Caroline Gras

70754163

28/09/2016

To: Yves Carcelle, chairman and CEO of Louis Vuitton

From: Caroline Gras (70754163)
Subject: Louis Vuitton in Japan
Date: 28/09/2016

Over the past 10 years, Japan was the most profitable market for Louis
Vuitton, the worlds leading luxury brand. Present on this market since the
mid-70s, Louis Vuitton always paid an important attention to However,
due to the 2008-2009 economic crisis, LVs sales in Japan have been
declining. The purpose of this paper is to define what made Louis Vuittons
success story in the Japanese luxury market in order to understand sales
decline and to find out what could be the key to Louis Vuittons
continuing success in the Japanese market.

ENTRY OF LOUIS VUITTON IN JAPAN

The French luxury brand, decided to entry the Japanese market in 1977
with a challenging strategy: although other foreign firms had chosen to
distribute their products via licensing, Louis Vuitton chose to enter the
market without a local distributor, establishing its own subsidiary in Japan
and exporting directly its products from France. LV so became the first
international luxury brand to open its own shops-in-shops in Japan. This
strategy allowed the company to have a strict control over their retail
network and to adapt to Japanese consumers, relying on Japanese
management who was more likely to understand Japanese consumers
behavior.

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After opening two stores in Tokyo and Osaka in 1977, Louis Vuitton
inaugurated its first Japanese retail store in Tokyo, in 1981. Both shops-inshops and dedicated boutiques were based on interior design in order to
provide a French Luxury Experience to local customers while controlling
price, products, sales team... This approach had been successful since, in
1980, 20 million Japanese women owned a bag of the brand. By 2007, the
French brand directly owned 54 stores in Japan.
To strengthen its presence in Japan, Louis Vuitton utilized the Japanese
market as a laboratory to test its marketing and retailing strategies. First,
thanks to the few regulations in terms of architecture, Louis Vuitton has
been able to design amazing stores that fully represent the brand unique
vision of luxury. Secondly, Louis Vuitton has adapted itself at the Japanese
culture in order to reach even more local consumers. To do so, Louis
Vuitton launched in 2003 a limited edition in collaboration with a famous
Japanese artist, Takashi Murakami. Finally, from a managerial point of
view, the French brand decided to hire a new Japanese CEO in 2006, CEO
who had had to be Japanese and aware of Japanese trends, culture, and
ways of consuming.

LOUIS VUITTON AND THE JAPANESE FASHION

LUXURY MARKET
The Japanese fashion luxury market is a very mature and concentrated
market as Japan has the highest luxury spending per capita in the world.
Women were said to have a psychological need to own something

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considered to be beautiful and faced a real pressure to own luxury

status-driven brands.
As Japanese consumers are very concerned by the quality and the
uniqueness of their possessions, Louis Vuitton is facing a very competitive
environment in Japan (see exhibit 7). Indeed, its competitors such as
Gucci, Prada or Burberry, made more than 30% of their overall revenue in
Japan in 2005.
In this specific environment, what has made Louis Vuittons business
model successful?
One of the main reason that has made LVs business successful in Japan is
the way the brand managed to adapt to Japanese consumers culture, their
needs and their wants. Indeed, Japanese market attached a great
importance to the product quality and to their social status. Louis Vuitton,
thanks to its marketing strategy, managed to match Japanese grouporiented culture with its products (see 4Ps appendix).

OPPORTUNITY AND CHALLENGES FACED BY LV

IN JAPAN
Louis Vuitton had lots of opportunities in Japan as it had been proved that
45% of luxury goods produced worldwide ended up in Japan. Moreover, in
2004, 55% of LVs revenues came from Japanese consumers. However, as
the market was growing, it was getting mature, bringing new challenges
and opportunities to the French brand.

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The first challenge faced by Louis Vuitton in Japan was the consumers
preferences shifting because of the entrance of new competitors such as
Zara and H&M. If Japanese consumers were still attached to high quality,
the young generation was not demanding for high prices anymore and
was looking for affordable good quality products. This phenomenon gave 2
opportunities to Louis Vuitton: first, the wealthy old generation that gained
an increasing purchasing power as the Japanese population is aging, and
secondly, the opportunity to offer the Japanese market inexpensive luxury
products such as ready-to-wear collections.
Another challenge faced by LV is brand dilution and loss of its luxury.
Indeed, as in 2007, more than half of Japanese women was possessing a
LV item, the brand had become ubiquitous, losing its luxury aspect. To
overcome this problem, Louis Vuitton decided to launch limited editions
in association with Japanese designers but this strategy began to lose its
appeal as it had been overdone. To continue its expansion, Louis Vuitton
saw new opportunities in either opening stores in middle-size cities or
growing its consumers base by launching new lines such as children
collections.

THE ECONOMIC CRISIS, NEW CHALLENGES AND

HOW TO OVERCOME THEM
The global financial crisis is going to bring new challenges for Louis
Vuitton. Indeed, purchasing power and demand declined and people
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lowered their expenses in luxury products, favoring competitors such as

Zara or H&M.
To counter consumer loss and sales decline, Louis Vuitton can consider 3
options: lowering its prices in order to enlarge customers base, refocusing
on high quality and on the essence of the luxury brand or extending the
brand via new collections and new distribution places such as small cities
and e-shop.
The best solution for LV could be recreating a real luxury experience for its
customers in order to make LVs products shiny, exceptional and desirable
again. The aim of this strategy wont be to gain new customers but to
keep the loyal customers and to make them willing to pay more. To do so,
Louis Vuitton will have to focus on product development, CRM & customer
experience, to provide customers as much satisfaction as possible, and to
remind them about the quality, the values and the uniqueness of its
products.
To put those values back on stage and to regain its luxury aspects in
Japan, Louis Vuitton will have to act on its products, on their promotions
and on the distribution channels. First, limited editions should be less
frequent and the brand should focus on worldwide collections. In Japan,
Louis Vuitton could launch a dedicated product range to make Japanese
consumers feel privileged. Then, to promote the new marketing direction,
LV could consider doing a 360 marketing and advertising campaign with
Japanese celebrities and fashion-bloggers to make the brand attractive
and fancy again. Concerning the distribution channels, Louis Vuitton
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shouldnt consider opening an online store, which is too mainstream and

too accessible for a luxury brand. LV should focus on the in-store
experience, providing customers new services that could involve them
even more into Louis Vuitton experience (customized products).
Finally, we can see in exhibit 3 that share percentage of Japan in the total
revenue has been decreasing between 2006 and 2008. It is time for Louis
Vuitton to become less dependent of the Japanese market and to find
other place to invest and to develop.

Words: 1204

APPENDIX
SWOT OF LOUIS VUITTON IN JAPAN

STRENGHTS:

Worlds Number one luxury

Brand
Popular and profitable in
Japanese market

WEAKNESSES

Expensive: Brand product not

affordable to the average
consumer
Large number of luxury
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Recognizable brand and logo

Efficient management practices
Quality products and Lifetime
free repairs
- High Productivity and quality
control standard
- Consumer loyalty
- Collaboration with well-known
Japanese Artists
- Many Louis Vuitton stores in
Japanese cities
OPPORTUNITIES:
- Evolution of ageing of Japanese
population: wealthier older
women
- Socio Cultural relations with
fashion
- Constant innovation and support
- Ready-to-wear collections
- Important middle-class

28/09/2016

competitors
Decline in sales due to global
economic recession
Strong reliance on Japanese
market

THREATS:
-

Worldwide Counterfeiting :
falsification of brand logo and
market dilution

Rising costs of labour in Europe

resulting in increased cost of
production

Sales are cyclical and have a

correlation with Economic
conditions

Competitors: other luxury brands

and lower range brands

Over dependence on the

Japanese market

Changing taste of customer

preferences

Keeping control of multinational

business

Brand dilution

SWOT by Caroline Gras & Natalie Yap

4Ps
PRODUCT:

Absolute High quality

French manufacturing
No licensing

PRICE:

Prestige price
No bargaining sales
Almost no discount

PLACE:

Selective channel strategy

Only a few original stores and
shop-in-shops
Strategic stores located in the
prestigious sites

PROMOTION:

Almost no LV advertisement on
TV
Fashion print magazines or
catalogs
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Communication strategy built

on brand prestigious image

4Ps by Caroline Gras

Competitors

Positioning map by Aaron Lattimer