Think of some of the top luxury brands in the world. Let me help you out with a few names. Louis Vuitton, Dior, Lauriana, Bulgari, Fendi, Tiffany, Taguar, and Kenzo. Do you know what is common? The company that owns them. Luxury is a $1 trillion industry and one company dominates it. LVMH. Louis Vuitton Moy. But what makes.
The story of LVMH even more interesting is that the man behind it, Bernard Arnold, did not create any of these brands. He’s not a fashion designer, nor is he an innovator. His massive empire is a result of financial prowess and two other strategies. But before we get into these strategies, let us first understand a bit about the man himself.
Bernard was born in March 1949 in Rubé, a northern industrial city in France. He is an engineer by graduation and he grew up under his father’s shadow who had his own civil engineering firm and that is exactly what was expected of Bernard as well to join the family business but he wanted to start out something of his own. After graduation he spent a few.
Years in his father’s firm and then went to the US where he learned about hostile takeovers. In the 1980s hostile takeovers had become very common in the US. But what are hostile takeovers? A hostile takeover is the acquisition of a company against the wish of its former owner. And this brings us to the first secret and strategy behind his success,.
Financial prowess. In 1984, Europe’s textile industry was struggling. One such company was the almost bankrupt and please excuse my pronunciation, Busous Seera, which had many businesses under it. It had a departmental store, it had a retail store and a fashion firm. Now, Bernard Anald was just interested in this fashion firm and he bought 20%.
Stake in this company for $15 million and he raised another $80 million to buy the rest of the company. And this, by the way, was a hostile takeover. Now, do you know what this fashion firm was? It was Dior. He shut the departmental store and the retail shop and put all the resources that were earlier going into running the departmental store and the.
Retail shop into Dior. And it worked wonders. The textile industry eventually recovered and Dior prospered. This is also when the next opportunity came his way. By the late 1980s, hostile takeovers had become very common in Europe as well. And one of the ways for a company to defend against a hostile takeover was to merge with another.
Company because when two small companies merge, they become a bigger company. And it’s a lot more difficult to have a hostile takeover on a bigger company. Bernard helped in having one of these deals come through. Bernard got close to the CEO of LV Louis Vuitton and the CEO of MH Moeth Hennessy and he convinced both of them to merge their firms and.
Form LVMH Louis Vuitton Moeth Hennessy. Now do know that at this point in time even after the merger Bernard had a negligible stake in the company but the dynamics inside the company were going to prove to be very favorable for him. The CEOs of both these companies Louis Vuitto and Moit Tennis really disagreed with each other. They were rivals and.
They had very different strategies and usually whenever two big players fight the third one benefits. Bernard slowly and secretly started buying more and more shares of LVMH especially during the 1987 crash when they were available cheap. This is when his true intentions were revealed. Slowly he acquired 43% stake in the company becoming the.
Largest shareholder and even became the chairman of the company. And this is when he fired the CEOs of both LV and MH and became the chairman and the head of LVMH. Bernard was now at the helm. But unfortunately for him, the company was once again struggling. He had to find a way to bring it back to profitability. And this is where the second strategy.
Comes in. Controlling the supply chain completely. Bernard believed that in the luxury business, brand perception was everything. and brand perception could be destroyed by poor customer experience or product inconsistency. Earlier many manufacturers depended upon third parties for supplying their raw materials, manufacturers for producing.
The final product and departmental stores for sales. Bernard changed all of that. He started getting into vertical integration basically owning all or most aspects of the entire process. For raw material sourcing, LVMH started their own farms for leather production and their own vineyards for their champagne. For manufacturing, a lot of the.
Workshops were owned directly by the brands. For distribution, instead of using departmental stores and other retail outlets, they use exclusive brandowned boutiques. This way, LVMH could guarantee that when a customer entered a Louis Vuitton store, be it London, Tokyo or Mumbai, the experience and the product quality would be.
Identical. Now, coming to the third and arguably their most annoying strategy, fake scarcity. In the world of luxury, value is directly linked to exclusivity. The rarer an item appears, the more desirable it gets. In Bernard’s own words, “A luxury product is sold when it’s no longer available.” Even though LVMH can easily produce tens of.
Thousands of watches and bags, they purposely choose not to. They restrict the number of products available. There are waiting lists for popular products like the Dior handbags or Tiffany jewelry. In fact, allegedly, a lot of these luxury product companies burn their unsold products rather than selling them at a discount. While.
They’ve denied this, this could very well possibly be true. You’ll never see a discount at a Louis Vuitton store. In fact, you could walk in with money ready to buy their products and still be told that the model that you’re looking for is not available. This scarcity creates a sense of urgency and prestige. In recent times, to top it all off, some.
People have complained that they were ignored in these stores. And this is probably done on purpose to offend you, to basically hurt your ego, which would eventually lead to you buying more of their products just to prove that you’re rich. In fact, I’ve kind of experienced this firsthand. Back in the days when I was very dumb and not broke, I was at.
Selfridges London and I had made up my mind to buy this one particular shoe. I was all set to buy it and I was just waiting for somebody to guide me and just tell me about the price and everything. Now this guy who was in charge of the store was literally ignoring me. By the way, there was one instance when a Chinese woman made the.
Store manager count 600,000 yuans which is almost $80,000 or 71 lakh rupees and then walked out of the store because she was ignored and had a poor treatment. I thankfully knew about this strategy of theirs and I walked out eventually as well without buying the shoe of course. Anyway, as a result of these strategies and the incredibly high margins that.
Luxury products enjoy, LVMH has been making a lot of profits. And what do they do with all this money? This is when we circle back to strategy one, financial progress. Bernard has always been on the lookout for companies in the fashion and lifestyle industry that are trading at either a cheap valuation or are a great fit for the company. For.
Instance, he acquired the jewelry company Tiffany when it was struggling during the pandemic and the fashion firm Bulgari when it was struggling in 2011. He’s like Warren Buffett in this way, but his acquisitions have been restricted to the lifestyle and fashion industry largely. This list of acquisitions goes on and on. Let me name.
A few of them. Kenzu in 1993, Seline in 1996, Taguar and Thomas Pink in 1999, Puchi in 2000, Fendi in 2001, Laura Piana in 2013, Off-White in 2021, and this list is longer than you can imagine. It is these acquisitions that have created the behemoth that LVMH is today. Its market capitalization is over $250 billion, their annual revenue.
Nearly $und00 billion, and their annual profits over $10 billion. As a result of all of this, Bernard Arnold has a net worth of $150 billion, placing him in the list of the richest people in the world. This brings us to the end of the video. I really hope you enjoyed it and found it useful. As always, thank you so much for watching and I hope to see you.
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