French luxury good conglomerate, LVMH, is currently under fire as concern about the future of the company has been raised. Louis Vuitton, which makes up more than half of LVMH’s financial profits, is suffering from slow sales. [1]
Louis Vuitton suffers from brand saturation as the company has marketed itself to be a luxury brand that is available to middle to high-class consumers. This is a mistake because if middle-class consumers are hurt by a slow economy, Louis Vuitton’s profits will follow. The choice to market to a broader market has also reduced the brand’s prestige and has been affected by the production of counterfeit products. This failure to occupy a niche market and create new designs is now hurting the company, whereas ultra-luxury brand, Hermès, does not share this issue.
Despite this pessimistic outlook, LVMH can still recover. The conglomerate owns major fashion house, Dior, which could be a major outlet into the ultra-luxury market. Louis Vuitton now faces the choice of continuing with its current strategy or revamping the name into a more prestigious brand. While I believe the latter option is viable, it proves to be a gamble as there is no guarantee consumers will follow.
Original article: Reuters Canada
____________
[1] LVMH’s First Half of 2013 Financial Report
Leave a Reply