Louis Vuitton Case Study Essay
Louis Vuitton(LV) was est. in 1854 in France and is known as one of the oldest French luxury fashion houses. The brand became famous for its exclusive leather bags and trunks. Over the years the LV line expanded from leather goods to fashion, selective retailing; wines & spirits; perfumes & cosmetics; watches & jewellery making the brand one of the most luxurious brands worldwide. The LV brand is most recognizable for its logo, quality, uniqueness and price.
It resonates a sense of prestige, quality and longevity in the minds of the consumer and in the fashion world. Previously tailored to the more affluent social strata, LV is now tapping into a more youthful middle class demographic by setting new trends in global high fashion. The core of the case is about the restructuring of the LV brand in the Japanese market after the economic downturn since 2002 and the increase in competition. The Japanese Market is known as the ‘Capital of Luxury’, it is the leading market for Louis Vuitton products.
Over 20 million Japanese women currently owns a signature LV bag and each year five million units of the class monogrammed bags are sold. The Japanese market is known for having a high demand for fashion and it is the source for new trends and creative ideas. However, because of the decline in the economy and numerous competitors surfacing in the Japanese market sales for the LV brand have significantly declined. Therefore, the LV brand needs to restructure itself in the Japanese market to ensure future profits.
There are a few major hiccups the Louis Vuitton company faced in Japan. A major issue it encountered was market and brand dilution. As it ventured into product line expansion Louis Vuitton was challenged with upholding the prestige, exclusivity and quality its name epitomised, and growing its market share. A clear example of this problem was the repetition the ‘Limited Edition’ products which caused confusion in people’s minds as well as damage to the brand name. Another issue was that of the ‘falsification’ of the brand.
The well know counterfeiting ordeal with the two Japanese girls selling fake Louis Vuitton products , as well as the counterfeits coming into Japan from South Korea, created a culture for the population to use these on a daily basis and save their authentic products for special occasions. This caused the brand to become diluted as people could obtain status without the real Louis Vuitton product. The company now has to ‘share’ the market with these products. The Global Economy faced a slowdown as a result of the September 11th terrorist attacks.
The direct consequence of this was a decrease in sales in duty free zones in international airports and prestigious luxury destinations. Another issue revealed in the case was the issue of whether or not Louis Vuitton reached its growth potential. The company relied heavily on the Japanese economy for approximately 20% of its revenue. As the market is becoming saturated (competitive pressure), coupled with the changing mind set of the Japanese women away from Louis Vuitton’s products, this can pose a real threat to its survival in the economy.
Louis Vuitton’s top designer, Marc Jacobs, may leave the company soon. This can pose a real problem to the company as customers who are loyal to him may veer away from the Louis Vuitton brand and follow his personal brand. The company can also suffer from a loss in creative direction. In essence, the brand can lose that personal meaning to its key loyalists. Louis Vuitton’s main objective is how it can reinvent itself and regain what used to be its well attested fame in Japan.
This includes targeting a younger segment of the market, market growth and offering new product lines. There are many possible courses of action that can be taken as discussed in the case. The first option is to segment the market to include a younger population of women. This can be seen through the rental of bags strategy put forth in the case. Additionally, because the strength of the Yen had appreciated against the Euro in 2008, the aging population can continue to purchase the higher end luxury products characteristic of the Louis Vuitton brand.
In the case, it was stated that even though Japan was facing an Asian Financial Crisis and facing 10 years of economic slowdown, women still had a ‘cult’ for luxury brands. Louis Vuitton can capitalize on this ‘cult’ and create a niche market for its luxury products. Studies of the well-known Japanese cyclical economy have revealed that over time spending fluctuates. The market is saturated with more price sensitive buyers who purchase a higher ratio of “knock offs” to authentic Louis Vuitton products.
These less affluent Japanese place lower value to the Louis Vuitton brand as the brand became more diluted. The prediction of the future cycle would allow us to recognize that the older population would be able to afford the authentic luxury pieces. Therefore products can be tailored and targeted to this segment. Hence we can capitalize on opportunities that may present itself in the near future due to its cyclical nature. Louis Vuitton is also exploring the option of extending its product line by developing a children’s “Ready to wear line”.
Another option discussed in the case is to establish a Louis Vuitton Internet business. This strategy will facilitate the popularity of the e-commerce for the younger generation and may allow Louis Vuitton to reach a wider market. Louis Vuitton is recognized across generations so a change in market strategy by penetrating mid size and smaller cities seems feasible in this economic downturn. This is in conjunction with the changing Japanese mindset that is no longer eager to buy the brand. As a result Louis Vuitton is feeling the negative impact. This strategy aims to maintain market share.
The courses of action proposed in the case each have their strengths or weaknesses. Firstly, the rental of bags proposed, may have a negative impact to the Louis Vuitton brand. Since LV is a luxurious, high end brand, renting of these bags may cheapen and devalue the power of the LV brand. Luis Vitton bags are targeted to the elite and prestige and because of the price only they can afford to wear them. If renting is implemented this means that almost anyone can wear a bag for a period of time. Consequently, the brand image will falter as it will no longer be considered luxurious and exclusive.
Secondly, Targeting the Aging population could be seen feasible, however, while this target market in Japan is constantly growing, there is no absolute assurance that this target market will always be successful. Therefore, this action should be thoroughly scrutinized as there is room for growth and success but must be mindful of the possibility that older individuals may or may not purchase the LV brand. In this instance, the LV Company can take into consideration of Japan’s cyclical market. Since this is based on past trends, evidence shows periods of high buying and periods of low spending.
Another action taken by LV is opening to Mid- Size market. This can be a successful strategy since it will tap into new markets. According to the Japan market, this will be a thriving venture. Therefore, it can be profitable and a positive move for the LV brand. Children’s LV line is another action taken; this can be successful if executed strategically. For instance, LV can target a niche market whereby only the elite will be able to purchase these items. It should be limited edition which makes even more exclusive. This gives owners and parents of the items a sense of high esteem and prestige.
Finally, Internet Business as proposed. This will be successful since, more people are gravitating towards internet buying. In this fast pace world they see it as quick, efficient and convenient . E-commerce is dominating the consumer market. Therefore, this will not only appeal to customers but gives a competitive advantage. If LV concentrates their efforts on the most feasible strategies they will be able to achieve their main objective of reinventing themselves and regaining what used to be its well-attested fame in Japan.