Best Practice Branding in a Recession – Louis Vuitton


The recession is clobbering the luxury goods market, as falling incomes have curtailed customer spending especially in the near affluent segments.  According to Bain & Company, 2009 global industry sales are expected to fall by 10% to $225B.  Moreover, a number of venerable labels have either filed for bankruptcy (Escada and Christian Lacroix) or are considering bringing in partners (Prada Group). 

Tough times may not be a short term phenomena.  For the past 10 years, the key industry growth driver has been “aspirational” middle class customers, who make up 60% of the luxury market (according to Bernstein Research).  Worryingly, these customers’s attitudes and behaviors may be undergoing a paradigm shift. Bernard Arnault, chairman and CEO of LVMH (the largest luxury products conglomerate and Louis Vuitton’s parent) has said: “The word luxury suggests triviality and showing off, and the time for all of that is gone.”

However, one powerful brand is bucking industry declines and profitably increasing share.  In 2009, Louis Vuitton  has registered double-digit gains in every market while maintaining industry-leading profit margins of around 40-45%.  Indeed, Louis Vuitton has benefited from a traditional industry pattern that sees a flight to quality, established brands during difficult times. However, Louis Vuitton is pulling ahead because of their relentless focus on getting product, distribution, communication and pricing right.  For example:

Uncompromising Quality – Louis Vuitton has refused to cheapen its quality, production standards and materials for any of its products. Unlike many of its competitors, the company has avoided brand degradation by declining to license its brand to poor quality or unrelated products.

Savvy Marketing – Louis Vuitton has resisted the urge to move down market and compete with near-luxury brands like Coach in order to retain an air of exclusivity and premium price points. Furthermore, the company is also the only leather goods firm that never discounts its products, preferring instead to destroy obsolete inventory. Finally, Louis Vuitton has been very agile and sensitive with international expansion.  The firm is aggressively expanding into the lucrative Chinese market but with the same exacting standards that would befit a store in Milan or New York.

Operational Excellence – Louis Vuitton’s model of owning retail outlets has allowed it to maintain high standards and exert tight control over pricing, the in-store experience and inventory.  For example, the firm will quickly shift merchandise between stores to reflect changes in demand.  In addition, the company has adopted best in class production techniques (many from the car industry) to deliver process consistency, workforce flexibility and cost reduction.  

Continuous Innovation – To stay on the cutting edge of fashion with the right product mix, Louis Vuitton has invested substantially in design and creativity beyond its signature “Monogram” print. As well, the company has successfully launched a number of new and limited products in a variety of style and colors without cannibalizing its core leather bag franchise, introducing complexity or cheapening its image

Louis Vuitton’s story is a lesson to premium brands that to sustain success substance must accompany style.

For more information on our services or work, please visit www.quantaconsulting.com

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1 comment so far

  1. […] must stick to their knitting if they want to survive and prosper. Major global brands such as Louis Vuitton, Hermes and Mercedes have demonstrated that luxury brands can grow during recessions by maintaining an emphasis on core values like quality, exclusivity and image. Firms should be very […]


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