A Case Study on
Louis Vuitton in India”
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Submitted To: Submitted By: Dr. D.D.Swain Ajeet Singh Chauhan
Mr.
Contents 1. Introduction 2. Identification of Problem(s) 3. Analysis of Environment 4. Development of Alternative Solution 5. Analysis of Alternative solution 6. Selection and Implementation of Alternatives
Introduction Louis Vuitton Malletier commonly referred to as Louis Vuitton, or sometimes shortened to LV, is a French luxury fashion and leather goods company. Founded in 1854, one of the main divisions of LVMH headquartered in Paris, France. Known especially for bags and trunks, the company collaborates with prominent figures for marketing and design (most notably supermodel Gisele Bundchen and fashion designer Marc Jacobs). Louis Vuitton, the fashion and leather goods business unit of LVMH Group, the Paris- head quartered luxury goods conglomerate. It was founded by Louis Vuitton in 1854 a French craftsman invented the flat-topped trunk with a canvas cover. The company flourished with the growth of travel by rail and ship. It opened its first store in London. For seven decades Louis Vuitton remained a single-product brand of handmade leather bags before diversifying into leather accessories. In 1987 merged with Moet Hennessy, a French wine maker of 1743 vintage in form of LVMH. Luxury in Europe was for the chosen few. In Europe meaning of luxury was about feeling exclusive where as in U.S the meaning is about feeling special. Luxury is for all. European luxury brands did not have price points aimed at capturing consumers at various levels. American brands did. They had product lines allowed luxury nibbling.
In 1999, the company started working to enter to India. There was a historical reason for choosing India. In the late 19th century, more than 600 maharajas used to buy custom made leather
interiors for their Rolls-Royces and leather bags for their travel during annual vacations. This had helped Louis Vuitton to survive the Great Depression of 1920s. They had become customers for Louis Vuitton. Yves Carcelle, Louis Vuitton’s CEO was keen on leveraging the historical relationship between India and brand. He knew intuitively that India was a market for luxury products yet to be tapped. Post-liberalization Indian economy had grown. The percentage of those below the poverty line is coming down. In India 97% of the population lived an income less than $2.50 a day. Louis Vuitton while observing about the market scope in India, it observed that the rich in India were flying to London, Dubai, Singapore, New York and Paris to shop because there was nothing available in India. It articulated two clear long-term goals: •
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Open a Louis Vuitton store in every Indian city with a population of 10 million plus. Acquire a cumulative customer base of one million in India.
Another concern for LV is custom duties ranging between 30% to 70%, which had rendered domestic purchases of luxury products more expensive than offshore. The company spent the interim period preparing the ground. One major concern is MNC like Louis Vuitton would place the domestic leather trade at risk. It is planning here as it had the potential to become a sourcing center for its global requirements and also a manufacturing hub.
Identification of problem(s):
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Small target as only 4% households qualify as target segment and super rich-near rich = 3 million Consumers looked for best deals even on premium products.
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Lack of quality retail locations Luxury hotels shop space was a constraint as rentals were twice compared to that of luxury malls. Finding the market to be tapped.
Analysis of Environment: One of the biggest factors that could affect sales of luxury goods in India is the tariff. The higher the taxes are for luxury goods, the smaller the incentive is to sell those goods because demand isn’t going to be as high if prices have to increase in order to make up for the tax. The market is currently set up for an oligopoly, because the demand for goods at a luxury store would be inelastic for anyone interested in a luxury item and there are so few stores.
SWOT ANALYSIS Strengths •
Brand Equity
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One of the best in luxury segment
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Flagship brand of fashion and leather goods of LVMH
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Craftsmanship focused production
Weakness •
Heritage brand
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Stores in Luxury malls
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Store Area
Opportunities •
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Individual store Time changing brand Customizing the products based on customer needs Targeting young consumers and cocooners.
Threats •
Exim policies
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Perception of the consumers about the offshore purchases
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Threat from competitors US luxury product brands
Development and Analysis of Alternative Solution(s): In order for luxury goods to survive in India, the government would have to make the tax relatively low so that customers have an incentive to purchase the luxury item. The Oligopoly makes it possible for luxury stores to either jack up their prices as part of a cartel or to sell below the price set-up by the oligopoly. If this were to happen, the store would capture a large part of the market share and increase demand for luxury goods in India.
It’s important to establish different price points with varying level of quality so that this segment (cocooners: who try to increase their income eventually buying exclusive products) can establish brand loyalty and eventually buy more expensive items once they establish a higher income.
Selection and Implementation of Alternatives The target market for LV in India can be focused mainly on the cocooners. Due to the varying levels of wealth in India, it would make more sense to appeal to the different types of wealthy people than to focus only on the wealthiest. When the customers make more money, they will stay loyal to LV and buy its higherpriced luxury items. The ultimate objective could be to make LV more convenient for customers in India so they don’t have to go to other countries to buy LV. There needs to be a way for the rich to get what they want when they want it if they pay a high enough premium. In this aspect, it will be important to focus more on the service that LV provides than the product, since the wealthy have no problem going to other countries to buy luxury items. In addition, LV will sell its products at varying degrees of price points in order to appeal to those who recently became wealthy as well as keep the old customers intact.
