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Louis Vuitton bags space, influence

Louis Vuitton bags space, influence
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First Published: Wed, May 09 2007. 12 07 AM IST
When the French fashion house Hermès tried to rent space for a boutique in a new high-end shopping mall in New Delhi recently, there were no good locations left. LVMH Moët Hennessy Louis Vuitton SA had already taken all the best spots.
“When they arrive with their brands, they push everyone else out,” says Christian Blanckaert, Hermès’ executive vice-president, who visited New Delhi in March to scope out locations for the brand’s first stores in India.
Since its biggest brand—leather goods maker Louis Vuitton—entered India in 2002, LVMH has been pushing aggressively to bring its other labels into the growing new market. Italian fashion house Fendi, watch maker Tag Heuer and Dior perfumes and make-up—all part of LVMH’s portfolio of more than 60 brands—have already opened up shop. And Kenzo, and the make-up and perfume chain Sephora could arrive soon.
This Louis Vuitton store opened in Mumbai three years ago.
Now, LVMH has become enough of a mass presence in India to call the shots in negotiations over real-estate and advertising space. It is also using its clout to prod the government to change restrictive laws, particularly on high import tariffs.
At the Emporio shopping mall in New Delhi, LVMH has hogged two of the best locations by reserving boutique space for Louis Vuitton and Dior, and it is considering opening shops for other brands, including Fendi and Celine. The shopping centre is scheduled to open by the end of the year.
In India, the rush for good space is key to cementing a presence in one of the world’s hottest emerging luxury-goods markets. Until now, nearly all of the luxury boutiques were confined to high-end hotels, and competition is fierce for the few new retail locations that are suitable.
With the September launch of Vogue India, LVMH will have more opportunities to tap synergies. Alex Kuruvilla, the managing director for Condé Nast India, which publishes Vogue, says LVMH will be buying bulk ad space for its brands—at discounted rates. “LVMH is in a better position than other small, individual brands,” says HSBC luxury-goods analyst Antoine Belge.
The clout LVMH wields in India is a reminder of one of the key drivers behind the multibrand strategy in the luxury goods industry. The world’s major fashion groups embarked on major acquisitions in the late 1990s, with LVMH snapping up small family-owned brands such as Fendi and Pucci that were having trouble competing in the global marketplace. The goal was threefold: having a portfolio of brands to offset the risk of fashion cycles; pooling sourcing and manufacturing to reduce costs; and negotiating top positions and discounts when buying bulk advertising and retail space.
The first two drivers haven’t worked as well as expected. Many of the small brands that LVMH and other groups, including PPR SA’s Gucci Group and Compagnie Financière Richemont SA, bought in the 1990s still aren’t making money. Executives at individual fashion brands wanted to hold on to images that were distinct from the other labels under the same umbrella, rendering production synergies difficult.
But the third aspect of the multibrand strategy—getting prime retail and advertising space—has reaped results. In Tokyo’s Omotesando neighbourhood, for example, one of the most coveted shopping addresses in the world, LVMH has bagged boutiques for Fendi and Celine that are right next to each other.
So far, LVMH is the only luxury-goods conglomerate to build up a group presence in India. Italian brand Gucci, the anchor of Gucci Group, is leaning on its local distributor, the Murjani Group, instead of leveraging its multibrand structure. “Scale does help,” says Mohan Murjani, the company’s chairman, who is also launching brands like Jimmy Choo and lingerie maker La Perla in India.
As LVMH’s most powerful brand, Louis Vuitton has helped pave the way for the group’s other labels in India. It opened its first store in the lobby of New Delhi’s Oberoi hotel in 2002, after persuading the hotel’s owner to convert his office into a boutique. Last year, it helped sister label Dior snag the space across the corridor. Similarly, at the historic Taj Mahal Palace hotel in Mumbai, where Louis Vuitton opened a store three years ago, the French brand’s reputation benefited Fendi, which unveiled its first Indian store there at the end of last year.
“It becomes easier to deal with a company we’re familiar with,” says Farhat Jamal, general manager of the Taj Mahal Palace hotel. Jamal says he chose Fendi over competing luxury brands for the five-year lease. And one of the display windows in the Taj Mahal Palace’s main hallway recently featured another LVMH brand: Dom Pérignon champagne.
LVMH’s sway in India is becoming even more important with the development of new luxury malls. Emporio is still months from completion. Metal rods stick out of concrete blocks at the work site in the south of New Delhi. But it’s already clear that Vuitton and Dior will have the most prominent locations, facing on to the main road.
Moreover, while many retail projects languish in India because of delays in signing deals and development, LVMH’s local expertise could help Sephora get off to a running start. Local LVMH executives have scouted space for Sephora at the mass-market mall under construction adjacent to Emporio, says Tikka Shatrujit Singh, an adviser to Louis Vuitton in India. “Everything is based on strategic relationships, and that takes time,” he says. Indian mall developers now organize trips to Paris to consult with LVMH on architecture and design before breaking ground on a new project, Singh says.
In addition to locating store sites and negotiating ad deals, LVMH executives spend a lot of time lobbying the government. While they support the efforts of US and European Union policy makers to lower India’s high import tariffs on products such as champagne and cognac, LVMH officials are also trying to press their case before Indian government officials themselves. It’s not the first time LVMH has become involved in public-policy issues to further its business interests. In China, the French company works actively with government authorities to help crack down on counterfeiting.
Louis Vuitton chief executive Yves Carcelle says he has visited minister of commerce and industry Kamal Nath several times over the past few years to press another issue: the right of foreign brands to own the local retail operations through which their labels are sold in India. Owning the stores, rather than running them via a local partner, would give foreign brands more flexibility and authority in deciding how to market and sell their products. Carcelle says his endeavours are starting to pay off. Last summer, Louis Vuitton and Fendi were two of the first foreign brands permitted to take a 51% stake in their local distributors.
“The ultimate goal,” said Carcelle during a visit to India in March, “is to be able to own 100%.”
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First Published: Wed, May 09 2007. 12 07 AM IST
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