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Small wonder that there has been a slash in the colossal promotional activities of such luxury brands in recent times. Market watchers claim that Chanel’s couture show (2008 fall-winter collection) was a much muted version of the spectacular displays in previous years. Even the Swiss luxury giant Richemont (owner of prestige brands like Cartier & Montblanc) is cutting down on promotional costs. Given the dramatic dip in their third quarter sales (by 12%) and their quagmire is understandable.
But why has premium-luxury escaped the wrath of the market downturn? Take Tag Heuer. Despite Swiss watch brands seeing an overall drop in export figures, Tag Heuer (from Louis Vuitton), claims that in the last half of 2008, it has grown by nearly 4%. “Recession hasn’t affected us much because we are into the premium luxury segment. Our target audience will buy a Tag Heuer irrespective of recession,” Jean Christophe Babin, President, Tag Heuer told 4Ps B&M.
Clearly, premium luxury and their Richie Rich target audience continue to ride the downturn unaffected. Self-proclaimed global leader in luxury Moet Hennessy Louis Vuitton (LVMH) has recorded 6% growth for the quarter ended December 2008 and Dior has shown a 3% growth in the same period. A glaring case in point is Van Cleef & Arpels (a premium-luxury brand from Richemont) that has shown 5% growth this quarter; while Cartier and Montblanc (mass-luxury brands from the same Richemont Group) recorded negative growth. Here’s what Stanislas De Quercize, President and CEO, Van Cleef & Arpels told this magazine. “We don’t believe in volume growth. The brand has always been into quality sales (as opposed to quantity sales) so our sales figure has remained intact even during recessions.”
What also keeps the premium-luxury flame burning is exposure to emerging markets (instead of depending only on US and European markets). Take for example Cartier. The brand still does not have a direct retail presence in India, whereas LVMH has expanded its arms deeply into Japan, India and China. The company claims that 94% of 20-plus Japanese women own a LVMH bag. That’s huge, given that Japan accounts for almost 41% of the global luxury mart. “This takes care of avoiding the monetary transaction cost, which has been affected due to recession,” feels Bradely Jones, Head of South Asia Unit of UK Trade & Investment. The Lipstick-Index may or may not be decisive in its feelings and judgements; but hey, it does seem that there are a few recession-proof things in this close-knit, global world! Do we hear cheers going up from the likes of Tag Heuer, Versace, Dolce&Gabbana, Van-Cleef & Arpels???
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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