Louis Vuitton’s Success in Japan
An Essay on Louis Vuitton’s Success in Japan
Louis Vuitton is one of the world’s leading international fashion houses selling a wide range of luxury products such as luxury trunks and leather goods to ready-to-wear, shoes, watches, jewelry, accessories, sunglasses, and books, through small boutiques in high-end department stores around the world and through the e-commerce section of its website. It is a French fashion house founded in 1854 by Louis Vuitton well known for its LV monogram appearing on its products. It has 322 stores in 52 countries around the world and still opening more. Due to its marketing strategy and business model, Louis Vuitton has enjoyed success globally being named the world’s most valuable luxury brand for six consecutive years from 2006-2012.
The valuation of the brand was at 25.9billion USD rising to 28.4 billion USD in 2013 with sales of 9.4 billion USD. In Japan, the company’s model of four Ps (Product, price, place and promotion) has been vital to its success (Roberts, 2012).The brand name in the market, the location of its store in Tokyo, price of products and the promotion campaigns has helped the company to be successful in Japan. With Japan being one of the cornerstones of the fashion industry, presenting to the world some of the most unique and cutting edge styles and new trends, many times and years before they catch on in the rest of the world, there are a number of popular brands on the market today and many more coming up through the ranks regularly, and these has helped LV to find market. The understanding of the Japanese culture and needs also helped the company excel. Despite its success, like any other business, Louis Vuitton has taken a hit from the economic meltdown of last few years. It has however laid down some strategies to overcome these challenges.
Based on data published in Luxury Import Brand Marker in Japan 2008 (Yano Research Institute Ltd. 2008), Louis Vuitton held the top spot for net sales of single brands for FY2007 with sales of around 165.0 billion yen-approximately 2.7 times that of third-place Hermes, about 3.1 times fourth-place Tiffany and around 2.5 times Coach, which had rapidly advanced to second. Moreover, in per-store sales for major luxury brands, Louis Vuitton raked in approximately 3.0 billion yen-three to more than ten times that of its main competitors-demonstrating Louis Vuitton’s tremendous presence in numbers alone. Accordingly, the brand boom in Japan can even be called a Louis Vuitton boom, with Louis Vuitton continuing to dominate in both image and actual performance (Nagasawa et al.,2007).
The quality of Louis Vuitton products has made them to be accepted in Japan. Louis Vuitton’s handbags represented products of distinctive qualities and attention to details. In general the concept of relative quality is challenged by the absolute quality, which has forced customers to Louis Vuitton or nothing attitude. To back their products Louis Vuitton has taken action against counterfeiting item by carrying out campaigns and involvement of French trademark authorities, this makes there product defendable. Partnership with local artist and Limited edition products has demonstrated that Product Line up and innovation are very strong parts of Louis Vuitton business model in Japan (Nagasawa, 2008)
Generally, most marketing strategies entail reduction in price to increase demand. With LV, it has been different with the company majoring on value rather than price. Louis
Vuitton handbags are priced high compared to other handbags. In essence, the Louis Vuitton difference is value, not price-this being absolute value, not relative value. Many of the principles for Price were innovations that carne about after Kyojiro Hara became president of Louis Vuitton
Japan and that subsequently went global.
Place as the key principle in the business model has been embraced by LV differently. In general, more distribution channels, the companies have the more sales potential is predicted. However, in case of ‘Louis Vuitton’ – they are selling only from few stores and started online (via web) presence in Japan after the new CEO (Nagasawa, 2008). The reason being, it’s easy to control few distribution channels than many. Control is the key in the business plan of Louis Vuitton. Promotion of Louis Vuitton products is mainly through print media, like fashion magazines and it prefers doing it directly to customers and not on TV.
The success of Louis Vuitton into the Japanese luxury market was based on different opportunities that the company had. The Japanese have a socio-cultural relation with culture. This opportunity was well explored by the company to enter the market by understanding the culture and venturing in product lines that go in hand with the people’s culture. The high disposable income of Japanese customers and solid proportion of middle class individuals has helped provide market for the company’s products. The company is however faced by challenges of; economic downturn and strong Yen against USD and Euro, competition with other similar luxury brands or low range brands and the existence of counterfeit items in the market. The other challenge is the need to change with change in demand without damaging the company’s brand name.
The Japanese fashion luxury market specifics include; high competition and high barriers to entry. The market is also highly saturated or oversaturated. The availability of price comparison websites, auction web sites and online stores’ are making the market to be more difficult. There is also a tendency of renting items rather than owning them. Luxury fashion is highly demanded in Japan and the country has recorded highest luxury spending in the world.
Louis Vuitton entry into the Japan market was very unique. The company used the “shop-in-shop” which entails a brand owner or retailer taking space in another retailers store and making space to sell their product. This is how it all started. There was exclusive distribution for France offering products through one wholesaler. The company relied on Japanese management which was able to entice customers and make them enthusiastic to shop for their products. The Guerilla marketing strategy was used to build a new extravagant pop-up store in the heart of Tokyo’s large fashionable districts. Louis Vuitton treated Japan as testing grounds of its strategies and strengthened the brand identity by flawless gigantism architecture of the stores and celebration of Japanese artist in product designer and worldwide launch. The company teamed up with Japanese artist Takashi Murakamiin2003 and recreated new versions of handbags with smiling blossom designs (Nagasawa, 2009).
Like any other company or business, Louis Vuitton is hit by the global financial crisis. The strengthening of the Yen more than the USD and the Euro was the biggest pain for Louis Vuitton. The looming economy factor forced the company to put down some strategies such as lowering the price of products. This has a negative implication since it allows competition and revenue goes low. During this period the demand was still present but shifted with brand loyalty going astray. An increase counterfeit product in the market was also a blow to the company since it was hard for customers to differentiate. Heavy reliance on the Japanese market with over 50% of profits coming from the country was a hard task. The company is thus needed to play on with the global crisis and being a multinational, global issues have a higher impact. Louis Vuitton slumps in the luxury market by always rebounding to regain what it had lost. Embracing of bag rentals is one of the strategies it has used to overcome the challenges, which are still attracting profits. The presence of its stores in Japan is one of the strategies of overcoming the challenges. The brand positioning, with the company having prestigious products, it is still regarded as of high quality and focus. The company has utilized its build ties globally and still holds on the brand name as its strength in overcoming challenges.
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Nagasawa, S., Ohizumi, K., and Maeda, K. (2007). The principles of Louis Vuitton: The Strongest Brand Strategy, Toyo Keizai Shinposha.
Nagasawa, S. (2009), Luxury Brand Strategy of Louis Vuitton – Details of
Marketing Principles, Proceedings of the International Conference of International Association of Societies of Design Research, Branding 1, pp.1-10.
Yano Research Institute (2008), Luxury Import Brand Market in Japan 2008, Yano Research Institute Ltd.Posted on: October 14, 2018, by : jameswatson