Louis Vuitton and the Apple Store

By Francisco Dao , written on March 5, 2013

From The News Desk

I remember a moment at SXSW in 2009 when a friend of mine asked to borrow my computer. When I handed him my Acer laptop he said, “What the hell is this?” For a second, I felt like the guy wearing Wrangler jeans at the hip nightclub, and it occurred to me that Apple had become a status symbol. What I didn't realize at the time was just how much Apple had mimicked the model of luxury brands.

In 1977, the luxury goods industry was a jumbled mess of overexposed European brands, such as Pierre Cardin, that stamped their name on hundreds of random licensees from cigarettes to Lincoln Continentals, mixed in with a small group of old world boutique manufacturers. Louis Vuitton was part of the latter group. Founded in 1854, Vuitton was still family controlled over 100 years later and doing a meager $12 million in sales when the family matriarch asked her son-in-law Henry Racamier to take over running the company.

Upon examining the business, Racamier discovered that the retailers were making the bulk of the profits, a far bigger cut than Vuitton itself. In a move that was considered radical at the time, he decided to cut out the middle man and take control of the entire sales chain by opening more stores owned and operated by Louis Vuitton. (There were two existing stores in 1977.) The move was a resounding success, and in a few years Vuitton was enjoying profit margins of 40 percent while its competitors margins ranged from 15  to 25 percent. By 1984 sales had increased 12 times over to $143 million and profits had increased over 18 times from $1.2 million to $22 million. The Vuitton model was so successful that most high end luxury brands followed suit.

If this playbook sounds familiar, that’s because it is the exact model used by Apple in opening their now ubiquitous Apple stores. And as we now know, Apple has enjoyed similarly spectacular results in both sales and margins.

It’s interesting to note that in 2001, when Apple first announced they were opening factory stores, it was met with almost universal predictions of failure despite the existing proof of the model blazed by Louis Vuitton and the luxury goods industry. What the pundits failed to realize was that Apple was moving away from being a computer company and turning itself into a luxury brand.

I imagine the business analysts and press had limited knowledge of the fashion industry, and it never occurred to them that Apple was completely repositioning itself. Instead of simply being a computer maker in competition with Dell, HP, and the Wintel empire, Apple was remaking itself into a premium brand, complete with stylized cathedral-like stores in the image of Vuitton and Prada. Had they looked at Apple’s move through the lens of the luxury goods industry, we likely would have seen very different predictions of its chances for success.

Of course it wasn’t simply a matter of opening stores. Apple products still needed to be distinguishable from the competition in the same way Louis Vuitton bags are all covered with the “LV” pattern. This second point is why Sony and Microsoft stores haven’t performed nearly as well. But removing Apple from the clutter of electronics store shelves and presenting them in a setting where they literally stood alone was a key step in the recreation of Apple as a status symbol. This is why Apple almost never focuses on specifications. Specs are entirely secondary to the image presented by the Apple brand.

People usually attribute Apple’s resurgence to superior design but designs are easily copied. When I travel, I use a $250 Samsung Chromebook that looks almost exactly like a Macbook Air. What is impossible to copy is panache. Much in the same way anyone can copy the basic design of a Louis Vuitton bag but can’t put the LV monogram on it, it isn’t the Apple designs that stand out anymore but the image that comes with using an Apple product.

When my friend looked at my Acer, which performed flawlessly and did everything I needed a computer to do, and said, “What the hell is this?” he wasn’t commenting on its performance or utility. He was critiquing my lack of style.

Luxury imagery is what allows brands like Vuitton and Prada to charge exorbitant amounts for bags and clothes that perform no better than the competition costing a quarter of the price. Luxury imagery is why people stand in line for days when Apple launches a new product. Luxury imagery, or the lack thereof, is why your friends make fun of your car or your computer. And luxury imagery is why I wrote this post on a Macbook Pro.