Louis Vuitton Attracts More High-end Clients by Raising Prices

July 28, 2016

Jean-Jacques Guiony, CFO of Louis Vuitton’s parent comany LVMH, announced on a conference call Tuesday that the brand will be shifting towards higher priced accessories due to higher quality materials.

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In recent months, price tags on Louis Vuitton bags have increased by as much as 12 percent in the effort to increase sales.

Vuitton’s growth has slowed in recent months because luxury-hungry consumers in emerging markets like China are becoming rapidly more sophisticated; in essence, they want subtle leather bags instead of the logo-covered canvas pieces that are Vuitton’s bread and butter, in addition to being the brand’s most visible symbol. So how, exactly, might a price hike help?

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As Passariello mentions, much of Vuitton’s recent success has been predicated on entry-level luxury consumers’ lust for the brand’s flashy canvas pieces. That group will be the one affected the most by Vuitton’s price-increase strategy because they’re the most price-sensitive segment of Vuitton’s consumer base; in losing some of what the brand seems to consider riff-raff, execs are hoping to gain new customers at the top end of the market. After all, Hermes increases its prices constantly (or at least it feels that way) and is growing at record rates, perhaps because the type of customer the brand attracts doesn’t care about an extra $500 on top of a $5,000 purchase. If Vuitton can’t buy Hermes, it seems hell-bent on trying to become its twin.

Hermes, of course, doesn’t have much of an entry-level segment of which to speak, which is part of what makes it attractive to the most cash-flush of luxury consumers. Even with the Birkin as in-demand as it ever been, the brand walks the exclusivity-profitability tightrope better than anyone else in the business, and it does so without relying on $190 key pouches to keep the bills paid. Almost no other company can say that, but the second segment of Vuitton’s reported growth strategy – emphasizing its subtler, more expensive leather bags and accessories over its famous canvas – indicates that it’d like to at least attempt to become a similar brand, at least in the eyes of the purchasing public. (Those keychains and card cases, of course, will still be readily available, just at a slightly higher price.)

From Wall Street Journal @Aitbags

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