Filipa ALVES Camille BARBE Margaux BOMBE Pei Xin LIN
LVMH Challenge Unique Store & Secret Houses
Imagine the luxury experience of tomorrow
Abstract : In this report, we worked on the ‘Imagine the luxury experience of tomorrow’ subject for the LVMH Group. The Group is already doing many things to improve its image and each brand. We thought about many solutions and ideas, but for instance, the democratization was not an idea that could suit to LVMH, since the Group has already several brands (extended luxury). Therefore. in order to address this matter, we propose the implementation of Special Stores. Firstly, we thought
about a Unique Store. This store would resemble a house and would be designed to be neutral, so that the core and codes of the brands of LVMH will not be recognizable. Then, if this concept work we will implement secret stores which will be settled secretly in some places like near from the born-cities of founders of the LVMH’s brands. Those stores’ address will not be known before the booking. And the consumers will have to keep the secret. What we want to improve is the consumer experience in luxury. Thanks to these stores, the consumers will feel special, learn about the brand and share their experiences. Luxury is uniqueness and we want consumers to feel unique too.
Introduction : This assessment is based on the idea of creating and designing a “luxury experience of tomorrow” for the LVMH Group. We aim to innovate what LVMH is providing to its customers, while following the company’s strategy in the long term, in order to achieve sustainability. LVMH is known as one of the biggest luxury groups in the world, with six categories under the group's name: Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, Specialist Retailing, and Other Activities. LVMH also has engaged in many programs. Not only do they sell luxury product, they also hold lots of exhibitions, which relates to art pieces, and sponsor plenty of prizes including fashion and technology, thus encouraging the talented young generation. However, because of its huge integration of different kinds of categories, a relevant number of customers can barely recognize some brands as being LVMH’s or their identity and purpose. Since the reputation of the brand is a strong and determinant factor in the luxury sector and, consequently, in the decision of purchasing, lack of recognition could decrease the sales, leading detachment from the customers base and losses of profit. Thus, in order to increase the visibility of the group, we recommend to set a Unique store, where the group's brands will be put together, hoping that let the customer learns more about the group and enjoy the services are willing to offer.
About LVMH: ※ LVMH: The Group
The Group is headquartered in Paris and was created in 1987 thanks to the merge of Moët Hennessy and Louis Vuitton. Before that, in 1971, Moët & Chandon associated itself to Hennessy. Since its creation, they have been acquiring a large number of maisons, with the purpose of gaining more and more market share and to make a permanent footprint on the luxury sector. It is currently constituted by 70 maisons of different categories: Houses of Wines & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry, Selective Retailing and Other Activities. The portfolio of maisons includes Dior, Givenchy, Bulgari, Château d’Yquem, for instance, which are very successful brands. ※ LVMH: The luxury sector During the last few years, the consumption of luxury goods has remained vigorous, much due to the fact that emerging markets are increasingly investing in the sector. These countries, mainly represented by China, Russia and United Arab Emirates, having been increasing their stake in purchases of luxury goods, which is very outstanding when compared to a lowest percentage in mature markets (Europe. North America and Japan, mainly). These countries clearly are driving the sector growth and portray a huge opportunity to the players in the sector. Furthermore, the role of tourism has been crucial to maintain and improve the health of the luxury sector. Especially concerning tourism in Europe, we can observe in the graphics bellow that 40% of customers in emerging markets buy abroad and 20% buys travelling at the airport, fulfilling a total proportion of 60%. Therefore, tourism is a factor that will continue to benefit most luxury brands, even if they have had a rough year.
Source: Delloite Luxury Multicountry Survey for Global Powers of Luxury Goods 2017
In what comes to the general trends and the next steps for luxury companies to take, it is visible that these companies are searching for digital development in order to improve their services and products, without, however, compromising the quality and, consequently, the brand’s reputation. This emerges from the need of satisfying the client with customized services. The constant challenge in this industry is, therefore, to innovate. Concerning the market perspective of LVMH, the Group is the main leader and competes directly with two other groups: Richemont and Kering. The competition is relatively high and fundamentally based on talent and quality. The designers are essential to a luxury brand presence in the market and to its sustainability in the long term. However, large groups like this are slowly trying to differentiate themselves by providing not only new products, but also new experiences, which increases the bar. ※ LVMH: The strategy LVMH present themselves as having three main shared values: Creativeness and Innovation, Excellence Delivery and Entrepreneurial Spirit. The company looks forward to keep these values entrenched, while connecting them with society. In a more profound analysis, the long term strategy of the Group is mainly based on innovation. That is confirmed by the fact that the company is always looking forward to acquire brands that are well succeed and may fit well in a certain category, in order to enhance their performance on the general market. But why does the Group acquire some brands that in some cases are considered “less luxury” and more accessible? For instance, we should take into consideration Kenzo example. It was acquired in 1993 and since then the brand suffered years of stagnation. However, even though that there was a lot of speculation that LVMH would sell the “black sheep”, they didn’t. Instead, LVMH opted by restoring the brand’s reputation and to revive it at some point. It’s clearly a risk for the group
general reputation if it didn’t go as planned, so why take it? Besides the obvious reason of obtaining a larger market share by adopting this policy, LVMH aims to take advantage of the label’s competencies, more precisely its Asian and Japanese influence style that may be an advantage to attract more customers. With that in mind, the perceived strengths of the Group are the heritage of each maison, the craftsmanship and the relevance that they attribute to modernity and evolution. In order to do so, they are chasing talent in a frequent basis, thus creating the Inside Program. ※ LVMH: Overview of 2017
Source: LVMH - LVMH 2017 Record Results
According to data from the LVMH Report of 2017, the Group achieved a total revenue of 42,6 billion euros, which represents an increasing of 13% when comparing to 2016. Overall, all categories did relatively well in the past year, much due to the fact that LVMH is investing a lot in emerging markets. The fashion and the leather goods represents a large part of the sales and suffered a good increase in the period of time considered. Wines & Spirits increased outstandingly, due to more consumption from the American and Chinese consumers.
Even though that the results are satisfying in the short term, we highlight that these numbers are mostly a consequence of the “star” brands of the Group. We consider that there are still “undeveloped” brands that are in the shadow of the biggest ones and LVMH should look at this matter as an opportunity to develop the potential of these brands. The field of Watches & Jewelry is potentially a path to follow and to develop in the future.
The problem : As we have seen, LVMH relies strongly on innovation as a long term strategy of growth. The Group has constantly to find creative ideas which are suitable with all the 70 Houses. Moreover, the Group has to inspire a unique identity to the consumers. However, especially concerning their massive acquirement policy, some questions may arise. Luxury should be unique, in its true nature. Since there are already 70 maisons included in the group, it is perhaps difficult for customers to identify its core. The Group gathers several cores and codes which are completely different because the brands and houses are different as well. That’s why it is complicated to identify the Group as a unity. Even if the brands themselves still follow the same values, heritages, cores, and still operate in their respective markets, some may overshadow others, which is not an efficient interaction and lacks cohesion. In the long term, some “stars” of the group may even get damaged. Furthermore, as we have seen with the example of Kenzo a few years ago, the aim of owning these lower perceived level brands is not very clear to the customers. Consumers perhaps don’t fully understand what opportunities each brand can offer. We defend that if LVMH has bought those brands, their potential should be harnessed to the maximum, as a seeding practice. Therefore, this brands should gradually be more integrated in the innovation process and more clear to the customer.
The development of the idea : A unique store which gathers all the brands of LVMH. I/ The houses A. The unique store The idea is to create a store which will look like a house because we want the customer to feel like home. There are already some specific stores around the world, that are definitely very unique per si. But we intend this one to be special and innovative, since it will gather all the brands of the LVMH Group. It’s about experiencing the group and not a single brand. It should be seen as a unity of all the brands of the Group. In fact, consumers know the brands, but not always that they belong to the LVMH Group. This store will allow the consumers to be aware of it. Each brand has its own strategy and identity, which must align to the Group’s general vision. The Group is involved in a lot of projects, including environment commitments, for instance. However, we consider that the brand should engage more its customers as a whole. That’s why we thought about this house. We want to build only one house because customers will have to wait to go there. This will increase the exclusivity of the experience. Indeed, the heritage of the LVMH Group is strong because the craftsmanship and uniqueness of each brand is a true asset for them. Moreover, LVMH has also its own heritage as a Group. It has its own history. The idea of the Unique Stores is to promote and highlight that heritage. It brings authenticity to the Group and each of its brands. The name LVMH (Louis Vuitton Moët Hennessy) also gives prestige and authenticity to all the brands of the Group. The name LVMH refers to the heritage of the Group too, thanks to the four brands quoted, in fact each brand of the Group has a history and carries the heritage of the merges. Concerning the disposition of the house, there would be four bedrooms, a dressing for each bedrooms and bathrooms. Additionally, there would also be a dining room and a kitchen where a Michelin-starred chef would cook. The house would be cosy but also filtered. In fact, the house will represent the identity of LVMH. So, one doesn’t have to recognize a brand in particular while seeing the arrangement because it will be something neutral. We thought of a traditional house, one from the seventieth or eighteenth century. It will be near from Paris but in the countryside. In this kind of store, the core and codes of each brands do not have to be more prominent than others. In the arrangement of the house, no core will be enhanced more than the others. The brands will all be present in the form of
their products, but the house has to remain neutral because we want to portray an idea of LVMH as a wholeness, as we already referred. The aim is to provide the client a peaceful place to reconnect with the Group and to enjoy the moment. The most important thing is to have a break from routine, while absorbing knowledge concerning the Group and its brands. In the light of Kapferer and Bastien theories (2008), the main objective is not to sell, but to make the client dream as much as possible. And that’s what we search for by suggesting this idea.
According to many art theories, we know that luxury is strongly related to art. It is due to the common timeless of luxury and art. We can even talk about a Artification process. Artification, is a process that transform a brand into an example of art. In fact, if the Unique Store of LVMH expose works of artists, the Group can become an example of art. It can also provoke an Assumption. Assumption brings aesthetic and justify high prices. It brings legitimity to the concept of that house. The art infusion influence the perceptions of products by consumers. It is a ‘consumer-focused perspective of art’. It would be a house where several services could be provided. The idea is to propose a house which consumers can book to events, for example. All the products of each brand of LVMH will be present in the house. Moreover, some highly-trained employees will be there to help and serve the consumers. It could have makeup artists for a wedding preparation, for example. Those employees will make the customers feel unique and special. It will be a moment of luxury with many services to discover the Group and all the brands. For the offer, first the consumers will choose ‘a moment’ like a tea time with friends or a night party, for instance. Then they will select the duration of the booking and as well as the services they wish for.
As an example, we will follow Patricia MacDougal. She is an attorney, and loves skiing. She has a chalet in La Clusaz and a summer house in Monaco. Her favorite brand is Fendi. She loves spending time writing poems about nature and moods and visit exhibitions. For the summer holidays, Patricia wants to enjoy holidays with her son, husband and daughter. She will go into a store (no matter to which brand it belongs) and register her holidays. She loves nature and wants a quiet place. The employee will ask her several questions to understand well where she will be more comfortable. She will finally chose a “secret house” in the Massif Central. She hates cooking so she will ask for a head chef to prepare the meal. The employee in the store will ask about her tastes and prepare some personalized decoration. At the end of her stay, she will come back home with a little candle designed by Maison Francis Kurkdijan.
Source : Facebook on LVMH Page
Where to implement it? Who to target? The idea is to implement a house in France. Then, we will see if it works before opening other houses in different countries. We want to focus first on the country where the group is already set up, where history arises. We want to
implement only one Unique Store per region. According to the map, we want to create Unique Stores in France, one in the rest of Europe, another one in Asia and Japan and one in The United States. Moreover, we know that luxury products should be available in few select places. That’s why we wanted to implement only four or five Unique Stores in the world. It guarantees the uniqueness of the services proposed and the luxury moments that consumers can experience. The target will be the patricians and the parvenus. This Unique Store would not remain a secret, on the contrary. The parvenus will take pictures and share their experience to show that they can afford that kind of luxury experiences. The social signifier is really important here, considering that some people are sensitive to the exclusivity of luxury. They want to consume luxury products or live moments of luxury because it is rare and they desire it. Thanks to this they could differentiate them from others. It is primarily important for the parvenus or the poseurs because they want to be associated to the patricians and dissociated from others. That is part of the conspicuous consumption theory too. B. The secret houses If the unique store works and customers appear to be more engaged, we suggest the creation of “secret houses”. Taking into account that ultra-rich (HNWI = High Net Worth Individuals) people are used to live surrounded by luxury, for them a luxury experience can be a return to smaller, more natural status, such as spending time with family or spending time close to the nature. The main difference between those stores and the Unique Store is to remain unknown. The Unique Store is known, as well as its address. But if a customer goes to a Secret Store, it will private and intimate. We want to use as an advantage inconspicuous consumption hints that suits “patricians” or HNWI. Customers will pay for the raw materials and the craftsmanship that have gone into houses, understanding their sophistication. The customer will not pay for the brand prestige but for the stealth of the group. With the secret houses, this group of people can live it up without being recognized by a common person. The aim of the creation of secret houses is to offer this segment a moment of luxury by breaking their routine. It’s all about spending time with people you love and you want to spend time with. These houses will be higher in quality than luxury holiday home as they will contain different services provided by different brands of the LVMH Group. The customer can ask for the service he/she wants before his/her arrival. The services will include gym courses, spa, etc… We really want to take into account personal tastes that are always important in luxury, but especially important for luxury experiences. The address of the place will be secret in order to preserve the intimity of the
customer. Moreover, each secret house will have a unique universe according to the place of the house. So that, a consumer will choose his secret house according to his tastes. In the stores, consumers could bring products back home, like a memory of the moment they lived. Where to place it and why? We want the houses to embody the cores of different brands. The cores allow customers to be aware of the brand’s roots. We want the houses to be gather the Group heritage. That will set these houses apart. Moreover, we can relate it to the “charisma legitimacy” theory, since the founders and creators of the brands bring their creativity and uniqueness to their brands, and consumers will discover that and can immerse themselves into the universe of these personas (Dion & Arnold, 2011). That’s why we want to build these secret house in places that have a link with the brand. Maybe where a creator was born. This will provide authenticity. In the houses, elements will remind the cores of the Group. To reinforce prestige, that is to say the authenticity and the heritage of the Group, we will link the services to the place where houses are built. For example, the head chef will cook with local and sophisticated products, therefore embodying the heritage of the place where the house was built on. Who to target? The target of this secret houses would be HNWI only, since the aim is for these houses have to remain secret. Therefore, they couldn’t associate it with the parvenus or poseurs. Moreover, that’s the price will be significantly high (very exclusive) and this experience would be largely sophisticated, thus being related with the main target. II/ The consumer experience
A. Feel special The fact that the house of the Unique Store will be in the countryside, which will bring the feeling of peace to consumers. They will feel special and will enjoy their moment of luxury. During the moment the consumer will spend in this Unique Store, he will be alone or with friends with employees to help them and serve them. That’s why we can say that he will feel special. In the Unique Store, the employees will be only focus on the customer. Employees will treat each customer the same way, no matter their income, their job... With the secret houses, consumers will feel
special because the place will be unknown and the universe chosen will fit with their tastes. It will be like everything has been made especially for them. That’s why we can call it a moment of luxury because the consumer book the place only for him and his friends or family. According to marketing theories, customers pay for luxury but they expect something extra in return. They want to feel special that’s why that kind of Store that we want to propose them answer well to marketing theories. Before their arrival, customers will be asked about their personal tastes in order to create a colloquial atmosphere. So, it’s really important for the employees to listen carefully to the customers wants and needs. B. Learn about the Group and the brands All the services that the house will propose will allow the consumers to learn about the Group and the brands they could not know yet. For example, when a consumer will order a bottle of champaign, the sommelier will explain the origin of the brand, etc. Like we have said before, the Group is not well known as a unity. It is our main goal, to make the consumers know more about the Group, not only some brands of the Group. For the Secret Stores, each of them will be dedicated to a universe. For the stores which will be settled near from the born-cities of the founders of brands, they will be arranged with the core and codes of the brand. It is really important to differentiate the Unique Store from the Secret Stores. Indeed, the Unique Store is for the Group whereas the Secret Stores can be dedicated to one brand in particular. The reason is because there will be more Secret Stores then Unique Stores and our main aim is to show LVMH as a unity. So in the Unique Store, the consumers will discover the Group and all the brands and in the Secret Stores, they will learn about a universe and sometimes about a brand in particular if they choose the store dedicated to that brand. According to marketing theory about moments of luxury experiences, the fact of ‘living an experience’ is essential nowadays. In fact, luxury does not have to be boring and while customers are spending great moment of luxury with their near relations, they learn about the brand. C. Self-indulgence When a consumer will come the the Unique Store, he will come with friends or family or colleagues. They will share this luxury moment together and enjoy all the services the asked for. In the houses, there will be different products of the brand that customers can buy and bring back to their home in order to extend their experience. These products can be personalized to the customer. The aim of its action is to make the customer think about the brand and above all to allow the customer to remember
all the best moments he/she shared with the person he/she was with. So, this experience will be timeless. All the products that customers will bring back home can remember the moment they spent. Thanks to that, this experience can be characterized as a luxury experience. In this houses project, luxury can enrich everyday like with a hint of something special. (Hansen & Wänke, 2011)
Conclusion : The idea of the Unique Store and the special stores is to show the Group as a unity. As we showed before, LVMH has engaged in many programs. Not only do they sell luxury product, they also hold lots of exhibitions, which relates to art pieces, and sponsor plenty of prizes including fashion, technology to encourage the talented young generation. The problem is that, as we mentioned, even though the group has a large scale of business, their recognition by the customer is not equivalent comparing to their engagement in different domaines. Most of the customers know some brands under the LVMH Group, but they don’t know the fact that they belong to the Group. That’s the reason why, with these unique and special stores, LVMH will propose services with the products of all their brands. The arrangement of the house will be sober and pale. It will be a store which will look like a house to make consumers feel like home. The consumers will be able to enjoy moments and choose services like makeup, a dinner, etc. The employees of the Group will be dedicated to them and will explain them the history and values of the Group. The aim is to make consumers discover some new brands of the Group but also the Group itself. We want to put the accent on the consumer experience discovering brands and the Group.
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