How the luxury retailer, Louis Vuitton entered India.

1. IN INDIA
Prepared by:
Jasjit Singh
Harmandeep Deol
Neha Randhawa

2. LVMH Business Segments
Fashion & Leather
Goods
Louis Vuitton
Loewe
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
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

3. Leadership
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Chairman LVMH
Bernard Arnault
Yves Carcelle
1990-2012
Marc Jacobs
1997-2013
Michael Burke

4. LVMH – Current Statistics
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5. LVMH – Major Brand Value
Brand Value
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6. Louis Vuitton
Generates 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 years
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7. 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

8. 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

9. 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.”

10. 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

11. 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

12. 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)

13. 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

14. 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

15. 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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16. High Net Worth Individuals (HNWI)

17. 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

18. 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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19. Counterfeit Market
http://www.cheapsalelouisvuittonoutlet.com/
Damaging to Brand
- Exclusivity
- Affluence
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20. Several issues to consider
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21. Three critical issues
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22. Important because…
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23. LuxuryHotels
• 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
LuxuryMalls
• 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
IndependentStores
• 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)
OtherOptions
• 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

24. 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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25. Recommendation: Focused Marketing Tactics
Focus 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

26. 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

27. Thank you!
Questions?