Bernard Arnault CEO of luxury goods group LVMH was recently interviewed by the Nikkei about Asia, in particular Japan but also about the global perspective
B.A. Since I have been in this business, I have seen economic crises every 10 years. The last crisis was in 2008. So while I am optimistic in the long term, I think we are nearing a period of 10 years without having seen a big crisis.
I would not be surprised if the world has a major economic crisis. But I cannot tell when, because today we are in a situation which I have never seen before, with global interest rates almost at zero. For instance, if we borrow money today, we borrow in negative rates.
Second, we have a lot of money available everywhere, and central banks have been putting a lot of money in the market. It’s an enormous amount of liquidity.
The third factor is how the world’s stock markets are at incredibly high levels. It means people invest and overvalue some assets, which is also a risk factor for the future.
Lastly, the currencies are moving in very erratic directions all the time. Take the dollar, the euro, the yen — they’re moving very fast without much stability.
Q: Will it have an impact on brand businesses?
B.A.: Yes. I think all this may well end up in a few months or a few years in a major economic crisis. When you manage a large international group like LVMH, which is the number one luxury group in the world, we have to be — in spite of the success we have — very cautious.
Because one, if there is a crisis, we will have some adverse winds blowing in some markets. And two, for a group like us, a crisis will also allow us to find opportunities.
Q: What are your views on Brexit?
A: I think Brexit is something bad for the English people in the long term. But they don’t feel it right now. They have felt the weight of a very bureaucratic Europe, and maybe that’s the reason why they chose this. But in the long term, I think it’s quite a mistake for the U.K. and I hope that maybe during the process, between now and the end, they may experience some evolution.
Maybe Europe itself can reform.Europe has to be reformed since it’s too bureaucratic. And maybe also in the meantime, in Great Britain, people will understand that it’s a bad decision in the long term. So you never know.
You have extreme volatility in terms of politics. You have seen the results of the various elections.
We have the election in France very soon. There will be an election in Germany. So after that, there may be a big shift in Europe. And that may change the situation between the U.K. and Europe. Every election today is characterized by a high level of volatility, and people change their minds until the last minute.
Q: Will what’s happening now impact the consumption pattern of high-income consumers?
A: I think in the long term, buying power globally will continue to rise and grow. Maybe you will have one year when its down, like it was in 2009. But on average it’s going to go up over time. That’s the reason why, in spite of all this, I am a long-term optimist.
I think buying power and the level of living in many countries will continue to grow, and the appetite for very high quality products will continue to grow. That is the reason of the success of our group, and the reason why I am optimistic for the future.
You asked about what’s going on in the world. I think the present situation is mixed. We have been through so many crises. So even if there is one, we will get through and gain market share. It will be a more difficult period, but in the long term I am quite confident we will continue to grow, and consumption of high quality products will continue to grow.
Q: There’s some slowdown in economic growth in emerging markets, including China. Have you seen any changes in growth in these countries due to recent events?
B.A.: For the time being, yes. We have seen some slowdown. But it’s still growing fast compared to the rate of growth of developed countries. If you take China, China’s GDP is growing between 6% and 7% when in Europe we are at around 1%. So it’s still extremely fast.
I think the economy of these countries is based on the success of their openness in trading with the world, and that will continue. I am very confident. What we have been afraid of in recent months, like protectionism, will not grow. That’s because it’s not in the interest of developed countries like the U.S. and Europe, nor the emerging countries. So I am quite confident with this situation where international trade is quite open. We will continue to see growth. Even if it’s a little less, it will continue to be positive, and at least for us, it will continue to provide a lot of opportunities.
Q: What do you think of Ginza [shopping district of Tokyo]?
B.A.: I think Ginza is the most famous area in Japan, or maybe in the world, for tourism and for high-quality products. What is interesting in Japan is the level of refinement that you’ll find when you come to Ginza, and also the safety. At night you can walk in the streets and you can take the subway, and it is very safe. Today, in Paris, it’s impossible. If you walk the Champs-Elysees after midnight, it’s dangerous. Here in Ginza you have this situation which is very extraordinary when coming from Europe. An extreme level of service, people are very kind, and there’s a very high level of safety. So that’s one big asset of Japan for tourism.
Q: The Japanese government is very keen to promote tourism and make the country more attractive. What are your thoughts on Japanese consumers?
A: Yes, and for us, as a luxury group, the Japanese customer is very important. Japanese customers have a sense of quality, and for our products, the fact that they are successful in Japan means they can be successful everywhere. Maybe Japanese customers are among the most discerning in the world. For us, it’s very important to be successful and to grow in Japan.
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