Louis Vuitton in Japan Case Analysis

Louis Vuitton in Japan

Case Analysis

Introduction

Japan has one of the world’s largest economies and its consumer’s account for an outsize portion of all luxury goods sales. Last year, nearly a quarter of luxury products were bought by the Japanese, according to Deutsche Bank, more than any other single region (Alderman, 2011). Therefore, not only the upper class of citizens interested in luxury brands but also Japanese middle-income people also have purchasing power of luxury products. Those who are middle - class consumers really like to spend their money to buy expensive meals and luxury clothes or bags even they often skimped on vacation. Moreover, Japanese people eager to buy luxury brand and they have very strong emphasis of brands not only name brands especially about western luxury brands.

In addition, the Japanese addiction to Western luxury fashion brands arose in the 1960s and 1970s with the extraordinary economic growth of the country, and the resulting rapid expansion of the new middle class that wanted to show off their success. Because in the densely populated island nation the Western way to enjoy as well as to exhibit one’s riches - with grand homes and large properties in plush neighborhoods - was near impossible, the Japanese chose to show their wealth by dressing richly (Degen, 2009). Japanese consumers like to use luxury brands more than other countries. However, there are also some obstacles in Japanese luxury market.

Therefore, LVMP has faced to three major problems in Japanese market, which are the weak economy, customer changing taste and competitors. Obviously, Louis Vuitton wants to tackle those difficulties as fast as they can do in Japan.

Weak economy

The most recent visible issue is the financial crisis, which influences to Japanese luxury market.

Initially, the global financial crisis started from America then spread all around world include in Japan. The mostly Japanese middle-income consumers spend their income to luxury goods, suddenly they had problem of general economic crisis. So that those people had lack of money to spend luxury goods even they had confusion because consumers have been suffering stagnant incomes, and as a result, have lost faith that the economy will improve in the future. This became especially accurate when the economic recovery of 2003-2007 saw most young people hired as temporary workers at reduced incomes. Companies were hoarding cash instead of sharing profits with employees.

Over the past decade, Japan has been faced with rising unemployment, numerous bankruptcies, deflation, drops in consumer spending, and declining income. In a time when people are feeling less economically secure, 100-yen shops 2 and discount brands such as Uniqlo have become increasingly popular. One would expect that in such dire times, consumption of luxury goods would decline (Japan market resource network, 2007).

Consequently, Japanese consumers behavior had changed from buying luxury goods to saving money for future. Literally, Japanese young women had hand to spend a huge amount of money for luxury goods in 1980 because Japanese economic was unbelievable increased. After that all financial system had changed to credit card system in 1990, in order to Japanese young women really appreciated this procedure that firstly buy a product then pay system (Degen, 2009). That’s why Japanese costumers eager to buy much more expensive products during that time but now they already got used to it and also might worry about their big amount of bills. Today, Japanese young costumers mind is changed because they are already familiar with those expensive products. The majority of Japanese high school students already have leather man-crafted Louis Vuitton’s bags and also other brands expensive jewelries.