Thursday, 8 February 2018

LVMH’s CEO still concerned about online sales of luxury goods

LVMH CEO Bernard Arnault is still concerned that a heavy presence online will damage the reputations of the luxury brands in the group’s portfolio, and that’s shaping how the conglomerate’s digital strategy plays out globally.

“We plan to continue investing in digital technology in 2018, but we need to be prudent there, so as not to sell at all costs,” said Arnault during a presentation with investors for the company’s 2017 year-end results. “We need to be strong on the digital front, but we must not trivialize our products.”

Louis Vuitton, Arnault claimed, is currently the only luxury brand that does not mark down prices. He pointed out that other brands who claim not to hold sales still sell product in outlet stores.

“We don’t do that. We don’t have a single store where items are sold at knockdown prices, like outlets. It could significantly boost revenue if we increased our presence on the internet and in all channels, but I think we’re right not to do that. We’re very careful about brand deterioration,” Arnault said.

nearly all of LVMH brand sales generated online come through its own e-commerce stores. Group CFO Jean-Jacques Guiony said that digital revenue rose by 30 percent in 2017, to about $3 billion. That’s only about 5 percent of total sales. Overall, LVMH reported a revenue increase of 13 percent in 2017 year-over-year, to $52 billion. Net profits were up 29 percent, to $6.2 billion.

The company didn’t shed light on the performance of 24 Sèvres, but building out a profitable competitor in a space dominated by established players like Yoox Net-a-Porter, Farfetch and MatchesFashion is a formidable task

On some fronts, LVMH has been unwavering. As other brands like Saint Laurent and Burberry have set up shop on and Tmall, Louis Vuitton operates its own e-commerce channel in China. But there’s been some give: 24 Sèvres operates a limited retail channel on Tmall, in order to experiment with selling on the site. And Rimowa, the luxury luggage brand that LVMH acquired last year, sells on Tmall and participated in Alibaba’s Singles Day’ see-now-buy-now event.

“China is a very strongly expanding market. Our strategy is to favor our own sites and the experience, which must be luxurious for the customer, even if we’re online,” said Arnault. “But it’s true that the existence of a more structured panorama of marketplace retail means there are more walled gardens. We’re experimenting with full control of price and proportionality to see if we’re yielding results, and so far it has.”

While China’s dynamic and lucrative luxury market could push LVMH to loosen its stronghold of control on its retail channels, there’s still very little hope that its portfolio of brands will ever end up on Amazon.

24 Rue de Sevres, LVMH

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