Louis Vuitton has held the title for world’s most
valuable luxury brand for more than a decade. Its limited edition handbags
can cost upwards of $55,000, that's 175 times the average cost of
a new handbag in the United States. So how does this French fashion house
get away with charging so much? Louis Vuitton’s beginnings can
be traced all the way to 1837. France was in the midst of
an economic expansion, and that growth was attracting hundreds
of thousands of people to the city of Paris. A 16-year-old Louis Vuitton
was one of them. He traveled 292 miles by foot to the French
capital to work as a trunk maker's apprentice. At the same time, steam-
powered trains and ships were making travel more accessible,
and the industry was booming. Vuitton capitalized on this
when he opened his first store. In 1858, he debuted
his new trunk design. It was rectangular, unlike its dome-shaped
predecessors, making it easy to stack. The cotton canvas fabric was lightweight,
durable and waterproof, ideal for travel. Many call this design the
birth of the modern suitcase. In 1896, his son Georges Vuitton created
the iconic Louis Vuitton monogram, a floral pattern with an interlocking L and V, in
honor of his late father, who passed away in 1892. From French royalty in the 1800s
to celebrities in modern times, owning Louis Vuitton has a long history
of being seen as a status symbol. I do really enjoy the Louis Vuitton
x Supreme collaboration. I'm so grateful to be able to wear Louis
Vuitton and work so closely with the brand. Now you can find the famous
monogram on everything, handbags, clothing, shoes,
jewelry, even a toilet. The brand is worth a
whopping $47 billion. One reason Louis Vuitton products are so
expensive is the high manufacturing cost. For example, the luxury brand produces
its handbags here in France and shies away from outsourcing
manufacturing to cheaper locations. Its collections are handmade
by experienced craftspeople in Europe and the United States
using expensive materials. Despite advances in technology,
the company says the most advanced machinery touching
its products is the humble sewing machine. But even the highest quality goods can lose value
if there are too many of them on the market. That’s why Louis Vuitton suspends production
of a product once it hits its sales target. Often when brands produce too much of a product,
they offload the extras by holding sales or selling them at
discount shopping outlets. By controlling its supply, Louis Vuitton has
managed to avoid both of those things. In fact, it claims to be the only brand
in the world that never holds sales. And while this helps the fashion house maintain its
value, it also makes it a prime target for counterfeits. Louis Vuitton is the most counterfeited
luxury brand in the world. In 2018, its products made up over half of
the fake luxury products found on the market. Experts are saying there are many counterfeits on the
market because the brand’s classic style has virtually been the same for the last 150 years, giving those on the
black market time to create near-perfect imitations. The counterfeiting of goods from luxury
brands has become so widespread that e-commerce giants like Amazon and
Alibaba have started cracking down. For example, Alibaba seized almost half a
billion dollars in counterfeit goods in 2018. Although Louis Vuitton had its
humble beginnings here in France, its developed marketing strategies to
attract a large following in other countries. These strategies have been especially effective in
China, one of Louis Vuitton’s most crucial markets. The brand had its eye on this
market as far back as 1992, when it became the first foreign luxury brand
to open a physical store in the country. China was still seen as an
emerging economy at the time. Bernard Arnault, the man at the helm of
Louis Vuitton’s parent company LVMH, even said there were more bicycles
than cars at the time of the launch. With China’s ascension as
an economic superpower, its growing middle class and high
net worth individuals have grown. That’s made the country a lucrative
market for luxury brands. Chinese consumers at home and abroad
spent $115 billion on luxury items in 2018. That’s one-third of
the global spend, with each luxury-consuming household spending
an average of almost $12,000 per year. By 2025, Chinese consumers will account
for 40% of total global spending. All of this demand is driving up price. In China,
goods from luxury brands such as Louis Vuitton are 21% more expensive
than the global average. That means the average Chinese consumer is
paying an extra $420 dollars for a $2,000 handbag. That adds up. So much so that some
wealthy buyers have started hiring agents to purchase
luxury brands for them overseas. Luxury goods go for 22% less than the
global average in France and Italy. The same $2,000 handbag would
end up costing a Chinese buyer $860 less in France than if
they’d bought it at home. Despite being more
than 150 years old, the brand is now focused on finding ways
to appeal to younger, affluent audiences. It’s brought on board influencers like Sophie
Turner, Chloë Grace Moretz and Kris Wu. And while the actors appear in traditional Louis
Vuitton ads, they also post photos of themselves wearing the designer on their
Instagram or WeChat accounts. Kris Wu has been the face of another
strategic move, its streetwear collection. The streetwear culture, popularized by
designers such as Virgil Abloh and Kanye West, was seeping into the luxury industry, and
appealing to younger people around the world. Louis Vuitton wanted to capitalize on this
and in 2018, it announced perhaps the most influential streetwear designer, Virgil Abloh,
as its creative director for menswear. The company borrowed a distribution and pricing
strategy from streetwear culture, the drop model, meaning it releases a limited number
of items over a short time period. For example, this pop-up space in London launched
Abloh’s debut collection as Artistic Director. The collection was only
available for a week. Because there were so
few items and a time limit, consumers flocked to the shop, where
hoodies were selling for as high as $2,395. These strategies and of course the hefty prices
have helped Louis Vuitton to hold on to its title as the world’s most
valuable luxury brand. But as younger consumers begin
to make up more purchases, it's going to need to keep evolving
to hold on to its seat at the top. Thank you so much for watching
my video on Louis Vuitton. How much would you spend on a handbag?
Let me know in the comments below.
