Whether the Group's Margin Impact Will Vary Based on Volume

. In the general environment of the epidemic, various industries and markets have been affected to varying degrees. This article will compare some of the measures taken by the luxury industry during the epidemic, as well as the changes in the economy, to determine whether the impact on the group suffered from the market impact differently depending on the size of the group. The study focuses on LVMH and Burberry's operations, supply chain, and market results during the epidemic as the main objectives of the study. The study found that although the operating plans and development goals of the two luxury groups deviated significantly, the earnings rate fluctuations tended to be the same after the market impact, which proved that the fluctuation of interest rates due to the market impact was consistent and not related to the size of the group.


Background
Since the beginning of 2020, the global economic market turmoil caused by covid-19 has affected almost all industries. Almost all industries, except for the pharmaceutical sector, have experienced a significant decline in revenues. The luxury goods industry, as a profitable industry, has been greatly affected. However, there is a huge difference in the revenue of different group volumes, and it is difficult to conclude whether the impact is consistent for each group. So, studying the change in earnings is an important investigation to help investors determine the risk of the industry.

Related research
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Objective
The Research focuses on the product marketing strategies of two of the world's leading luxury goods groups, LVMH and Burberry, and analyses the difference in revenue due to the differences in their respective merchandise supply chains. The research focuses on listed market stocks to understand the profitability of the luxury industry on several levels.

Company Overview
This research compares the LVMH Group and the Burberry Group. First of all, LVMH is a group that embraces all types of luxury goods, with 70 exceptional brands in 6 different sectors. Each brand is dedicated to the production of high-quality products with a high level of expertise. Familiar to the public are Louis Vuitton, Dior, Bulgari, and Tiffany & Co, to name a few of the top brands. Louis Vuitton is the oldest aristocrat in the luxury industry, but it often creates new fashion, such as the LV Trainer series, which uses transparent canvas design to add new vitality to this century-old aristocrat. For example, the LV Trainer collection, with its transparent canvas design, has added a new vitality to this century-old aristocracy and is loved by young consumers.
The Burberry Group was founded in 1895, and its brand focuses on making traditional Britishstyle clothing, such as the highly identifiable plaid shirts, scarves, Burberry is based on the classic plaid pattern and unique fabric craftsmanship in the luxury industry, loved by British gentlemen.

Comparison
Louis Vuitton is the oldest aristocrat in the luxury industry, but it often creates new fashion, such as the LV Trainer series, which uses transparent canvas design to add new vitality to this century-old aristocrat. For example, the LV Trainer collection, with its transparent canvas design, has added a new vitality to this century-old aristocracy and is loved by young consumers.
Burberry has repositioned its brand to be a digital luxury brand. Targeting post-80s and post-90s users, Burberry is enhancing its content on social media, building a multi-country brand matrix, portraying the brand's story, sharing information about product launches and fashion shows, and promoting British elements and the British elite line. Burberry has always focused on the classic image of the brand, which is unable to attract consumers who follow the fashion trend. According to the comparison of sales demographics, Burberry is gradually losing its young consumers, which means that the brand is losing its power.

Supply Chain Model
Supply chain refers to the chain structure formed by the upstream and downstream enterprises involved in the production and distribution process to provide products or services to the end user, i.e., the whole chain from the merchant to the consumer. Supply chain management includes five basic elements: planning, purchasing, manufacturing, distribution, and return of goods.
For the luxury industry, the biggest problem in the supply chain is how to ensure that the products do not lag and accumulate inventory, and at the same time how to ensure that they reach the customers safely.
Both LVMH and Burberry have adopted the operation mode of MTO and ETO (MTO is a process where the product is manufactured once the order is confirmed; ETO is a highly customized production process that meets all of the customer's custom needs) combination, which largely avoids the risk of pressure warehouse. As large luxury groups, LVMH and Burberry have their own independent supply channels and production teams. Such a supply chain approach ensures further cost reduction while guaranteeing the quality of the products.

Comparison
The fact that LVMH has luxury brands across multiple sectors means that LVMH has a huge supply chain network. And the brands under LVMH have adopted an independent operation model, which means they all have independent supply chains, thus ensuring their own development and not being influenced by other sub-brands. For high-end luxury goods, their customer groups are almost connected, for example, if some customers choose Bulgari's jewelry as accessories, then this consumer group will still choose luxury brand clothing to a large extent. Therefore, based on LVMH's coverage, it almost locks in this group of customers, and whatever their needs are, they can almost always be met. LVMH, with its own independent supply chain, can even customize different matching solutions for different customers, because the information of this group of customers is recorded within the whole group. The customized solutions are more likely to win the customers' favor.
In contrast, Burberry's few brands involved, even if they have their own manufacturers and supply chains, are far from being able to compare with LVMH's brand power. The most important reason is that its supply chain is more for the main brand Burberry, which means that when a customer buys a dress and wants to add accessories, but does not like the Burberry style, he needs to choose another brand, Burberry Group's other brands because of the lack of group resources, and the taste does not meet the needs of customers, and thus miss the deal. This is the difference between the Burberry and LVMH supply chains, one centralizes the allocation of resources; the other manages the resources separately and is free to deploy them to ensure the development of the brand.

Financial Reports Analysis
For the year ending 2021, LVMH reported total revenues of $62.415 billion and gross profit of $43.860 billion. Compared to 2020, LVMH's gross profit will increase by approximately 52%. The sales feedback from the market gives the reason for this huge percentage increase. Due to the impact of the covid-19 globalization epidemic in early 2020, LVMH operating profit was only 7.972 billion, which is far from enough for the operating profit of such a large luxury group. According to the financial reports of LVMH for 2021 and 2019, the operating profit is 17.155 billion and 11.273 billion respectively. After another decline of about 30% in 2020, the revenue profit in 2021 becomes a straight line rise of about 2.15 times the profit in 20 years, which is good news for investors, and there is a strong rebound in the market due to the impact of the epidemic to return to normal.
According to Burberry's financial report, operating profit in 2020 also fell by about 30%, which can indicate that the entire luxury industry has been hit by roughly the same strength.
According to the financial reports of the two groups in 2021, the operating profit and gross profit will be further expanded by about 25% in 2022, thanks to the further policy of global control of the epidemic and the liberalization of control in various countries, giving the luxury industry a chance to recover. Of course, such an increase will not be maintained forever, when the world eliminates the serious impact of Covid-19, the market economy will recover and stabilize, then there will be no more spurt of operating profit and gross profit increase.

Marketing Operations
The strategies of LVMH and Burberry are very different. LVMH expands its market share as well as enters new areas, while Burberry focuses on its own brand power and carries out a series of overhauls.
LVMH operations have always been based on the autonomy of its brands as a solution. In the face of the general market environment, LVMH not only overhauled its own brands, but also started a crazy journey of mergers and acquisitions. After spending an astronomical $15.8 billion to acquire Tiffany, in April 2021, LVMH increased its stake in Italian luxury group Tod's to 10%; in July, it acquired 60% of New York designer trendy brand Off-White. In addition to increasing its stake in some brands, it also rejected some marginalized brands. Examples include Pink Shirtmaker, a highend British menswear retailer, and Fenty, a fashion brand launched in collaboration with American singer Rihanna. The new additions will open up more markets for LVMH's vast luxury empire. Even if the market is affected by Covid-19, as long as there are consumers who want to buy luxury products, then LVMH's products will be considered.
Burberry has improved the quality of its business over the past five years in four key directions: an increase in retail share to 80% of total sales; an increase in the number of new products to 48% of total product; and the continued renewal and streamlining of retail commercial properties.
For these points, it is important to point out that the global wholesale business point of sale is streamlined and upgraded to the level of luxury brand shopping environment.
Burberry has launched a new store concept to further enhance the customer experience. To date, 47 of the brand's stores now feature the new design, with store facades covered in the iconic birch brown Burberry check. The new store concept has disrupted the customer experience of the brand and its products, driving revenue growth, and in fiscal 2023 Burberry plans to expand the new design to 65 stores, or a quarter of the brand's directly owned stores.
In response to the key area of digital business, Burberry has strengthened its online and offline channel integration and expanded its after-sales service offering, with customers able to access the highest quality after-sales service via its official website.
This change has helped tremendously in terms of sales during the Covid-19 period. Firstly, the iconic dé cor will be more attractive to consumers, increasing the brand's attention and appeal. No one wants to spend a lot of money on clothes in a mediocre store. Secondly, the after-sales service covers more online channels, which means that consumers are more comfortable with buying Burberry online and are more likely to decide to buy.

Conclusion
This paper examines the product audience demographics, the different supply chain solutions, and the operational solutions and marketing strategies of two premium luxury groups, LVMH and Burberry, during the outbreak. Through the analysis of the financial reports of the two groups, it is found that the market economy is affected by the same proportion regardless of the volume, and there is no question of the large group having a small decline in profitability while the small group has a large decline in profitability. Through this study, it can be understood that the economic changes in the market have a fixed rate of impact on a certain industry, rather than changing arbitrarily with the size of the market share.