“I think the island needs a little bit of a signal ” said Yves Carcelle chairman and chief executive of LVMH fashion group and Louis Vuitton.
“When you come after three years you expect a lot more transformation — I was a bit shocked.”
“I consider my visit highly symbolic ” Carcelle said.
He met with the Journal on April 30 to explain why in an exclusive interview.
LVMH will be investing heavily in Guam to better showcase its flagship brand Louis Vuitton and its increased range of products. Carcelle broke that news to the Journal and also shared his belief that the Micronesian region has a positive time ahead.
Carcelle spent two days in Guam last month returning after a hiatus of three years. “For over 10 years I was coming at least once a year. Then Sept. 11 the War in Iraq many other markets to develop in India Russia and China took my attention and management.”
The timing was right he said for the company to increase its investment in Micronesia. “We think we are at the end of one cycle and if nothing new happens we can enjoy the new positive cycle here.”
The Tumon Sands store Carcelle said will be completely rebuilt. “It is too small too obsolete. The product categories we have developed — the shoes the watches the jewelry the travel lines the bags — we have many more lines than eight years ago.”
Making the announcement first through the Journal Carcelle said “We have taken the decision that we are going to move to a temporary store for a few months and then we will tear down the existing building to build something much bigger and more striking.”
The investment in the store of approximately 15 000 square feet is estimated at “significantly more” than $10 million. The bid process has yet to open but the one-year construction will be completed by the end of 2005. Mark Browne general manager for Louis Vuitton Guam Inc. said “It is the first significant construction in a tourist precinct in Guam. It is a two-story global store which is the largest category we have.”
Louis Vuitton has 60 global stores worldwide. “It’s positioning Guam among our shortlist of global stores in the world ” Carcelle said. “We have a store concept which is consistent — the same material the same wood the same principal — but there is always a little bit different — a personality to each one.”
Louis Vuitton purchased the property adjacent to Tumon Sands integrating it into the Tumon Sands facility and opening a store of 4 000 square feet in 1996. Carcelle said owning real estate was atypical of the brand’s 319 stores. “You can count them on the fingers of one hand. But sometimes the only way to get the store you want is to invest and this was the case. We own several pieces but this was the first time in history we built something from scratch.”
The expanded Louis Vuitton store in the DFS Galleria in Tumon first opened on April 1 1998 is due for completion on May 21 with an increase in store space from 2 293 to 3 384 square feet.
Carcelle said “What we are doing — building something stronger to the new standards of retail — maybe people in the islands in the hotel industry restaurants retail should consider similar approaches. The world changes fast and Guam has to adapt to a changing environment.”
He had noticed upgrading in Guam. “I’m happy to see road construction. But we will be happy if what we do convinces other people to invest here and improve altogether the environment.”
Carcelle was pleased Public Law 27-72 had been passed. Anti-counterfeiting measures such as that he said were important and contributed to a healthy investment atmosphere. “We see criminal organizations taking control more and more. Taking action locally and not only referring to federal law was a very good measure. The Chinese as I said will be demanding. You cannot at the same time tolerate selling fakes in the street. I think everyone should understand that finding counterfeit is not helping us it’s helping Guam.”
Guam would do well to improve its product he said a message he was intending to share with Gov. Felix P. Camacho Carcelle said “You are a product in competition with other products.” Guam should question he said “Is this mall this hotel this service at the standard at the travel industry?”
Carcelle sees visitor arrivals from Guam’s major market increasing and potential for the island to welcome an expected wave of Chinese visitors.
“The Japanese will be back significantly again. They have overcome Sept. 11. They will not travel easily in all parts of the world but I think they have realized Guam is safe — you don’t hear any kind of uncertainty about safety here. Everything considered it’s probably safer for them to come here than Thailand.
“It’s probably the only clientele we have where we do more business with the mainlanders outside of China than in the mainland.” By nationality Chinese are the fourth largest market for Louis Vuitton.
Chinese visitors he said could be demanding and astute shoppers.
“My message is ” Carcelle said “Think about that here. It means that probably in the hotel you need different service and quality of restaurants.” The prospect of freeing its dependency from traditional markets Carcelle said “Should give the island the confidence to invest. Geography is your main asset.”
Some brands he said in the middle of the previous decade had not considered China to have the potential to be a major market. “There were brands that used it to get rid of their seconds their old season’s stock and build a second category store. The Chinese were not stupid.”
He said LVMH had the experience and brand recognition to welcome Chinese visitors to Guam. “We started our implementation in China 12 years ago. Our implementation in Japan was 26 years ago and you see the result. We are far and away the No. 1 brand in the Japanese market driving the luxury sector and of course that influences our business here with the Japanese.”
LVMH opened its first store in Beijing in 1992 and now has nine stores in China. A global store opened in Shanghai in September and stores will open in four additional cities by the end of 2004.
“A lot of people are discovering China now and say they think it’s a big market and their dream is to open in Beijing and Shanghai. We did that at the beginning of the ‘90s. We are opening now in places like Xian Xiamen Qingdao and Hanzhou.”
Carcelle said Guam could position itself to diversify from its Japanese market. “Hong Kong mostly due to SARS has seen a significant decrease in Japanese business. This has been more than replaced by the arrival of the [Chinese] mainlanders. We decided a year ago a big program of five-year reinvestment in all our stores in Hong Kong.” He said apart from the fact that the local market was buoyant “We think it’s very nice to have a balance in travel retail between Japanese and mainlanders if for one reason or another one clientele tends to fade away. I don’t see any reason why this phenomena should happen all over the Asia-Pacific region.”
Browne said Louis Vuitton expected Chinese visitors to enter the Northern Mariana Islands market. “We are very confident the Chinese will travel to Saipan through the approved destination status this year.”
Through the years Guam had always been on Carcelle’s radar since he began traveling to Japan and doing business with Japanese 31 years ago. “I knew quite well their cultural habit to travel to escape the big city for three or four days and shopping while you are there.”
Carcelles visited Guam soon after his appointment in 1990 as chairman and chief executive of Louis Vuitton. He had served for a year as director of strategy for LVMH from 1989. Since 1999 he has been chairman and chief executive of the LVMH fashion group and since 2002 chairman and chief executive of Louis Vuitton. “It was among my first trips in the first few months. We had this small store in Tumon Sands — very few people in France had the idea that there could be business in places called Guam and Saipan.”
He said Micronesia has it’s own charm. “It’s interesting when you discover Guam — and Saipan for the first time. It’s a world in itself — three hours away from the closest land — I always found it fascinating.”
But Carcelle’s visits to Guam over the years have been due to the return on investment and potential in the region he said as much as the area’s charms.
“We have always invested — first because we have our own structure here our own team and very quickly a CEO for Micronesia. We always considered it big business and having our own management here enabled us to react much more quickly as we see opportunities.”
Carcelle said in recent years other companies in the luxury goods market have started to directly control their products and presence in Micronesia. “The situation I discovered when I joined 15 years ago was that apart from DFS everyone was working within their regions. There was very low visibility at headquarters of what was happening in Guam. If you have your own organization if something happens in Guam you know it in Paris the next morning.”
Guam he said “Has always been a territory for us like any other — close to the decision process.”
In 2004 Louis Vuitton celebrates its 150th anniversary and 25 years of business on Guam. Since Carcelle took the helm fashion group profits which reportedly account for more than half of revenues for LVMH’s five division group increased dramatically. In 2003 LVMH fashion group revenues were $4.7 billion.
Carcelle said growth was through penetrating new territories geographically and new territories of product. “The magic of this house of this brand is that we respect the eternal values of the brand and at the same time a permanent creativity.”
The Asia-Pacific region including Japan contributes about 50% of Louis Vuitton revenues with Micronesia into double digits.
The traditional monogram and its colors had an ongoing attraction Carcelle said. “We haven’t changed one millimeter of the Keep All bag that was created in 1924.” However he said “Today you would not create a product in brown and yellow like that.” Of the new variety of colors in both leather and monogram he said “At the end of the day it was very modern but it was so much Vuitton because it was built on tradition.”
Carcelle’s had not previously worked in the fashion retail industry but his involvement is obvious not only on the balance sheet but in creative aspects of the brand. “I spent five months with [designer] Marc Jacob before we signed the contract. We met regularly. We were visiting factories together — stores archives. I talk to him every week.” He deflects his 15-year influence at LVMH back to a “collective responsibility” and pride for growth of the business. “Our chairman and CEO is at the same time the main shareholder. If we have three months of relatively disappointing results we are not at risk of a hostile takeover because we have secured the majority shareholding. We would never be forced to change a strategy because of that.”
Louis Vuitton merged with Moet Hennessy in the late ‘80s and Carcelle was appointed by the then-chief executive. Carcelle said “We had fantastic management continuity. If something happened to me there would a group that can continue to have the vision and put in place the best CEO to continue. I’m confident we have a strong management team. At the end of the day we need to take one decision but this is taken after everyone who has a chance to influence it can express his point of view.” MBJ
