Handbag products contribute nearly 75% of LouisVuitton’s revenue, while at Prada and Gucci (featured reading), the handbag strategy accounts for nearly 45% and 40% respectively. MarioOrtelli, a senior analyst at Bernstein, does the analysis shown below.
In the LouisVuitto, NicolasGhesquiè Re’s former designer, MarcJacobs, excels at creating buzz in his collections. But Mr Ortelli explains that under Jacobs, brand sales relied heavily on classic monochrome handbags with low prices and some high-priced products to maintain their brand identity. And since the first brand series was released in 2014, Ghesquiè Re is constantly injecting new vitality into the brand’s handbag line by introducing several higher-priced seasonal styles to transform itself into a new classic.
First released at Speedy’s fall/winter 2014 fashion week in Paris, the PetiteMalle bag was the most coveted bag of the season, which has since evolved into a LouisVuitton core bag, comparable in status to classic but relatively inexpensive items like Speedy. PetiteMalle was also introduced in January at KimJones’ final presentation for the label.
LouisVuitton has done a particularly good job of relaunching handbags after a few years with a season in the works, as they did recently in Manhattan, says Ortelli in a report. Capucine, which was relaunched in 2013 and sold out immediately in stores in London, milan and Paris, is now arguably one of Vuitton’s core bags.
In the past eight months LouisVuitton has also unveiled new models priced between 1,500 and 2,000 euros (11,690 yuan to 15,588 yuan), and has expanded the range of existing models by offering different colors and materials, or decals or embroidery. Looking ahead, Ortelli says we will also see Vuitton come out with new models, but the pace will be more normal than the acceleration in the second half of 2016 to the first half of 2017, which is about four new models per season.
Louis Vuitton will offer more seasonal or limited-edition handbag styles, the analyst said, and will also revisit the brand’s historical archives and relaunch seasonal handbags to develop into evergreen brands, such as PetiteMalle.
Since AlessandroMichele took over as creative director of the brand in 2015, Gucci has been trying to capitalize on the new momentum of the transformation by reintroducing traditional and new styles to boost handbag sales. Gucci has a large proportion of leather goods, readymade garments, shoes and other products in history, Ortelli said. Vuitton, by contrast, started out as a leather goods company, which this year launched ready-to-wear clothes and shoes.
Under Michele’s creative direction, Gucci is now a classic brand, he continued, such as Dionysus or Sylvie handbags, [Michele] expanded Gucci’s range of handbag products originally targeted at 1500 to 3000 euros, and introduced more expensive GucciTotem and other handbag products for customers who pursue elegant taste.
Indeed, with Gucci’s brand power and sales momentum still growing rapidly, the brand has launched two new product lines in different price ranges in the past eight months: priced at 1,500 to 2,000 euros and 2,500 to 3,500 euros respectively. In 2017, the brand will continue to promote Ophidia, Ottilia and other products based on the hugely successful Dionysus Dionysus bag. Gucci hopes to meet strong market demand by launching mid-priced products. That could give Gucci a big boost in 2018, Ortelli explains.
Prada has the most limited price range of the three brands mentioned in this article. In the past, handbags were more expensive than their peers. A mini PradaGalleria, for example, costs 1,100 euros, but LouisVuitton’s Speedy small Speedy costs 650 euros, and Gucci’s small single-shoulder bag costs around 690 euros.
Prada has further lowered the price range for its new handbags to 750 to 2,000 euros over the past eight months. Ortelli said that the expansion of low price can support the sales of Prada in the short term, and the sales volume will increase, but he also pointed out that Prada’s current bag product structure is not as strong as Vuitton and Gucci. Prada did not launch new handbags in the price range of 1,500 to 2,000 euros, but this range can actually try to copy the successful model of Galleria handbags. He thinks the other two brands have a wide range of prices.
Last September, Prada’s first-half 2017 profit missed analysts’ expectations, falling to its lowest level since its IPO in 2011 and triggering a wave of store closures in 2016. To get back on track, the milan-based fashion house has always relied on handbags. ‘we think Prada will continue to come up with innovative and unique designs over the next few years in an attempt to create new, permanent models in this important product category,’ Mr. Ortelli said.
He also suggested that the brand focus on lower-priced collections while introducing new products in the high-priced range of 1,400 to 3,500 euros, which would help Prada boost sales. Faced with the two biggest and most powerful brands in the handbag market, namely LouisVuitton and Gucci, Prada is now in a position to defend itself and strive for potential profits, which is a great challenge.