Bankruptcy can be used as a tool to handle product-related injuries, raising questions about justice and opportunism.
The luxury market is growing due to the rise of Chinese consumers, millennials' purchasing power, and companies' ability to create exclusivity and collectible value.
Deep dives
Using Bankruptcy to Handle Mass Torts
Bankruptcy is not only about liquidating businesses but also about using it as a tool to handle situations where a company's products have caused harm. This includes cases like Johnson & Johnson and Purdue Pharma where thousands of lawsuits have arisen due to product-related injuries. Companies are taking advantage of bankruptcy to create subsidiaries and distribute funds to settle these claims. While bankruptcy offers certain advantages such as fair distribution of awards and avoiding the unpredictability of mass tort outcomes, it also raises questions about justice and the potential for opportunism.
The Luxury Market and Pricing Behavior
The luxury market is experiencing significant growth despite economic downturns. This can be attributed to the rise of the Chinese consumer and the increasing purchasing power of millennials. Luxury brands have been successful in creating scarcity and collectible value for their products, driving up prices. Companies like LVMH have become conglomerates, managing a diverse portfolio of luxury brands. The success of luxury brands lies in expanding the customer base while maintaining elite status. Counterfeits also play a role in driving luxury prices as companies raise prices to maintain exclusivity and authenticity.
Formula One and Luxury Brand Success
Formula One, with its intersection of science and sports, has gained a strong following and provides an exciting platform for luxury brands. Luxury brands have been successful in targeting younger consumers and capitalizing on the desire for authentic and well-crafted products. The success of luxury brands can be attributed to a combination of supply-demand dynamics, changes in consumer income distribution, and the ability to preserve elite status while expanding the customer base. Conglomerates like LVMH have also played a role in consolidating diverse luxury brands and leveraging economies of scale.
Revamping Loyalty Programs
Loyalty programs have become conventional and predictable, lacking the element of surprise and delight. KLM's loyalty program stands out through its unique collectible offering of Delft houses filled with Dutch gin. The program creates a sense of nostalgia and loyalty by enabling customers to collect these items, which cannot be purchased. This unconventional approach to loyalty programs demonstrates the importance of creating memorable and enjoyable experiences for customers, fostering brand loyalty and creating a sense of luxury.
Felix, Mihir and their colleague Kristin Mugford debate the merits of using bankruptcy to shield companies from consumer lawsuits. Should we allow companies to bundle lawsuits, place them in a designated subsidiary with few assets and let that subsidiary go bankrupt? Might this actually be better for consumers who claim to have been hurt by defective products? Doesn’t everyone deserve their day in court? Plus, what is happening to prices of luxury goods? Are we looking at the next bubble?
