‘Young people have discovered luxury’ Will Putin escalate it? These are the scenarios of how things will continue in the second year of the war

Bernard Arnault is the master of LVMH, the largest luxury empire in the world. He is also currently the richest man in the world. Chance?
The approximately 70 brands under the LVMH umbrella have developed very well in recent years. But the luxury industry as a whole is also experiencing good times. Including cars and hotels, their revenue is currently around $1.4 trillion. Excluding cars and hotels, growth was 22 percent last year. And this boom is expected to continue. By 2030, the luxury industry should grow by another 60 percent.

LVMH is therefore a well-run company that is also fortunate to benefit from extremely advantageous conditions. Still, the luxury boom is surprising. 2022 was a bad stock market year and otherwise not really great. What is driving this boom?
Young people, Generation GenZ and Millennials have discovered luxury. Customers in this age segment are growing three times faster than anywhere else.

How can the boys afford that?
The so-called “wealth effect” has been clearly noticeable in recent years, including among young people. This has resulted in the luxury market growing by more than 20 percent in 2022, while the Chinese market was closed due to the lockdown.

A study by the consultancy firm Bain & Company – a leader in the luxury sector – concludes that the boom can also be explained by the fact that the super-rich are now so rich that even a bad year in the stock market can no longer stop them from to consume. Would you agree?
I don’t think that’s entirely fair. LVMH and other companies are successful because they are highly diversified. They cover all generations and all continents. In the US, for example, these companies have long been concentrated in a few cities such as New York, Los Angeles and Miami. They have now also discovered cities in Texas and the Midwest.

However, the successful luxury brands do not want to become suitable for the masses. There is no cheap version of a Rolex. And if you want to buy a Birkin bag from Hermès, you have to wait years, if you can get one at all.
The reason is that luxury goods in particular have a high priority on sustainability. The products used and the supply chains meet the highest standards. During production, it is ensured that the CO₂ balance tends towards zero. Working conditions are also generally above average. There’s a reason why brands like Rolex and Patek Philippe have held their own for over a century.

In other words, do the luxury companies excel as environmental and social role models?
The luxury industry has profit margins that allow it to treat its workers very well and maintain high environmental standards. This applies to companies such as the Italian clothing manufacturer Brunello Cucinelli as well as to Hermès or Rolex.

Only those who have the resources can buy the products of these companies.
That’s correct. But the products are usually very durable. For example, a Rolex will last for generations. Therefore, consumers are not always among the wealthy. Above all, they are conscious consumers who value quality and tradition.

Why are young people in particular crazy about luxury brands?
Don’t know. The fact is that the average age of consumers of luxury brands is falling. Companies such as Ferrari or Hermes also report this.

What happened to the slogan “less is more”? How is that compatible with a luxury tree?
The industry has become much more international. It focuses not only on the US and Europe, but increasingly also on Asia, the Persian Gulf and Latin America. This will take time. Appropriate shops must be set up and the market must be developed. As a result, we have been able to acquire a large number of new customers.

You paint a very rosy picture of the luxury industry. However, there is also an ugly side. The braggarts with the huge SUVs, the big watches and the gold chains, flaunting themselves on Instagram and TikTok. Is this bad for the industry?
There are exaggerations in all areas of life. But wearing a Rolex doesn’t harm anyone. And the auto industry is in a state of turmoil. Porsche wants to convert half of its production to electric cars within five years. Even Ferrari wants to produce hybrids. These companies have the means to finance this transition.

A quick question: where does luxury begin for you? Do you have a piston machine and organic vegetables?
Luxury means time and health to me. But I also get happy when I buy a product from a company that treats its employees properly and pays attention to sustainability. But of course everyone is free to define luxury.

We haven’t talked about the elephant in the living room yet, about China. This market has been closed for the past two years. The lockdown has now been lifted. What are the consequences for the luxury industry?
We expect the Chinese to be the largest consumer of luxury goods this year. The savings accumulated during the lockdown are close to $2 trillion as Chinese have not spent in the last two years. But now the Chinese want to return to normal life.

Who will benefit?
In 2019, the Chinese accounted for 20 percent of the tourism market. It will be like that again. The rest of the luxury market will also put a stop to it.

Wealthy Russians have also played a role in the luxury industry in recent years. Now they fall off. What does that mean?
It’s not really relevant. This is evident from the rapid growth figures in 2022.

You said the luxury goods market will grow by 60 percent by 2030. Where does your optimism come from?
Over the past decade, the luxury goods market has consistently grown at about three times the rate of global gross domestic product. Thanks to China’s opening up, this year’s numbers will be even better than expected, adjusted for inflation.