Brand value, product quality and business strategy are the three reasons Louis Vuitton would rather destroy sluggish bags instead of lowering prices.
On the ranking of Forbes’ most valuable brands in 2019, Louis Vuitton (LV) leads the high-end fashion field with a value of $ 39.3 billion, more than twice the name at No. 2. – Gucci – brand is valued at 18.6 billion USD.
For a long time, this French branded product has become the dream of many fashion followers around the world. Consumers will find it very difficult to find in any LV store a bag for under $ 1,000. But why are they so expensive?
According to an international press, all genuine LV bags are handmade and usually take about a week to complete a product. Even the company has a team of employees who only count the stitches on the bag straps. Any excess or missing stitches will immediately be broken into small pieces. That is why on LV bags there are always the same number of stitches in the same place.
Besides, all bags of this brand must go through strict inspection before being shipped. They are dropped from a height of half a meter continuously for 4 days to test durability. Throughout the process, each bag contains an item weighing 3.5 kg. Not only that, the material is subjected to ultraviolet rays to ensure the ability to not fade and the zippers are closed and closed 5,000 times continuously to make sure they will work well when it comes to customers.
Another reason the bags carry the LV logo “skyrocketing” price is that most of its products are resistant to fire and water by using waterproof Canvas fabric combined with non-flammable PVC material.
After each season, unsold LV products will be returned to the factory in France for destruction. This is how the company maintains the value of the item as well as creating a brand level.
Although there are rumors that, before destroying the humid items, the company will resell to employees at an affordable price with the condition not to resell to anyone. But in fact, LV has never implemented an official discount program.
According to Mark Ellwood, author of the book “Bargain Fever: How To Shop In A Discounted World ”, LV applied the method. Vertical Integration (vertical link) to confirm the brand’s brand value. This means that LV not only owns its own factories, it also leases locations to open stores and sell products directly.
The strategy was used in the 1970s, when steel magnate Henri Recamier married the heir to Vuitton and became the first outsider to control the brand.
Recamier found that retailers of LV products raised their prices by at least 100%, then ‘pocketed’ nearly all profits and paid little to the manufacturer. Therefore, Recamier decided to eliminate “greedy” intermediaries by opening stores with full ownership of the company.
This way, Vuitton can control the actual product (if a bag does not “sell well”, they can reduce the amount of production). The company also directly manages stores and never wholesale – meaning that other stores cannot have LV products for sale.
The change quickly took effect when the company’s profits doubled. While other high-end fashion companies are 15-20% profitable, LV can reach 40% or more.
“As Recamier realized dozens of years ago, controlling distribution channels meant you could control prices. Without intermediaries, profits would be higher,” Ellwood said.
How was Louis Vuitton born?
In 1935, at the age of 13, young boy Louis Vuitton walked more than 400 km from his home town of Jura to the French capital Paris to learn an apprenticeship. At the age of 16, Vuitton desired to get rich and change his life, so he tried to become one of the best apprentices at suitcase maker Monsieur Marechal.
During the time of Napoleon III, Louis Vuitton was hired to serve exclusively for the queen of France – the Countess of Spain Eugenie de Montijo. She praised Vuitton for “packing the most beautiful clothes in the most delicate way”. Under Montijo’s introduction, Vuitton approached royal customers and quickly became a supplier to the upper class, setting the stage for a future career.
In 1854, Louis Vuitton opened the first store bearing its name. In 1858, he created a revolution when he introduced square suitcases of burlap, replacing the wooden chests and trunks with wooden lids, which were very popular at the time. Louis Vuitton products quickly received the beauty of elegance, durability and compactness.
In 1892, he died, leaving behind a career for his son, Georges Vuitton. This was a turning point in the company’s development process, and Georges Vuitton was the major contributor to the development of LV to become a fashion brand that has a wide coverage all over the world.
Currently, LV is owned by LVMH, the world famous brand corporation holding many famous brands such as Dom Perignon, Bulgaria, Sephora, Tag Heuer …