LVMH brand, owns the most luxurious brands in the world, such as Louis Vuitton and Tiffany. The corporation now has more than 70 brands in the first-class retail chain. But, getting there took years.
How LVMH was formed
The LVMH conglomerate was born from the brilliant idea of French businessman Bernard Arnaut to buy part of the house, Christian Dior, in 1984. Boussac, Dior’s parent company at the time, had declared bankruptcy. Therefore, the French government was looking for a buyer. Arnault stepped in, convinced that the acquisition of such a famous house was the first step in creating the largest group of luxury brands he was planning. In fact, he had envisioned the conglomerate long before its creation.
To own Dior, Arnault spent $60 million, with the help of the French financial institution, Lazard Frères. In addition, he put aside the manufacture of disposable diapers. As well as the textile operations, which were Boussac’s main activities, laying off more than 9,000 employees in the process.
In 1987, the luxury brand conglomerate was created when renowned French leather goods company Louis Vuitton, Champagne maker Moët et Chandon, and Cognac maker Hennessy merged. Hence, the name LVMH was born.
Other luxury brands join the conglomerate
Just a year later, the couture house, Givenchy, joined LVMH. Berluti, and Kenzo followed. In 1994, the LVMH conglomerate opened a perfumery and cosmetics department when it was acquired, Guerlain. The conglomerate grew over the years with acquisitions like Céline, Marc Jacobs, Sephora, DKNY, Hermes and Fendi. LVMH’s most recent developments were the label, Fenty, created by LVMH with Rihanna, Stella McCartney’s label, Pheobe Philo, a label by the designer of the same name, and Virgil Abloh’s Off-White.
The conglomerate now has five departments:
- Fashion and leather goods
- Wines and spirits
- Perfumes and Cosmetics
- watches and jewelry
- selective retail
Why luxury brands would join LVMH
LVMH is today the largest luxury goods conglomerate. The corporation leverages the high-end aspect of its brands as leverage for its image as a luxury group. In other words, they have the best quality and most expensive names. They use this to gain notoriety and create loyalty. On the other hand, Kering, the competitor, plays the accessibility card, offering a competitive advantage to footwear. For example, just think of Balenciaga handbags, they have been more common in recent years than a Dior bags.
The uniqueness of the luxury brand conglomerate lies in its marketing advantage. Just because a brand sells expensive products doesn’t make it luxurious. If an item is expensive but doesn’t have a story, it might have a spike effect early on. Since people will be curious about the new phenomenon. But most likely it will not last over time. For a brand to be considered a luxury, it has to sell a dream, a vision.
Let’s take a look at Dior. The rose is the emblem of the house since its inception. He refers to the tender love that Christian Dior had for his mother, who transmitted to him so much adoration for feminine elegance, as well as for the flower. Dior has a story, a dream. When someone buys a Dior perfume or a Dior bag, they don’t buy it for the price, they buy it for the feeling of being part of the brand’s history. This is what makes a brand luxury, compared to being a premium brand. That simply higher quality products at a higher price on the market.
LVMH Brand, a conglomerate of dreams
LVMH is, therefore, a conglomerate of dreams. Louis Vuitton, Céline, Givenchy each tell a different story, their own story. What makes each of them unique. It is the core strategy of the LVMH conglomerate and brand and this strategy has shown great results. For a brand, entering the corporation is a guarantee of growth.
LVMH’s advantageous business model
Marketing alone did not make the LVMH brand what it is today. The group’s business model has played the most important role in acquiring its status. First of all, it has a decentralized organizational structure. What this means is that even though he owns Dior, Dior chooses Dior. This occurs with all the other brands that are part of the conglomerate. With this, the preservation of the brand identity is allowed. Imagine if the conglomerate made all the creative, marketing and strategic decisions for the brands, over time their style and identity would merge into one.
Therefore, a decentralized structure allows each brand’s creative director and marketing department to bring their own vision to life. It also gives them the time efficiency that problem-solving requires. Vertical integration is also a very important aspect of the LVMH brand business model and refers to the production and distribution value chains. Dior remains in France and Emilio Pucci in Italy. So it makes sense that each one is located in the respective countries they are associated with. Vertical integration ensures that the best luxury products are produced at their place of origin, while only the less premium ones relocate.
Another part of the great success of LVMH’s business model is its international portfolio. However, this factor has come into play in more recent years. In fact, most of LVMH’s acquisitions in the past have been French or Italian houses. But the conglomerate has strategically expanded its acquisitions to become increasingly independent of its traditional markets.
The LVMH Award
The conglomerate’s massive investments are the ultimate factor in its long-term growth. The financial advantage of being part of the group is the heavy investment in each brand, pushing them to the forefront of the industry. But, the conglomerate does not only invest in the brands it owns. In fact, the corporation has a strong relationship with art, and the Louis Vuitton Foundation museum was created to house avant-garde and contemporary art. The LVMH Prize was also one of the conglomerate’s largest investments in recent years.
In 2013, the LVMH conglomerate and brand invented the LVMH Award for Young Designers in order to give designers a special chance to win €300,000. In addition to a year of mentoring with some of the most prestigious brands in the industry. Since then, many young designers, whose work has been recognized, have emerged as new fashion icons. Among them, Jacquemus and Marine Serrey.
It is the largest conglomerate of luxury brands, with more than 70 houses to its name. The strategic marketing of the LVMH brand makes it a prestigious asset for brands and its business model is strong. All thanks to the decentralized organizational structure, vertical integration, an international portfolio and large investments.