LVMH and the Luxury Strategy

Host: And of course, the luxury sector spans over so many different products. But what do you think the definition of luxury is?

Bernard Arnault: First of all, I don't like very much the word luxury, because you have something attached to it, which means show off, which mean something of non significance or something, something that is useless. And ... See more

This is what I call the luxury trap. It’s a fatal mistake many brands make. Defining a luxury brand by its functional aspects and high prices cannot replace the value a brand creates.

As traditional luxury goods, such as the iconic Louis Vuitton monogram bags or Chanel number 5, have become more widespread and attainable than in the past, the wealthy need alternative ways to signal their prestige and power.

Luxury brands have to create an extreme amount of value for their consumers. Design, packaging, and function are undoubtedly important features. However, they aren’t what drive Added Luxury Value (ALV), and ALV is the precondition that’s needed before someone will even consider buying a luxury brand.

Their analysis depicts three distinct types of new luxury goods: accessible superpremium, old luxury brand extensions and mass prestige or mass-tige. Accessible superpremium designates products that are considered at or near the top of their categories in terms of quality, and are sold at a considerable premium. Despite the comparatively high price... See more

Odds of success are stacked toward brands with hybrid business models. These hybrid models mix luxury strategy (investing in desirability, scarcity, status-signaling) and fast retail (trend, availability, price) in a way that capitalizes on the strengths of both.