Bagging Some Big New Markets
Indian aristocrats, business leaders, and Bollywood stars turned out in force last March at a glittering opening reception for an exhibit of antique luggage used by maharajas. But the luxurious steamer trunks and custom-made cases for swords and turbans weren't on display in an historical museum. The setting was Louis Vuitton's newly launched New Delhi store, its first outlet in India.
Vuitton's move into India is part of a global expansion that over the past decade has doubled the size of its retail network, to 318 stores in 51 countries. Besides India, it opened its first store in Russia last year and will soon move into South Africa. Tapping new markets is essential to Vuitton's drive to maintain double-digit sales growth. And it helps reduce Vuitton's dependence on Japanese customers, who account for more than half of sales worldwide.
Vuitton isn't the only luxury group eyeing emerging markets, but it tries to stay ahead of the pack. In his Paris office, Vuitton chief Yves Carcelle keeps a photo of Nanjing Road in Shanghai, which was clogged with bicycles in 1992 when Vuitton became the first global luxury group to open a store there. Today, the street is thronged with cars and is the main artery of a bustling business district. In fact, about 8% of Vuitton sales are made to mainland Chinese customers. That includes clients at nine stores in China, as well as Chinese tourists shopping in other countries. Rivals Gucci Group (GUC ) and Hermès sell only about 3% of their wares to Chinese customers. Once again in India, Vuitton is the first major luxury group to set up shop. "We have one billion [Indians] who are just waiting for us," Carcelle says.
Yet entering a new country requires painstaking groundwork. Carcelle, a fan of Bollywood films and Indian art, sent a team to India in 1999 to meet with Tikka Shatrujit Singh, a young aristocrat who was the advisor to Vuitton's parent LVMH Moët Hennessy Louis Vuitton (LVMHY ) in India, where it was selling champagne, cognac, and perfumes. Singh introduced them to wealthy businesspeople and socialites. "There was nothing available in India for the rich to buy. People were flying to London, Dubai, Singapore, and New York to shop," Singh recalls. Within a year, Vuitton was scouting for store locations, finally settling on retail space in Delhi's luxurious Oberoi Hotel. The company expects to open a second store, in Bombay, this year.
For Vuitton, these store openings serve a dual purpose. Of course, the company hopes to draw crowds of shoppers. But just as important, the outlets and the publicity they generate help raise the brand's profile with people who may end up shopping for Vuitton when they travel abroad. London-based analyst Melanie Flouquet of J.P. Morgan (JPM ) says that within 15 years more than 100 million Chinese will go abroad annually.
That's why Vuitton plans to open four more stores in China this year. The company says mainland China and Taiwan together are already its third-largest market behind Japan and the U.S. And there are some serious shoppers out there. Vivian Hung, a 34-year-old Hong Kong native who lives in Beijing, is a devoted Vuitton fan who owns a collection of handbags and the latest ready-to-wear by Vuitton designer Marc Jacobs. "Other big brands like Prada and Gucci are very good, but I choose Louis Vuitton," she says. With clientele like that, Vuitton looks set for even more global growth.
By Carol Matlack in Paris, with Manjeet Kripalani in Bombay and bureau reports