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First signs of trouble at VUITTON ?

Analysis 05 February 2010

Louis Vuitton ateliers

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In an anticipated remark, LVMH boss Bernard Arnault confirmed to Reuters : 'bling, bling' was out, while sales have been improving for the French luxury group, particularly in spirits, champagne and watches. Mr Arnault also said the crisis had led consumers to look for authentic and genuine luxury more than ever, a trend which analysts say tends to benefit strong and well established brands."With the crisis, 'bling, bling' is largely passe ... and something which someone should not show off," Arnault said. Oliver Petcu of CPP Management Consultants Ltd, a luxury consultancy, begs to difer insisting that even if sales of Vuitton are showing signs of recovery, the LOUIS VUITTON brand is way behind direct rivals such as HERMES and GUCCI in regards to the strategy of returning to heritage. It could be that the executives of VUITTON have thought that unrolling a worlwide campaign illustrating manufacturing would suffice as to this essential positioning towards quality and heritage. On the contrary! Many specialists have argued that the campaign is going too far, considering less than 50% of production processes is hand made when it comes to Vuitton bags or shoes, which has the total opposite illustration in the advertising campaign. If bling is out, what about the predictable logo driven designs ? Although there is no clear definition of bling from a luxury point of view, Mr Petcu defines it as ''showing off logo branded products''.Could be the Vuitton non sale policy be a heritage matter ? How many clients are, for instance, aware that parts of a Vuitton bag are made in an automated factory in Romania, precisely near the city of Sibiu ? None of the above issues can be raised when it comes to Gucci or Hermes ! The two rivals have instead focused on quality, without necessarily insisting on the actual production process. Mr Petcu also believes that the two rivals have 2 timely advantages over Vuitton: Gucci has a lower international exposure due to its balanced retail network of directly operated stores versus franchised ones ; Hermes is launching a Chinese brand which will address all Asian consumers. There are also common challenges which need to be addressed by all the three brands, especially customer service. More and more stores both franchised and directly operated employ staff speaking the launguages of the top consumer profiles. At first, this seems like a very smart decision but how many times have you entered a Vuitton or Gucci store and found yourself being ignored or spoken to by staff with limited knowledge of English? In most of the cases, such staff need to call on colleagues who speak better English, some even admitting they serve a particular nationality target group. For instance, over half of the staff of the Gucci and Vuitton stores in the Dubai store are Russian speaking. Not only is the language barrier disturbing but also the way a customer is approached. This is even more widely spread at brands such as Dolce Gabbana, Versace and Giorgio Armani.