Editor’s Note
This article discusses a significant shift in global wealth rankings, as reported by Bloomberg. Bernard Arnault, chairman of LVMH, has surpassed Bill Gates to become the world’s second-richest person, marking the first time in seven years Gates has held a position outside the top two.
A recent major shake-up in Bloomberg’s Billionaires Index, which estimates the world’s wealthiest individuals, has become a hot topic. Bill Gates, founder of the global giant Microsoft, was pushed down to third place for the first time in seven years. The person who surpassed Bill Gates to claim the title of ‘the world’s second richest person’ is none other than Bernard Arnault. He is the chairman of LVMH (Louis Vuitton Moët Hennessy), the world’s largest luxury goods company.
According to LVMH Group’s 2018 sales report, revenue reached a record high of approximately 59.47 trillion Korean Won, a 10% increase compared to the previous year. The net profit growth rate also showed a significant surge, reaching a record 18%. In the first half of this year, sales increased by 12% year-on-year to about 29 trillion Korean Won, and the stock price has risen by 50.04% since the beginning of the year. The LVMH Group continues to show strong sales growth. Here, we introduce the strategy of Bernard Arnault, the emperor of the luxury empire, and the LVMH Group, which has led to their annual success.
After studying in France, Bernard Arnault moved to the United States to run his own business, where he gained a key insight. He judged that the value of a luxury brand would be greater through acquiring existing brands rather than launching new ones. By acquiring brands that excelled in design but were facing management crises, he preserved their tradition and history while introducing a system to quickly respond to trends by hiring emerging designers. Their design and autonomy were respected as much as possible, while distribution and marketing were managed by headquarters. Subsequently, he acquired famous luxury brands including Louis Vuitton, Dior, Givenchy, Celine, and Fendi, as well as cosmetics brands like Make Up For Ever and Benefit Cosmetics, and watch and jewelry brands such as TAG Heuer and Bulgari. His strategy brought significant change to the fashion industry.
Seeking to break away from the traditional image of luxury brands, he began a major recruitment drive for emerging designers across his brands from the mid-1990s. He valued the personal conviction and creativity of designers, respecting and supporting their opinions. A prime example is his appointment of Marc Jacobs as artistic director in 1997, giving him the role of women’s wear designer for Louis Vuitton, and entrusting Christian Dior’s design to the British emerging designer John Galliano. As a result, luxury brands with an old-fashioned image captivated the hearts of younger generations through the synergy with new designers, leading to increased sales. He is always embracing change and pursuing innovation. Analysis suggests that the designer changes at Celine and Louis Vuitton last year contributed to the continued stock price rise from 2018 to this year. By appointing Hedi Slimane as chief designer for Celine and Virgil Abloh as artistic director for Louis Vuitton menswear, he sought a major transformation, injecting new vitality into the old brands.
He is also the key figure who led the democratization of luxury. He focuses on appealing the brand’s value to customers through bold ‘dream marketing’. Rather than the quality or value of the product itself, marketing involves embedding the dreams and stories that customers desire into the product. To lower the entry barrier to luxury, he introduced products across various price points. He launched accessory products at more affordable price points than traditional handbags or scarves, allowing the middle class to consume luxury goods as well. Store buildings and interiors were also decorated as lavishly as possible to stimulate consumers’ fantasies. His strategy’s core is to democratize luxury by stimulating consumers’ desire for status elevation without damaging the brand’s image.
Owning half of France’s brands, he is expanding his reach beyond luxury brands into beauty, watches, jewelry, and more. Everyone is watching to see how much more the LVMH Group will grow.