Louis Vuitton, Gucci, Fendi, Bottega Veneta, Prada, Hermes and Ralph Lauren are among the major international luxury brands with the best financial performance in the past 3 years, defying the world financial depression. Smaller luxury brands such as Loewe, Alexander McQueen andTom Ford have been catching up too, registering two digit growth rates in the past three years.
Besides the trend for consumers to focus on quality, creativity and heritage, which I entirely acquiesce to, analysis have been speaking about other important winning factors such as: understated, less logo driven design of products and a more relaxed approach to the mix and match trend (consumers wearing at the same time fast fashion products with luxury brands, usually accessories). To these trends, I would also add instantly recognizable designs through shapes and finishing of materials, which Hermes and Bottega Veneta master. While there is no (or very little) visibility of a logo, both brands have been creating products, which are instantly recognizable due to shape (Hermes) and materials (Bottega Veneta).
Despite the intense rumours of Celine’s designer Phoebe Philo (known for her understated, clean designs) taking over at Louis Vuitton to replace Marc Jacobs, it seems owner Bernard Arnaud has yet to identify the ideal timing when his powerhouse brand Louis Vuitton will become more understated and thus, give up on the logomania which the brand has built its immense success in the past decade. Unlike his direct competitor Francois Pinault, whose PPR owns two fashion brands of similar caliber Gucci (logo mania) and Bottega Veneta (understated), Arnaud’s Celine, Loewe or Givenchy – all three known for their understated style, are a fraction of Louis Vuitton in terms of size. I see this imbalance as a major challenge for Arnaud and LVMH in the long term, hence Arnaud’s obvious interest in Hermes.
By balancing between two brands of the same calibre but with different crreative design directions, the major groups are able not only to better understand the fast changing trends but also to increase or decrease investment in one of the brands. Who would have ever believed that the mix and match trend will be embraced even by the most logo driven consumers such as Russians or Chinese? And when I say logo-driven, I am also refering to a more ”flashy” design.
Chinese luxury consumers have long been considered as ”followers” as in consumers wanting to own the same bag or garment as his or her counterpart. But this is rapidly changing too! Access to worlwide media and international exposure through travels is having an indirect effect on Chinese consumers who are ”learning” less is more and wearing a ”recognizable” product can be equally rewarding. Fortunately for the major dominants of the Chinese markets (Gucci and Louis Vuitton), this change in consumer dynamics in China is progressing very slowly, especially due to the fact that a new segment of Chinese consumers is shaping in third and fourth tier cities every month. Needless to say, in China, even carrying a particular shopping bag is of utmost importance…
As for other major emerging markets such as Brazil, consumers are swiftly developing a more sophisticated and eclectic style, hence the mixed performance of certain brands in Brazil. Mention needs to be made, that in the case of Brazil, shopping abroad is still a major factor in hindering the development of the market. Other emerging markets such as India, Middle East or Eastern Europe are not yet of strategic importance for the major luxury players to adapt their creative direction.
What about the mature markets?
Going from ”fashion victims” and through the ”shame factor”, Japan is now re-emerging as a market which is growingly more sophisticated, consumers being less and less loyal to a particular brand and mix and match being considered a must (wearing basic clothing items with luxury accessories such as bags and shoes.
The European debt crisis has had a direct negative impact especially on Spain and Italy, with sales to locals dropping by at least 30%. Fortunately, an increase in travellers from Asia especially to the major cities of Madrid, Barcelona, Milan and Rome has compensated the loss and had even driven an important and constant sales growth.
Germany, which boasts the largest number of billionaires in Europe has seen stagnating sales in luxury in the past two years, especially due to the already conservative nature of the German luxury consumer which, coupled with future uncertainty worries has inhibited consumption. The only unaffected sectors have remained jewellery, watches and travel.
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