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Ugh.  They’ve done it again.  Interbrand recently published their latest “Best Global Brands” list, with all the usual suspects topping the list – Coca Cola, Google, Disney (shout out to my Disney friends!), etc. However, what caught my attention was their analysis of brand performance among luxury fashion brands such as Gucci, Chanel and Hermès. Louis Vuitton had the highest brand value of the major luxury players while low-price, high-fashion players like H&M and Zara got a toehold on the list. Ok, so far, so good.

Where I get peeved is with the simplistic and inaccurate explanation of why this happened. Even Jez Frampton, the CEO of Interbrand, chalks Vuitton’s brand performance up to “trust”. As in, people trust Vuitton more than the other luxury brands, therefore Vuitton has more brand value. Trust is an easy buzzword to throw around when talking about brands and one which has little to do with brand performance. Frampton contradicts Interbrand’s own methodology, which bases brand value on its ability to get customers to try the product, keep buying it, pay more for it and recommend it to their friends. According to Interbrand, Vuitton is able to do all of those things simply because customers trust them. I strongly disagree. Differentiation, not trust, is the lever which creates all the wonderful outcomes described above and it is differentiation which sets Vuitton apart from other brands such as Gucci and Chanel.

Although each brand has their own distinct look and feel, Vuitton, at the hands of genius Marc Jacobs, is continually reinventing itself, while maintaining the quality which earns it luxury status. For example, partnering with artists such as Takashi Murakami created a coveted line of bags still auctioned for more than their retail price.  I kick myself for not buying the cherries wallet when I had the chance…

But it’s not just about design…LVMH, the parent of the Vuitton brand, dominates the luxury industry with best practice pricing and operations strategies.  The Economist provided a great description of their keys to success:

“What explains Vuitton’s resilience? Beneath the gloss of advertising campaigns, catwalk shows and each season’s fleeting trends, Vuitton brings a machine-like discipline to the selling of fancy leather goods and fashion. It is the only leather-goods firm, for instance, which never puts its products on sale at a discount. It destroys stock instead, keeping a close eye on the proportion it ends up scrapping (which it calls the “destruction margin”). In 2005, when Maurizio Borletti, owner of several prominent department stores in Italy and France, was preparing for the opening of a refurbished La Rinascente department store in Milan, he recalls, the Vuitton people built a scale model of the building in their offices to understand customer flows and get the best positioning. “In this they’re the most professional in the industry,” he says.

Unlike most other luxury marques, Vuitton never gives licences to outside firms, to avoid brand degradation. Its factories use techniques from other industries, notably carmaking, to push costs down ruthlessly and to allow teams of workers to be switched from one product to another as demand dictates. It has adopted methods of quality control, too: one quality supervisor came from Valeo, a French auto-parts supplier. The result is long-lasting utility, beyond show, which is valuable in difficult times.

Owning shops gives Vuitton control over levels of stock, presentation and pricing. It was not therefore affected by the panicked price-slashing of up to 80% by American luxury department stores in the run-up to Christmas last year—a “catastrophe” for others in the industry, according to Mr Arnault. Although other LVMH divisions have been hit by outside retailers de-stocking during the crisis, Vuitton has managed its own inventory, with no competition for space from other brands. With a global network, says Mr Carcelle, the firm can move poorly selling stock to shops where it has performed better.”

Interbrand’s comments are an insult to the excellent strategies of LVMH – ones that allowed them to survive, and thrive, in this economy.

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