Being popular in China seems attractive to many luxury products, but – argues retail analyst Shain Rein in CNBC – Louis Vuitton is becoming so popular, it might wipe away its attraction as a luxury asset. What should Louis Vuitton do?
My firm conducted interviews with several dozen mega wealthy with investible assets of more than $10 million. The majority told us they no longer wanted to buy Louis Vuitton. As a woman in Beijing, who is worth billions, said, “Louis Vuitton has become too ordinary. Everyone has it. You see it in every restaurant in Beijing. I prefer Chanel or Bottega Veneta now. They are more exclusive.”
Soaring wealth and obsession with luxury products provides huge opportunities for luxury retailers. The number of Chinese millionaires are estimated to more than double in the next five years. The Hurun Report estimates there are 271 billionaires, up from 189 in 2010. That growth is also causing challenges for Louis Vuitton and other historically dominant players like Zegna and Omega to maintain market share because the truly wealthy no longer want to buy the same fashion brands everyone else has…
To stave off competition from very exclusive brands, and premium brands like Coach, Louis Vuitton is going to have to spend more on marketing to maintain its exclusivity. So far it has kept ahead of the curve, launching multi-story flagship stores in key shopping areas and marketing initiatives in conjunction with the Beijing National Museum.
Celebrity endorsers like Angelina Jolie also help add luster. These initiatives are key to maintaining status but will become increasingly costly, squeezing margins, as rent and labor costs go up.
Louis Vuitton’s parent group, LVMH, should consider more acquisitions at the higher end to capture wealthy consumers tiring of its flagship brand. It has bought stakes in Hermes but should try buying high-end brands outright to capture the truly wealthy segment.
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