Get The road to luxury: the new frontiers in luxury brand management second edition ashok som free a
Edition Ashok Som
Visit to download the full and correct content document: https://ebookmass.com/product/the-road-to-luxury-the-new-frontiers-in-luxury-brandmanagement-second-edition-ashok-som/
More products digital (pdf, epub, mobi) instant download maybe you interests ...
Luxury Brand Management in Digital and Sustainable Times 4th Edition Michel Chevalier
“Ashok Som and Christian Blanckaert have brilliantly outlined and share with us the new frontiers and opportunities in the luxury management. I find their development on the second hand, vintage, pre-loved opportunity for the luxury and fashion Maisons and Brands very interesting. As Jean-Louis Dumas said in his famous definition of luxury ‘Luxury is what you repair.’ It also what you transmit. A very inspired and inspiring book to read!”
—Stanislas
de Quercize, former CEO of Cartier, Van Clef & Arpels & Richemont, France
“The Road to Luxury presents a thorough analysis of the luxury industry in a remarkably easy-to-read way. The authors evaluate the critical processes, skills and major players of luxury compared to those of other industries, skilfully identifying the key points that harness success. Professor Ashok Som has studied and worked with the major industry players and this clearly grants him a privileged and passionate perspective on the industry. The book is a good reference point for understanding the luxury industry’s key drivers and making more informed decisions, which makes it as an ideal handbook for people who are currently working in the industry or who wish to understand what makes this industry special.”
Stefano Rivera, CEO, Scabal
“I found this book beautifully illustrated, very pleasant to read, and full of great ideas for managing the LEONARD operations worldwide in the years to come. I will keep the book within reach so I can consult it regularly to find inspiration.”
—Daniel Tribouillard
, Chairman of the Board, LEONARD Fashion
“The Road to Luxury is a must-read for anyone interested in the future of luxury, and how to find successful paths in its new environment. Christian Blanckaert and Ashok Som have combined the best of academic analysis and business expertise to give a unique perspective on how to predict, and create, the luxury of tomorrow.”
Published by John Wiley & Sons Singapore Pte. Ltd.
1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628
All rights reserved.
Edition History
John Wiley & Sons Singapore Pte. Ltd. (1e, 2015)
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons Singapore Pte. Ltd., 1 Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628, tel: 65-6643-8000, fax: 65-6643-8008, e-mail: enquiry@wiley.com.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation.You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for any damages arising herefrom.
Other Wiley Editorial Offices
John Wiley & Sons, 111 River Street, Hoboken, NJ 07030, USA
John Wiley & Sons, The Atrium, Southern Gate, Chichester, West Sussex, P019 8SQ, United Kingdom
John Wiley & Sons (Canada) Ltd., 5353 Dundas Street West, Suite 400, Toronto, Ontario, M9B 6HB, Canada
John Wiley & Sons Australia Ltd., 42 McDougall Street, Milton, Queensland 4064, Australia Wiley-VCH, Boschstrasse 12, D-69469 Weinheim, Germany
Library of Congress Cataloging-in-Publication Data is Available:
Typeset in 11.5/14pt Bembo by Straive™, Chennai, India
We dedicate this book to Wladimir, Amelie, and Zoya
Acknowledgments
The idea of the second edition of The Road to Luxury started to take shape as I witnessed double-digit growth of the personal luxury goods segment from 2015 to 2019. Four of the luxury companies—namely, LVMH, L’Oreal, Hermès, and Kering—were within the top six companies in the CAC40 index, with an all-timehigh market cap. Each of these companies was witnessing spectacular growth. For this reason, the examples we had used in the first edition of the book was becoming outdated. Digitalization, sustainability and China were moot in most discussions. The idea finally crystallized at the beginning of the COVID-19 pandemic in early 2020. I started to organize my notes and interview managers and CEOs to understand how the new frontier of the luxury goods industry would look in the future. In March 2020 the market crashed and most of the companies lost 50% of their value. That was the moment I went back to the first chapter to be reminded that every 10 years such a calamity occurs and usually there is a sharp rebound. Over the rest of that year I reworked and revisited the book as I interacted with participants from the EMiLUX and the Masters in Management programs.
Prompted by my students, I created assignments such as case studies, which the students from the program wrote under my supervision. Those teaching materials were used in the program with great success and were adopted worldwide in other universities and business schools. I am grateful to the participants in this program for their insights and feedback. My work environment in a French grande ecole provided and sustained my interest in French and Italian luxury businesses. I appreciate the efforts of my colleague, manager and friends to discuss and debate the world of fashion and luxury trends. My sincere thanks to all of them.
I acknowledge the support of all my students, especially Zula Hu, Sandhya Rangan, Nikhil Anand, Shirin Sonal, Yu Cao, Arushi Chopra, Sushanta Das, Rashi Gupta, Hannes Gurzki, Naja Pape, Shiva Pappu, and Milan Rabold who supported me in my research as I wrote the two editions of this book. My sincere thanks to my students, Manuela Brische, Lilly Liu, Deepak Yachamaneni, Boris Gbahoué, Geraldine Carter, Stephanie Masson, Misha Gupta, Karyn Bell, Anna Nolting, Fernanda Harger, Nora Kato, Raghavendra Sheshamurthy, Nonika Vyas, Tina Huang, Sid Shetty, Priscilla Mark, Mario Sanz del Castillo, Lynn Chou, Lan Wu, Leonardo Banegas, Pajaree Kasemsant, and Salman Bukhari who spent their time revising and integrating my comments multiple times to make their work publishable. Also, my appreciation goes to Ruchi Shangari Dsouza, Debjani Roy, Daniel Tobar-Richter, Clara Gonzalez Goicoechea, Valerie Flexor, Jisook Anh, Mo Cheng, Wenjing Wang, Meng Li, Erik Lobatom, Kanika Holloway, Sophia Redford, Alessandro Cannata, Hui Xu and many others who worked diligently in my course on Managing the Global Corporation.
I unhesitatingly acknowledge the support and encouragement of Françoise Rey, who inspired me to try new concepts and creative ways of managing programs to keep on building my network in this industry. I express my sincere thanks to all my colleagues, especially Michel Baroni, Dean of Faculty, who was there to extend support in this endeavor whenever required.
I acknowledge the following companies: LVMH, Kering, Richemont, Chanel, Van Cleef and Arpels, Chaumet, Krug, MFK, and many others who enhanced my knowledge about the different sectors of the luxury business. Prashant Mishra from IIM Calcutta, India, with whose
invitation I was appointed as Hindustan Unilever Visiting Faculty at IIM Calcutta to continue research in emerging brands.
Despite the best efforts of the contributors, I remain responsible for any shortcomings. Finally, I would like to acknowledge the efforts of my fourteen-year-old daughter, Mekhala-Zoya, who regularly reminded me not to waste my time during the pandemic on browsing Facebook but to complete my part of revising and rewriting the chapters before the ever-nearing deadlines.
Ashok Som
About the Authors
ASHOK SOM is Professor in the Management Department at ESSEC Business School. Professor Som is one of the pioneering thought leaders in designing organizations and an expert in Global Strategy. His book Organization: Redesign and Innovative HRM was published by Oxford University Press (2008) and International Management: Managing the Global Corporation by McGrawHill, UK (2009). At ESSEC, he is the Founding Director of the Executive Masters in Luxury Management (EMiLUX) that partners with the Parsons School of Design—The New School, New York; Accademia Costume and Moda, Italy; and previously with SDA Bocconi. He was the Founding Associate Dean of the fulltime, one-year post-experience, Global MBA program; the founder of the India Research Centre; and the founder and Director of the Global Management Programs on Luxury and Retail Management (in partnership with the Indian Institute of Management [IIM], Ahmedabad). He received his PhD from IIM Ahmedabad; M.Sc and M.Tech from the Indian Institute of Technology, Kharagpur; and a bachelor’s degree from Presidency University, Calcutta, India. He is passionate about case-based research and teaching. He was the winner of the EFMD Case Writing Competition 2008 in the Indian Management category. He won
the Case Centre Award 2014 in the Entrepreneurship category. He is Adjunct Faculty at IIM Ahmedabad, (India), and Mannheim Business School (Germany), and Visiting Professor at IIM Calcutta (India), Auckland University of Technology (New Zealand), the Graduate School of Business, Keio University (Japan), and Tamkang University (Taiwan). His current research is on creative industries, focusing on the luxury industry. He is a regular speaker at international conferences and consults with European and Indian multinationals.
CHRISTIAN BLANCKAERT’s resume establishes him as a global leader in luxury. He is currently senior advisor of EPI Group (J.M.Weston, Bonpoint, Champagnes Piper Heidseick and Charles Heidsieck), senior advisor of Eurazeo, Vilebrequin, Furla SPA. He is a board member of the Yves Rocher Group and Figaret. For several years he was President of Petit Bateau and a board member of Moncler. From 1996 to 2009, Blanckaert was the CEO of Hermes Sellier and Executive Vice President of Hermes International. From 1988 to 1996 he was President of Comité Colbert (a french organization that represents 70 French Luxury companies). During his career, Christian has been a consultant with the Boston-base consulting firm Harbridge House. He was the CEO of the do-it-yourself chain Bricorama, Chairman and CEO of Thomson Distribution, and Managing Director of the SCAC group. Christian was also for many years Chairman of the board of the French National School of Decorative Arts (ENSAD) and Vice President of Action Again Hunger (ACF). Blanckaert was Mayor of Varengevillesur-Mer for 21 years and is the author of several books: les chemins du luxe (Grasset 1996), Portraits en Clair Obscur (Balland, 2004), a biography of Roger Salengro (Balland 2001), Luxe (Éditions du Cherche-Midi, 2007), Luxe Trotter (Éditions du Cherche-Midi, 2012), Les 100 mots du Luxe (Les Presses Universitaires de France PUF, 2012), Argent, Fortunes et Luxe en Asie with JM Bouissou and J. Siboni (Picquier Éditions 2013). Instants Précieux (Allary Éditions, 2018). He is a visiting Professor at ESSEC, ESCP in Paris, Singapore and ESA in Beirut. Blanckaert graduated from the Institut d’Etudes Politiques de Paris, the Faculty of Law of Paris and has an MBA of INSEAD.
Prologue
The Pink Bag
It had been sitting there, on the shelf, for ages.
Two years, three years—nobody knew exactly, but it was surely a “depreciated asset,” as a slick city banker might say.
They could have hidden it away at the back of a store cupboard, but that would have been too sad, too harsh. The bag had become a fixture, a familiar friend of the store, and it sat there, doggedly, fixedly—probably for a long time.
This bag had personality. It was pink. Pink crocodile leather with a diamond clasp. Worth a small fortune.Yet still on the shelf.
From time to time, someone would move it to another spot.
It would be showcased, at the entrance, or to one side, or right in the middle, or at the back of the store.
It had attracted plenty of dust, watched thousands of customers pass by, as it waited in vain to catch someone’s eye.
The pink crocodile bag filled the sales assistants with despair, but it was no use to think about it. They kept it, convinced that one day there would be a new turn of fate.
The pink bag had aged a little, the candy pink had begun to fade slightly, and the diamonds, which were polished every day, had lost some of their sparkle.
“We should take it off the shelf,” said the leather section manager. “We can’t keep it on sale,” said the head sales manager. In short, the pink bag was a nuisance; its continual presence was annoying and it was beginning to stand out like a sore thumb.
The bag felt ashamed. What could be the reason for its failure? Its price, its color, its skin?
The sales assistants resorted to making jokes and calling it “unsellable,” which is of course the worst insult for a handbag.
One Monday morning, a customer came across the bag, high up on its perch. The bag seemed rather aloof, almost condescending, as it looked down on the crowd of customers.
“May I have a look at it?” inquired the lady.
Excited, the sales assistant took down the bag, taking care to don her white gloves, so as not to scratch the crocodile leather. She announced the price, one hundred and ten thousand francs, and said rather clumsily, almost apologetically: “Madam, just look at the magnificent diamonds.” The customer replied, “No, I think the bag itself is beautiful. The color is unique. I’ve never seen a pink quite like it.” Gilberte, the sales assistant, couldn’t believe her ears when the lady added, “I’ll take it.”
With a wave of her arms, a hand in the air, Gilberte did all she could to alert her colleagues.
“The pink bag has been sold!”
The news spread through the store like wildfire.
At the checkout, the bag was ready and waiting, all polished and packaged, magnificent in its superb orange box.
The sales assistant accompanied the customer to the checkout. “How would you like to pay?” she asked.
“American Express,” replied the lady, confidently.
Normally, the transaction is accepted at the first try. But this time, the machine tried once, twice, three times . . . before the harassed cashier was obliged to announce, in hushed tones, “I’m sorry Madam, your card is refused.”
“The swine!” cried the customer. “It’s my husband’s doing, we’re divorcing and he’s blocked the account. I’ll come back tomorrow and pay cash.”
A few shrugs and gesticulations later and the whole store heard the message that something was wrong.
The bag remained calmly in its box while its would-be owner stormed out.
Gilberte slowly removed the packaging, took the bag out of the orange box, and placed it back on the shelf.
At closing time, the bag was still there, shrouded in disappointment and surrounded by the sales team, who were muttering, “It’s because of the color,” and “It will never sell.” In the end, the manager said, “We’ll take it off sale tomorrow.”
The story of the pink bag should have ended there.
The next day, around 11 a.m., a man stopped at the store, asked to see the bag, examined it lovingly, and bought it.
This time, the American Express card was accepted, the bag was sold; a victory for candy pink and a relief for Gilberte. The pessimists and the gigglers were both left speechless.
The story of the pink bag should have ended there. It had been purchased by its very own knight in shining armor.
That afternoon, something extraordinary happened.
Nobody had believed the lady when she said she would come back for the bag and pay cash. They had sold it without as much as a second thought for her.
And who was going to believe that divorce story, anyway?
Well, she turned up, all happy and smiling, and proudly placed 110,000 francs in notes on the desk.
“I’ve come to pick up my dream,” she said.
The reactions among the sales assistants ranged from unease to sheer horror.
This was not going to be easy to explain. What could they say?
It was Gilberte who took the plunge. She explained the situation and promised to remedy it. And so, a second and last bag was made, identical to the first.
They say crocodiles will wait a long time to catch their prey.
Part I UNDERSTANDING
THE LUXURY BUSINESS
Chapter 1
Introduction—Definition and Crisis of Luxury
Luxury has a long and fascinating history. This is apparent from artifacts of the Egyptian period of lavishness, from 1550 to 1070
b.c. The Italian Renaissance, an era of great painters, sculptors, and architects, through the course of the fourteenth through sixteenth centuries a.d., introduced another important wave of a lifestyle marked by luxury. This was followed by the reign of King Louis XIV of France (1638–1715), whose reign deepened the meaning of an authentic French lifestyle. Then came Charles Frederick Worth (1825–1895) of Great Britain, the designer who coined the concept of haute couture. Worth moved to Paris in 1846 to perfect and then commercialize his craft, holding the first fashion shows and launching the use of fashion labels. Coco Chanel (1883–1971) and Christian Dior (1905–1957) gave birth to modern trends and ideals, marked by the rise of New York City as a capital of luxury. Over the course of the 1960s and 1970s, the world
saw the second Italian luxury revolution. Gucci and Bernard Arnault started applying the principles of strategic management to modern luxury by building the first multibrand conglomerate: the Louis Vuitton Moët Hennessy (LVMH) group.The latest chapter to this fascinating tale of luxury and high fashion is the information technology revolution, in which news about a new product spreads like wildfire, and how opinions pertaining to brands, products, and companies are shared at the click of a button. What is important to remember is that the history of the evolution of luxury is highly correlated to the evolution of society.
Changes in consumption in the luxury industry affect the ways countries evolve. The first stage is deprivation: despite being crushed by poverty, the population of a country maintains the desire to consume. The second stage is a new wave of prosperity: as the country witnesses economic growth, its middle class seeks to acquire luxuries that have high functional utilities, like washing machines, cars, and practical appliances. Then the wealthy and elite start buying luxury products. The third stage of development is the desire of consumers to show their wealth: mere possession is insufficient when luxury goods become a symbol of social status and bestow their owners with an aura of divinity.The fourth stage is that of being plentiful: in which most people in the nation are well-off and have sufficient resources; however, they have a need to fit in with their group. If someone is not carrying or wearing an appropriate social marker, they might find it hard to fit in with a particular group. The fifth and final stage is normalization: where luxury becomes a way of life. When people become used to this lifestyle, it becomes difficult for them to go back to their previous habits. Here luxury is more and more associated with personal tastes and pleasure, and not necessarily with wealth or status.
Issues of Defining Luxury
It is important to understand why certain brands are called luxury brands and what justifies the superior positioning they command. Luxury empires are not built by selling tasteful products at an exorbitant price. Luxury brands have been carefully crafted through meticulous strategies in marketing and brand building, making their mark in the
consumer’s subconscious and having the following main characteristics: brand strength, differentiation, exclusivity, innovation, product craftsmanship and precision, premium pricing, and high quality.
It is the differentiated quality of the material, design, and performance of a Patek Philippe watch that merits a 1,000% premium over a normal watch picked up from a general store. It is the craftsmanship that goes into the Kelly bag made by Hermès that justifies its exceptionally high price tag. It is only the brand strength of Louis Vuitton that can entice customers to preorder bags months in advance. It is attention to craftsmanship and nuances of details that help differentiate a luxury product.
Many misconceptions surround the luxury industry: (1) Do luxury and fashion mean the same thing? (2) Does a high price imply a luxury product? and (3) Does luxury imply perfection?
Luxury and fashion do not mean the same thing; they can coexist, but that’s not always the case. Until the nineteenth century, only the very privileged few could afford to keep up with changing trends. So only those who could bear the cost of luxury could afford to make and follow fashion. However, the twenty-first century consumer doesn’t need to be wealthy to be fashionable; being trendy no longer needs to be costly. For example, streetwear brands produced by H&M and Zara are fashionable and affordable. Haute couture is still the trendsetter but is not the only reference anymore. Luxury products used to be seen as an investment, which is not replaced that often, but now they have become more of a lifestyle choice. Many luxury houses try to release fashionable products along with their traditional luxury goods. For instance, Chanel offers fashionable products in order to keep up with the times and renew interest in their classic items.
A large price tag does not explicitly indicate that a product is a luxury good. Everyday products could trade up and charge a higher price. All luxury products are expensive, but not all expensive products are luxurious. This means that it is difficult to sell premium products as luxury goods—a phenomenon known as “premiumization” or “tradingup.” Similarly, it is unwise to reposition a luxury brand as a premium product to extend its market. Automobile companies have tried to reposition products both ways and have failed, such as Mercedes with both the launch of the Smart car and its acquisition of Chrysler. However, the
brand managed to strengthen its luxurious image through its portfolio of products, namely Maybach, AMG, and its venture into the pure electric vehicle industry. In the meantime, Porsche rose to become the most valuable luxury brand for the year 2020 through a brand value increase of 15.6% to USD33.91 billion. When one pays a tidy sum to procure a luxury brand, what does he or she pay for? Perfection? Not necessarily. In some ways, what defines the luxury brands are the creators and not the consumers. A luxurious product may thus be far from perfect. However, would these characteristics be questioned in times of a recession, when consumers become more cautious, have a limited budget, and spend less?
Crisis
Bling is over. Red carpet covered with rhinestones is out. I call it the new modesty.
—Karl Lagerfeld
There were several economic crises during the 1970s to 2020, starting with the oil crises in 1973 and 1979, the stock market crash in 1987, the 1992 Black Wednesday crash, and 1997’s Asian financial crisis. The first 10 years of the twenty-first century also saw many crises. The stock markets collapsed in early 2000, following the dot-com bubble of the late 1990s. In 2001 the world watched as the terrorist attacks in New York and Washington took place, followed by the war in Afghanistan in 2001 and the invasion of Iraq in 2003. The early 2000s also saw a recession in many countries of the world, aggravated by the outbreak of SARS in Asia in 2003. In 2004, the tsunami in Asia killed hundreds of thousands. In 2007 the subprime mortgage crisis that began in the United States housing market spread all over the world and caused, among many other things, the collapse of Lehman Brothers and the European debt crisis of 2011, which continues to have effects such as the Cyprus bailout and political turmoil in Russia and Italy. In 2020 the outbreak of the coronavirus all around the globe has wiped billions off luxury companies’ market value.
Crisis can take four forms: (1) endogenous (inner), such as economic and financial crises; (2) exogenous (outer), such as a political crisis; (3) natural disasters; and (4) mixed characteristics. An economic crisis is one where the real economy, of one country or worldwide, experiences a significant slowdown. The gross domestic product consumption stagnates or shrinks, along with investments, capacity utilization, household incomes, company profits, and inflation, while bankruptcies and unemployment rates rise. Figure 1.1 shows periods of shrinking GDP between 1950 and 2013, followed by negative GDP in the year 2020 using the examples of the world’s biggest economy, the United States.
On the other hand, a financial crisis is a sudden devaluation of assets, such as stocks or currencies, which may or may not have an effect on the real economy. In itself, a financial crisis only leads to the destruction of paper wealth. It has been observed that there is a reciprocal relationship with other types of crises, such as economic crises and political crises, which is the reason why financial crises generally lead to increased levels of caution within politics and the real economy. Examples of such financial crises are the burst of the dot-com bubble, together with the September 11, 2001, and other terrorist attacks, the subprime crisis of 2007, and the ongoing Eurozone debt crisis facing the world, transforming from the private debt property bubble of 2008–2009 into the sovereign debt crisis of major banks and economies of Europe, in which the Dow
Quarterly GDP growth in the United States, 1950–2020, in %, adjusted for inflation
Figure 1.1 Quarterly GDP Growth in the United States, 1950–2020 (in percentage adjusted for inflation)
Jones has lost about 50% of its value. Other such crises that affected the world include the South American debt crisis of the 1980s, known as the “lost decade”; the Asian financial crisis of 1997; the Russian crisis of 1998; and the European debt crisis that started in 2010 and has taken an enormous toll up until the present moment.
Like financial crises, political crises may affect the economy and have an effect on industries, including the luxury industry. Examples of political crises are the Cuban Missile crisis, the Falklands crisis, the Iraqi invasion of Kuwait and the subsequent intervention by the United States in 1990, and the terrorist attacks in 2001. In 2011, the governments of Tunisia and Egypt were overthrown by revolutions and Libya saw a regime change after a civil war that was supported mainly by France and the United Kingdom. In 2013, the election results of Beppe Grillo’s Five Star movement in Italy combined with the EU’s decision on tax issues in Cyprus have fueled disbelief in the democratic problem-solving capacity of the EU and its members. In 2019, protests against the government in Hong Kong, a tax haven, forced luxury companies to close retail stores and shift their priority more to mainland China.
Natural disasters, such as the tsunami in Asia in 2004, the Tōhoku earthquake and tsunami that caused a meltdown at the Fukushima nuclear plant in Japan in 2011, and the typhoon Bhopa in the Philippines in 2012 had devastating effects on the local economies. The coronavirus pandemic was one such global health crisis, which created a global economic impact affecting most luxury markets worldwide.
The Luxury Industry
In the past, crises have had different impacts on various groups (be it luxury conglomerates or independent luxury houses) at different times; this could be attributed to the exogenous and endogenous characteristics of the economic cycles. Nonetheless, the 2009 financial crisis was global in nature and ultimately evolved into the Eurozone crisis in 2014. The luxury industry slowly recovered. Brexit was announced in 2016 and the US–China trade war started in 2018, which shredded any shade on luxury’s future. The Hong Kong protests of 2019 forced luxury companies to close retail stores and cancel shows. If there was
still optimism for growth, that was due to the China mainland market. However, at the beginning of 2020 it was surprisingly hit by the coronavirus, which soon evolved into a global pandemic. The luxury industry is probably one of the industries most affected, as all of its major markets were hit.
To understand this effect, luxury must first be divided into: (1) hard luxury, such as watches and jewelry; and (2) soft luxury, such as fashion. A more comprehensive definition of the luxury industry includes products and services such as wine and spirits, food, travel, hotels and spas, technology, and cars. Among the most well-known luxury brands are Louis Vuitton, Hermès, Gucci, Cartier, Porsche, Ralph Lauren, Rolex, Tiffany, Armani, Burberry, and Ferrari. In 2015 the worldwide market for luxury grew more than 11% over 2014 to a massive €245 billion. In 2019 the worldwide market for personal luxury goods grew over 7% in 2018 to a massive €281 billion, followed by a decline of over 22% in the year 2020.1
Luxury consumers changed, and so did the industry, with the rise of luxury multibrand conglomerates such as LVMH of Bernard Arnault, Kering of Francois Pinault, and Richemont of Johann Rupert, which were formed by the acquisition of traditional family-run brands. Other luxury brands (usually family-owned) that resisted being taken over by the aforementioned conglomerates also grew alongside the conglomerates. The family brands protected their brand heritage and DNA; in addition, they purchased their suppliers and integrated vertically. They focused on brand equity, investing heavily in international expansion while repurchasing franchises and licenses to gain more control over their retail operations.
Notably, over the past several years, more and more luxury companies have been trying to create synergies and omni-personal experiences by expanding product categories, acquiring or building more daughter brands. Very few remain as monobrands and focus on a single product line. Figure 1.2 depicts conglomerates that have a portfolio of brands selling different product categories (LVMH), conglomerates with many
1Statista, 2021. Value of the global luxury goods market 2020 | Statista. [online] Available at: <https://www.statista.com/statistics/266503/value-of-the-personal-luxury-goods-marketworldwide/>.
