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

[Liberté]

I am sort of disappointed to learn that LVMH spends half the amount of the industry average on labor and material costs...

Well, like I mentioned, it doesen't seem to be FASHION or LUXURY world average at all, which is why is asked for gucci and prada, chanel or hermes equivilant info, rather it's conglomerate average, which include General Electrics and Hydro among others. Try to follow the link and look at the numbers.

UNless the OP got the numbers from another source, I'd hate to see a lot of people being disappointed for no reason.

 

[handbag*girl]

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.

wow...interesting I thought they would be making so much more...

 

[chloe.f.puff]

wow...interesting I thought they would be making so much more...

I agree. In fact, I now feel better about my purchases, seeing that they're not generating a boatload of profit.

 

[azia]

Even if it ISN'T the most accurate information, it is pretty interesting to get a general idea.

 

[theglamorous]

Wow.

 

[socalgem]

Well, like I mentioned, it doesen't seem to be FASHION or LUXURY world average at all, which is why is asked for gucci and prada, chanel or hermes equivilant info, rather it's conglomerate average, which include General Electrics and Hydro among others. Try to follow the link and look at the numbers.

UNless the OP got the numbers from another source, I'd hate to see a lot of people being disappointed for no reason.

I would also like to see it compared to Gucci, Prada, etc. That info would make the comparison more accurate.

 

[e_pinpin]

it thread makes me feel better paying for LVs haha...thx

 

[*GINGER*]

These figures actually made me feel great knowing that the revenue actually goes into paying the workers right!

 

[couturecreature]

I would still buy LV even if the net profit is 99%. Haha, that's pretty sad eh?

 

[deluxeduck]

These figures actually made me feel great knowing that the revenue actually goes into paying the workers right!

i absolutely agree!

 

[Olgavd]

LV is OK in terms of pricing compared to other brands. I've never understood Hermes, their Birkin is waaay overpriced.

 

[*GINGER*]

LV is OK in terms of pricing compared to other brands. I've never understood Hermes, their Birkin is waaay overpriced.

me too...it baffles me with hermes

 

[voodoodoll2005]

LV is OK in terms of pricing compared to other brands. I've never understood Hermes, their Birkin is waaay overpriced.

Actually I remember reading an article on LV modernizing their production of handbags (apparently they were inspired by Japanese automaker Toyota). The article mentioned Hermes as the total opposite. Even though a Hermes bag is way, way more expensive, their gross profit margin is only 1/2 of LV because the bag is exclusively hand sewn.

 

[betterthanshoes]

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....)

Exactly what I was thinking. I'm an economics major so I have to know that stuff

LV stores and window displays seem to be brighter and more elaborate than that of Gucci or Chanel (at least where I'm from). That's all advertising/marketing expense.

 

[aluminum_siren]

Well, like I mentioned, it doesen't seem to be FASHION or LUXURY world average at all, which is why is asked for gucci and prada, chanel or hermes equivilant info, rather it's conglomerate average, which include General Electrics and Hydro among others. Try to follow the link and look at the numbers.

UNless the OP got the numbers from another source, I'd hate to see a lot of people being disappointed for no reason.

I assumed the INDUSTRY AVERAGE was within the industry meant the fashion or high-end luxury. That was somewhat misleading if you didn't read the entire article which I didn't because I assume the numbers were highlighted as a summary of the article.