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 19th 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....................
Asian Luxury Market
Today 27% of the company’s revenue comes from the Asian market with fashion and leather goods accounting to 35% of the total revenue for LV. A look into the country-wise luxury spending reveals that China contributes 31% followed by America and Europe with 24% and 18% respectively (Exhibit I).........
Luxury Market in India
While India is an emerging market for luxury goods, most of the purchases are likely to be made outside the country. “The reports on luxury retail tend to take into account goods bought in the country. But, in reality, almost 99 per cent of luxury goods are not bought in India. While the Indian psyche is driven towards value luxury and discounting, there is a fine line between what they aspire and the price they are willing to pay for their aspirations,’’ observes Vijay KG, Founder, Luxepolis, an online portal for selling pre-owned luxury goods.............
Louis Vuitton in India: Growth, Challenges and Opportunities
In India, there is a varying perception of luxury between those born into wealth and those of first generation wealth-creators. Various factors that define luxury apart from the aspiration are gratification, social assertion, ego fulfillment as well as exclusivity it creates include the self-image, brand image, the desire to seek consistency between the two.
LV had its presence in India between 1890-1940 prior to its re-entering the market in 2003. Its main customers were the royal families and maharajas for whom the company used to provide custom-made bags and accessories shipped form Paris and London.........
Competitive Landscape in India
Gucci, Hermes and LV have been competitors since ages in the global luxury market (Exhibit III). Hermes opened its first stand-alone store Mumbai in 2011 and was the first luxury brand to do so avoiding luxury malls or hotel. It entered into the Indian market with the offering of 27 limited edition saris inspired by Indian culture and ethnicity. Gucci is one of the most-known brand among Indians and entered India in 2007 in competition to LV. Along with its retail sales, Gucci also sources embroidery from the country for its worldwide operations.............
Challenges in India
Major challenges that the company faced during its initial years in the country were advertising platforms, credit cards and retail outlets. Although India has a thriving print and electronic media, it is highly fragmented. There were few lifestyle magazines and TV channels delivering focused readership and viewership to advertisers and the credit card culture was fairly new at that time. There was a lack of Luxury Retail Clusters and the luxury mall development was still at its nascent stages............
Counterfeit Products
Other major challenge that LV faces is that its products are the most counterfeited globally and have a huge market both online and offline.The global socio-economic impacts were estimated to cross $1.7 trillion by the end of 2015, according to 2011 report of the International Chamber of Commerce..........
Alternate Channels and Re-Used Goods
Another important challenge is the immergence of e-commerce making luxury affordable for many. New start-ups Envoged, Luxepolis and Confidential Couture are targeting ‘aspirational’ yet ‘value’ seeking Indian consumers for whom a Louis Vuitton bag or Jimmy Choo footwear will now be within reach, with discounts ranging from 50% to 70%. Ecommerce sites selling used luxury goods are well-known among fashion seekers who want affluent brands at cheaper prices. Indian re-selling sites like Confidential Couture, Evoged, Refashion and Zapyle following the steps of............
Growth Prospects
Luxury comes with price, but the amount of taxes being levied in India on luxury articles is exorbitant and is one of the prime reasons for the slow growth of luxury retail in India. In the recent budget proposed by the NDA government, there has been a proposal to impose tax of 1% on car purchases of more than 10 lakh and luxury goods exceeding 2 lakh. The luxury industry has not taken well the recommendation of the government and feels that for the luxury segment to be surviving and flourishing in India..........
Conclusion
LV has yet to spread its roots in India despite having its presence for more than a decade. The new customer segment of first generation of wealth creators are well-versed with the idea of luxury and know what they aspire form a brand. Though with increase in HNWI and the purchasing power of individuals, the concept of exclusivity and quality is gaining strength, the pace is still low............
Assignment Questions
I. How is the demand affected with regard to price for luxury goods?
II. What are the factors affecting entry strategies for luxury brand like LV in India?
III. ..............
Exhibits
Exhibit I: Personal Luxury Goods: Growth Contribution in Absolute Value, by Region and Top Contributing Market, 2009–2015E (€ billions)
Exhibit II: Ranking Luxury Brands Based on Their Perceived Value, Price Point and Market Segment
Exhibit III: Luxury Brands: Competitive Landscape
