LUXURY RETAILER LVMH PUSHES ONLINE OFFERING TO MAINTAIN SALES GROWTH
High-end brands are developing e-commerce platforms to better meet rising customer demand
After demand from China drove another quarter of rapid growth for LVMH, chief executive Bernard Arnault is counting on e-commerce to help keep his luxury empire ahead of the pack.
First-quarter sales rose 13 per cent on an organic basis, the Paris-based owner of Sephora and Christian Dior said this week. That beat analysts’ average estimate of 8.5 per cent.
While Chinese consumers have been stocking up on LVMH’s Louis Vuitton handbags and Givenchy make-up, the country’s economic growth is expected to slow to 6.5 per cent in 2018, according to forecast data compiled by Bloomberg.
LVMH is intensifying its digital efforts, such as its sponsorship for a start-up accelerator that aims to encourage entrepreneurs developing new technologies and services for the luxury industry.
“Digital allows us to reach the client more quickly and directly,” Mr Arnault, who is the company’s chairman and Europe’s richest man, said at an inauguration ceremony for the accelerator. “Innovation and creativity are fundamental values for LVMH.”
The programme is located in Station F, a former Paris terminal that telecoms billionaire Xavier Niel has turned into a sprawling campus for start-ups.
With more than 4,000 stores from Paris’s Avenue Montaigne to Los Angeles’s Rodeo Drive, LVMH has been boosted by a rising Chinese middle class that is travelling more than ever.
It’s also gaining from a push into e-commerce and new products to entice young consumers – like luxury sneakers and iPhone cases styled like Louis Vuitton trunks.
LVMH moved to ramp up its e-commerce business across its stable of brands last year with new sites for its Celine handbags and Berluti shoes, the first online store in China for its largest brand, Louis Vuitton, and a new multibrand emporium called 24 Sevres.
“We’ve really seen progress across the board,” said chief digital officer Ian Rogers, pointing to the online openings as well as increased engagement on social-media platforms like Instagram and China’s WeChat.
The company saw organic first-quarter growth of 10 per cent or greater in categories such as spirits, fashion goods, cosmetics and jewellery.
The strong results across all divisions show that sales momentum for LVMH’s key brands remains intact, said John Guy, an analyst at MainFirst, who raised his rating on the stock to outperform from neutral after the results. “This is a remarkable start to the year for LVMH, with broad-based market share gains in a buoyant environment for luxury goods,” said Rogerio Fujimori, an analyst at RBC Europe who rates the shares the equivalent of buy, in a note to clients.
Swiss watchmaker Audemars Piguet, meanwhile, is on track to hit $1.04 billion in global sales this year, the firm’s chief executive told Reuters in Beijing, as the revival in luxury demand in China drives up watch sales.
The watchmaker’s chief executive, Francois-Henry Bennahmias, said sales rose more than 9 per cent in the first quarter.
Last year, sales rose 12 per cent thanks to a shift towards single-brand stores and higher average retail prices.
“We are confident about being able to do a year as good as 2017,” Mr Bennahmias said.
The watchmaker also launched its first online pop-up boutique with Chinese e-commerce platform JD.com this week, hoping to tap into China’s burgeoning middle class, who are increasingly shopping online.
Swiss watch industry exports to China rose 18.8 per cent last year, according to the Federation of the Swiss Watch Industry. Growth this year so far has been even faster.
JD.com, along with rival Alibaba, is expanding its luxury offerings. Last year, it launched luxury platform Toplife, luring big-name global brands such as Saint Laurent and Alexander McQueen.
Mr Bennahmias said JD.com had been lobbying Swiss watchmakers to forge tie-ups with the platform, but he did not rule out the possibility of working with Alibaba, the country’s largest e-commerce firm led by entrepreneur Jack Ma. “I am waiting for Jack Ma to give me a call,” he said. Chinese luxury sales had stalled under a government campaign against shows of wealth among public officials, but are now gaining momentum on the back of the growing purchasing power of China’s middle class – in part driven by younger shoppers and online sales.
Luxury goods sales in China hit $22.55bn last year, up around 20 per cent from the year before, according to consultancy Bain & Co.