IN INDIAPrepared by:Jasjit SinghHarmandeep DeolNeha Randhawa

LVMH Business SegmentsFashion & Leather

Goods

Louis VuittonLoewe

Celine

Berluti

Kenzo

Givenchy

Christian Lacroix

Marc Jacobs

Fendi

StefanoBi

Emilio Pucci

Thomas Pink

Michael Kors

Donna Karan

Wines & Spirits

Moët & Chandon

Dom Pérignon

Veuve Clicquot

Krug

Pommery

Mercier

Ruinart

Canard Duchêne

Château d’Yquem

Chandon Estates

Cloudy Bay

Cape Mentelle

Hennessy

Hine

Newton

MountAdam

Fragrances &

Cosmetics

Parfums Christian Dior

Guerlain

Parfums Givenchy

Parfums Kenzo

Bliss

Hard Candy

BeneFit Cosmetics

Urban Decay

Fresh

Make Up For Ever

Watch & Jewelry

TAG Heuer

Ebel

Zenith

Benedom

Fred

Chaumet

Omas

Selective Retailing

DFS

Miami Cruiseline

Sephora Europe Sephora

AAP

Le Bon Marché

La Samaritaine

Specialty Retail

Concepts

Leadership

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Chairman LVMHBernard Arnault

Yves Carcelle1990-2012

Marc Jacobs1997-2013

Michael Burke

LVMH – Current Statistics

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LVMH – Major Brand Value

Brand Value

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Louis VuittonGenerates over 50% of group’s

profits

Luxury brand, not a fashion “trendy” brand

- Brand image built on heritage

- Association with affluence and exclusivity

- No promotional sales or discounts

- Tight control of merchandise distribution (max 5 pcs per customer) to avoid parallel re-selling market

- 10-15% price increase in last 2 years6

Louis Vuitton

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Merchandise same in all stores – no variation in product offering

Target Market - High Net Worth Individuals (HNWI), high disposable income

- “Cocooners”, growing mid-segment of Indian market, potential to develop taste for luxury and become loyal customers

European vs. American pricing- European price points reflect exclusivity

- American price points allowed luxury “nibbling”, capturing consumers at various levels

Louis Vuitton

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Stores- From case: 2 stores in luxury hotels, considering locating new third store in

luxury mall

- Since the case: 4 stores in India (1 New Delhi, 2 Mumbai, 1 Bangalore) in luxury hotels and malls

Leather & fashion goods business – 14 production facilities- 12 in France

- 1 in Spain

- 1 in California

- Labour intensive manufacturing, up to 1,000 manufacturing tasks, craftsmanship valued

- International logistics centre serving global supply chain

Why India?

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Pressure to sustain double digit growth rates

Enter new markets, beyond Japan, Western Europe and USA

Begin to invest in growing markets of China, India and Central Europe

Began working on entry plan into India in 1999

Indian luxury market estimated at $4B, growing to $30B by 2015… luxury products $444M market and growing 20% annually

Historically received custom orders from Indian royal families and wealth Indian customers (eg. Custom leather interiors for Rolls-Royces, leather bags for travel)

India was familiar market and brand well known among ruling class

…”the rich in India were flying to London, Dubai, Singapore, New York and Paris to shop because there was nothing available in India for them to buy.”

But India may have challenges…

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87% of population lived on less than $2.50 per day

266.5 million people below poverty line (2005 est. less than $1 per day)

How hospitable would Indian market be to luxury brand?

Macro-management issues- High customs duties on imports between 30-70%, disincentive for customers to

buy locally

- Federal government did not allow FDI in retailing ventures

- Official ban on imports of leather goods

- Concern entry of MNC would place domestic leather trade at risk

Louis Vuitton’s long-term goals

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1) Open LV store in every Indian city with 10 mn+ population

2) Acquire cumulative customer base of 1 mn people in India by 2010

Customers – Connecting with the Elite

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Viral marketing from influential maharajas

Start-up owners (technology, manufacturing, services)

Professional CEO’s in 30’s and early 40’s

Non-resident Indians (NRI’s)

Small and medium retailers

Big-brand franchisees

Bollywood actors (customers and image makers)

“Closet spenders” (politicians and bureaucrats)

Buying Behaviours

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Exclusivity and status important for luxury customers in India

Driving factors for “super rich” purchasers:- Gratification

- Social assertion

- “Make statements”

- Prone to look for best deal

- Willing to pay a premium if there’s a clear gap between them (affluent) and other consuming classes

Status

Admiration

Affiliation

Safety

Psychological

Maslow’s Hierarchy: The Asian Equivalent

Worldwide Luxury Customer Categories

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1) Superior functionality and quality- Older and wealthier

- Willing to pay premium for products with enduring value

- Extensive pre-market research

- Logical decision making

2) Perceived luxury as a reward (Indian consumer)- Personal statement they had “arrived”

- Eager to show success to others

- Communicate “acceptable” exclusivity

- Micro-trend… women’s voices within affluent space decision making

3) Luxury as a means of self-indulgence- Feel good factor

- Emotional purchases, not concerned with longevity

Indian Market Regulations

Regulations- 2001 Leather goods import ban lifted (compliance with

World Trade Organization requirements)- 2004 major tariff reductions- 2006 allowing 51% foreign ownership of local retail

venture “single” brand- 2011 FDI up to 100% for single brand

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High Net Worth Individuals (HNWI)

HNWI - continued

Luxury Market will grow 86% between 2013 and 2018 *Euromonitor

Average annual spending by Indian HNWI $665k compared to $1.1MM by Chinese HNWI *wealth-x

300,000 HNWI in India in 2018

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300,000 HNWI in India in 2018

Recap of Challenges in Indian Market

Very expensive real estate

Lack of Luxury Malls/LRC

Untrained retail sales force

Rise of counterfeit with awareness

High custom duties on imported goods- 0% - 150%....approx. 30% for Louis Vuitton

People buying overseas for the experience

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Counterfeit Market

http://www.cheapsalelouisvuittonoutlet.com/

Damaging to Brand- Exclusivity

- Affluence

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Several issues to consider

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Three critical issues

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Important because…

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Luxu

ry H

ote

ls

• Experience with first two pilot stores

• Less risky option

• Store space an issue (max. 3,000 square feet)

• Rental costs high because of demand

• Gathering point for society or hub for travelers

• Rapid growth difficult to achieve through hotels

Luxu

ry M

alls

• Expand customer reach to local citizens in higher traffic areas

• Rental costs half of luxury hotels with same ambience

• Next best option to luxury retail clusters (LRC)

• Larger store sizes versus luxury hotel option

• Little control of neighbours (store next door)

• Limited luxury malls in India despite growth plans

Ind

epe

nd

ent

Sto

res • Option to open stores in

preferred locations if desired luxury hotel or mall are not available in area

• Flexibility with store design

• Very costly option due to several hard costs (land, building, etc)

Oth

er O

pti

on

s • Luxury Retail Clusters (LRC)

• Limited LRC opportunities in India

• Won’t all for the rapid growth LV is trying to achieve

• Duty Free

• Limited reach

• Not a sustainable method for growth in India

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Options to Grow Retail Presence in India

Recommendation: Luxury hotels & malls

A hybrid solution of continuing to open in luxury hotels and focusing more on opening stores in luxury malls

- Allows for continued market penetration

- Cost effective solution versus stand alone stores

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Recommendation: Focused Marketing TacticsFocus on building database of traditional customers and new

HNWI

Market to potential customers with promo brochures, special viewing invitations, personal tours of private museum, viral marketing, referrals and word of mouth

Promotional strategies around key holidays

- Religious and cultural holidays include gift exchange

Leverage endorsements to drive consumer awareness

- Celebrity culture very strong in India 25

Recommendation: Reducing FDI Constraints

High customs duties on imports between 30-70%, disincentive for customers to buy locally

Federal government did not allow FDI in retailing ventures

Official ban on imports of leather goods

Concern entry of MNC would place domestic leather trade at risk

New government is not in favor or FDI

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Current Obstacles

Work with other foreign direct investors in retail to lobby government to reduce restrictions

Move production of items to India and increase leveraging power with government (job creation)

- However, brand image can be damaged due to manufacturing location change

JV with an Indian retail company to get around laws & regulations imposed on FDI

Recommendation

Thank you!

Questions?