French luxury brand Louis Vuitton is slashing internal discounts for French employees and their families, according to sources. The reason is that the French tax authorities have previously decided that the substantial discounts on high-end fashion items enjoyed by employees should be regarded as "taxable benefits".
According to the source, the internal discount for Louis Vuitton's French employees, originally as high as 90%, will now drop to about 75%, which means that the internal purchase price has more than doubled.
Bernard Arnault, chairman of the LVMH group, has always been proud that Louis Vuitton never offers in store discounts. Offering internal discounts to employees is a common way for luxury brands such as Louis Vuitton to transfer inventory, some of which retail for up to 2500 euros. The new tax policy may increase Louis Vuitton's inventory pressure.
In order to prevent products from being sold at low prices, luxury brands will also use direct destruction to manage excess inventory. However, due to consumers' higher and higher environmental requirements for fashion brands, the direct destruction of excess inventory has been strongly condemned by public opinion.
Burberry, a British luxury brand, has cancelled its policy of destroying excess inventory and is striving to become one of the most active environmental brands in the luxury industry. In September, the French Senate banned the destruction of inventory by fashion brands.
Louis Vuitton's new policy only affects French employees, which means employees of the brand in other countries can still enjoy substantial discounts, and inventory goods may be sold to employees in other countries at a discount.