, ,

To catch the latest opening of a LVMH store, most consumers will need to update their passports. The luxury goods conglomerate of more than 60 brands is opening stores in fast growing urban areas in Mongolia, Ho Chi Minh City, Vietnam; Phno Penh, Cambodia; Yekaterinburg, Russia; Macao, Abu Dhabi; and Lhasa, Tibet.

The strategy is nothing new: LVMH has always opened stores before the luxury market developed in the area. For example, Louis Vuitton stores popped up in 1992 in China (where it now runs 35 stores) and in India before cars were widespread in that country. The Mongolian store, 120 miles from the Russian border, is already profitable. Getting into emerging markets early lets LVMH gain a brand reputation among consumers whose income is likely to grow rapidly, and at a lower cost than an entry after the country has developed.

Not including Japan, Asia accounts for 25 percent of Louis Vuitton’s revenues. Its stores in Europe and America tend to be more profitable than its Asian stores, but even with their weaker spending power, Asian consumers are more willing to spend their money on Louis Vuitton.

Yet even in developed countries, LVMH goes beyond targeting just luxury consumers by selling makeup at Sephora, along with Dior handbags for $2800 and Hublot watches for $21,000. It also has been successful with efforts to reinvent truly old brands: Marc Jacobs updated LV-printed luggage with more trendy items, and John Galliano reinvented Dior before it headed into elderly consumer territory.

Luxury retailing thus is not just for New York City. Consumers around the world still want luxury products, especially from the likes of Louis Vuitton, even if they have to scrimp and save to obtain them. Thus, overall LVMH sales have grown 20 percent since the beginning of 2010, and watch and jewelry sales have grown 29 percent.

Discussion Questions:

1. Why is LVMH opening Louis Vuitton stores in emerging markets?

Susan Adams and Hannah Elliott, “Master of the Brand: Bernard Arnault,”Forbes, November 22, 2010.