LVMH and Luxury Goods Marketing
LVMH Moet Hennessy- Louis Vuitton Societe Anonyme is the world’s largest marketer of luxury products and brands. The French company, headquartered in Paris, has been built into a worldwide, billion dollar company with the help of Bernard Arnault, “the pope of fashion.” Arnault said of LVMH, “We are here to sell dreams. When you see a couture show on TV around the world, you dream. When you enter a Dior boutique and buy your lipstick, you buy something affordable, but it has a dream in it.” The companies that today comprise LVMH focused on prestige rather than profit, being family run enterprise, and this prestige continued throughout the decades as the company grew. Arnault acquires many different brands, and his portfolio approach would reduce the risk exposure to fashion cycles; if demands for watches or jewelry declined, clothing or accessory sales would offset any losses. Arnault is also able to cut costs by eliminating redundancies in sourcing and manufacturing, his list of stable brands is able to translate into stronger bargaining positions when negotiating leases for retail space or purchasing advertising. There are high margins associated with the LV handbags, gun cases, and luggage. The prestige of the Louis Vuitton luggage and leather fashion goods are thirty five percent of the company’s revenue. The Louis Vuitton brand itself accounts for sixty percent of LVMH’s profit. The company holds many other luxury brands such as Christian Dior, Givenchy, and Kenzo, whose perfumes and cosmetics generate nearly twenty percent of LVMH’s revenues. Givenchy and Christian Dior’s Dune fragrance are two of the luxury brands that are diverted from authorized channels for sale at mass-market retail outlets. In March of 1995 the U.S. Supreme Court let stand an appeals court ruling prohibiting a discount store chain from selling Givenchy perfume without permission. Some discount stores such as Wal-Mart and Costco cannot sell some imported fragrances without authorization. Parfums Givenchy USA claimed that its distinctive packaging should be protected under US copyright law. The company holds brands in multiple units. Its wine and spirits unit includes champagne brands as Dom Perignon, Moet & Chandon, and Veuve Clicquot. Its fashion and leather goods unit includes brands like Fendi, Emilio Pucci, and Donna Karan International Inc.; the company’s first American designer label that LVMH paid over €600 million for its brand and trademarks. Its perfumes and cosmetics unit includes brands like Guerlain and Acqua di Parma. Its watches and jewelry unit includes Bulgari and Chaumet. A major issue that luxury goods companies face is counterfeiters. Louis Vuitton Societe Anonyme spends over ten million dollars annually battling counterfeiters in Turkey, Thailand, China, Morocco, South Korea and Italy. The company spends money on lobbyists who represent the company’s interests in meetings with foreign government officials. The chairman of LVSA explained, “almost every month, we get a government somewhere in the world to destroy canvas, or finished products.” Bernard Arnault has broadened the company’s consumer base and the company has a presence in more than a dozen countries, including China and Russia. LVMH has entered into emerging markets like India. LVMH entered India in 2002, opening a boutique in a luxury hotel, and now having a Dior, Fendi, and Tag Heuer store open there as well. The company has a lock on an upscale shopping mall that recently opened in New Delhi, Emporio. This presence in the mall allows them to negotiate favorable lease rates for retail space. LVMH is also able to buy large blocks of advertising space from Conde Nast India at a discounted price, featured in Vogue India which launched in September 2007. The global economic crisis in 2008 resulted in purchases for luxury goods falling in key markets. Luxury good brands around the world were making price cuts,...
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