Fashion as Big Business: Luxury brands and Empires. The Beginning.
In 1987 the luxury goods brand Louis Vuitton and the producer of French champagne and cognac Moet merged together and paved the way for the luxury goods market, including the haute couture, to operate in a new and dynamic style.
The new company was named LVMH and it took only 15 years to become an international luxury powerhouse. The chairman and chief executive, Bernard Arnault, built the world's largest luxury goods empire. LVMH has mercilessly acquired some of the biggest and best-known labels in the fashion and luxury goods sector, including Christian Dior, Givenchy, Celine, Donna Karan, Kenzo, Tag Heuer, Fendi, and Pucci.
The four main elements on which the LVMH business model concentrates are product, distribution, communication and price. Bernard Arnault says: "Our job is to do such a good job on the first three that people forget about the forth - price." For many years, clever branding, advertising, attention to retail ambiance, strategic market positioning, an global expansion in network distribution has made the formula work without fault, yielding consistent profit margins of around 40-45% for LVMH's star company, Louis Vuitton.
Prior to 1994, only a handful of luxury goods companies were listed: Tiffany, Waterford Wedgwood, Hermes, and Vendome. By the mid- to late 1990s, three names - Richemont, the Gucci group, and LVMH - represented the new global map of luxury fashion. These newly formed conglomerates had a huge financial might and acquired brands that gave them a greater share of the market in haute couture, ready-to-wear, luxury goods, and beauty products. Gucci, once associated with 1970s styles and glamor, bought Yves Saint Laurent, Sergio Rossi, Alexander McQueen, Stella McCartney, Balenciaga and Bottega Veneta. Meanwhile, Richemont, predominantly a jewelry retailer acquired Cartier, Chloè, Dunhill, Montblanc, and Bulgari. During the same period Prada launched a its successful ready-to-wear label and splashed on Jil Sander and Helmut Lang.
The designers who came with the fashion houses were considered an important part of the package and were tasked to reinvent and transform the brands. For example, first LVMH had John Galliano at Givenchy and in 1997 transferred him to Dior. Designers of the caliber of Galliano, Tom Ford and Stella McCartney not only attracted media attention but became directly associated and representative of the brand identity, intensifying the fashionable "must-have" image of the goods.
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