2024-10-12 13:04:00
The world has never seen so much marketing as in the summer. Not only athletes appeared at the Olympic Games, but also the richest Europeans. The Olympic torches and medal holders came from Louis Vuitton, the medals were forged by jeweler Chaumet, Dior supplied the clothes to stars like Céline Dion and Lady Gaga and Berluti dressed the 1,500 French athletes, in sizes 3XS to 6XL. They were Bernard Arnault’s games. Because all these brands belong to its LVMH group, the largest luxury conglomerate in the world.
All the glitz fits discreetly into the overall atmosphere, because even brands whose coats cost 4,800 euros don’t want to be considered ostentatious. For stock market professionals the grand apparition was a strange sight. Luxury stocks have been under pressure since spring. LVMH’s share fell more than 20% as sales are stagnant and business in China is weak. Hermès and Boss also lost double digits. The British classic Burberry, which has long been a favorite among fashion and stock market enthusiasts, even had to endure a price drop of two thirds in five years – although structural reasons such as Brexit probably also played a role in this case.
LVMH’s participation in the Olympics apparently had consequences. The prices of many luxury stocks have recovered slightly since the summer. The strategy of taking over large public places and events seemed to work. This means that the luxury industry does not seem like an isolated caste, but rather a semi-official body. The richest family in France, one of ours. The Arnaults are simply part of public life, with a museum in the Bois de Boulogne, numerous boutiques on the Place Vendôme, fashion shows in the Louvre and dozens of shopping addresses on the Champs-Élysées.
But will the bear market really turn into a bull market again? The luxury spell has lost much of its magical power. When it was revealed in the spring that a bag from a Parisian luxury brand costs less than 60 euros to make in Italy but sells in stores for more than 2,500 euros, it was no longer a surprise. Some people online were even surprised that the brand paid so much for the leather and manufacturing. Many customers have now realized that the profit margins, especially on leather goods, are astronomical.
Youtubers and Tiktokers are now creating awareness that you don’t pay for the value of craftsmanship, but for the value of the brand. They cut and shred leather bags and find that the costs of materials and production often represent only 10% of the selling price. No wonder, because a large part of the income has to flow into marketing, so that the good piece is considered valuable.
For many there are no exclusives
The question now is whether the symbolic value can keep up with the selling prices. The industry’s strategy of bringing expensive goods to many people is slowly leading to a contradiction: there are no exclusives for many people. Just as a haute couture dress is sold only once in a country or region, so that two women do not meet in the same Chanel dress at the opera in New York or at a party in Doha, so artificial scarcity should be the desire to fuel by raising prices. But the opposite is true: brands flood the market with more and more products.
Until opium loses its effect on the people. Confidence in good looks is already crumbling. Oversupply is met with growing skepticism. It’s not just about pandemics and inflationary shocks, subdued income expectations, crises, wars and geopolitical risks such as the China-Taiwan conflict. What will dampen consumer enthusiasm in the future: new generations are looking for experiences rather than status symbols. The trend towards “invisible wealth”, towards inconspicuous wealth with discreet self-representation and no logo, almost seems like a guilty conscience among older people. In any case, almost no one wants to pass off their addiction to luxury anymore.
A look at the wardrobe doesn’t deceive: given the overabundance, the only thing that helps is the old motto “Less is more”. Secondary recycling increasingly takes place through resale platforms and vintage shops, which previously struggled with an outdated image, but now offer many products and ever-better quality. The biggest surprise of all the new second-hand platforms on the Internet: you can actually still afford the big brands there. And with these luxury products, the material is almost worth more than the marketing.
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