Louis Vuitton in JapanGroup 5

AbstractThis case study deals with the opportunities and challenges of Louis Vuitton, the leading European luxury sector multinational firm, in Japan, taking into account the unique features of brand management, and integrating culture and consumer behavior in Japan. In the last decade, Japan has been Louis Vuitton's most profitable market, but it seems that the global economic crisis has resulted in a decline in sales. Facing a weak economy and a shift in consumer preferences, Louis Vuitton has been adapting its unique strategy in the Japanese market. The days of relying on a logo and charging a high price seem to be gone as there is more interest in craftsmanship and value for money. To promote sales, the company has had to launch less expensive collections made with cheaper materials. The brand has also been opening stores in smaller cities, where the lure of the logo still works. Over the years, Japanese consumers have demonstrated fascination with and passion for the iconic brand. What have been the keys to Louis Vuitton's successful business model in the Japanese market?

What has made Louis Vuitton’s business model successful in the Japanese luxury market?

Factor 2 : Insistence on maintaining and controlling its own distribution and sales

In a modern market where companies are constantly trying to get their products to as many consumers as possible, Louis Vuitton maintained a strict code of only selling its products in its own

stores that it can constantly control and ensure that its customers are satisfied.

Louis Vuitton didn’t allow a large chain store, such as JCPenny, to sell its items within its stores.They undoubtedly would garner more sales statistically; however, their brand image and its rarity would also likely be damaged due to the brand now being much more easy to obtain .

Factor 1 : Simply sticking to designs and products that consumers instantly recognize and attribute to the brand and its success around the world.

Louis Vuitton has maintained much of its original designs into what it sells today, including its classic propriety logo and colour scheme that is one of the earliest examples of obtaining property rights within the luxury market.

The history of the brand, is an impressive accomplishment in an era where companies feel the need to re-invent themselves every few years in the modern markets.

Factor 4 : Constant pro-activity and adapting to the Japanese market.

LV introduced newer product categories in the Japanese market, such as jewellery, watches and eyewear. The markets for these products have grown rapidly, exceeding expectations. Louis Vuitton redesigned bags exclusively for the Japanese market

with a local flavour. The care given to establish the stores at the best possible locations in cities is another factor that has attracted high-income customers Louis Vuitton products.

Louis Vuitton was able to improve its positioning in the market due to constant pro-activity and wise expansion in the tertiary markets. For instance, after land prices decreased in the 1990s and with the global recession during 2007-2009, there were some changes in people’s shopping habits and lifestyles. Louis Vuitton reviewed them carefully and reconsidered its line-up of merchandise.

Factor 3 : Louis Vuitton’s approach to quality.

Japanese consumers used to equate foreign products with high quality. Japanese consumers expect their luxury items to last for a long time. Louis Vuitton has done so well in Japan is

because LV products fit this Japanese notion of imports being of higher quality.

Louis Vuitton’s prides itself on their quality. First, the leather raw material comes from cattle which are known for less insect bites. After the leather is selected, it is put through several vigorous tests such as exposure to ultra violet rays to determine fading. Once the leather passes these tests, teams of 20-30 LV employees produce single product lines in an effort to minimize errors and were also encouraged to propose improvements. On top of their extensive quality control measures, Louis Vuitton offers a lifetime repair guarantee on all of their products.

OpportunitiesWealthier Families and more purchasing power

Ready-to-wear collection

Louis Vuitton Internet Business

Louis Vuitton children’s line

Limited Edition Handbags

ChallengesMass Counterfeiting of all types of luxury products

Reducing the dependence of revenues on the Japanese market

Louis Vuitton will have to change with changes in demand and market changes.

Competing with prices, while keeping up the quality

Japanese Luxury Market• Japan is the world’s largest market and has the highest per capita spending for luxury goods

• Contribution of Japan to total revenue of famous luxury brands:

Company Number of Stores Share of RevenueBulgari 34 26%Coach 115 22%

Salvatore Ferragamo 64 27%Gucci 49 27%LVMH 252 15%Tiffany 50 20%

Consumer Behavior in Japan• Compulsory form of social expression

• Preference was slowing moving from Quality to Affordability

Luxury became a commodity

Future Considerations• Reduced price due to Exchange Rate Fluctuations, Manufacturing Costs and Quality

Considerations • Rental of Bags• Ageing population• Cyclical Japanese Market• Market was still expected to grow at 6 percent for the next few years

• First luxury brand to enter japan in 1970’s

• Wholly owned subsidiary • They took advantage of the

high demand in the Japanese market

THE LIMITED EDITION MARKETING STRATEGY

KEEPALL $1270 SPEEDY 35 $725 THE ALMA NORMANDE $1290

https://www.youtube.com/watch?v=WLq7HFkuFp4

Will the financial crisis affect the mighty Louis Vuitton?

Threats:•Change in consumer

preference• Japanese women market•Value of money • Smaller purchases•Christmas of 2008

Strategies to overcome:

• SWOT Analysis • Focusing on

counterfeits

In 2008, the recession forced LV to lower their prices. This decrease in price made the competition much stiffer

As of 2004, Japan accounted for 55% of Louis Vuitton’s revenues making them very susceptible to any changes in Japan

The good news for Louis Vuitton is that the Japanese luxury market is cyclical. It is in the Japanese market’s nature to fluctuate between periods of fiscal conservatism and huge spending

Final Verdict: Although there was a continued decrease in the demand for luxury items in 2008-2009, the Japanese market remained a relatively healthy and developing industry and hence it did not affect Louis Vuitton drastically.

Product (Customer Value) – Luxury Goods Luxury trunks, leather goods, ready-to-wear, shoes,

watches, jewelry.

Lifetime repair guarantee.

Quality control measures.

Price (Cost to Customer)

o High prices, even during recession time.

o In essence, the Louis Vuitton difference is VALUE, not price.

Place (Convenience for the Buyer) – Japanese Luxury Market

1977 – 1st LV Store

1980- economic boom in Japan / “Vuittonmania” / 20 million women owned a LV bag

1st multinational luxury house without the help of Japanese distributors. It established its own

subsidiary and exported products from France to Japan.

After recession caused by 9/11 attacks, LV redefined its strategy in Japan

Promotion (Communication) – Marketing Strategy

Louis Vuitton cultivates a celebrity culture and employs famous models and actresses (i.e. Jennifer Lopez,

Madonna).

LV uses print ads in magazines, and billboards in large cosmopolitan cities.

LV also has its 90-second commercial ad on TV asking “Where will life take you?” (Has been translated to 13

different languages)

Limited Editions: Marketing Strategy

Louis Vuitton – Company ProfileFrench Fashion House, started in 1854, Headquartered in Paris, France. Currently, division of holding company - LVMH

Sells products, ranging from luxury trunks and leather goods to ready-to-wear, shoes, watches, jewelry, accessories, sunglasses and books.LV sells its products through standalone boutiques, lease departments in high-end department stores, and through the e-commerce section of its website.

The company operates in 50 countries with more than 460 stores worldwide.Revenue was $10 Billion in 2016

The Louis Vuitton company seeks to cultivate a celebrity following and has used famous models, musicians, and actors such as Keith Richards, Madonna, Sean Connery, Hayden Christensen, Angelina Jolie, Gisele Bündchen and most recently David Bowie in its marketing campaigns.

The company commonly uses print ads in magazines and billboards in cosmopolitan cities.

For six consecutive years (2006–2012), Louis Vuitton was named the world's most valuable luxury brand. For six consecutive years, Louis Vuitton was number one of the ten most powerful brands list published by the Millward Brown Optimor's 2011 BrandZ study with value of $24.3 billion. It was more than double the value of the second ranking brand. Louis Vuitton is one of the most counterfeited brands in the fashion world due to its image as a status symbol. Ironically, the signature Monogram Canvas was created to prevent counterfeiting.

Louis Vuitton – Case AbstractIn Japan, whether you are in Tokyo, Osaka or Nagoya, just turn your head and Louis Vuitton is everywhere.

A unique vision of luxury took shape when Louis Vuitton opened yet another new store inside Comme des Garçons on September 4, 2008, in the heart of Japan’s capital. The pop-up store situated on the prestigious Omotesando Street was an illustration of Louis Vuitton’s attachment to the Japanese luxury market. Yves Carcelle, chairman and CEO of Louis Vuitton, said, “This project not only brings a new meaning to luxury, but also speaks volumes about how the know-how and heritage of Louis Vuitton have always been perceived in Japan, including by its foremost designers. We are very proud to have been able to help Rei Kawakubo2 relive her memories in such an original and creative way.”

Louis Vuitton had been following an aggressive marketing strategy in the country, opening extravagant stores such as those in Ginza or Roppongi. When Louis Vuitton, the world’s biggest luxury-goods firm, inaugurated its huge shop in 2002 in the district of Omotesando, Tokyo, hundreds of people were queued outside. During the first few days, sales exceeded the initial estimations by ¥1 million.

In the last decade, Japan had been Louis Vuitton’s most profitable market, representing almost half of its profits, but it seemed that with the 2008–2009 economic crisis, there might be the start of a decline in sales. Facing a weak economy and a shift in consumer preferences, Louis Vuitton started adapting its strategy in the Japanese market. They were no longer in a position to charge high price for products with their proprietary logo. The company had to launch relatively low priced collections to boost sales. The firm had also been taking steps to open stores in other mid-size cities where the LV brand was not well known.

Louis Vuitton might be French, but Japan had become the land of Louis Vuitton lovers. Over the years, Japanese consumers had demonstrated fascination and passion for the iconic brand. What would be the key to Louis Vuitton’s continuing success in the Japanese market?