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Louis Vuitton in China - Luxury Transcends Borders
 

Louis Vuitton in China - Luxury Transcends Borders

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  • When Luxury Transcend Borders-Louis Vuitton In China
  • Louis Vuitton has been around for a 158 years. What started off as a little corner street shop on Rue Neuve des Capucines in Paris, France, is now a major part of a multinational corporation with its brand currently valued at $25.9 billion (http://alturl.com/ox89w). The 158 year old  multinational corporation is the world famous Moet Hennessy Louis Vuitton SA commonly known as LVMH recorded $13 billion in revenue last year. It is now the worlds largest conglomerate of luxury products, and it has acquired many international brands like Louis Vuitton, Marc Jacobs, Fendi, Moet & Chandon and Hennessy. More interestingly, Asia (excluding Japan) accounts for 28% of LVMH’s revenue (http://alturl.com/irt8p). This presents us with the following question, why and how did Louis Vuitton enter the Chinese market?
  • China has +++ growthWealth is concentrated in the large east coast citiesHuge market already exploited by Louis Vuitton bound to grow even more.
  • Confucianism is deeply embedded into the Chinese culture, it underlines luxury as unnecessary and superficial.With the opening of the markets in China, Chinese consumer are now thirsty for foreign luxury goods but they have little knowledge of themThis is an opportunity for Louis Vuitton to educate the market and sell their goods at a premium
  • Cultural revolution of Mao Ze Dong: single class, mass culture devoted to the partyDeng Xiao Ping opens up China to market economy = A need for wealthy Chinese to differentiate themselves from the lower tiers. Very wealthy uneducated market base that will buy foreign products for a higher price for the sole reason that its expensive
  • => Although personal use accounts for a good proportion of sales in the Chinese luxury market, more than half of the luxury goods bought in china are bought as gifts since gift-giving plays an important role in the Chinese culture, especially when the gift is an expensive luxury product.=> Louis Vuitton can leverage that trend
  • No difference between the exteriorLook pretty much the same.
  • Even inside, look very similar.
  • Negligible or limitedSame product line all over the world2 people in this classroom probably own items which have the same monogram print.Same prices all over the world except for taxes and import dutiesPrint hasn’t changed in 100 years

Louis Vuitton in China - Luxury Transcends Borders Louis Vuitton in China - Luxury Transcends Borders Presentation Transcript

  • Louis Vuitton In China Luxury Transcends Borders
  • Sameer Mathur BuddingMarkets.com Asst. Professor (Marketing) 2009 – 2013 Ph.D. and M.S. (Marketing) 2003 – 2009 Indian Institute of Management, Lucknow Marketing Professor 2013 –
  • Outline 1. Louis Vuitton Background 2. Business Model 3. Chinese Market  CAGE Framework Comparison with America/Europe  Consumer Behavior of Wealthy Chinese 4. Louis Vuitton’s China Strategy  Little to No Adaptation  Cultural Arbitrage
  • 28% of Revenue is from Asia
  • Business Model Value Proposition: • Luxurious handbags and briefcases • Leather goods, shoes, watches, Je welries • Worldwide brand recognition
  • Louis Vuitton Handbags
  • Target Consumers Market Participation: Target Consumers •Fashion-Conscious •Brand-Sensitive •Luxury-Craving •Wealthy
  • Business Model Market Participation: Promotions • Celebrity endorsement
  • Print Ad featuring Uma Thurman
  • Business Model Value Chain infrastructure: • Presence & Broad access to markets • 150 years of prestige • Added new product lines, but preserved the main focus • Counterfeiting prevention measures
  • Production Value Chain infrastructure: • Everything In-House • No off-shoring or outsourcing
  • Differences between China and Europe/ North America Europe / North America • Acquainted with high fashion. • Free and open markets, very easy to open store. • Easy to expand, smaller country with better communication and transportation. • Highly developed economy, with high per capita income but low economic growth. China • Want to get accustomed to European Styles • More difficult to open stores, government influence. • Big country, tough to expand in all parts, many different weather conditions. • Per capita GDP and economic growth not an issue due to target market of rich consumers.
  • China vs. Europe/ America: Cultural Distance • Minimal when considering luxury goods • Since China opened to foreign markets, there has been a thirst for foreign fashion • Increase in overseas travel has exposed wealthy Chinese to Western fashion and luxury brands
  • China vs. Europe/ America: Administrative Distance • Lack of effective, efficient enforcement against counterfeit goods. • Major Challenge: dealing with the local production of seemingly identical and cheaper counterfeit Louis Vuitton products. • Serious loss in Sales and damage to Brand Equity • No easy solution to this challenge
  • China vs. Europe/ America: Geographic Distance • Minimal, since modern transportation has made the physical distance between the two continents a small obstacle • Luxury brands offer the advantage of having a low weight to value ratio compared to other exported goods
  • China vs. Europe/ America: Economic Distance • China has an expanding niche of wealthy consumers located in the top tier of the purchasing power parity pyramid. • the number of wealthy Chinese has been multiplying each year • Naïve, less relevant: China’s GDP is $4,300 while EU’s GDP is $35,000
  • Wealthy Chinese China has +++ growth Wealth is concentrated in the large east coast cities
  • Wealthy Chinese Consumers: Limited Knowledge of Luxury A market that has limited knowledge of luxury and that is ready to pay a premium for luxury branded products
  • Wealthy Chinese Consumers: Desire for Social Differentiation Luxury goods in China act as an intermediary for social differentiation
  • Chinese Tradition: Gift Giving A historic tradition of gift-giving
  • ~Identical Exterior => No Adaptation Louis Vuitton, Beijing Louis Vuitton, NYC
  • ~Identical Interior => No Adaptation Louis Vuitton, Beijing Louis Vuitton, NYC
  • Product Adaptation • Limited to NO product Adaptation • Almost the Same Products Worldwide
  • Arbitrage • Cultural Arbitrage Wealthy Chinese Value Products made in China less than Products made in Europe
  • Summary 1. Louis Vuitton Background 2. Business Model 3. Chinese Market  CAGE Framework Comparison with America/Europe  Consumer Behavior of Wealthy Chinese 4. Louis Vuitton’s China Strategy  Little to No Adaptation  Cultural Arbitrage
  • Over 600,000 views from more than 100 countries http://www.BuddingMarkets.com/ http://www.facebook.com/BuddingMarkets/ Sameer Mathur BuddingMarkets .com