Hermes and Louis Vuitton luxury brands

Introduction

Many luxury brand stores open each year to provide a market for the wealthy. According

to a report made in 2013 by Forbes, there are 1,426 billionaires, which was a rise according to

2012 1,226-billionaire result. This therefore means that as the number of wealthy people increase

there is a great need to increase their market. Two of the major luxury stores are the Louis

Vuitton and Hermes group. They mainly operate as directly operated stores. Directly operated

stores aid in increasing margins in a period where there is a high demand and rapid growth

therefore increasing the market presence of key brands. There is however a problem of the fixed

cost of the stores pushing down the financial performance at a time when there is slower sales.

Louis Vuitton is the leading luxury store in directly operated stores with an approximate of 350

retail outlets. Hermes luxury store on the other hand is has an approximate of 100-200 stores.

This report examines the differences and similarities that exist between the two luxury brand

both generally and in parts such as in the DNA, heritage and market positioning categories.

General differences and similarities between Hermes and Louis Vuitton luxury

brands

Hermes and Louis Vuitton are two of the universes luxury giants with an annual per

capita turnover of 3.25million Euros and 3.35 Euros respectively according to a study in 2010.

The two companies have shown a great stability and sustainability despite the tough economic

environment they exist. Looking at the evolution of the two companies it is clear that the two

have some shared features (Apukhtina, 2013). The first similarity is that they both started with

the manufacture and development of classic products that have conquered the test of time.
 The other similarity is that both the luxury brands have six key characteristics: excellent

quality, high prices, aesthetic and emotional value, rich brand history and heritage, uniqueness

and scarcity, and intangible symbolism that comes from owning the brand. The companies with

time established solid models in their business and they expanded them overseas (Martin, 1995).

Joining the international market gave them a great platform to show their unique works and

helped them create a high-end international brand image.

Despite all those similarities, there are still some differences evident in the management

practices of the two companies. Louis Vuitton is part of the multi-brand, public-listed,

multinational Louis Vuitton Mot Hennessy Group (LVMH), while Hermes brand remains to be

an independent brand that a single family runs (Colino, 2010).

The other difference is in terms of their strategies. Louis Vuitton is a progressive

company, which continues to build and expand its multi-brand entity through acquisition. LVMH

has created one of the strongest brand collection in the sector, this is a conclusion made from

how it has 60 top brands that are among its five divisions and other functions, with Louis Vuitton

as its greatest. It passes a message to the investors and the market that one day each of the brand

will become Louis Vuitton, this therefore offers a great potential for growth in the future and

creates value for any potential investors (Xiao, 2012). On the other hand, Hermes is more

conservative. Its focus is on the brands impeccable craftsmanship and heritage, building value

with time through quality. Their preference is having an endogenous growth. For example, their

iconic Kelly bag may sometimes be unable to meet the rising demand but the company still

refuses to expand their production (Colino, 2010). This is may seem almost impossible for a

listed company but the Hermes still manages to remain in the top of other listed luxury brands.
 The Hermes brand defines the basis of luxury industry. It shows that if a luxury product

happens to lose its uniqueness, it stops being a luxury and becomes a mass consumer product

with a non-justifiable price. Louis Vuitton was however not that successful in a competitive

market and it was on the verge of collapsing when the Mot Hennessy group acquired it (Lee,

2007). Through the lifeline provided to the struggling brand by the capital markets, LVMH was

able to successfully revive and restructure the brand.

Market positions of the two brands

In 2013, the French luxury group Hermes made a 16% increase in the second-quarter

sales which equated to a 1.19 billion US dollars. Most of the sales originated from North

America and Asia. Despite the stiff competition it has been facing from other luxury brands, the

Hermes group has always had a way of staying at the top of the market position. In a study made

in 2010, the Hermes group was the second best luxury brand in the whole world (Apukhtina,

2013). The experts commented on the success of the Hermes by saying that it is their way of

combining innovation and heritage, which helps them, stay selling and leading. The luxury daily

magazine also said the reason for the success of the brand might be due to the sales they make

from the home furnishings and from the spring/summer campaign, they made in 2013, which

attracted so many customers (Apukhtina, 2013). Hermes, which people refer to as the holy grail

of luxury goods has had staggering increase in sales even during the hardest times like the 2009-

2011 recession periods. It even came as a surprise to LVMH as it was during that time that Louis

Vuitton had experienced the slowest quarterly growth.

Louis Vuitton has been having many problems with its competitors especially Hermes

which are their main threat. They even own 22.6 percent of the Hermes company stock. Due to
that competition and instability in the market, the LVMH CEO decided to make new strategies.

He said that if the company was to recover it had to launch ten new monogram products even

though it is not a good long-term strategy. Therefore, instead of that, he decided that the

company is going to open fewer stores and instead it will focus more on the services, while

increasing the production of non-monogram and leather products. The company however had a

successful past. For six consecutive years, from 2006 to 2012, it had been the worlds best and

most valuable luxury brand group. In 2012, it had a valuation of 25.9 billion USD. The valuation

even further increased in 2013 by 2.5 billion USD that came from a sale of 9.4 billion USD

(Xiao, 2012).

Product DNA of the two luxury brands

Every product has a main characteristic that brings out its distinctiveness and novelty.

This is distinctiveness is what is called a brands DNA. The Hermes has a distinctive feature of

targeting the ultra rich people by making their products inaccessible. For example, they sell their

silk scarves at 300 Euros and their Birkin handbags at 10,000 Euros. It is therefore easy to see

that the group they are targeting is the super rich. The increasing number of rich people means an

increase in the luxury goods and therefore Hermes had to be the brand to satisfy the ultra rich

category. Hermes even made a new world record of the most expensive handbag ever sold in a

public auction when it sold its diamond Birkin handbag for 203, 150 USD. In addition to that,

according to Forbes, most of the billionaires come from America, which happens to be Hermes

strongest sales growth (Rocca, 2011). Asia has also shown great rise in the buying of luxury

goods. It might be due to the changing behavior of the luxury customers in china as the love of

crafts and exclusive products has become more widespread.

 Louis Vuitton on the other hand mainly focuses on quality. Most of their products are

usually fire and waterproof. Their fine canvas and PVC are what makes them durable. One has

an assurance 10 years or more of great service with their products. People have started

considering them as status bags. Their products are recognizable from far and therefore this

makes it hard for replicas to get market (Xiao, 2012). The Louis Vuitton group has even gone to

the extent of hiring investigators who check out for any counterfeiters who may b trying to spoil

their name.

Brand heritage of the two luxury brands

In 1845, Mr. Louis Vuitton designed the first Louis Vuitton leather suitcase. He also

opened the first Louis Vuitton store and located it in Paris. Since then the pattern of capital letters

combination LV has been the main symbol of the Louis Vuitton leather brands. The LV brands

have always topped the international fashion industry. There have been six generations working

for the LV brand, the first generation being Louis Vuitton, the second being George Vuitton and

so on. This carrying down of roles, gives the customers a sense of family (Martin, 1995).

Therefore, if the LV can provide permanently services for a client such as maintenance, and they

will hand down the roles to their other generation until the contract is over.

Hermes founded in 1839, started as harness and saddle making company in Paris. It has

always been proud of its craftsmanship and heritage. The company has its own way of showing

off its unique and incredible proficiency to the clients, which does not involve going on a tour to

demonstrate it first hand to customers. The group came up with an idea called Festival des

mtiers, which involves a world tour where the customers get to come together with the
companys craftspeople where they enjoy and experience a fascinating insight into the superb

production of the Hermes hand-made products (Rocca, 2011).

Distinctive brand messages sent to the two brands touch points

Hermes sends a message of flexibility to the customers of its product. Most luxury brands

have been feeling threatened by the new era of digital marketing. They fear that this will make

most customers lose interest in their product. Therefore, Hermes decided to join in this venture

and started a sound of Hermes Silver campaign, which was to emphasize on how the company

is committed to craftsmanship and innovation (Apukhtina, 2013). This was a very good way of

displaying their range in a stylish video. This campaign was highly received due to its emotive

feature. The video is entertaining and artistic but also it is 100 percent on brand.

The Louis Vuitton Company on the other hand gives the customers a sense of family.

Because the Louis group hand down their roles to their younger family assures a client that, they

are still safe (Lee, 2007). A client therefore can feel at peace giving the group a permanent

contract as they know the contract will be passed down through generations without any breach

of contract.

Hermes most coherent message in the most innovative way

Luxury retailers are shifting to the manufacturing of cheap labor regions at a very high

rate. This may generate lots of money in the short-term but is not effective at all in the long-term.

Public image is very important for the success of luxury goods corporations as the clients pay

large premium for brands. The Hermes group has its way of making their items scarce. They take

long in manufacturing product but will eventually enjoy a rate of 30% and more price premium

on such goods over other similar products (Xiao, 2012). Their legendary Birkin handbags for
example take five weeks to complete but its price on the other hand starts at around 6,000 USD

or even six figures.

Recommendations that would apply to other brands

In many countries such as china, most manufacturing and creative agencies, rush into

booming property sector and financial market that will give them quick money in the short-term

but they never work in the long-term. I would recommend that they copy the way Hermes works.

It may take time to complete its products but when it finishes they sell the goods at a very high

price therefore they still outdo other brands and continue to dominate the market.

Conclusion

The rising numbers of rich people calls for the increase in luxury brand. The luxury

brands such as Hermes and Louis Vuitton are some of the main luxury brands that have topped

the market position. If other brands could copy how they work then they can be assured a success

in the luxury brand market.

References
Apukhtina, T. (2013, July 23). Herms Success Story or Targeting the Ultra-Rich.
Retrieved November 11, 2014, from fashionmarketingsecrets.com/:
http://fashionmarketingsecrets.com/2013/07/23/hermes-success-story/

Colino, N. (2010). The Herms Scarf: History & Mistique. New York: Thames &
Hudson.

Lee, S. (2007, June 07). customer think. Retrieved November 11, 2014, from
customerthink.com/:
http://customerthink.com/is_louis_vuitton_delivering_effective_experie/

Martin, R. (1995). Contemporary fashion. Guatemala: St. James Press.

Rocca, F. (2011). Herms - L'avventura del lusso. Torino: Lindau.

Xiao, L. (2012, May 17). Louis Vuitton or Herms: From whom can consumers learn?
Retrieved november 11, 2014, from knowledge.insead.edu/:
http://knowledge.insead.edu/world/china/louis-vuitton-or-hermes-569