Louis Vuitton Case Study
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Louis Vuitton:
New product introductions vs. product availability
In the spring of 2004, Mr. Marcello Bottoli, CEO of Louis Vuitton, the largest and most profitable subsidiary of LVMH (Louis Vuitton-Moet Hennessy), the #1 luxury goods company in the world, was called upon to arbitrate a ongoing conflict between Mr. Jean-Marc Loubier, the company’s vice president for marketing and sales, and Mr. Emmanuel Mathieu, the vice president for manufacturing and logistics. For several months, these two senior managers had been bickering about how to solve the out-of-stock problem Louis Vuitton’s 300 company-owned stores around the world were increasingly frequently faced with. Jean-Marc Loubier blamed the situation on the lack of flexibility and responsiveness of the company’s supply chain while Emmanuel Mathieu faulted the recent increase in new product introductions, combined with very poor forecasting of demand. Marcello Bottoli had mixed feelings about the whole issue. On the one hand, close to perfect quality was critical in a business where customers might be paying up to €1000 for a pair of shoes and €3000 for a handbag, and he felt very reluctant to disrupt Louis Vuitton’s traditional and proven manufacturing process. On the other hand, the rapid pace of new product introductions had been a decisive factor in the company’s 20% average growth rate in the previous three years and, in a business like that of Louis Vuitton, it was very difficult to predict how customers would respond to new products, no matter how much money, time and effort were spent on market research. Still, despite the advantages resulting from the snob-appeal attached to those products that turned out being hard to purchase, the opportunity cost of stores being out of products customers wanted had to be very high. So Marcello Bottoli was determined to find an appropriate solution to the problem very rapidly.
The Luxury Good Industry
Luxury goods have
Louis Vuitton:
New product introductions vs. product availability
In the spring of 2004, Mr. Marcello Bottoli, CEO of Louis Vuitton, the largest and most profitable subsidiary of LVMH (Louis Vuitton-Moet Hennessy), the #1 luxury goods company in the world, was called upon to arbitrate a ongoing conflict between Mr. Jean-Marc Loubier, the company’s vice president for marketing and sales, and Mr. Emmanuel Mathieu, the vice president for manufacturing and logistics. For several months, these two senior managers had been bickering about how to solve the out-of-stock problem Louis Vuitton’s 300 company-owned stores around the world were increasingly frequently faced with. Jean-Marc Loubier blamed the situation on the lack of flexibility and responsiveness of the company’s supply chain while Emmanuel Mathieu faulted the recent increase in new product introductions, combined with very poor forecasting of demand. Marcello Bottoli had mixed feelings about the whole issue. On the one hand, close to perfect quality was critical in a business where customers might be paying up to €1000 for a pair of shoes and €3000 for a handbag, and he felt very reluctant to disrupt Louis Vuitton’s traditional and proven manufacturing process. On the other hand, the rapid pace of new product introductions had been a decisive factor in the company’s 20% average growth rate in the previous three years and, in a business like that of Louis Vuitton, it was very difficult to predict how customers would respond to new products, no matter how much money, time and effort were spent on market research. Still, despite the advantages resulting from the snob-appeal attached to those products that turned out being hard to purchase, the opportunity cost of stores being out of products customers wanted had to be very high. So Marcello Bottoli was determined to find an appropriate solution to the problem very rapidly.
The Luxury Good Industry
Luxury goods have