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September 1, 2007updated 10 Jan 2016 3:06pm

Deluxe: How Luxury Lost Its Luxury

By Spear's

Deluxe: How Luxury Lost Its Luxury
Dana Thomas
Allen Lane

Review by Peter York

The seriously rich are always with us. Most of them. But what about the worldwide New Modestly Rich? The people who account for the massive growth in the ‘luxury goods’ market. What will happen to them in any major ‘correction’ in world stock markets and employment?

And if it’s rough, won’t the Vuitton bag and the Chanel sunspecs be the first to go? But no-one really knows, because luxury goods are about magic – they’re irrational markets, with irrational priorities and oddly-configured demand curves – the more expensive, the more attractive, so the more demand.

The single consumer group that accounts for more of the world’s sales of ‘luxury goods’ than any other – goods like the LVMH brands (Vuitton etc.), the Richemont brands (Cartier, Dunhill, etc.), Gucci, Prada, Chanel and the rest – is made up of well-paid Japanese single women, ‘The Parasite Singles’. And as Dana Thomas describes in Deluxe, this group just went on spending through the Japanese recession of the early 1990s, keeping the trade going.

Thomas’ case is that the ‘democratization’ of luxury, whereby small, specialist private companies have grown into huge quoted ones like LVMH, serving a huge global market of aspirational people, has actually been a brilliantly organised scam to create supernormal profits legally. But losing everything that made the original brand values – elegant design, fantastic build-quality – along the way.

Once, so Thomas contends, luxury goods companies and high-end design houses run by remarkable individuals made special stuff for special people using special craft skills, and in small quantities. And overwhelmingly in ‘Old Europe’. They served toffs and big plutocrats and stars (when they were remotely glamorous). Now they target WAGs and rappers, dodgy Russians, New Jersey suburbanites, Japanese housewives and Chinese factory owners.

The original Vuitton business for example – with its 19th-century origins in making steamer trunks for the haut ton of Europe – is now the world’s largest single luxury brand, with a turnover of €3.17 billion in 2006. It’s the lead brand of the world’s largest luxury brand business, LVMH, Louis Vuitton Moet Hennessy, which owns a raft of luxury brands at every level, selling clothes, accessories, scent and liquor.

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LVMH turned over €15.3 billion in 2006: it’s one of the giants of the French Bourse, because luxury goods companies command supernormal PEs and Bernard Arnault, its architect, is the world’s seventh richest man.

The change has taken fewer than 30 years. The luxury businesses are now completely unrecognisable, the products are unrecognisable – and the global market they serve is utterly unrecognisable too.

The luxury goods business is underwritten by modest prosperity in emerging markets everywhere, following the pattern set in Japan from the late 1970s on. The Japanese still buy 50 per cent of what the luxury businesses produce, 20 per cent of it at home from astonishing new statement flagship stores in big cities and secondary concessions in department stores (sunglasses and scent, etc.) and the rest as tourists in Paris and Rome and Hawaii. (Hawaii is now just one enormous luxury mall for the Japanese.)

The Japanese originally bought Western luxury goods as cargo-cults, useful bits of social currency because they had legible branding – those unmissable logos – all over them. They were hugely important markers for people who couldn’t buy big houses – there’s not much room to build big in little Japan – and lived in a rather repressive, conformist culture.

That universally recognisable Vuitton canvas pattern or the Chanel interlinked Cs or the old Gucci canvas with its spider-webbed Gs all worked to say ‘because I’m worth it’ and ‘I’m up with Western standards, I’m a valuable person.’ And for these first Japanese cohorts, the amazing ubiquity – over 40 per cent of Japanese own something Vuitton according to Thomas – didn’t matter at all. Rather the opposite.

Now the luxury businesses are setting out their shiny stalls in what international relations wonks call BRIC – Brazil, Russia, India and China – where they’ve got lots of New Rich coming through. They’re in yet more spectacular flagships in Rio and Moscow, Mumbai and Shanghai. And China, according to the analysts, will be the biggest market of all soon enough.

China’s already, so Thomas shows, a bigger source of the product than anyone will admit. Not just fakes either, but brands we think of as utterly French or Italian… or British. There are all sorts of ways to hide a product’s modest low-wage origins.

Labelling laws in Europe don’t require country of origin (look through your rails of £120 Euro-shirts in your cedar-lined dressing rooms, dear reader) and anyway a modest amount of finishing – the sticking on of trim or handles – can secure that valuable ‘made in Italy/France/Britain’ label for those territories that do.

If you’re making those huge volumes in new places for new people, then an awful lot has to give: quality of materials and finish for a start. Designer-branded clothes and accessories will be made by the same factories in Manila or Cairo which are producing for Gap or Wal-Mart. And design changes utterly. What was once a carriage trade aesthetic is now focussed on selling to the Essexes of Everywhere.

This means the key design criterion is absolute recognisability and high impact through giant logofication, the massive advertising of key sub-brands, like the hot bag of the season, and huge PR-generated editorial – particularly celebrities on red carpets.

The big designer clothes and jewellery houses practically own the Oscars and their imitators now. A-list stars get a dress, bag, shoes and jewellery and a stylist to put the look together – most of those Hollywood women haven’t got a clue. Some of the stars get a hefty fee too, in return for ensuring the right pictures and a stipulated number of mentions in mainstream media.

That approach delivers Middle America, spending in those new, unintimidating luxury malls in places like the re-vamped Las Vegas. But it hits aspirants in all those BRIC markets too. The Academy Awards are on cable and satellite everywhere and the pictures will be in the world editions of Vogue and Cosmopolitan and InStyle a week.

It’s a world away from the couture atelier and bespoke in basements. It’s a brilliant business idea, chasing wealth creation around the world, being there as the lights turn on, providing a new vocabulary and a new semiotic system for a new class.

When established, evolved groups in Western markets start saying they never want to buy another designer anything, the market in, say, Vietnam – and everywhere like it – will be showing 3,000 per cent growth, so the brand-owners won’t give a toss what snobby, moth-eaten, tight-wad, Western upper-middles say. Bernard Arnault realised early on that only the magical luxury business at global scale gives you luxury margins. And that’s what matters.

Dana Thomas is terribly Newsweek (she’s their cultural and fashion writer in Paris), with all that implies. Deluxe is thorough and well-plotted and Thomas covers all the key developments. Every chapter starts with a colourful vignette from, say, a Brazilian mall or an Asian sweatshop and ends in a blizzard of statistics and fact-checked quotes.

But luxury is such a freakish business now that you want more – the sociological imaginations, big colour spreads and Tom Wolfe’s prose for a start.

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