The World of Luxury: Creating and Selling Desirability

"As far as I'm concerned, the strategy of Vuitton and all the luxury brands within the LVMH Group is actually striking a balance between desirability and accessibility. So I don't understand the debate, inclusive, exclusive. But the debate, for me, is very much about making the brands accessible and at the same time, desirable. If we are very desirable and not accessible, we don't do any business. And if we are too accessible, it has some impact on the desirability, and we end up not doing any business anymore."

"So it's really at all times striking a balance on that. And what we try to do is really managing this balance, increasing the network, but not too much; making sure that we keep what makes the brands exclusive, in the case of Vuitton, no rebates; all the products are being sold within our own network, including perfume, which is a little bit counterintuitive when you look at the way perfumes are being distributed by the competition, et cetera. And you know the strategy of Vuitton, I will not get into some details. But I think the point to bear in mind is really this question of accessibility versus desirability. And for us the key point is really desirability. That's the key success to long-term growth of luxury brands, and particularly for Vuitton."

“What is interesting is that we are in a country where the desirability of the brand is the most important thing because you know there's [French] as we would say in French. I mean, if you get the strong desirability, you will get the pricing power. If you get the pricing power, you will get the margin. If you get the margin, you get the profit. And in Japan, especially, because, as Richard said, the prices -- I mean, we have increased the prices because of the pricing power of our brands. Obviously, for some of these Japanese guys, I mean, the products become expensive. But if at the same time, they are very desirable, they will buy, and this is what they did, and that they will continue to do. So in all these countries, and I was quoting the Herron study before, desirability is the name of the game, brand equity is the name of the game. And we check with all our brands that we are sure that everything they do in terms of products, in terms of communication, in terms of PR events, in terms of promotion, in terms of everything, that it will contribute to the brand equity.”

“At Vuitton, we could move a lot faster. Michael often says to me and so does Delphine that it would be quite feasible, but it would be the detriment of quality, and it would be opening up retailing, which would lead to serious consequences regarding the brand's perception, its status, its image and desirability. Vuitton remains a company whose fundamental goal, even the figures are very good, is not revenue, the fundamental goal is the desirability of for the brand. And what I am interested in at Vuitton is not its size, is that Louis Vuitton in 10 years' time, should be the most desirable brand in the world, even if there are some smaller brands that are growing very fast, et cetera. What I wish is that Vuitton should remain the most desirable, from that we won't depart from our strategy.”

“I mean, we don't target a specific audience. I mean, we want to improve the desirability of the brand through products and marketing strategies that make sense with no particular designation to a specific group of customers. With regards to price elasticity, it's a difficult question. But traditionally, there is no such thing as price elasticity. I mean, basically, when we increase prices in a given geography, we don't see a big impact on volumes. It doesn't mean that we can increase price in a limitless way. But when we do price increases, we don't see a particular response from the client base in terms of volumes. And this has been true for as long as I have been following the industry.”

“We have this strategy for a very long time, sometimes you agree with it, sometimes less, is that our price are done by the cost of production and not by the desirability of the product. And I think it's something which is very important for Hermès and it's a kind of trust that we have between our client of ours. What costs an Hermès bag, for example, is the cost of labor and materials that we put into it. It's not if you like it or not. And there is this client, for us it's about authenticity. And so I'm not looking at the price positioning of the other one. I'm trying to look with my cousin, Guillaume, which is heading production about our prices of goods, cost of goods. But our view is that that's the main driver for our price. And I think that the beauty also of the Hermès model is the fact that we -- it's first and foremost, the craftsmanship and the product and the creativity who leads the company.”

“I mean, it seems like pricing power is a sort of windfall -- comes from the sky. And some brands have it and some brands have not. The reality is that pricing power is actually a function of the desirability of the brand. Desirable brands can increase prices and non-desirable brands cannot. It's as simple as that. So what it is about is really developing strategies, marketing, products, distribution strategies that will increase desirability of the brand, so that in tough times or in other times, we can reflect into prices the cost of doing business. It's as simple as that. So when you look at Vuitton and Dior, I think that's what they've done, by and large. And therefore, they enjoy a significant pricing power. But it doesn't come -- it did not happen overnight. I mean, it's something that has been created patiently over years and years and years so that the desirability of the brand is such that clients accept it.”

“I mean, the 3 top priorities are desirability, desirability and desirability. And this doesn't change. I mean, it was the case with Michael, now with Pietro and with Pietro now with Delphine. I mean, there is no change at all in our strategy, and all our energy is focused on increasing desirability of the brands.”

“Fendi is continuing growing from strength to strength. And Loro Piana, greatly sought after of luxury as it's known is posting very high growth rates. To my mind, overly high. We need to put the brakes on a bit because I'm often told that growth rates, why are you only delivering 8% to 9%? Well, I find that's pretty good. And I hope that we won't exceed that. I'd rather slow than push. And in this group, I'm fortunate in having people that I need to slow down. I mean I spend my time slowing. I did it for Delphine. Michael spent 10 years trying to put the brakes on it. But it's easy to develop this business. We have so many successful products. All we have to produce more, but we have to resist that to no point. They must be of flawless quality, and you mustn't be in a hurry when you're achieving 8% or 9%, maximum 10%. That suits me fine. I don't know for the analysts, it's enough -- well it's never enough. They're never happy. So that's really not a problem. But at least for the brand, for the desirability of the brand, our main asset really, midterm, it's perfectly adequate.”