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Luxury items are just not what they used to be, not with so many plebs buying them anyway. Who wants to spend thousands of dollars on a bag, if you’re just going see some commoner wearing the same one made of a different material? Or so luxury designer Louis Vuitton seems to think.
Vuitton is cracking up its prices in an effort to restore an air of exclusivity to its brand, with price tags rising as much as 13% on some items over the past few months.
To avoid “overexposure of the brand,” Vuitton has also stopped new stores from opening, and has started promoting its more expensive leather bags over the cheaper canvas bags (the ones the commoners buy).
LVMH (parent company of Louis Vuitton, also known as Moët Hennessy Louis Vuitton) finance director Jean-Jacques Guiony said, “It’s a work in progress.”
But will it work? When it comes to luxury, surely LVMH knows a thing or two. After all, what could be more luxurious than Moët & Chandon at a few hundred dollars a bottle, Hennessy cognac at $800 a bottle, or a Louis Vuitton handbag for $4000? Yes, that is a small bag that you put stuff in, for $4000.
According to Luca Solca, an Exane BNP Paribas analyst, Vuitton is facing the luxury industry’s most challenging problem – how to make the things you sell seem exclusive, while still selling billions of them. “The industry is built on a paradox,” he said. “If luxury is being cool by having something others don’t have, then commercial success and the ubiquity that comes from it can kill brand appeal.”
While Vuitton may think it’s a good idea to jack up prices, surely it will mean fewer sales at the lower end of the market. Vuitton has enjoyed some great sales growth in the past, but much of it has been driven by sales of the canvas bags the brand is now trying to downplay.
Despite operating within a still-recovering economy, Vuitton’s competition has also pushed up prices recently. However, they blame it on inflation and the rising cost of raw materials. Just this week, Miuccia Prada, Prada designer and one of Vuitton’s peers, defended the high cost of luxury items.
“People [who] are intellectual leftists, they say I am expensive and horrible – ‘How can you sell clothes at that price?’ Simply, it’s the cost,” said Prada. “If you pay people to do everything with the right system, things are expensive.” Nevertheless, Vuitton’s price increases are said to more aggressive, and cover much more than inflation and material costs.
Which seems odd, considering LVMH itself admits demand in Europe is “nothing to write home about”, demand in China over the past year or so has been “flattish”, and Japanese travellers spent 40% less on Louis Vuitton in the last quarter compared to the previous year.
Who knows? Perhaps raising prices will help sales? After all, who wouldn’t want to spend 13% more on a bag that is exactly the same as it was before the price increase three months ago? Thirteen per cent more expensive must make it 13% better.
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