S08 E08: Anish Melwani, Chairman & CEO of LVMH for North America
Mar 14, 2023
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Anish Melwani, Chairman & CEO of LVMH, discusses the evolving relationship between luxury and US consumers. Topics include price increase trends, the role of physical stores, measuring customer impact, and the Aura Blockchain Consortium. Also, LVMH's approach to Web3 and the metaverse.
Increased engagement with luxury among American consumers due to forces like COVID-19.
LVMH's well-balanced portfolio across luxury sectors provides resilience against economic turbulence.
The emotional stickiness of luxury comes from its connection to personal accomplishment.
The role of physical stores remains crucial in the luxury industry for the tactile experience and personal interaction.
LVMH's Aura blockchain consortium focuses on traceability and authenticity in luxury goods.
LVMH is exploring the metaverse to engage potential customers and express luxury identity digitally.
Deep dives
Evolution of Luxury and the US Consumer
The US consumer's relationship with luxury has evolved over time, with cultural traditions and penetration still lower compared to Europe. However, recent forces like COVID-19 have led to increased engagement with luxury among American consumers. LVMH has witnessed the benefits of this engagement, with the US region's share of global sales increasing from 23% in 2019 to 27% in the past year.
Confidence in LVMH's Growth
LVMH's chairman and CEO, Bernard Arnault, expresses confidence in the company's growth prospects due to its well-balanced and diversified portfolio across various luxury sectors. The different business cycles of wines and spirits, beauty, leather goods, and hospitality provide insulation and resilience against economic turbulence. The shift from product-focused to experiential luxury, which was temporarily halted by the pandemic, is also expected to continue driving LVMH's growth.
Challenges in the US Luxury Market
While the US luxury market has shown resilience, there are signs of slowing sales and weaker growth among department stores and luxury brands. Economic uncertainties and layoffs have impacted consumer confidence, leading to potential delays in significant luxury purchases. However, in stressful economic times, consumers still turn to affordable luxuries like beauty products, which have performed well.
Luxury's Emotional Stickiness
The emotional stickiness of luxury stems from its connection to a sense of personal accomplishment. Luxury products go beyond functional equivalence and offer quality, craftsmanship, storytelling, and cultural relevance. Choosing luxury as part of one's identity signifies accomplishment, and customers are often reluctant to give up that sense of achievement even during challenging times.
Role of Physical Stores and Social Media
The role of physical stores remains crucial in the luxury industry, with customers valuing the tactile experience, personal interaction, and trying on products. While digital platforms and social media play a significant role in broadening product discovery and building desirability, luxury brands must strike a balance between their physical and online presence. Social media platforms, which continue to evolve, are essential for reaching and engaging with younger consumers.
Blockchain and Sustainability Initiatives
LVMH's Aura blockchain consortium, established with partners such as Prada and Richemont, focuses on traceability and authenticity in luxury goods. For instance, Louis Vuitton's diamond jewelry comes with digital certificates tracing the diamond's journey from mine to the final product, ensuring ethical and sustainable practices. LVMH is also exploring the application of blockchain technology in increasing sustainability and reducing waste throughout its supply chain.
Metaverse and Luxury
LVMH is cautiously exploring the metaverse as a space to engage potential customers and express luxury identity digitally. The focus is on creating digital twins of physical products, allowing customers to carry their luxury purchases into virtual worlds. Additionally, collaborations with gaming and web3 communities are being explored to build desirability and cultural relevance in the metaverse.
Luxury Hospitality and Expanding Portfolio
LVMH's luxury hospitality portfolio comprises three hotel groups: Bulgari, Cheval Blanc, and Belmond. Each brand follows a unique strategic approach, with Bulgari aiming for top cities, Cheval Blanc focusing on iconic locations, and Belmond emphasizing journeys. Collaborations between LVMH brands occur only when mutually beneficial and aligned with each brand's DNA.
Sustainability Commitments
LVMH's sustainability agenda focuses on protecting biodiversity, fighting climate change, promoting circular economies, and enhancing transparency. Sustainability is not just a CSR obligation but an existential issue for LVMH brands that rely on raw materials and quality craftsmanship. The group aims to maintain high environmental standards and transparency to ensure clients can see the authenticity of their sustainable practices.
Strategic Acquisitions and Future Growth
LVMH's approach to acquisitions is opportunistic, seeking brands with long-term potential and rich heritage. There is no emphasis on filling gaps, but rather on finding brands that align with the group's values and can remain relevant for the next century. The group's focus on creativity, heritage, and authenticity drives collaborations and ensures a strong business performance.
Luxury Item Question
When asked about a luxury item he would want on a deserted island, Anish Milwani chose a pair of Louis Vuitton sunglasses, showcasing the brand's significance and the need for sun protection. This highlights the enduring appeal and desirability of luxury products even in challenging circumstances.
LVMH—Moët Hennessy Louis Vuitton—is the biggest and most successful luxury goods conglomerate in the world. It's home to a constellation of prestigious luxury brands including Louis Vuitton, Bulgari, Dior, Fendi, Marc Jacobs, Tiffany & Co, Moët & Chandon, and Séphora to name a few. Scott Kerr sits down with Anish Melwani, chairman & CEO of LVMH for North America to discuss the evolving relationship between luxury and the US consumer and why LVMH is well positioned to navigate through economic uncertainty. He also talks about price increase trends, why luxury is connected to our identity, the role of the physical store and measuring customer impact, the relationship between the maison's creative and business leaders, and the latest on the Aura Blockchain Consortium. Plus: How LVMH approaches Web3 and the metaverse
Featuring: Anish Melwani, Chairman & CEO of LVMH for North America (lvmh.com)
Host: Scott Kerr, Founder & President of Silvertone Consulting
About The Luxury Item podcast: The Luxury Item is a podcast on the business of luxury and the people and companies that are shaping the future of the luxury industry.
