Background of the Case: I came to China for the first time in year 2005 and my first impression of China specially Beijing was full of pre olympic undergoing Construction, heavy pollution,Commuters on the Subway with a dream of doing big in this City and my Favourite “ Zhongguancun: Silicon Valley of the Northern China. I never heard about this Brand Louis Vuitton back in my home country or rarely I see people carrying this Brand in China that time.But after living in China for more than 16 Years I have seen personally how luxury brands has penetrated in China .But for this case study my interest point came when I saw a difference in the Consumer behaviour in China with the west where Louis Vuittion has been favourites of the Elite Class and the same Brand in China became the favourite of the middle class where people doing normal job also saves money to buy luxury brands like Louis Vuittion.
Chinese consumers are quickly becoming the world's largest group of buyers of luxury goods, grabbing up products across all segments of luxury, both at home and overseas. Eighty per cent of the growth in luxury goods sales since the 2008 financial crisis has come from Chinese consumption. Even taking into account the potential obstacles such as slowing economic growth and government-led anti-graft measures, all forecasts predict the country's luxury consumption will continue to expand.
Although China is second to none when it comes to buying luxury goods, it barely registers when it comes to making them. Today's Chinese consumers are infatuated with European brands. Recently I spoke to more than 20 of my middle and upper-class Chinese Friends to name their top five luxury brands and more than 18 of them failed to mention a single Chinese brand. The winners as expected were exclusively French or Italian fashion brands: Chanel,Louis Vuitton ,Dior , Prada ,Gucci and others.I also asked them about Maotai Wine as a brand and many of them missed treating as a Brand which really surprised me.
Louis Vuitton founded his company in 1854 in Paris. Few Chinese know that the starting business of Louis Vuitton was “The Luggage” for travellers and before starting his business Louis was an assigned packer of the Royal Family and Elite in the French Society. After an innovation: the trunk, Louis Vuitton’s has came with the advantage of being flat and is able to stack some of the means of transport and be sealed with a cotton cloth varnished.The luggage was quickly copied that driving the firm to innovate in terms of design to achieve a unique product.They invented the famous checkered canvas (1888) and Monogram (1896 by Georges Vuitton).
Till now these are still the best-sellers of the Brand.A century and a half later, the legend of Louis Vuitton continues, coupled with an international reputation in the image of the Monogram canvas that since 1896 known for unparalleled success and is one of the cornerstones of modern luxury and became one of the first Chinese consumers appreciated brands with a long history.
High Penetration in The Asian Market Before Coming To China Mainland:
Before the Louis Vuitton started expanding in China it has already good notoriety and a strong image in Hong Kong, Taiwan and Japan. The penetration rate of Louis Vuitton bags among Japanese women in the 2000s reached 40%. The label LV was already a real social phenomenon in Asia (in France the Home Country of LV the penetration of Louis Vuitton bags was only 2% in 2000).
Source of the Graph : LVMH Group Website
United States remain the biggest market of the Louis Vuitton (LVMH Group) and Asia comes the second with maximum share of revenue coming from Japan and China with China growth taking 22% in the year 2022 amid an economic slowdown in the west.
The Flagship Product In China : The Bag
Chinese Consumers appreciate an item that will never be out of fashion. LV wants to be always at the top of the innovation, but in reality, these bags have not changed in China so much.Unlike its competitors (Dior, Prada…), which launch every year a new collection.The Chinese middle and upper class is able to bleed to afford a unique bag in their life, so no question of the change before 5 years.The bags still represent 95% of the Louis Vuitton business in China.
Exclusive distribution By Louis Vuitton Official Store in China:
China has the big issue when it comes for fake goods and High End luxury brands and always the target of the Fakes which can be even found on online ecommerce websites and offline unofficial stores selling luxury goods. Louis Vuitton control the distribution which is the Key to the authenticity of the Brand product. The Chinese Consumers want to be reassured when they buy an expensive and luxury product of the authentic and also the buying experience from 62 LV stores which are located at upscale shopping malls in the Chinese Cities, that’s why LV has launched its own retail everywhere in China. Most of them will be able to buy only ONE Louis Vuitton in their life and it became very important for Chinese Customer about the whole shopping experience.
French Elegance ,Creativity and Communication:
Marketing is the core business of LVMH. The brand is quite discreet but presents everywhere in its target audience. At the Airport, Shopping center, and on the Internet which we will discuss in details (LV was the main topic of discussion in the Chinese SNS Renren and Kaixin for 2010 in China which moved to famous ecommerce Website like JD to live streaming like Red Book (Xiao Hongshu in 2021 )
Louis Vuitton does not use media such as radio and television, The company does not use either public display, except in places like airports. Vuitton is very active in women’s magazines and in the Offline media, such as organizing and sponsoring events.
Made in France
LV communicates everywhere in the world about “Made in France” and their know-how in luxury, it is an argument that the core audience appreciates in China. The main customers of Louis Vuitton stores in Paris are Chinese Tourists. France is a shopping place for Chinese tourists and every year thousands of Chinese invade Louis Vuitton’ shops in Pairs.
In Paris, the first attraction for Chinese tourists is Shopping and especially Luxury shops like the Vuitton Shop in Champs Elysée. They are already the best buyer of items of the brand. They like buying in France because they have the guarantee that the bag is a “real” Louis Vuitton from France.In any shop of LV in France, you will find 2 saleswomen speaking perfect Mandarin to communicate with these customers.This is how much LV put importance to the Chinese Consumers not only in the Mainland Market but also in their home country.
Online sales are key in China
In 2020, the online sales of luxury brands in China market gained 88% growth, reaching US14.1 Billion, accounting for 21% of the whole market share. In 2021, online sales of Chinese luxury goods experienced even faster growth, with a 75% growth and reaching US 24.7 Billion (more than 150 billion RMB), which accounted for 26% of luxury China market sales.
While almost all luxury categories suffered from the pandemic’s impact, categories with higher online channel penetration performed relatively better. For instance, the luxury beauty category, with 50% online penetration only saw a decline of about 6%.
Louis Vuitton’s strategy in China
On July 24th, 2012, LV opened its largest exclusive store in mainland China—Louis Vuitton Maison Shanghai, which was a significant move in the brand’s China strategy. As of 2023, LV operates 62 offline stores in mainland China, as well as various online sales channels, including its official brand website (louisvuitton.cn), brand app, WeChat mini-program, JD mini-program, and livestream on Xiaohongshu.
LV taps into live shopping
In 2020, LV made its first live broadcast on Xiaohongshu, a popular social commerce platform in China. The broadcast was filmed at LV’s Plaza 66 House Maison in Shanghai, which is not only the largest LV store in China but also the 16th Louis Vuitton House Maison in the world. The hashtag of the brand’s live session had over 8 million views on Xiaohongshu, but the actual number of viewers during the 1-hour period livestream was only 15,000
Source: Xiaohongshu, Chuxi Zhong appears in LV’s Xiaohongshu livestream room
Additionally, On June 24, 2021, LV cooperated with NYLON to livestream its 2022 Spring/Summer Men’s Wear Show on the short video platform “Kuaishou”, turning into the first luxury maison to do so. The event drew a cumulative total of 3.9 Billion .This partnership exemplifies Louis Vuitton’s commitment to the Chinese market, particularly in engaging with younger audiences and expanding its reach.
The French maison’s first cooperation with a Chinese e-commerce platform
Louis Vuitton’s e-commerce strategy in China has evolved over time, but historically the brand has been cautious in its approach to digital sales in the country. In the early days of e-commerce in China, Louis Vuitton was hesitant to sell its products online due to concerns about counterfeiting and the risk of damaging its brand image.
However, in recent years, Louis Vuitton has begun to embrace e-commerce in China as a way to reach more consumers and capitalize on the growing online shopping trend. The brand launched its own official online store in China in 2017, which offers a wide range of products including handbags, shoes, and accessories. This move was a significant step for the brand, as it allowed Louis Vuitton to control the customer experience and ensure the authenticity of its products.
Louis Vuitton has also been selective about its partnerships with third-party e-commerce platforms in China. The brand did not join luxury marketplaces such as Tmall and JD.com until recently, as it was concerned about diluting its brand image and competing with its own retail stores. However, Louis Vuitton eventually realized the potential benefits of partnering with these platforms, such as increased visibility and access to a wider audience, and began selling on Tmall in 2020.
In 2021, JD.com and Louis Vuitton announced a strategic partnership to expand the French luxury brand’s digital presence in China. The partnership included several initiatives, such as opening a Louis Vuitton flagship store on JD.com, launching a “white-glove” delivery service for JD’s “Top Tier” customers, and collaborating on social commerce initiatives, including live-streaming events on JD’s platform.
Louis Vuitton Marketing Matrix
LV employs a multi-channel approach to reach its Chinese customers, both online and offline. The luxury brand is active on popular social media platforms, including Xiaohongshu, Douyin, Weibo and Wechat, where it promotes its latest products and releases TV commercials. Recognizing the significance of brick-and-mortar retail in shaping brand image, LV expanded its presence in China in 2022 by opening new stores in Taiyang Taikoo Li, Chengdu, and Fuzhou.
Weibo is another one of the channels that LV uses to attract potential consumers. As of March 2023, LV’s Weibo account has reached more than 8 million followers. One example of its popular posts is about the collaboration with the Japanese artist Yayoi Kusama, with gif pictures featuring celebrities getting up to 136,000 likes.
Source: daxue consulting, posts about LV X Yayoi Kusama, collaborating with Liu Yifei刘亦菲, Wang Jiaer王嘉尔 on Xiaohongshu/Weibo”
Douyin
From 2019 to 2023, the size of short video users in China grew from 648 million to 1 billion. As a result, it is not surprising that international luxury brands have set up their official Douyin accounts, one of China’s most popular short-video platforms. LV is no exception, and its Douyin account features include spokesperson advertisements and product concept sharing. All promotional and product videos on Douyin are optimized for vertical screens to provide a better viewing experience for netizens.
WeChat account
LV’s WeChat account is also used to communicate the brand’s culture and values to its Chinese consumers. In addition to new product releases, LV also shares articles on topics such as sustainability, craftsmanship, and the brand’s history. With an average of three articles per month, LV is able to maintain a consistent and engaging presence on the platform, while also keeping its followers informed and entertained with a variety of content.
Offline marketing
In addition to its strong online presence, Louis Vuitton is also expanding its offline presence in China with new store openings and unique dining experiences to provide a memorable luxury experience for its customers. Louis Vuitton expanded its presence in China in 2022 with the opening of new locations in Taiyang Taikoo Li, Chengdu, and The Mixc in Fuzhou. The Taiyang Taikoo Li location marks the third Louis Vuitton House Maison in mainland China and the first in Southwest China, while The Mixc store is the newest addition to the brand’s retail portfolio. In November, Louis Vuitton also launched its fifth restaurant worldwide, “The Hall”, which is the brand’s first restaurant in China and the fourth in Asia.
Source: SOHO, “LV THE HALL”
Pop-up stores have become an increasingly important element in Louis Vuitton’s offline marketing strategy in China. They offer a unique and temporary shopping experience, creating a sense of exclusivity and urgency for consumers, while also allowing the brand to test new markets and experiment with different store concepts. The success of Louis Vuitton’s pop-up stores, such as the Yayoi Kusama campaign, has demonstrated the value of this approach in attracting and engaging Chinese consumers.
Source: SOHO, “Louis Vuitton x Yayoi Kusama pop up store”
How LV fights against brand dilution
Brand dilution refers to the blurring of a luxury brand’s image and value among consumers. Luxury brands often use entry products such as handbags to expand their influence while high-net-worth individuals pursue uniqueness and value preservation. To resist brand dilution, LV uses a price increase strategy to prevent its products from becoming too common and give the impression that they are valuable and worth preserving.
On February 18th, LV Announced its first global price adjustment in 2023, taking into account changes in production costs, raw materials, transportation, and inflation. In fact, the above reasons are not all. According to data from UBS, the average price increase of luxury goods such as LV in the past 20 years has been 2.5 times the inflation rate.
Luxury goods have a small elasticity of demand among their buyers, who see price increases as a way to preserve value and worth investing in. Increasing prices also help maintain a brand’s scarcity and uniqueness while demonstrating confidence in the market.
Conclusion:
- Despite a decline in China’s luxury market in 2022 due to the pandemic, it remains the most promising market for luxury goods, and online sales are key in China’s luxury market.
- LV has 62 offline stores in mainland China and various online sales channels, including its official brand website, brand app, WeChat mini-program, JD mini-program, and livestream on Xiaohongshu.
- LV is engaging with younger audiences and expanding its reach by tapping into live shopping and partnering with popular social media platforms, such as Xiaohongshu, Douyin, Weibo, and WeChat.
- Louis Vuitton has been cautious in its approach to digital sales in China but has started to embrace e-commerce in China as a way to reach more consumers and capitalize on the growing online shopping trend.
- Louis Vuitton has been selective about its partnerships with third-party e-commerce platforms in China and recently partnered with JD.com to expand its digital presence in China.
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