Publications

Concentration of Luxury

On the catwalks of the world's biggest fashion capitals luxury brands are battling it out for the next It Bag, the most impressive show and the greatest exposure on social networks. But how transparent is this battle really?

Just a quick look at the brand portfolio of the top five luxury goods companies of the world can provide more clarity. Many of the largest and most influential fashion houses are in fact part of a larger brand portfolio strategy. At the top of the list and well ahead of other competitors is the luxury group LVMH Moët Hennessy-Louis Vuitton SE. It includes some of the leading names in the fashion industry with brands such as Louis Vuitton, Fendi and Bulgari. Another big player ranking amongst the top 5 luxury goods groups is Kering SA, a holding which includes fashion brands such as Gucci, Saint Laurent and Balenciaga.

The luxury segment in the area of watchmaking and jewellery shows the same phenomena. Many brands competing with one another ultimately stem from the same house. Even though IWC, Jaeger-LeCoultre and Cartier all strive to adorn the wrist of each customer individually, they all belong to the Swiss luxury group Compagnie Financière Richemont SA (Nr.3 of the top 10 luxury goods companies). What is the marketing strategy behind these holding companies? Well, just like individual brands and designers, they are competing to increase the number of consumers and brand awareness. The LVMH group for instance, is focusing on brand diversification within various luxury segments. In addition to the fashion brands mentioned above, the group also includes the well-known champagne brand Moët & Chandon as well as the Swiss luxury watch brand TAG Heuer. Other luxury groups, on the other hand, pursue a strategy of diversification within the same product segment. In second place of the top 10 luxury groups is the the Estée Lauder Companies Inc. Its portfolio includes mainly cosmetics and beauty products. However, their subsidiaries all pursue different and independent brand philosophies. Their brand M.A.C. for example, is known for opulent make-up, while another brand, Clinique, is aimed at a completely different target group with its minimalist skin care products. The diversification of a brand portfolio, either in different luxury segments or within the same segment, helps luxury groups minimise the risk of being dependent on trends. They also benefit greatly, together with other leading luxury groups, from their oligopolistic position.

A genuine battle for more public attention and the next It Bag is currently being fought by fashion houses Louis Vuitton (part of LVMH) and Gucci (part of Kering SA). These two brands are the figureheads of the two luxury conglomerates and deliver the largest contribution to the companies’ annual turnover. At the same time, financial challenges never burden the individual brands themselves - they rest secure within a larger holding. One of the very last major independent fashion brands is the Italian fashion house Armani. The inventor and designer Giorgio Armani (A1) with his Giorgio Armani SpA, has remained true to his brand portfolio strategy and is selling exclusively in-house brands, thus forming an exception in the global luxury market.

According to Focus, the oligopoly in this market also means that prices are being kept consistently high for consumers in the luxury segment, another main factor in the groups' quest for more commercial power. It can be advantageous for investors too, as they can cover a large part of the market with just a few different shares. It remains to be seen if this trend will continue after the Corona Pandemic is over - if new market participants will emerge or if others will disappear.

November 05, 2020

Publications

The Fast Track to E-Mobility

by the Example of Volkswagen

April 13, 2021

Publications

Wood - The "new" construction material

A growing trend bringing many attractive advantages for buildings, the construction industry and the environment.

April 01, 2021

Publications

Private Market Investments

Private Markets can offer attractive investment opportunities. Mikaël Safrana, CIIA, CWMA, provides some insight into this asset class.

März 30, 2021

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