Louis Vuitton Storefront

According to the Telegraph, third quarter growth for LVMH weakened to just two percent, an outcome which the conglomerate’s recent shift in strategy probably predicted. Although that’s still growth, it’s certainly a marked shift from what the world’s largest luxury company is used to and the kind of growth its counted on in the past. In LVMH’s heyday, quarterly grown was often as high as ten percent, and it had fallen to five to six percent earlier this year.

Although LVMH, which owns Louis Vuitton in addition to noted handbag purveyors like Celine, Dior and Givenchy, doesn’t break results down by brand, it does indicate which product categories have been weakest, and apparently this decline in growth is a result of decreased sales in the formerly cash-flush categories of fashion and leather goods, perfume and cosmetics and watches and jewelry. Those are the “Big Three” categories that luxury companies can usually rely on to bring in the steadiest cash flow.

Louis Vuitton has long been LVMH’s biggest cash cow, and perception problems with its monogram bags have begun to haunt the brand. Namely, customers at the highest end of the market, those who shop the most frequently and spend the most money, perceive Vuitton to be a brand that caters to a less sophisticated segment of the market, to put it delicately. When you pair that with a market that no longer makes Celine Luggage Totes and Trapeze Bags disappear off the shelves instantly (and with no super-buzzy replacement in sight from Celine), LVMH’s shift in strategy seems well-timed.

As we told you when the story first broke, LVMH’s strategy is to go after those big-fish customers that are now somewhat leery of its marquee brand. That means raising prices overall to discourage low-end customers and renewing the company’s focus on leather instead of monogram canvas. The first indicators of that strategy have already reached the public, including producing the entry-level Neverfull bag in pricey leather and introducing several all-leather bags with more limited use of the company’s logo.

Considering all of that, Marc Jacobs’ recent exodus from the brand comes at what may, in fact, be an opportune time. Even though Jacobs was generally an enormous boon to Louis Vuitton’s handbag business, it appears that his particular brand of magic was beginning to wear off. Fashion is almost always willing to reconsider a historic name with a new creative talent at the helm (hello, Celine), so if LVMH ever gets Nicolas Ghesquiere to sign on the dotted line, we might be in for some fun.

  • Jen

    Thank God they’ve caught on to why the monogram line isn’t selling to the ‘big fish’ anymore.

  • pe.riche.

    It seems as if LVMH has cut off it’s nose to spite it’s face. Rather than focus on the clientel that did purchase their products, it has decided to bite the hand that feeds them by increasing their prices to push certain buyers out of the market. Aspirational buyers are a niche market that drive the economy, because they are such a large segment of shoppers, and tend to show more loyalty than other niches.

    Also, I think LVMH assumed that the more financially sound shoppers would immediately flock to their stores because they raised their prices. Yet again, LVMH makes judgements about a certain market and its assumptions are reflected in it modest growth (despite buying up other luxury designers and owning a major chuck of Hermes).

    It’ll will be interesting to see if Arnault can stop this market slide before LVMH is calling for his replacement.

    • pe.riche.

      Too early, forgive me; *its and *its.

    • TL

      I was discussing this with a friend and said exactly the same thing. Not only is LVMH discouraging customers that could very well grow into being their main clientele. They did a poor job in assuming that raising prices will turn their older more established customers’ heads.

      I don’t think luxury consumers use price as an indicator of value as much they used to.

      LVMH will hopefully use this time to evolve the brand and turn it back into what it is meant to be.
      We have seen this happen far too many times in fashion.

    • Edia

      actually raising prices to cut off lower income customers is the strategy chanel went for and they had no problem thus far.

      also goyard seems to do very well with that strategy as well.

      i dont know why people always use lvmh as a scapegoat for all things evil in fashion when theres a whole bunch of other brands that are far more “evil” so to speak.

      • pe.riche.

        Ah, yes. But in addition to increasing their prices, Chanel also offers limited editions of their bags, as well as a beautiful range of colors and hardware for cyclical bags. Basically, Chanel increased their prices, but supplied the product to warrant a new price structure.

        LVMH isn’t so much a scapegoat as it is an excellent case study. Organizationally, they seem to be facing an identity crisis which is manifesting in their product line and decline in sales. And rather than evaluate where they failed to really protect their branding and image, they blame the consumer (and in business you learn that the customer is always right. And if they aren’t, you never openly admit it lest your forfeit your reputation).

      • Edia

        “Chanel also offers limited editions of their bags, as well as a beautiful range of colors and hardware for cyclical bags”

        so…theyre doing the same things as LV it seems.
        but i think youre right with the identity crisis. Im really curious about how lvmh is going to develop in the future..with all their designers moving from one brand to another and what not

    • a1016

      Sure, raising prices may not yield immediate results. It needs the collaboration of PR and advertising to establish a new image and wake up the long-left bigger spenders.
      Pricing is crucial in the luxury market. Many brands handcraft their goods, whether it’s Italy, France or Spain, it’s still handcrafted by artisans. But what differentiates them, it’s pricing. Hermes and LV, they are both luxury brands, but why do people of only certain financial ability shop at Hermes and not LV? Because of its price tag, Hermes not will, but can only cater for the bigger spenders. Whilst LV caters for a much bigger market. Branding is all about image, you buy a certain brand because you want to be associated with that particular image group. These brands have put the options out there, the choice still lies on the consumer.
      If these aspirational buyers are loyal, they will buy the bag regardless of its price. People are willing to save half a year worth of money for a LV bag. If they really want it, they will continue to save money for it. Whether it’s half a year or a year.

  • Nerdster

    Just to throw in an observation. There are people who buy handbags to contribute to their outfit or wardrobe as opposed to those who just buy handbags for the logo/designer appeal. I have noticed that a majority of people that buy LV are those people that do it just for the logo/designer appeal. I have seen and known so many people that seem to spend more money on their LV then pay some of their bills! In a way, it does give LV a reputation of attracting ‘a less sophisticated segment of the market.’

    It does suck that they would raise prices to get back the ‘big fish customers.’ The product would still be the same (logo, styles, colors). Why not produce less logo products and bring out a more diverse selection of products that may appeal to those people who truly appreciate a beautiful piece of art?

  • viennaprinzessin

    Every time I see a LV or a Coach handbag, I just think it’s a knockoff. Not worth my time or money.

  • Babs

    This article is very funny. Enough said.

  • tortina

    Not all Big Fish are going to be reeled in :D

  • LadyBaginess

    Lets face it LV has been making tons of money off the canvas bags,v minimal leather is used and profits are high…because of this its been v easy to copy hence all the fakes that have flooded the market since long…this has definitely damaged its rep..more than others i feel..its the people that have bought THESE bags that have damaged its image…not people who pay for them…they should be cherished especially with the economy the way it is…because LV has a very high recognition as an expensive bag due to its logo im sure its the most popular fake bag sold…..i actually think its gone down because of its unimaginative line of bags…which havent really kept with the times when compared to other brands…most of the bags i call old lady bags lol…i actually prefer to see them on older women as i feel it suits them well but for the younger crowd there arent many cool bags from LV to chose from…i personally am not going to pay a bomb for a canvas non leather bag especially now that its so common and faked…LV should phase out a lot of these canvas ones retaining only the iconic ones…and make a completely different line of leather bags which dont have to be overpriced like hermes but well designed so everyone would want one…i have 3 LVs a sobe clutch black. a vernis amarante Avalon and a grand bleu pm alma also vernis..i always get a positive response and ilike the way the logo is there on the vernis but not so obvious as the canvas which screams at u…im not a fan of the W bag it is a glorified canvas bag…even with the fine leather ..the reason we are seeing it on so many celebs is because they get it FREE…Saying that i find men love LV bags i get a lot of appreciation from guys when i carry my LV as well as women…LV has a lot going for it..it just needs more IMAGINATION in the design dept

    • M Green

      The cost of a handbag is not leather vs. canvas. Most of the cost is marketing, store location, and labor. When you buy a designer handbag, you primarily purchase the experience of buying a bag on 5th ave, on Rodeo Drive, or Avenue Montaigne. You purchase the experience at the store, the nice box and quality shopping bag, the drink the SA offers you. As a former Gucci employee, I can tell you that our manager would remind us of this fact every morning. Customers don’t buy a bag: they buy a bag and everything else around that shopping experience.

  • Elka

    I’m a lower end client, French bag stamped made in USA, no thank you.

  • Jen

    well this article and comments have made me quite distraught. I have purchased 3 LV bags within the past year and I absolutely love them. I am a school administrator and have worked for 20 years in the field. I have wanted the LV mono bags since I was a young girl but could never afford them. I feel like these designer bags are bags of a lifetime in comparison to mid price point bags like my closet full of coach, longchamp, and mulberry. I LOVE the Celine luggage tote but in my opinion that bag is so unattainable for a modest mom of three! (a girl can dream though!!!)

    I have been lucky enough to score a few high end treasures from Gucci, Prada, and Fendi in the past, but I still adore the LV bags (speedy 35 damier ebene; neverfull gm; and the bandouliere 40) and hold them in high esteem up there with chanel and hermes.

    To hear that LVMH has the attitude that someone like me is not their intended market is insulting! My money is as hard earned and as green as anyone else’s. How dare the company not embrace their consumer!!! Perhaps, I need to reconsider where I drop thousands of dollars the next time I am in the market for a luxury handbag…..

    • a1016

      I don’t think LVMH or the luxury market is trying to discriminate any kind of clients, money is money. But as a business, it needs to make sense and think long term. One big spender who shops once every season is financially more beneficial than 10 moderate spenders who only shop once a year.
      LV’s canvas is still one of the most affordable and recognisable. For those who are keen to get a slice of it, will continue to buy it – regardless of the price increase. Prices of handbags are forever increasing, it’s not just LV.

    • M Green

      LVMH is not discriminating against you! The strategy is to encourage people like you who started with a mono or damier canvas piece to move on to the next segment: epi leather or vernis.

  • Diane

    as long as your bag is not FAKE then we’re cool. How dare they treat their customers with such condescension. It reminds of Burberry a few years ago and how they called it “chav” chic. If LV wants to increase their game with better handbags that’s fine but don’t make it seem like your better than you’re clients. It’s your clients that help you make your billions.

    • M Green

      That’s not what is happening… they are a business rethinking their product. Just like Apple or VW… they are changing their product to be better positioned on the market.

  • Natalie

    I am not surprised! I have owned two LV monogrammed bags and both have had quality issues (stress fractures — cracking the vinyl). They replaced my first bag, saying that the bag had design flaws. But my second bag was “punctured” by something….according to quality repair specialists who made that diagnosis looking at a digital photo. Their customer service is anything but five star. I will no longer buy LV products… And they wonder why their sales are decreasing!!