LOUIS VUITTON - WHEN GOING GLOBAL IS NOT AN EASY TREND TO FOLLOW

            Louis Vuitton is a successful French company that produces luxury goods and is specialized in leather goods.

Louis Vuitton is part of its parent company Louis Vuitton Moet Hennessy (LVMH), which ranks at the top of luxury multinational corporations in terms of brand value.

            Today, Louis Vuitton is an international company – it operates in more than 50 countries with more than 450 stores worldwide.

            Louis Vuitton is one of the world’s leading fashion houses[1], and is ranked nineteenth of the world’s most valuable brands according to the well-known American business magazine Forbes[2].

            Due to its success and impressive leading position in the luxury market, we can ask ourselves if Louis Vuitton has always been so successful and if it has already faced any difficulties in its international expansion.

LOUIS VUITTON EXPANSION TO LATIN AMERICA

            Latin America has been a key market for luxury consumption and this market is still growing a lot. For example in Brazil, “the market has grown 35% over the last seven years”[3]. In this area, the countries that represent strong potential markets for luxury products are Brazil, Mexico, Chile and Columbia. Strategically, Louis Vuitton has extended its market to all of them and now owns stores in each of them.

           

            However, the situation is different in the case of Argentina, where the luxury market is declining. In 2012, the world most luxurious designer brands abandoned Argentina because of the government’s strong economic restrictions. This was the case of Louis Vuitton, which decided to close its Buenos Aires store on Alvear Avenue. This Louis Vuitton store in Buenos Aires was the brand’s only store in the country.

            The complex economic situation in Argentina is due to the very high protectionism put in place by the government through border controls, quotas and expensive custom duties on both exports and imports. These measures aim to encourage and protect domestic production and companies.

            In the case of international brands like Louis Vuitton, they are particularly concerned by Argentinian import restrictions because they have to import all their products and they don’t have an alternative option. For example, Louis Vuitton won’t be able to produce its goods in Argentina because its brand image is based on high quality French manufactured items.

            This store closure was a big loss for Louis Vuitton but also for Argentina’s economy. Many people lost their jobs and it damaged the country’s image since Alvear Avenue was about to become one of the most luxurious avenues in the world, like the Champs Elysées.

LOUIS VUITTON'S PROMISING FUTURE IN ASIA

            The Asian market represents one of the most important markets for luxury goods. It is especially true for China, which represented “10% of the global market” in 2012, and is estimated to be the largest domestic market for luxury goods in the world by counting for 44% of global demand by 2020”^[4].

             “Chinese consumers have become Louis Vuitton’s largest consumer group worldwide”^[4]. Nevertheless, Louis Vuitton has recently faced several store closings and a slowdown of luxury consumption in China.

            The first reason why Louis Vuitton is facing this situation is due to a major change in the Chinese social trends. Indeed, Louis Vuitton products used to be very recognizable thanks to big logos, and were used by the Chinese to show off their high social status. However, due to this trend and to the increase in Chinese income, more people have been able to buy Louis Vuitton products. Thus the brand has developed a more mass image whereas previously it was seen as a sign of exclusivity and privilege. In order to change this social image of the brand, Louis Vuitton has been making some efforts in China in order to recapture the market. For an example, the company started to sell some products with smaller logos to combat the new Chinese trend.

            The other reason why Louis Vuitton is facing this situation is due to a particular Chinese economic trend. In fact, Chinese customers are used to shop for luxury bands outside of China. Foreign luxury products are cheaper and Chinese customers believe products would be more authentic, with a better selection and better availability. In order to make its Chinese luxury consumers shop at home, Louis Vuitton has made efforts with its communication toward Chinese customers thanks to several collaborations with Chinese stars and opinion leaders in order to promote the brand.

Charline LR

---

[1] https://www.statista.com/statistics/267948/brand-value-of-the-leading-10-most-valuable-luxury-brands-worldwide/

[2] http://www.forbes.com/powerful-brands/list/#tab:rank

[3]https://books.google.fr/books?id=xk9vBAAAQBAJ&pg=PT44&lpg=PT44&dq=louis+vuitton+buenos+aires+closed&source=bl&ots=G3Qj1NLqD0&sig=CsA-ND5of2n31iMUjLekCv535hQ&hl=fr&sa=X&ved=0ahUKEwj7kPrf7qDQAhUCbBoKHQw6D_IQ6AEITTAI#v=onepage&q=louis%20vuitton%20buenos%20aires%20closed&f=false

[4] http://knowledge.wharton.upenn.edu/article/louis-vuitton-and-the-traveling-chinese-consumer/