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LVMH

LVMH says “no way” to Amazon’s business

LVMH, a French multinational luxury goods conglomerate, refused to do business with Amazon, an online retailer. This is despite the fact that Amazon has been fast growing its reach in the fashion and luxury segment bringing on board more accessible luxury brands such as Calvin Klein and Kate Spade. 

According to an article on the Reuters, LVMH chief financial officer Jean-Jacques Guiony told investors, that Amazon’s business does not match with the LVMH’s brand image. He was quoted saying:

There is no way we can do business with them for the time being.

Overall, LVMH Moët Hennessy Louis Vuitton  recorded a 4% increase in revenue, reaching €26.3 billion, for the first nine months of 2016. Organic revenue grew 5% compared to the same period in 2015. With organic revenue growth, the third quarter saw an acceleration compared to the first half of the year.

The company also said, Asia excluding Japan, showed a significant improvement during the quarter. Moreover, the Selective Retailing business group recorded organic revenue growth of 6% for the first nine months of 2016.

For the luxury conglomerate’s Selective Retailing business, Sephora continued to gain market share in all its markets and recorded double-digit revenue growth. Online sales rapidly increased in all regions and Sephora continued its store opening program. DFS navigated a difficult tourist environment in Asia, particularly in Macao and Hong Kong. After Cambodia in the first half, DFS opened in September a new T Galleria in Europe, in Venice, thus expanding its presence in major tourist destinations.

When reached out by Marketing, consultants in the space of e-commerce and luxury agreed to the move. Linda Locke, creative director and CEO of Godmother, said the decision to not partner with Amazon is right as Amazon is too mass for an exclusive luxury brand like LVMH. Locke was previously marketing consultant at Club21.

“The luxury brand is extremely particular about how the brand is presented, including the associations, which would not be possible to manage on such a platform,”she said.

Echoing the same sentiment as LVMH and Locke, is Rajeev Balasubrahmanyam, CEO, Digital Predator. He said: “One is defined by the neighbourhood in which one lives; especially if it is a luxury brand.” He further explained that by associating with cheaper brands, luxury brands’ value can get diluted.

However, Balasubrahmanyam was of the view that Amazon could be a way for LVMH’s second hand goods to be shared. He said: “LVMH could institutionalise certification for its second hand merchandise merchants on Amazon. This encourages transparency and consumer protection programs.”

This could be a way to tap into the data of LVMH aspirers who will one day buy first hand from the first party properties of the brand, he explained.

Gary Teo, regional technology director, VML Southeast Asia & India, said that many times, luxury brands hesitate to take the plunge into e-commerce segment because e-commerce channels may not be well-equipped to extend the entire experience to the customer.

“E-commerce platforms tend to make brands very ‘approachable’, which at times goes against luxury experiences that the brand wants to generate. The environment, thus, doesn’t provide luxury brands the opportunity to engage with their customers in multiple ways at this point,” he added.

Teo said that while Amazon may assure security of the brand, it is still perceived as a channel that is transactional, convenience-driven and often, price-sensitive.

However, not dismissing the fact that e-commerce cannot be ignored for long, Teo added that brands, publishers and platforms, alike, need to focus on insight, infrastructure and investment in customer experiences and user interface.

He explained, “As creativity and systems in the digital world improve, there is a high likelihood for brands to be more willing to experiment in the space.”

 

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