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Louis Vuitton: Luxury Reigns in India*

CASE STUDY, MARKETING MANAGEMENT
ET Cases - GSMC, 18 Pages

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Louis Vuitton: Luxury Reigns in India

 

Louis Vuitton (LV) has always carried its image of elegance, exclusivity, royalty and heritage since its inception. LV has its presence in almost every fashion city across the globe with more than 400 stores worldwide. LV’s founder, Louis Vuitton, decided to be a trunk maker at the age of 16 and therefore joined a Persian box-maker and packer named Monsieur Marechal as an apprentice. He opened his first store on Rue Capucines after seven years and with his wood crafting skills improved the customer’s trunks, keeping in mind the practicality, security and appearances. He also revolutionized the baggage industry by finding an alternative to leather called the “Trianon grey” which was much lighter than leather and also odour-free and added a sense of luxury to the trunks.

In 1876, LV introduced its iconic beige and brown stripe designs and logos in the market. Its first UK store was opened at Oxford Street, London in 1885 which marked the beginning of the expansion stage of LV. With the invention of unpickable tumbler locks in 1890, the brand completely diversified its presence globally by providing the most secure lines of luggage in the market. With the change in the family generations taking over the LV legacy ahead, the company revamped its signature monogram and also introduced new product lines of purses, bags and wallets which contribute largely to the company’s revenue in developing luxury markets.

Global Presence of Louis Vuitton

Since its inception in 1854, LV has come far ahead from what its identity has been. From being a company whose value propositions were luxury and quality in its early years, it has emerged as the most desirable luxury brand keeping its exclusivity and heritage as it progresses in the luxury market. In the half-yearly results of the 2016, LV posted total revenue of 6655 million dollars (approx.) in fashion and leather goods category with a profit of 1843 million of dollars (approx.) from recurring operations. Today, 27% of the company’s revenue comes from the Asian market with 35% revenue coming from fashion and leather goods, primary business category for LV.

According to Bain & Company, Inc. (2015), $282.7 billion of business came from the continuous borderless consumers and the constant global currency fluctuations. LV holds a brand value of $27.3 billion and 19<sup>th</sup> most powerful brand globally as per Forbes. Today, LV is the 3<sup>rd</sup> most followed brand in the world after Nike and Adidas Originals....................

Teaching Note Preview

Louis Vuitton: Luxury Reigns in India

 

Synopsis

The case study sheds light on the luxury markets in Asia, especially India, by taking Louis Vuitton as a company of focus. Through this case, the readers will be able to understand various concepts which when combined together help in understanding the development, opportunities, threats and failures of a luxury brand in a developing country like India. Concepts like Conspicuous consumption and Veblen goods highlight the concept of choice of a product by external or social influence as well as the demand elasticity with respect to the elasticity in prices of luxury goods. The importance of Omni-channel retailing as well as the various factors that influence the demand of luxury goods in India including the factors that influence the entry strategies of any luxury retailer in India are very important to understand the scope of international retailing in developing countries like India.

With the existing barriers in terms of low customer base, limited retail presence, lack of luxury malls, regulatory issues, untrained retail force, expensive real estate, and counterfeit market as well as the entry of major competitors such as Gucci, Hermes and Prada also pose a great threat to the revenue generation goals and target market acquisition goals of the company. Omni-channel retailing and concepts like reselling of used luxury products over e-commerce platforms are also important for acquiring new customer base and well as pose a threat in maintaining the exclusivity of the brand as a whole. Threatened by so many elements, should LV change its present strategy to encompass the new dimensions of competition and what can be the possible alternatives for modern day retailing?

Prerequisite Conceptual Understandings (PCUs)/Before the Classroom Discussion

An understanding of basic marketing and strategy is required as a prerequisite before classroom discussion. It has been designed for use in the 2nd year of Post-Graduation in Management or with experienced executives.

Case Positioning and Setting

For Post-Graduate programs and Executive Education programs in the domain areas of Retail Marketing, Strategy, International Business, Emerging Markets.

Expected Learning Outcomes

  • • To understand about Conspicuous Consumption and Veblen Goods
  • • To analyze the opportunities in Omni-channel Retailing
  • • To understand the concept of Collaborative Consumption
  • • To discuss about the luxury retail market opportunities and issues in emerging markets

 

Teaching Plan

The suggested teaching plan is to divide a ninety-minute class into five sections: an analysis of the company’s success factors and Veblen Goods (15 minutes), a critique of the issues and challenges before LV (20 minutes) a broader discussion about emerging market conditions (20 minutes), and an evaluation of possible paths forward (20 minutes). The last 15 minutes can be used to summarize the main points.

Assignment Questions

1. How is the demand affected with regard to price for luxury goods?
2. What are the factors affecting entry strategies for luxury brand like LV in India?
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Abstract

In a country that perceives luxury as a reward and has 21.2%1 of the population under the poverty line, decision of Louis Vuitton (LV) to enter India seemed oxymoronical. Yet with a history of serving maharajahs and the Indian royalty, the company decided to take a plunge in 1999. But, the retail high street was not yet ready for luxury in India and thus the company decided to enter into the country only in 2003, through luxury hotels, by opening its first store in Delhi’s Oberoi hotel. Today there is an increasing number of high net worth individuals in India and the country’s luxury market is forecasted to reach $18.3 billion by the end of 2016, at a CAGR of about 20%, according to a new study released by the ASSOCHAM.2 The company’s long-term goals include opening stores in every city with the population of more than 10 million.

With the existing barriers in terms of low customer base, limited retail presence, lack of luxury malls, regulatory issues, untrained retail force, expensive real estate, and counterfeit market as well as the entry of major competitors such as Gucci, Hermes and Prada, all pose a great threat to the revenue generation goals and target market acquisition goals of the company. Omni-channel retailing and concepts like reselling of used luxury products over ecommerce platforms are also important for acquiring new customer base but at the same time pose a threat in maintaining the exclusivity of the brand as a whole. Threatened by so many elements, should LV change its present strategy to encompass the new dimensions of competition also like reselling of luxury goods, collaborative consumption, etc. or should it continue with its existing strategy?



Pedagogical Objectives

  • Conspicuous consumption and Veblen Goods
  • Omni channel retailing
  • Collaborative consumption
  • Luxury retail market opportunities and issues in emerging markets

Case Positioning and Setting
For Post Graduate programs and Executive Education programs In the domain areas of Retail, Strategy, International Business, Emerging markets



1 Vidya Venkat, “World Bank estimates show fall in India’s poverty rate”, http://www.thehindu.com/news/national/worldbank-estimates-show-fall-in-indias-poverty-rate/article7727591.ece, October 6th 2015 (accessed date: August 21st 2016)
2 “India’s luxury market to cross $18.3 B in 2016”, Enterprise Innovation, http://search.proquest.com/business/docview/1757751493/D0BA683195E746FAPQ/57?accountid=145616, January 18th 2015 (accessed date: August 13th 2016)



* GSMC 2017, IIM Raipur

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