LOUIS VUITTON enter CHINESE MARKET Essay

This expansion demonstrates how the luxury industry is now run by massive corporations whose focus is only on growth, visibility, brand awareness, advertising, and most importantly, PROFITS! With growth and expansion, has come a decrease in quality and rarity. The luxury garments produced are mostly not handmade but are even outsourced to large factories in places such as China and Turkey. Also, to meet quarterly turnover projections, “designers churn(ed) out increasingly trendy collections of clothes, handbags, and shoes.” (Thomas, Pg. 246) With hundreds of new stores around the globe the surplus of designer labeled merchandise is immense hence, the proliferation of outlet malls.

For years, Louis Vuitton enjoyed high profit margins from the luxury market in Japan until other competitors such as Prada and Gucci entered the market. Counterfeiting also became a threat to the firm’s brand by satisfying consumer demand at lower prices. Other external global environmental problems included highly priced products, limited availability in stores only, and a heavy dependency on the Japanese market (Pearce & Robinson, 2013, p. 14-18). Moreover, “the after-shocks of the global recession were a threat to Louis Vuitton’s luxury business in Japan”, and Japanese women became less interested in the brand’s products (Pearce & Robinson, 2013, p. 14-18). Alternatively, Louis Vuitton could “reinvent itself and regain what used to be its well-attested

Meanwhile, some consumers were also attracted by the counterfeit products, which have the same design and considerable quality. The situation of LV in Japan seems to be fierce, however, with effective solutions, LV can also seize the opportunity to sustain profitability in Japanese market rather than just survive. As it is stated in the case that Japanese consumers had been holding the desire for inexpensive luxury products from Louis Vuitton. Therefore, to solve this problem and attract more customers, LV should strive to make “inexpensive” products by increasing the value of products, lowering the costs and prices, and finally creating high value for the consumers. As the scandal of counterfeit sold on the websites in 2008 led to a decline in the sales of Louis Vuitton products, it can be viewed as a valued opportunity for Louis Vuitton to establish its own business online since it can both add selling channels and empower the company to fight with counterfeiting.

The consumption of luxury goods in China is mounting sharply. Not only those born to elite families, but also many common people are greedy for luxury brands (China, a Booming

The following case analysis will assess Coach Inc. and its strategy in the accessible luxury brand goods market. The coach strategy focuses on its luxury rivals in matching key quality styles while offering it at a cheaper price. The company offers most products at a 50% off discount price less than other brands which gives them a competitive advantage pertaining to its customer base. Coach marketed its products to middle –income consumers desiring taste of luxury, but also affluent and wealthy consumers with means to spend considerably more on a handbag (Gamble, 2012. P.C-73) .The Company also has several other strategies such as to increase global distribution, improve same store sales productivity and continue its multi-channel business model which includes indirect whole sales to third party retailers but also focuses on direct consumer sales. Coach has done well in the luxury goods industry but the companies profit margin is still below the levels achieved prior to the onset of a slowing economy in 2007 ( Gamble, 2012. P.C-73.The Company had experienced a decline in sales as they are unsure if the company recent growth could remain constant and maintain their competitive advantage with other successful luxury lines Michael Kors, Salvatore Ferragamo, Prada and Dolce & Gabbana.

The author who inspired the topic of this thesis is Dana Thomas. As a fashion writer, Dana Thomas, has analyzed the changes in luxury fashion business. Thomas has been writing about fashion for the past twenty-five years in various journals such as Newsweek, The New York Times Magazine, New Yorker, Harper’s Bazaar, Vogue, Financial Times, and more. Dana Thomas’ two books, Deluxe and Gods and Kings, are the inspiration for this thesis. Deluxe: How Luxury Lost Its Lustre goes into great detail the secrets of the leading luxury industry brands, namely Prada, Gucci and Burberry, to showcase the “New Luxury” of today and how “luxury lost its luster” by featuring the manufacturing and logistical processes. Thomas exposes that many luxury brands use the same Asian factories that mass-market retailers employ, which raises questions concerning quality and craftsmanship for luxury brands.

An increasing economic interdependence of national economies across the world experiences a rapid cross-border movement of goods, service, technology and capital. Luxury goods industry, serve as one of the most competitive industry, emerging and developing rapidly all the time. To a great extent, globalization promotes the development of luxury goods industry significantly in spite of the big shock hit by several times of economic crisis.

When consumers are buying makeup they want to know the value of the product. A consumer knows that when buying a product from a drugstore it is cheaper so this way all the products are each under twenty dollars. However , they might be cheaper but the fragrance might not always smell the best. Not only is the fragrance not the best, but the packaging is not always pretty. On the contrary, consumers also know that buying from a higher end brand and store the prices are dramatically higher but know it is worth it. Unlike drugstore makeup, the fragrance and packaging smell and look elegant. For people who love makeup, most agree that paying for “luxury beauty items” are willing to pay extra money because they know it’ll be worth it .Due to this obvious fact, most of the consumers do not care for how much it is as long as they know the value of the product is very high in satisfaction, they will invest in the product.

This behavior brings competitive advantages to the European luxury brands. Moreover, customers in different countries have different purchase behaviors. For instance, some countries’ customers are willing to move away from common recognized brand, because they want to purchase more exclusive products. Furthermore, because of the increasing speed of globalization, people are more likely willing to travel between different countries. These travelers will buy luxury good during their trips. In fact, Chinese tourists contributed over one third of sales in Europe. The luxury goods industry should notice to adjust the actual demand between local people and tourists in Europe

With China emerging as a global power in business within the last decade, knowing about doing business in China has become more important than ever. There are both many advantanges and challenges with doing business in China in this modern era, and understanding both sides of this coin is the key to being successful in China. Some aspects to keep in mind include the cultural barrier, the price of the work force in China compared to the United States, and have the “made in China” brand be accepted back in the United States.

China is becoming more westernised, particularly the ‘cosmopolitan’ city of Shanghai, where demand for Western products is increasing rapidly as disposable income rises in line with China’s strong economic growth. Michel’s wanted to establish a foothold in the market at an early stage to demonstrate a long-term commitment, which has been identified as essential to compete successfully in the Shanghai market (per Tim Harcourt, Austrade Chief Economist).

Louis Vuitton Moet Hennessy, a luxury goods provider is looking to expand their brand dominance in Asia. In order to expand successfully LVMH must evaluate challenges that may arise and get in the way of their successful expansion. In the Asian market, LVMH must deal with political and cultural uncertainties, the threat of counterfeit products, and the increased cost of products in Asia compared to France.

Risk is a core reason why other luxury goods companies, with an eye on a Hong Kong listing, have hesitated. Prada was bold in its listing strategy, and that has to be one of the biggest lessons. It is one thing to identify emerging Asia – and China in particular – as the sweet spot of luxury goods opportunity, it is another to act on it

LVMH’s brand portfolio is a catalogue of the finest things money can buy. Arnault said, “A Star brand is timeless, modern, fast growing and highly profitable.”[iii] LVMH has positioned its brands strongly in the luxury segment offering more than 50 different brands under their five core competencies. LVMH has been successful through all of their various brands in their portfolio giving them each their independence and creativity. “LVMH is well known for leaving much operational and marketing freedom to the various brands it owns.”[iv] “LVMH has done an excellent job of brand positioning, says Ben Cavender, senior analyst at China Market Research Group. It has succeeded in securing the particularly enviable position of gaining a following among the top percentage of China’s wealthy. As the financial crisis stretches on, LVMH customers in China still have money to spend.[v] “LVMH’s brand imaging, which relies heavily on pushing its European heritage, is so successful that it has benefited other brands by proxy, says Paul French, one of the founders of Access Asia, a group dedicated to tracking regional consumer and marketing trends. “Everyone hangs on the coattails of Louis Vuitton’s brand imaging in China.”[vi]

The last problem we highlighted concerns how to increase the number of customers in the mainland China market . First, we believe that the most relevant issue is a survey amongst customers on the Shanghai Tang brand perception and the 5 luxury brands in their top-of-mind, in order to analyze the competitors that the company has to face in the future.