Why Rich People (sorta) Don't Wear Luxury

ALEXANDER2 minutes read

Luxury conglomerates like LVMH and Kering dominate the industry, led by figures like Bernard Arnault. The middle class is the main consumer base for luxury goods, with Major League brands facing challenges post-pandemic while Minor League brands like Brunello Cucinelli thrive with the billionaire population.

Insights

  • Major luxury conglomerates like LVMH and Kering dominate the industry with a significant market valuation, highlighting their immense influence and power within the luxury market.
  • The middle class, not the elite or upper class, serves as the primary consumer base for luxury goods, underscoring their pivotal role in supporting the industry's growth and shaping consumer trends, especially in the post-pandemic landscape.

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Recent questions

  • What defines luxury products?

    Premium price, exceptional craftsmanship, wealth symbol.

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Summary

00:00

Luxury Industry: Middle Class Drives Growth

  • Major luxury conglomerates include LVMH and Kering, leading the industry with a 397-billion-dollar market valuation.
  • LVMH CEO Bernard Arnault, worth 200 billion dollars, is a prominent figure in the luxury market.
  • The upper-middle class primarily sustains the luxury industry, not the elite or upper class.
  • Luxury products are defined by a premium price, exceptional craftsmanship, and symbolizing wealth or distinction.
  • Luxury brands are categorized into the "Major League" (Louis Vuitton, Dior) and "Minor League" (Celine, Saint Laurent).
  • Major League brands generate over 10 billion dollars annually, with LVMH's Louis Vuitton reaching 20 billion dollars.
  • The 1% prefer quiet luxury brands like Brunello Cucinelli and Loro Piana over Major League brands.
  • During the pandemic, the upper-middle class drove a surge in luxury sales, indulging in treats with savings.
  • Major League brands target the upper-middle class and "nouveau riche" more than the uber-wealthy.
  • The middle class, comprising 350 million people, is the main consumer base for luxury goods, supporting the industry's growth.

13:43

Fashion Industry Faces Post-Pandemic Challenges

  • The fashion industry, which experienced significant growth during the pandemic, is now facing challenges in the post-pandemic world. Major brands like LVMH and Gucci are seeing a slowdown in revenue growth, with Gucci's organic sales falling below expectations by 7% in the third quarter of 2023.
  • The shift in consumer behavior post-pandemic is impacting the industry, with the middle class cutting back on luxury spending and focusing more on saving due to inflation and rising living costs. This change is affecting Major League brands reliant on middle-class spending, while Minor League brands like Brunello Cucinelli are thriving due to their appeal to the billionaire population.
  • Despite the challenges faced by many Major League brands, anomalies like Hermès are thriving by maintaining selectiveness and sign value, typically associated with niche Minor League brands. The rise of "quiet luxury" is influencing consumer preferences, with some in the middle class shifting towards brands like Brunello Cucinelli that offer new sign value.
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