Louis Vuitton Moet Hennessy must decide whether to maintain its numerous product lines or eliminate certain lines to focus on its most profitable segments.
LVMH relies on its well established brand name and reputation for creativity and quality to market its diverse product lines. The firm is in a unique position as it is one of the only players in the luxury goods industry that can maintain a diverse portfolio of luxury brands. Of the top 5 major fashion houses it is the only manufacturer involved in Wines and Spirits, Specialty Retailing, and Auctions. It also has more than twice the brands under its control than its nearest competitor.
The company’s target market (high profile wealthy individuals) demands uncommon quality products. Through limited availability the firm is able to command high mark ups and maintains a waiting list for its most exclusive products. If the firm were to over diversify it is at risk of losing the exclusivity that defines its brand image.
The most profitable consumer segments for LVMH are Japan and North America. Both markets are nearly saturated with luxury brand products. To succeed LVMH needs to strike a balance between superior quality and the diversity of its product offerings.
Louis Vuitton should focus more on its most profitable and established segments. It should continue to pursue excellence in its Fashion, Wine and Spirits, and Perfumes and Cosmetics lines. These lines offer the long term profitability the company desires. Consumers are willing to pay a premium to have the best and rarest products. The firm’s major markets do not need more products offerings they need to enhance their existing products to demand higher margins and further promote the brands exclusive image.
Auctions and Selective Retailing are two industries LVMH has recently entered. Neither has been particularly profitable. LVMH should continue to pursue a larger market...