How We Got to the LVHM Acquisition

My mentors over at Collaborative Fund posted a fantastic article that briefly outlines economic history in the US since the end of World War II. It’s a great read, but for discussion here:

TL;DR Americans recently shifted their expectation not to be that of their economics peer, but rather that of the wealthiest among us. It’s an origin story of “keeping up with the Joneses” if you will.

The article doesn’t mention the proliferation of lifestyle voyeurism made possible by social media and its impact on consumption. Nor does it get into the backlash against the sameness caused by globalization, e-commerce, and the democratization of luxury items.

It is with that backdrop, that I found the news about LVMH’s acquisition of Belmond, a chain of luxury hotel groups, to be perfectly logical. LVMH has enjoyed tremendous growth in its flagship brands (Louis Vuitton and Moet, to name two brands) thanks to the democratization of luxury. Louis bags have been everywhere for well over a decade. In response, luxury brands have been forced to experiment outside of their iconic silhouettes and patterns, and often out of their core product offering, to manufacture exclusivity.

Widespread adoption of your brand is excellent for bottom-lines in the short-term, but what happens long-term? Louis has lost some of its panache, but LVMH must grow!

Meanwhile, we have a generation as hungry as always to consume, but growing tired of the same old options. Social media begs for unique experiences - sometimes achieved via having the “it” bag before anyone else, but more often achieved through unique experiences. Cue the acquisition of Belmond. Luxury meets travel.

As long as travel is relatively expensive, influencers best opportunities to peacock their status through consumption will be through experiences. Just as many people prioritized a $1200 Louis bag, so too could those same people prioritize a flight to Paris. A $500/night hotel remains out of reach for most people.

I’m guessing that we’ll see more of this type of consolidation in the luxury business as brands with commoditized core products (clothing and accessories) seek to refresh their exclusive status.