Friday, October 11, 2013

LVHM

Tiffany & Co 

As we all know, the economy has been far from good in recent years. But do we dare expand our knowledge to outside the United States, when it is evident that more than the “dollar” is failing?

Harry Winston, Tiffany & Co, and Louis Vuitton are just a few of the stores that has to raise their prices to offset the Japanese “yens” twelve percent slide since Prime Minister Abe took the office in December 26th with a promise to tame the currencies strength and revive the struggling Japanese’s exporters.
 
While these increases may curb the demand in the market for personal luxury goods, other brands that don’t have prestige face he decision that boosting prices may lead to loss of sales. It is better to make a profit, rather than no profit and if prices are increased to much-who will be able to afford it?

“People who can afford to pay 500,000 yen ($5,200) for a Bulgari watch won’t care if the price is raised to 520,000 yen,” stated Mikihiko Yamato, the deputy head of research for JI Asia in Tokyo (Bloomberg, 2013). “But if a lower-end brand bag had a price hike of, say, 5,000 yen, some people might give up on buying it.” The Roman jeweler is one of about 60 brands owned by Paris-based LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest luxury goods maker, who recently brought out Loro Piana.

 Japans economy has been in deflation for the last fifteen years. This deflation encourages the luxury good makers to divert their attention to emerging markets offering rapid growth such as China explained a writer for BOF, earlier this year. But despite the drop in yen, Japan is still a very profitable nation and some young shoppers say that they won’t let the decrease in Yen, or a price increase stop them from buying the luxury items that they want.

LVMH raised prices at the Japanese Louis Vuitton by an average of 12 percent on February 15th of this year. Tiffany lifted prices on select jewelry and products in Japan on April 10th. Harry Winston also applied price increases to jewelry in Japan on March 22, without specifying the size (or cost) of the raise.  The brand hungry, billionaire CEO of LVHM stated his opinion on the matter: “I’m very struck by the way the Japanese yen plummeted at the end of last year,” France’s richest man said in Paris in January, while presenting his company’s results for 2012. 

“There’s a risk of a currency battle, competitive devaluation, which is likely to lead to a situation in 2013 in which a number of currencies, dollar, yen — that’s already happened — and other currency in which French exporters are involved, will decline.” He explained. 
On a lighter note: Better buy those engagement rings now people! 

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