Who’s Hurt By LV’s Price Reduction?
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It is not occasional discounts but retail price reduction directly. Since early this year the 29 exclusive stores of LV in mainland China have quietly lowered down their prices by 2% to7% and the scale of price reduction includes all Louis Vuitton products from watches, jewelry, clothes, bags to shoes. This is the first price reduction of LV since the brand entered Chinese market, yet the price reduction isn’t applicable for the markets of Hong Kong and Macao. This price reduction of Louis Vuitton, a brand claims to offer no discounts and whose prices never lower down buy only raise is just like a depth bomb for the luxury goods industry and at the same time has triggered a chain reaction of many other luxury goods brands. From the new arrivals in June, top brands like Salvatore Ferragamo, Gucci, Fendi, Dior and Celine all have different discounts and promotions.
To create distance from the consumers and thus making consumers have fancies about them is the consistent principle of luxury industry marketing, and what makes LV look down and begin to their bold price reduction promotion? If taken the current global economic crisis and the status of the Chinese consumer market into consideration, you will find the top luxury brands actually have no alternative and their endless hope for the Chinese consumer market.
Why we say that they have no alternative is because cutting price is fairly a poor decision for luxury brands like LV, but they have to do this facing the Chinese consumer market potential. Louis Vuitton’s price cut is not recommended in two ways. On one hand, it is a fundamental principle of luxury goods to determine its market orientation through pricing, and a higher price is usually a sign and symbol of brand positioning, a way of telling consumers that they only serve people who can afford them, and thus keeping distance from consumers to stimulate consumers’ desire for owning the scarcity of expensive luxury goods; therefore, if a luxury product lowers its price after it has come to the market for a short time, consumers who have bought this product before will feel hurt and fooled, believing they have bought something unworthy and will be left with a bad brand image. On the other hand, for target consumers of brands like LV, the emotional satisfaction brought by the brand is much higher than the functional satisfaction of the products as the consumer recognition of the brand LV more depends on the brand’s high price and the small number of its clients. Under this situation, LV’s price cuts has in a certain sense hurt the feelings of the original high-end customers because the price reduction means the brand is extending their reach and care for the middle and low-end consumer groups, which is very difficult for high-end consumers to accept; and in fact this practice is not good for the expansion of existing customers as consumers will suddenly realize LV used to have such high profit that they can now make such a big cut in price, and these all hurt the brand core values of Louis Vuitton.
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