Vuitton is famous as the largest and most successful luxury-goods company in the world. Less well known is how closely its fate is tied to Japan. Other luxury brands are popular, but Vuitton controls nearly 10 percent of the Japanese market–outselling the next biggest name (Cartier) five to one. Of Vuitton’s $3 billion in global yearly sales, as much as 88 percent goes to Japanese customers, including those traveling abroad, according to a recent study from Morgan Stanley Dean Witter in London. That’s far more than, for example, Gucci (48 percent) or Hermes (38 percent). With Japan teetering toward a banking crisis after a decade of economic stagnation, the dangers seem obvious. Yet so far the country’s troubles have not dented Vuitton sales. In 2001 Vuitton’s 44 boutiques in Japan earned a record $897 million in sales, an 18 percent increase from the previous year, even as deflation gripped the country. “Economists have been saying that Japan is a risk for 10 years,” says Yves Carcelle, president of the LVMH Fashion Group. “You have to distinguish between the Japanese people and the banks. The Japanese have money. The Japanese banking system does not. We’ve been asking ourselves the same question for a long time: will it collapse? And year after year, I watch the Japanese continue to consume more and more [Vuitton products].”
Why Vuitton in Japan? One in three women and one in six men own a Vuitton product, and many teenage girls told market researchers they want Vuitton because “everyone has it.” In other independent surveys, Japanese cited Vuitton for its “durability,” and its signature pattern of cherry blossoms and stars mingled with the interlocking LV, a 19th-century design inspired by Japanese family crests. Perhaps most important, Japan’s new class of “parasite singles” (university-educated professionals living with their parents) has a thing for Vuitton. Mainly women 25 to 34, the 10 million parasite singles spend up to 10 percent of their annual salary on fashion items. According to analysts, they prefer Vuitton because it is less expensive and more identifiable than Hermes, and has a longer shelf life than Gucci or Prada. “You don’t feel compelled each season to go out and buy the latest Vuitton,” says one analyst. “It’s a classic.”
Frenchman Louis Vuitton started making traveling trunks for European aristocracy in 1854. His business evolved into the LVMH conglomerate that now includes luxury brands from Dior to Givenchy. Vuitton descendant Henri Racamier introduced Vuitton to Japan in the 1970s and in 1981 hired accountant Kyojiro Hata as president of Louis Vuitton Japan. Hata opened Vuitton boutiques inside Japanese department stores, and trained sales staff on company history and craftsmanship. After Vuitton capped prices in Japan at no more than 1.4 times those in Paris, Tokyo prices dropped half or more. Sales took off.
In 1990, French business tycoon Bernard Arnault wrested control of LVMH from Racamier. Arnault had dreams of building Vuitton within 10 years into the global cornerstone of the world’s largest luxury group. Yet for all its success, Vuitton has evolved into a primarily Japanese sales phenomena. “Now that we are very big in Japan, there is a risk that people consider us as a Japanese brand,” Hata said to Morgan Stanley Dean Witter. More to the point, the number of parasite singles is expected to drop as Japan ages. And the ubiquitous tradition of gift giving, especially among Japanese businesses, is disappearing quickly.
In response Vuitton is expanding aggressively into China, and Carcelle insists success in Japan is a harbinger of better things. “Japanese customers are the most informed customers of the world,” he says. “I heard from several other CEOs that if you succeed in Japan, you can succeed in every market.” That assumes, of course, that the Japanese market doesn’t collapse under your
