Porter's 5 Forces analysis of Louis Vuitton - Pet Series
Competitive rivalry
-Other luxury brands like Hermes and Gucci are early adopters of new trends. The new pet series could be copied easily as Hermes is leading brand in upscale luggage and accessorysegment. Gucci and Hermes both cater to the luxury class, though the major competition is fromHermes because of its ability to provide customized products.
-The targeted customer base for all the three brands is adults with net income of morethan $5,500 per month. (Amanda) what is the competitive nature between Hermes, Gucci & LV? Do they go after each other's market share? I am not clear from what you provided.Bargaining power of suppliers
-LV doesn't manufacture its own products; and the company will have to rely on manufacturers and suppliers for the new idea of Pet Series. The company has tie ups with several suppliers from China and India, which significantly reduces their bargaining power because of high competition. (Feedback) Yes, there is a great deal of competition with suppliers in China & India, but how much weight does the brand name carry? Traditionally, vendors like to work with wellknownbrands because it raises their perceived value to other lesser know brands. Also, these brands can pay higher prices and therefore the MU is higher. Please take a look at this. Bargaining power of customers -Company owns most of the direct to customer retail outlets and its own e-commercewebsite which accounts for more than 85% of the sales.
-Very less customers buy from wholesale and other retail outlets which reduces the bargaining power of customers.
-High sales from direct to customer channel reflect the strength of loyal customers and company with strong base of loyal customers need less to worry about bargaining.
-The LV brand is positioned as a luxury brands, and have advantage of being termed as aprovider of high quality product which again minimizes bargaining power of customers.
(Feedback) Is the LV customer price sensitive or not? Will they buy product specifically becauseit is LV and enhances their lifestyle through design and status?Threats of new entrants
-LV and its competitors are more than a century old business in the industry, which reveals their strength and nature of market. The brand loyalty LV persists is the reason company had exponential growth in last few years.
-The company also has key suppliers with very less bargaining power. All these factors together leaves no scope for the new entrant that can challenge the brand name though the particular idea of pet series can be copied and knockoffs in market will be easily available, but the loyal customer base will always keep the company ahead. (Feedback) Are other high-end brandsfeaturing this product category currently?
Do you need special relationships with vendors thatmake this product to start. I think the threat of new entrants is very low as it is the combination of an established high-end brand with the product type that they would have threaten.Threats of substitute products LV rarely has threats from substitute products, but the new segment of pet series and accessories is easy to copy and the market from China can produce counterfeit products. Becauseit's the accessory, not apparel the margin will reduce with the time and increase in competition.
(Feedback) Not sure that I agree with you here. The gross margin is directly related to the sell price vs. landed cost, not the product category. Certainly the price is dependent on what the market will bear, but certain pet products may be able to be very profitable. Please relook at this. I also don't see any evidence to support your assertion hat the pet product market is more easy to knock off than apparel. LV must contend with that problem in handbags too and apparel. this is not a substitute. A substitute would be the customer buying a completely different pet product, that is not the LV brand. Based on the customer loyalty and the need to own LV branded items, I would argue the threat is very low.