Is Louis Vuitton too popular in China?

Being popular is proving to be a bad thing for luxury retailer Louis Vuitton in China. The brand sells so well there, which is its second-largest market in the world, that it is becoming too common.
Lately, instead of China’s wealthy, the middle class has been fueling sales at Louis Vuitton.
There are tens of millions of Chinese women who aspire to buy a Louis Vuitton handbag and millions are actually buying it.
Their desire to save up to buy a Louis Vuitton is becoming a double-edge sword for the brand. It means it will have years of growth there as incomes rise but its mass appeal also risks undermining its exclusive positioning.
The truth is that Chinese High Net Worth Individuals no longer wanted to buy Louis Vuitton. As a woman in Beijing, who is worth billions, said, “Louis Vuitton has become too ordinary. Everyone has it. You see it in every restaurant in Beijing. I prefer Chanel or Bottega Veneta now. They are more exclusive.”
Soaring wealth and obsession with luxury products provides huge opportunities for luxury retailers. The number of Chinese millionaires are estimated to more than double in the next five years. According to the Shanghai Travelers’ Club, a luxury travel club for Chinese billionaires, 200,000 Chinese travelers in 2010 had the ability to spend more than $150,000 in shopping abroad during their leisure trip.
These super rich Chinese consumers are causing challenges for Louis Vuitton and other historically dominant players like Zegna and Omega to maintain market share because the truly wealthy no longer want to buy the same fashion brands everyone else has.
Wealthy consumers looking to differentiate from the masses provide an opportunity for luxury brands like Chloe, Hermes, and Patek Philippe that target the ultra rich. They are moving more towards inconspicuous consumption in handbags and apparel while becoming more flamboyant in auto purchases and jewelry to show status, which is why sales there of Ferraris and Lamborghinis are soaring.
One wealthy man in Beijing told me, “Everyone can buy Louis Vuitton now, but not many can buy a Bentley.”
To stave off competition from very exclusive brands, and premium brands like Coach , Louis Vuitton is going to have to spend more on marketing to maintain its exclusivity. So far it has kept ahead of the curve, launching multi-story flagship stores in key shopping areas and marketing initiatives in conjunction with the Beijing National Museum.
Celebrity endorsers like Angelina Jolie also help add luster. These initiatives are key to maintaining status but will become increasingly costly, squeezing margins, as rent and labor costs go up.
Louis Vuitton’s parent group, LVMH , should consider more acquisitions at the higher end to capture wealthy consumers tiring of its flagship brand. It has bought stakes in Hermes but should try buying high-end brands outright to capture the truly wealthy segment.
China is the market to win for luxury brands. Despite the rocky global economy the demand for luxury products continues to soar. Brands need to understand that China’s ultra wealthy are becoming more sophisticated and not just looking for flashy logos and brands that everyone has. Brands also need to understand that buying abroad in New York City, London or Paris is a true sign of social status for Chinese consumers: Buying in Shanghai or in Beijing shopping malls is not “cool” anymore for Chinese: It just show that you can’t afford to travel.  At the uber rich level, there exists the opportunity to capture market share by differentiating the brand. Three years ago, everyone wanted Louis Vuitton. That is no longer the case.

One thought on “Is Louis Vuitton too popular in China?

  1. It is funny though to see how can too much succes among the wrong target segment force a brand to reorient their marketing strategy

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