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Louis Vuitton, the France-based fashion house and luxury brand, which has been dominating the fashion industry for over a century, celebrated its 165th anniversary last year. Its net worth is $47.2 billion. According to Forbes, Louis Vuitton is one of the most profitable brands in the world today with a 30 percent profit margin.
Overview of Louis Vuitton
Louis Vuitton, a French fashion designer, founded the trunk-making company Louis Vuitton in 1854 whose first outlet was in Paris. At the beginning of its journey, the brand was mainly popular for trunk manufacturing. In 1858, Louis Vuitton created the first rectangular-shaped trunk, which is also regarded as the birth of the modern suitcase and it gained huge popularity.
After the death of Louis Vuitton, the brand’s founder, in 1896, his son George Vuitton adopted the iconic LV monogram to promote the brand. Since then, Louis Vuitton has been well-known as one of the world’s most desired luxury brands for over 100 years. The brand is now seen as a status symbol by the royals, the elite, and even celebrities.
Louis Vuitton was ranked 9th on Forbes’ list of the world’s most valuable brands. Louis Vuitton’s parent company is Louis Vuitton Moët Hennessy widely known as LVMH short. The company’s business units include champagne & wine and three different segments in fashion and lifestyle such as leather products, perfumes and cosmetics, and watches and jewelry.
Brands such as Louis Vuitton, Christian Dior, Celine, Fendi, Hublot, and Tag Heuer are owned by the company. Of the company’s nearly EUR 44.65 billion in revenue in 2020, nearly EUR 29.81 billion was generated from various brands in the fashion and lifestyle segment.
There are 500 Louis Vuitton outlets in 60 countries around the world, but the United States has the most with 129. Louis Vuitton produces a wide variety of products including fashion and lifestyle items such as clothing, shoes, fragrances, accessories, and smartphone accessories. Sports and lifestyle items are also available from Louis Vuitton.
The brand also offers products such as decorative pieces, art pieces, and books. Louis Vuitton produces products with their male and female customers in mind. While popular for leather products such as jackets, shoes, and handbags, LV is primarily known for its luxurious handbags. According to the website Love to Know, the price range of a regular LV handbag usually ranges from $1,100 to $6,000.
In the case of some limited edition products, the prices are even higher. The Louis Vuitton Urban Satchel Edition handbag cost $150,000. But what exactly makes Louis Vuitton’s products so expensive?
Why Is Louis Vuitton Expensive?
Expensive Raw Materials
Louis Vuitton collects animal skins as raw materials from Africa, South Asia, and America to produce high-quality leather. The company uses the skins of cows, and calves as well as exotic animals like crocodiles, lizards, and pythons to produce leather products.
Crocodile leather collection and processing take more than 16 weeks to complete. Rolling agate stones are used to polish the crocodile or python leather. Agate Stone’s price ranges from $3,000 or more. This gives the bags a perfect finish for which and makes the bags smooth, durable, and safe from rain and water. Due to the use of such expensive raw materials, the production cost of LV products is much higher.
Expert Craftsmanship & Handmade
Expert craftsmen from around the world are trained to craft Louis Vuitton’s products. In an interview with CNN, LVMH Chairman and CEO Bernard Arnault mentioned that Louis Vuitton trains their staff for as long as 18 months to 2 years. Craftsmen can begin production of the original product only after undergoing such an intensive training process.
Each piece of the LV bag is manually processed by crafters. Starting from stitching, assembling different parts, and polishing the final bags is also done by hand. Some products require about 300 assembly stages to complete. Quality standards are the same for all LV products. As a result, every product manufacturing requires a lot of time, and high-skilled, and a large number of workers, so the production hassle increases a lot.
Louis Vuitton also offers customization options for customers. Customers can customize everything from leather texture, size, shape, and color if they want. LV offers its customers a wide variety of options to choose from. Since all LV products are produced manually, it takes more time to customize the specific items and this also increases the cost.
Intensive Quality Control Process
According to Luxuryviewer, the Louis Vuitton bags will be as good as new as long as a user uses them carefully, meaning they can be used for a lifetime if used carefully. The bags have to go through several durability tests for such quality control.
According to a UK-based Independent, to ensure durability, each bag is zipped and unzipped as many as 5,000 times, dropped from a height of 1.5 feet for 4 days, and kept in the sunlight. This bag is also tested for durability by exposing it to the sun’s UV rays. Such an intensive quality control process is quite time-consuming and expensive to maintain.
Louis Vuitton chooses to produce its products in Limited Production instead of Mass Production. The brand follows the drop model strategy in terms of product release, which means releasing a limited number of products in a short time. Therefore, despite being able to afford it, many can’t get their hands on Louis Vuitton items because of unavailable stock.
As a result, even though there is a huge demand for LV’s products in the market, LV never caters to the demand by producing more than its target. The company also tracks its items through unique serial numbers. So it is very difficult to sell counterfeit or replicas of LV’s products.
Marketing & Promotion
LV’s marketing campaigns are amongst the most expensive campaigns in the world. Over the years, they have chosen celebrities like Madonna, Jennifer Lopez, and Angelina Jolie as LV’s brand ambassadors. These celebrities charge around $12 to $30 million, which is included in the brand’s huge marketing budget. In 2021, Louis Vuitton selected Jung Ho Yeon, the famous “Squid Games” star, as its new Global Ambassador. In 2020, the combined sales and marketing costs of all LVMH brands were 16.79 billion euros.
Exclusive & Expensive Stores
Louis Vuitton outlets around the world are located in the popular areas of the busiest metropolitan cities. The interiors of all LV outlets are luxurious and have unique pieces of artwork as decorative pieces. Each outlet also has multiple colorful themes as well as paintings by several famous artists. Being located in the heart of the city the rent of these outlets is much higher. Also, the exquisite design of these outlets increases the maintenance cost.
With a brand value of USD 47.2 billion, Louis Vuitton is currently one of the most luxurious brands in the world. However, buying Louis Vuitton products does not mean just having a luxury experience. In addition to product utility, the resale value of Louis Vuitton products is exceptionally high due to superior design, exotic raw materials, quality, and durability.
According to Luxuryviewer, the resale value of the Neverfull Bag with Louis Vuitton’s monogram could be up to 96 percent of the original price. This means, purchasing LV’s product does not only mean spending a lot of money to experience a luxurious item, it is also an investment. In many cases, just like vintage vehicle models, the resale value of vintage Louis Vuitton products has also increased, which is only possible because of LV’s brand image.
While LV’s products are never offered in a sale or discounted, the company offers discounts to employees on unsold products. However, since the products can be tracked through unique serial numbers, employees are not allowed to sell them commercially.
If anyone wants to resell, legal action is taken against them. Also in many cases, unsold items are destroyed by shredding. Since LV’s products are fireproof, many products cannot be burned. As a result, Louis Vuitton is a primary target in the counterfeit product market, with so much global popularity and demand.