Abstract
Japan is a lucrative market for global luxury brands. Many companies have realized this fact and have concentrated most of their operations in this country. Louis Vuitton is no exception. It succeeded in this market. This paper shows that the unique demographics of the Asian country and the company’s aggressive marketing campaigns have contributed to its Japanese success.
Evidences from this paper also show that poor economic conditions and changing customer preferences, in Japan, threaten the French-based company’s profitability. Nonetheless, there are many opportunities for increasing its sales growth. This paper suggests that the company should open new stores in mid-sized towns to increase its brand presence in the market.
Similarly, it suggests the need to improve the popularity of Louis Vuitton brands by undertaking more local marketing campaigns. Overall, this paper shows that although Japan accounts for most of Louis Vuitton’s profits, the company could increase its dominance in this market by adopting new marketing strategies.
Introduction
Louis Vuitton is a global luxury brand that has operated in the Japanese market for more than four decades (Ivey, 2008). As a case study, this paper explores how the French-based company started its operations in the Asian nation and why it has achieved tremendous success in this market.
Since Louis Vuitton is a successful global entity, this paper also investigates whether global economic conditions affect its operations. Similarly, it highlights how the company can overcome some of these challenges and exploit the demographics of the Japanese market to improve its market success. These analyses give a comprehensive understanding of Louis Vuitton’s operations in Japan.
Why Louis Vuitton Succeeded in the Japanese Market
Japan is an important market for Louis Vuitton because it accounts for almost 50% of the company’s profits (Ivey, 2008). Aggressive marketing campaigns have boosted the brand’s profile in the country’s fashion industry. The success of the Omotesando marketing campaign, in Japan, attests to this fact (Ivey, 2008).
Such campaigns have provided a platform for introducing extravagant stores in several parts of the Asian country (including successful outlets in Ginza and Roppongi) (Ivey, 2008). Besides its aggressive advertising strategy, Louis Vuitton’s success, in Japan, also stems from the company’s pricing strategy.
In the past, the company adopted a premium pricing strategy for its branded products, but uncertain economic conditions have made it untenable for the company to continue doing so. Since then, it has changed its strategy and now adopts a flexible pricing plan that portrays the Louis Vuitton brand as affordable. This strategy largely boosted the brand’s sales.
Opportunities and Challenges for Louis Vuitton in Japan
Challenges: Poor economic conditions and changing customer preferences present the most notable challenges for Louis Vuitton’s operations in the Japanese market. These challenges affect the company’s sales and make it difficult for the brand to understand the nature of future fashion trends.
Opportunities: Undoubtedly, there is a notable market presence of the Louis Vuitton brand in Japan. However, there is a lot of potential for the company to expand its operations in mid-sized cities and other locations where the brand does not have a notable market presence. This move would popularize the brand (further) and increase its revenue streams.
Specifics of the Japanese Fashion Luxury Market
The Japanese fashion market has accepted Louis Vuitton because of its unique social and economic dynamics that differentiate it from western markets. For example, besides being fashion-conscious people, the Japanese society buys luxury brands as a status symbol. Moreover, a demographic analysis of the market shows a large middle-income population that affords luxury brands, such as Louis Vuitton.
Furthermore, there is a huge population of middle-aged women who prefer to update their fashion, often (Ivey, 2008). Lastly, the Japanese culture requires people to dress according to their social status. People who have a high income prefer to have fashionable products like Louis Vuitton. This is why many global luxury brands depend on Japan to support their global operations (Ivey, 2008).
Original Entry Strategy of Louis Vuitton in Japan and the Strategies it adopted to strengthen its Market Presence
Louis Vuitton’s entry into the Japanese market started in 1977 through a direct market entry strategy. Albeit controversial, this strategy allowed the company to acquire two stores. The stores were departmental and stocked a few brands. They accounted for more than $10 million (in annual profits) after selling directly exported fashion products from France (Ivey, 2008).
The success of the stores paved the way for expanding the company’s network of outlets. Statistics, from 2007, show that Louis Vuitton owns more than 54 stores in Japan (Ivey, 2008). However, as a group, the company manages about 250 stores in the same market (Ivey, 2008). In the last decade, the brand has changed its operational strategy by operating some stores as franchises. Most of them are in Nagoya, Osaka, and Tokyo.
Will the Global Financial Crisis Affect Louis Vuitton and how will the Company Overcome it?
Louis Vuitton is vulnerable to the intrigues of the global economy. Its vulnerability stems from its reliance on tourist markets and disposable income fluctuations. Therefore, when the global economy suffers from terrorism threats and poor economic outcomes, the company suffers declined sales. Louis Vuitton learned this lesson in Japan after the 2001 terrorist attack in the US and the 2007/2008 economic crisis.
It suffered decreased sales from low tourist numbers and a growing hesitation by shoppers to spend their money on expensive luxury items. To overcome such challenges, the company needs to localize its marketing strategy and grow its domestic markets (Melicher & Norton, 2014).
This strategy would make most of its global stores independent. For example, instead of relying on tourist markets to support the Japanese stores, the company should popularize its products to the Japanese people and make its stores independent. Therefore, when, an economic crisis happens in one part of the world, other stores (that do not operate in the affected regions) are not affected (Pearce & Robinson, 2013).
Conclusion
Louis Vuitton’s Japanese success mirrors the success of other global luxury brands in the same market. This paper shows that the unique demographics of the Asian country largely contribute to a growing demand for Louis Vuitton products in Japan. Poor economic conditions and changing customer preferences emerge as the main challenges of the French-based company.
However, there are many opportunities for increasing its sales numbers. Consequently, this paper suggests that the company should open new stores in mid-sized towns to increase its brand presence in Japan.
Focusing on improving Louis Vuitton’s popularity in the country would also reduce the company’s reliance on overseas markets. Overall, although Japan accounts for most of Louis Vuitton’s profit, the company could benefit from adopting new strategies to improve its dominance in this market.
References
Ivey, R. (2008). Louis Vuitton in Japan. Web.
Melicher, R. W., & Norton, E. A. (2014). Introduction to Finance: Markets, Investments, and Financial Management. Hoboken, NJ: John Wiley.
Pearce, J., & Robinson, R. (2013). Strategic Management: Planning for Domestic & Global Competition. Boston, MA: McGraw Hill.