to beat Man City but they were undermined by a Pepe Reina error in the 78th minute.

No comments: