For those who are wondering how much of a *markup* is in a LV bag (ro)

  1. here's what your money is paying for. (The 1st number is LVMH, the 2nd number is the luxury industry average)

    http://stocks.us.reuters.com/stocks/ratios.asp?symbol=LVMH.PA&WTmodLOC=L2-LeftNav-16-Ratios

    For an LV item that sells for $1000:

    Labor + material cost:
    LVMH - $350; Industry Average - $680

    Cash operating cost (marketing / advertisement, store personnel's salary, transportation, etc.):
    LVMH - $420, Ind. Avg - $153

    Non-cash operating cost (e.g. depreciation of manufacturing equipment):
    LVMH - $30, Ind. Avg. - $17

    Income Tax:
    LVMH - $60, Ind. Avg. - $30

    Net profit after all it's said & done:
    LV - $140, Ind. Avg - $120

    I guess compared to other luxury brands, you do pay more for advertisement / marketing on a LV bag.

    Edited to add: The cost break down is based on LVMH margin. But since LV is by far the largest division of LVMH, the profit margin of LV should be about the same as LVMH, possibly even a little higher.
     
  2. WOW...that is very interesting!!! And I thought that compared to some brands, LV doesn't advertise as much (like Prada/Gucci)!
     
  3. That's very interesting, thanks for sharing with us voodoodoll2005.
     
  4. Hmm thanks for that!
    it's very interesting..
    But i really didn't think LV advertised THAT much...
     
  5. Okay...so they don't actually make like $700 on $1000 items...oh well. I guess I don't feel as bad paying over $1000 for a bag.

    Thanks for the info!
     
  6. It would be interesting to see how this is for the Gucci group and Prada. Do you have that too?

    LVMH is a LOT more than Louis Vuitton, just keep that in mind, these are not numbers for Louis Vuitton. Also, isen't it a bit weird to compare the LVMH number to the industry average for conglomerates (if you're using numbers from the link)? Other conglomerates listed aren't really into fashion at all, it's not strange the cost of f.ex ads is a lot higher. =P
     
  7. Thanks.... Very interesting. I thought there was a larger mark up.
     
  8. I recall seeing an interview on tv with the LV organiser of the Louis Vuitton cup (part of the America's Cup) and the sponsorship cost was something like $50 million Euros? Since they've pulled out of sponsorship of the America's cup, do you think there is a chance prices will come down.... okay.... just wishful thinking....
     
  9. Interesting...
     
  10. Wow, interesting.
     
  11. well you dont see any other big name famous celebs as the spokespeople for other brands like gucci or fendi, so im not surprised that LVs costs are from advertising....
     
  12. You're correct, LV is only a division of LVMH. However, LV is the largest & most profitable division of LVMH. So the profit margin for only LV should be similar or even higher.
     
  13. ^
    True I've read that Louis Vuitton has a profit margin on 45%, but I've never seen technical numbers for it. =)
     
  14. I am sort of disappointed to learn that LVMH spends half the amount of the industry average on labor and material costs...
     
  15. but the ads they do buy are expensive. and the facades they put up around some stores aren't cheap either. advertising is more than a visual ad too - it goes into ad $ allowances given to retailers that carry LV (other than LV boutiques) for their store advertising. advertising budgets can also be part of marketing budgets (parties, product launches, trunk shows, etc....)