LVMH's star brand Louis Vuitton has no limits to its potential
Louis Vuitton is moving up a gear. LVMH's star house has finally found a successor to Virgil Abloh to head the men's collections, which have been without a creative director since the death of the iconic American designer in November 2021. American pop star Pharrell Williams will take over. With his eclectic profile as a musician, author, performer, producer and stylist, his appointment marks a change of tempo for the house, which is more than ever committed to the lifestyle field. This is a bold move from the new CEO Pietro Beccari, as he takes the group's powerhouse to its next stage.
Succeeding Michael Burke, the Italian manager has just left Dior to take over the reins of Louis Vuitton at the beginning of February. It is, obviously, a well-oiled machine that has inherited. As Bernard Arnault, the head of LVMH, proudly proclaimed at the end of January when he published the annual results for 2022: "for the first time, Louis Vuitton will exceed 20 billion euros in turnover". In just four years, the star brand of the French luxury group has doubled its sales, with record profitability, despite the coronavirus pandemic. Thanks to a well-honed strategy, constant diversification, a vast network of directly operated shops and global communication, it has all the assets in hand to begin a promising new chapter.
According to Bernstein's estimates, the label's sales will be close to 22 billion euros, while its operating profit (Ebit) will rise to more than 10 billion in 2022 with a margin close to 50%. Today, it has 33,000 employees worldwide and plans to recruit 9,000 new staff within three years.
It has 460 shops in around 60 countries, including France, South Korea, Japan and the United States. As for production, it relies on 19 workshops in France and three sites in Italy, including a shoe factory.
"The luxury label par excellence"
The secret of his success? "It depends largely on the scale of the business. Luxury is a fixed cost business. The bigger a brand is, the more it can spend on doing things right: more beautiful boutiques, more communication, more prestigious initiatives. Success also depends on impeccable price and distribution management, exclusive retail, totally banning outlets, discounts and promotions. The combination of all these variables converge to make Louis Vuitton the luxury brand par excellence," summarises Luca Solca, head of the luxury sector for Bernstein.
According to estimates, Louis Vuitton has nearly 90 million customers worldwide. Omnipresent throughout the year with each new campaign and new products, the brand benefits from unrivalled media firepower, as shown by its current operation on all fronts (shops, advertising, social networks, etc.) for the launch of its collaboration with the Japanese artist Yayoi Kusama, including high-impact installations in the main luxury cities. Another example was the concert by Catalan star Rosalia, organised in January in the Cour Carrée of the Louvre in Paris to unveil its men's collection.
"It's a multidimensional brand. The trunk maker was first created around the world of travel, then around the art of living. It is now developed in all segments, and each time it diversifies, it makes a point of being the best in everything", underlines Yves Hanania, founder of the consultancy firm Lighthouse and co-author of the book 'Le luxe contre-attaque, accélérations et disruptions' (Dunod edition). Starting with its historical reputation and its recognisable logo with the initials LV intertwined, Louis Vuitton has been able to build a coherent universe over time, created step by step, becoming the leading luxury brand in the world.
We tend to forget it, but the diversification of the house founded in 1854 is recent compared to its long history. For example, the company has only just entered the children's clothing market with its very first baby collection, which will be launched in early March. After travel and leather goods, the first real foray into fashion came with ready-to-wear, launched in 1997 by New Yorker Marc Jacobs. From then on, the range gradually expanded to include accessories such as watches (2002), eyewear (2005), jewellery (2009) and perfumes made in-house (2016).
Over the years, the brand has extended its universe to lifestyle with its very first furniture collection created in 2012, calling on the most prestigious international designers. This was followed by tableware and lifestyle, stationery, technological objects and more. While cultivating its expertise in travel, also through publications, such as its famous "City Guides" initiated in 1998, Louis Vuitton continues to explore new areas. In particular, gastronomy via the restaurants opened in Osaka and Tokyo in Japan between 2020 and 2021, the ones entrusted to starred chefs last year in Saint-Tropez or Seoul, the pop-up tea room tested in its Lille boutique or the ephemeral café and chocolate shop installed in 2022 in the LV Dream space, within its Paris headquarters.
As LVMH CEO Bernard Arnault reminded us last year when the group published its 2021 annual results, Louis Vuitton is "more than a fashion company". "It is a creative cultural company that reaches a very large customer base, from the youngest, with Gen Z, to more mature customers. A culture brand with a global audience, something completely different to what you see in fashion. An image accentuated by the artistic activities of the Louis Vuitton Foundation, created in 2006, and the brand's countless collaborations with the art world.
Creating rarity and controlling distribution
But behind this cultural image and its broad scope, Louis Vuitton is also and above all a war machine with a powerful commercial strategy and logistics. "Louis Vuitton has a wider and more creative assortment than its competitors, with a very rapid renewal of its collections, but never in large volumes. This requires very precise stock management. They know how to manage rarity. This gives a dynamic and a desirability", explains Yves Hanania. "In short, the brand offers more models, but in smaller quantities of products, all of which are aimed at different customer groups with a wide range of prices."
Another crucial element is the direct sales network, of which Louis Vuitton has full control. "They have different formats, from flagship stores of impressive size to single-product shops, which cover the different geographical areas of luxury very well, often benefiting from access to the best locations," notes the consultant. This of course allows the label to manage its price positioning as closely as possible, activating the lever of increases according to the destinations. "Beyond the product, the label also offers a service and high-end experiences targeted for each segment by multiplying the points of entry," he continues.
Louis Vuitton shops stand out thanks to their ultra-personalized welcome and service. The brand has been a pioneer in customer care, with sophisticated and integrated customer relationship management at the global level.
Speaking of the brand's clientele, Bernard Arnault recalled in January that they were "largely loyal customers who come back", and that the company has a habit of "prioritising customer service". In particular, Louis Vuitton has been able to manage its local clientele, which has helped it to resist during the pandemic, faced with a decline in tourism, notably rich tourists from Asia and Russia.
Pharrell Williams, Virgil Abloh's successor
For Pietro Beccari the new head of LVMH's flagship house, 2023 will not be without challenges. He has just taken up the first one by appointing Pharrell Williams to head the men's collections. The executive and the rapper have known each other for about ten years. The singer-songwriter, who is also a fashion entrepreneur with two streetwear labels, has collaborated with Louis Vuitton in the past, in 2004 and 2008, notably when the manager was executive vice-president of marketing and communication at Louis Vuitton.
Pharrell Williams was also a close friend of Virgil Abloh and is well known in the luxury world. In fact, he was spotted in January in the front row of the Kenzo show (another LVMH house). Above all, he has multiplied his collaborations in recent years, notably with Adidas, Chanel, Uniqlo and Moncler, of which he will be one of the stars at the Genius event in London on February 20. This appointment marks the first major move on the part of Pietro Beccari, taking the brand resolutely into a new dimension. A decision that could have repercussions on the women's collections, which have been entrusted to the expert hands of Nicolas Ghesquière for the past ten years. Could it be that Louis Vuitton is taking this time to consider a change of creative direction for the women's ready-to-wear?
For the rest, the new boss will not fail to expand into new areas of work. As his predecessor recently hinted, the next step could well be the opening of a first Louis Vuitton hotel at the address of its Paris offices, opposite the Samaritaine. "The brand has been shaped over the past decades to accompany the lives of its wealthy customers. So what could be more natural than to think of a hotel and why not a tailor-made travel agency in line with the history of Louis Vuitton?" suggests Yves Hanania, betting on the house's as yet unspoken potential. "The power of a brand, when it is well managed and nurtured, has no limits," he concludes.
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