Lvmh in China

Part 2: Motivation to enter China market

1 Policy:

1)”Open Door Policy” in early 1980’s

Parfums Christian Dior was the first Western prestige cosmetics brand to enter China in 1979 through the Friendship Stores in Beijing, Shanghai & Guangzhou.

2) The boom Phase of FDI(1992--2001)

LVMH pioneered a direct China subsidiary in 1993 before all other competitors to successfully develop a retail distribution network across the country;

LVMH opened its first boutique in 1992 at Beijing’s Peninsula Palace Hotel

3) China’s accession into WTO in 2001

Sephora opened its first store in Shanghai in 2005

At the beginning, China is virgin market for the luxury industry. Besides, China’s government provide many benefits for foreign company at that time. Both of them play a key role in LVMH’s entry,

2 The rapid development of China’s economy

Seeing the follow graph, China’s income per capita has grown from $280 per capita in 1980 to $3000 per capita in 2010.Nowdays, China is the third largest consumer of luxury good market and China is expected to become second by 2015.There is great purchase power in China.

[pic 1]

3 Population

1) The emerging of middle class.

China’s sustained growth of around 9% of GDP has been emerged a large number of middle class. The urban middle class population in china was 145.10 millions and is expected to 300 millions approximately in 2015.

[pic 2]

2) The large population of millionaires.

According to the Boston Consulting Group Global Wealth 2014 report, China had 2,378,000 millionaire households in 2013,  China’s millionaire population is now the world’s second-largest, just behind the US.

[pic 3]

4 Luxury Model:

According to the spread of luxury model from Chadha and Husband, The spread of luxury model contains 5 stages. China is in the 3rd stage, which is show off.At this level, a Louis Vuitton bag is a must and a status marker. You need to show to other people that you do have money and make sure they notice it and so display your luxury goods. People like to prove that they come from a respectable family. Once this stage is reached then the next one is “Fit in”, at this stage there is no way back.