Vuitton Sees Growth Tied to Invitation-Only Luxury Salon: Retail

Louis Vuitton Tops Hermes as World’s Most Valuable Luxury Brand
The Louis Vuitton "maison," the London flagship store for LVMH Moet Hennessy Louis Vuitton SA, stands in New Bond Street in London, U.K. Photographer: Chris Ratcliffe/Bloomberg

Some Louis Vuitton clients are more equal than others.

The label’s most valued customers are allowed access to a luxury apartment perched above its New Bond Street store in London. The chosen few, admitted by invitation, can curl up on couches amid artwork by Jean-Michel Basquiat and Gilbert & George and order drinks from a butler while personal stylists tout the brand’s latest monogrammed wares.

The apartment shows how Vuitton, whose laminated canvas bags drape the arms of fashionistas the world over, is tackling luxury’s growing dilemma: how to sell more yet stay exclusive. The brand’s stores are getting larger and more sophisticated, with lavish decor, art exhibits and bookstores. With a flat in London and its own jetty in Singapore, Vuitton is working hard to make even the very wealthy feel special.

“What we have now is another layer on the cake,” said Peter Collett, a psychologist, consultant and author of The Book of Tells: How to Read People’s Minds from their Actions. “You’re not just bringing people into the shop, where anybody can come. You’re going to bring people into the inner sanctum.”

Six years ago, Vuitton introduced a larger store format known within the company as a “maison” after the French word for house. LVMH Moet Hennessy Louis Vuitton SA, its Paris-based parent company, has risen more than 75 percent since.

Champs Elysees Style

The concept was first unveiled on the Champs Elysees in 2005 to present “a certain way of life” with features designed to keep customers coming back, according to Yves Carcelle, the label’s head. Vuitton, LVMH’s largest unit by sales, has added 11 more maisons since, most recently in Singapore. Another is scheduled to open in Rome next year. The maisons “offer more than simple shopping experiences,” Carcelle said by e-mail.

The New Bond Street store, inaugurated last year, is inspired by “the home of a collector who loves only the best and the rarest,” according to the company. In practice, that means 1,500 square meters (16,145 square feet) of wood-paneled retail space with chrome fixings housing hundreds of Vuitton-branded handbags in the heart of the city’s West End.

The second-floor apartment showcases works of art, including Basquiat’s Napoleonic Stereotype Circa 44, which hangs in the entrance above an antique Vuitton trunk. Six attendants are on hand to cater to the needs of guests in one of three lounging areas, which can be split into private suites.

No Riffraff

This kind of space is “where you go and do private shopping and don’t have to mix with the riffraff,” said Peter Mace, a partner in charge of London retail leasing at broker Cushman & Wakefield Inc. Vuitton also uses the apartment, which has a bathroom but no bedroom, to host private functions, including dinners. It’s the lone flat in Vuitton’s network.

“In the process of taking somebody into this apartment, you’ve got to theatrically create the impression that this is somewhere where nobody or very few people go,” said Collett, the psychologist and consultant. “It’s got something to do with escalating exclusivity.”

Vuitton doesn’t say how it discriminates among customers, though the onus is probably on the sales staff to separate “the wheat from the chaff,” according to Collett.

Own Jetty

The sifting process is easier at Singapore’s Marina Bay Sands shopping complex, where Vuitton opened its first flagship store in Southeast Asia in September. The glass and steel pavilion, “the maison of the traveler with a nautical spirit,” has a jetty for clients who want to shop by yacht.

Making customers feel special is good business for Vuitton. The 157-year-old company has one of the industry’s highest average sales per store. The clothing and accessories maker generates 12.7 million euros ($17.4 million) of sales on average per store, HSBC Holdings Plc estimates. That compares with 6.1 million euros at Gucci and 5.4 million euros at Prada, according to analyst Antoine Belge.

Flagship stores also serve as advertisements for brands on the world’s most famous shopping streets. That’s increasingly important as Chinese demand for products ranging from $814 cashmere scarves to $4,367 Sofia Coppola-designed leather handbags soars at home and abroad.

After opening hundreds of new stores over the past decade, luxury companies are moving into a phase of “consolidation, engaging and educating” customers, says James Lawson, founding director of Ledbury Research in London, which conducts research for companies including LVMH, Gucci-owner PPR SA and Cie. Financiere Richemont SA, the maker of Cartier jewelry.

Luxury Temples

Vuitton brought in 28 percent of LVMH’s revenue last year and 57 percent of earnings before interest and taxes, HSBC estimates. LVMH, which doesn’t break out figures by brand, reported a 13 percent increase in fashion and leather goods sales in the first nine months of 2011. LVMH is confident for the future even as concerns grow that European shoppers may pare spending, Finance Director Jean-Jacques Guiony said last month.

Vuitton isn’t alone in building luxury temples. Hermes International SCA, the French maker of 5,500-euro Birkin bags, opened one last year in a former swimming pool in Paris. The shop includes a florist, a bookstore and a tea room. Burberry Group Plc, the U.K.’s largest luxury goods maker, plans to open a new flagship on London’s Regent Street next year.

Wow Factor

Luxury companies need “to have something that has a real ‘wow’ factor that will get people to come and visit” their stores, Mace said. “Some brands make money out of stores, some don’t. But it’s an advertisement to the world.”

New stores will add $3.8 billion of worldwide personal luxury goods sales to this year’s total from the $5.8 billion they added in 2010 as the industry grows 10 percent, Bain & Co. estimates. Vuitton plans to slow new store openings and invest more to spruce up some of the 459 shops it already runs, according to Carcelle.

Making a statement comes at a price. Luxury brands spend as much as 700 pounds ($1,116) a square foot to refurbish their stores in the U.K. capital, Mace said. He figures Vuitton’s London outlet probably cost more than $50 million to fit out.

The store is currently exhibiting trunks designed by Turner Prize-winning artist Grayson Perry. The maison’s permanent collection includes works by Richard Prince and Takashi Murakami. Jean Lariviere’s L’Enfant et le Monde Vuitton is on the ground floor by the cash area.

With rents running as high as 1,000 pounds per square foot in the neighborhood, devoting space to culture and comfort can be an expensive proposition, according to Mace. Vuitton and others do it because building bridges with the art world helps buttress the brand’s image of craftsmanship and reinforce notions of exclusivity and good taste.

“The surrounding is as important as the product,” Collett said. Mixing art and luxury to “create a little bubble” leads clients to feel special, he said. “It’s fantasian.”

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