Why is Louis Vuitton so expensive? | CNBC Explains


Louis Vuitton has held the title for world’s most
valuable luxury brand for more than a decade. Its limited edition handbags
can cost upwards of $55,000, that’s 175 times the average cost of
a new handbag in the United States. So how does this French fashion house
get away with charging so much? Louis Vuitton’s beginnings can
be traced all the way to 1837. France was in the midst of
an economic expansion, and that growth was attracting hundreds
of thousands of people to the city of Paris. A 16-year-old Louis Vuitton
was one of them. He traveled 292 miles by foot to the French
capital to work as a trunk maker’s apprentice. At the same time, steam-
powered trains and ships were making travel more accessible,
and the industry was booming. Vuitton capitalized on this
when he opened his first store. In 1858, he debuted
his new trunk design. It was rectangular, unlike its dome-shaped
predecessors, making it easy to stack. The cotton canvas fabric was lightweight,
durable and waterproof, ideal for travel. Many call this design the
birth of the modern suitcase. In 1896, his son Georges Vuitton created
the iconic Louis Vuitton monogram, a floral pattern with an interlocking L and V, in
honor of his late father, who passed away in 1892. From French royalty in the 1800s
to celebrities in modern times, owning Louis Vuitton has a long history
of being seen as a status symbol. I do really enjoy the Louis Vuitton
x Supreme collaboration. I’m so grateful to be able to wear Louis
Vuitton and work so closely with the brand. Now you can find the famous
monogram on everything, handbags, clothing, shoes,
jewelry, even a toilet. The brand is worth a
whopping $47 billion. One reason Louis Vuitton products are so
expensive is the high manufacturing cost. For example, the luxury brand produces
its handbags here in France and shies away from outsourcing
manufacturing to cheaper locations. Its collections are handmade
by experienced craftspeople in Europe and the United States
using expensive materials. Despite advances in technology,
the company says the most advanced machinery touching
its products is the humble sewing machine. But even the highest quality goods can lose value
if there are too many of them on the market. That’s why Louis Vuitton suspends production
of a product once it hits its sales target. Often when brands produce too much of a product,
they offload the extras by holding sales or selling them at
discount shopping outlets. By controlling its supply, Louis Vuitton has
managed to avoid both of those things. In fact, it claims to be the only brand
in the world that never holds sales. And while this helps the fashion house maintain its
value, it also makes it a prime target for counterfeits. Louis Vuitton is the most counterfeited
luxury brand in the world. In 2018, its products made up over half of
the fake luxury products found on the market. Experts are saying there are many counterfeits on the
market because the brand’s classic style has virtually been the same for the last 150 years, giving those on the
black market time to create near-perfect imitations. The counterfeiting of goods from luxury
brands has become so widespread that e-commerce giants like Amazon and
Alibaba have started cracking down. For example, Alibaba seized almost half a
billion dollars in counterfeit goods in 2018. Although Louis Vuitton had its
humble beginnings here in France, its developed marketing strategies to
attract a large following in other countries. These strategies have been especially effective in
China, one of Louis Vuitton’s most crucial markets. The brand had its eye on this
market as far back as 1992, when it became the first foreign luxury brand
to open a physical store in the country. China was still seen as an
emerging economy at the time. Bernard Arnault, the man at the helm of
Louis Vuitton’s parent company LVMH, even said there were more bicycles
than cars at the time of the launch. With China’s ascension as
an economic superpower, its growing middle class and high
net worth individuals have grown. That’s made the country a lucrative
market for luxury brands. Chinese consumers at home and abroad
spent $115 billion on luxury items in 2018. That’s one-third of
the global spend, with each luxury-consuming household spending
an average of almost $12,000 per year. By 2025, Chinese consumers will account
for 40% of total global spending. All of this demand is driving up price. In China,
goods from luxury brands such as Louis Vuitton are 21% more expensive
than the global average. That means the average Chinese consumer is
paying an extra $420 dollars for a $2,000 handbag. That adds up. So much so that some
wealthy buyers have started hiring agents to purchase
luxury brands for them overseas. Luxury goods go for 22% less than the
global average in France and Italy. The same $2,000 handbag would
end up costing a Chinese buyer $860 less in France than if
they’d bought it at home. Despite being more
than 150 years old, the brand is now focused on finding ways
to appeal to younger, affluent audiences. It’s brought on board influencers like Sophie
Turner, Chloë Grace Moretz and Kris Wu. And while the actors appear in traditional Louis
Vuitton ads, they also post photos of themselves wearing the designer on their
Instagram or WeChat accounts. Kris Wu has been the face of another
strategic move, its streetwear collection. The streetwear culture, popularized by
designers such as Virgil Abloh and Kanye West, was seeping into the luxury industry, and
appealing to younger people around the world. Louis Vuitton wanted to capitalize on this
and in 2018, it announced perhaps the most influential streetwear designer, Virgil Abloh,
as its creative director for menswear. The company borrowed a distribution and pricing
strategy from streetwear culture, the drop model, meaning it releases a limited number
of items over a short time period. For example, this pop-up space in London launched
Abloh’s debut collection as Artistic Director. The collection was only
available for a week. Because there were so
few items and a time limit, consumers flocked to the shop, where
hoodies were selling for as high as $2,395. These strategies and of course the hefty prices
have helped Louis Vuitton to hold on to its title as the world’s most
valuable luxury brand. But as younger consumers begin
to make up more purchases, it’s going to need to keep evolving
to hold on to its seat at the top. Thank you so much for watching
my video on Louis Vuitton. How much would you spend on a handbag?
Let me know in the comments below.

100 comments

  1. These used to be a rarity, but I see them everywhere today, especially when traveling. Secondary market probably reveals their true value. These are not scarce.

  2. I don't understand why people are obsessed with having certain brands as social status. What people notice first is how good-looking you are, or how you dress nicely. In my country, having handsome and beautiful face and white skin is most important, second is how luxurious and stylish the way you dress, third is your brain, fourth is your personality. Eventhough you wear expensive brands, but you are not good-looking, people won't notice you.

  3. One of the greatest marketing schemes ever. I can’t comprehend why people fall for this crap. I just got to have it even if I don’t have the money to buy mentality.

  4. The screw up at the store ahaha .
    I was asking the scarf and then they were like 585

    My mind : what on earth somebody buys a scarf for 585$ That’s why I thought different
    And I asked : do you mean 5 dollars and 85 cents .
    Lol that was so bad so bad .🤣🤣🤣

    My sister was I felt that she was going to do something . It was funny especially sales woman’s face in shock .

  5. I worked from the ground up. Its all about the hype . We used sewing machines after the sewing training session (for two weeks) on how to make the bags.

  6. This defines the psychology of sales. I only envy the people who are paid to wear the stuff, pity those who pay

  7. Im not rich so i cant afford LV. & even if i am rich, im sure i wont spend hundred thousand or millions just for a bag. i mean, is dat the reason y u pay for it? Just to prove that ure difrent? Then what hapens to the owner? Getin rich and rich and rich from dat perspective? So where's the return of investment? Does d value increases like a gold?

  8. This is a total waste of wealth. This is just a bloody handbag just over hyped and mostly percentage of people who buy them may not afford them but would buy for fake status

  9. Rich: LV is so cool
    Middle class: rich people are idiots that's why
    CNBC: thinks it explains why it is expensive
    LV: laughs secretly
    Me: write this comment

  10. How much would I spend on a handbag? Zero. I am that frugal and rely on gifts hehehe. So whatever bags I receive, mostly not expensive, I use.

  11. My Louis Vuitton never costs me more than $50….I wholeheartedly support knock offs and don't give a damn about it!

  12. 55,000 dollars for a bag that cost about 50 to 100 dollars to make yeah sure why not
    What precious metal diamonds and technology are in those bags??

  13. When you have people that are too fuckin stupid to know any better.
    But 99% of the people that buy them buy them because they think they make them look cool.
    Kind of like Kum kumsterdashian spending five grand on a gold-plated dildo, and another seven Grand on a solid gold butt plug for Kanye.
    P.S it's called having more money than brains

  14. They didn’t really explain to why it’s expensive.. just its tactics on appealing to the growing market seeking luxury brands.

  15. It’s expensive because vapid people are willing to buy them in attempts to pleases other people, thinking that it make themselves look like they hold a higher status in life.
    If people are willing to fork out the cash for these things, companies will capitalize on their vain desires and make products for them to buy.
    Some people (not all, but a lot), will buy these things on credit because they don’t actually have the money upfront, so they end up paying even more with interest rates through the roof. Other people will walk around with these bags that they used their earned income child tax credit to buy, and they don’t have more than $100 in the actual purse/bag to begin with.

  16. She did all of that talking, but I still don't understand why that bullshit is so expensive! From what I gather is it's because of some French white man's name on it 🤷🏿‍♂️

  17. difficult to understand where is the reason why the items so expensive.. its because very old history…and long indus

  18. because of ADVERTISEMENT. They spend a lot of money in ads to earn a lot of money from consumer.
    more ads more income

  19. I don't get the hype on these brands, cheaper bags do the same thing. All you doing is carrying your stuff in it.

  20. Virgil is garbage, LV needs to cut him off already. His fan base can’t even afford LV and he is not qualified to take the position of those who work for decades to get there. Just a culture vulture move from LV

  21. I wouldnt spend even a dime bc u can see everywhere of their knock off products and if u buy them ppl ll say ohhh its fake.

  22. I wouldnt spend even a dime bc u can see everywhere of their knock off products and if u buy them ppl ll say ohhh its fake.

Leave a Reply

(*) Required, Your email will not be published