Key Takeaways:
During the pandemic, the biggest luxury conglomerates have preserved their status quo and consolidated their assets through new acquisitions.
Chanel, Hermès, Burberry, Missoni, Salvatore Ferragamo, and Ermenegildo Zegna prove that family ownership and investments from private equity firms remain appealing alternatives to conglomerates.
The continued success of family-owned businesses depends on access to capital and affordable financing, the relationship they build with their customers over the years, their strategic adaptability to market volatility, and even the resilience of their supply chain.
With the COVID-19 pandemic wreaking havoc in retail and luxury, some brands might consider an association with a luxury conglomerate. Glossy rightfully highlights that “the ongoing pandemic has only increased conglomerates leverage over the industry, putting them in a perfect position to snap up even more struggling independent brands.”
Indeed, recent developments have pushed some independent brands into bankruptcies while others lost revenues because of an unexpected shutdown of consumer activity. On the other hand, the biggest luxury conglomerates have preserved their status quo and consolidated their assets through new acquisitions.
In a post-pandemic future, can a luxury brand be independent of a luxury group and matter?
The simple answer is yes. Take, for example, Chanel, Hermès, Burberry, Missoni, Salvatore Ferragamo, and Ermenegildo Zegna. These independent global fashion brands prove that family ownership and investments from private equity firms remain appealing alternatives to M&As and conglomerates.
While getting acquired by LVMH or Kering could be the path forward for many brands saddled with massive debt, not every problem can be solved with a merger or an acquisition. Moreover, many family-owned businesses are not open to conceding a controlling stake in their company in exchange for funding, know-how, and protection from market volatility. Sure enough, the continued success of family-owned businesses depends on access to capital and affordable financing, the relationships they build with their customers over the years, their strategic adaptability to market volatility, and even the resilience of their supply chains.
In 2012, Credit Suisse surveyed nearly 280 family businesses from the Family Business Network across 33 countries for research. On average, the respondents were representatives from large companies, some fourth-generation businesses or older. The research showed that during the 2011-2012 recession, family-owned businesses outperformed their competitors in revenue growth.
“In the midst of the tough economic climate, the majority experienced material revenue increases in the 12 months to June,” says the report. Indeed, around 60 percent of these companies registered increases of above 5 percent, and more than 10 percent of them saw increases of over 15 percent.
In China, Confucianism preaches the virtue of filial piety (孝, xiào). Accordingly, younger family members are bound to respect, honor, and obey the elderly. The same interaction is present in a family business. And while we encourage youngsters to find their path and develop personal skills in the West, the youth in China are motivated to seek continuity in family businesses.
In fact, a 2019 survey by PwC on Chinese family businesses showed that 42 percent of Chinese entrepreneurs plan to ensure their company’s legacy by passing on its leadership or ownership to a next-generation family member.
Overall, this approach has led to high trust in family-owned businesses. Meanwhile, conglomerates have seen a decline in trust that’s been linked to capitalist and corporate values. Accordingly, luxury companies that remain in family ownership might hold a special appeal in China, as they are associated with loyalty, trustworthiness, and family values. It also helps that some of the most successful Chinese companies are family-owned (Wanda Group, Amer International Group Ltd, etc.)
Overall, independent luxury brands can have a second life in a post-pandemic reality if they seize the opportunities that come within today’s new retail environment and build a foundation based on shared values and beliefs.
FAQs
The simple answer is yes. Take, for example, Chanel, Hermès, Burberry, Missoni, Salvatore Ferragamo, and Ermenegildo Zegna. These independent global fashion brands prove that family ownership and investments from private equity firms remain appealing alternatives to M&As and conglomerates.
How do luxury brands remain relevant? ›
Aligning with the expectations of younger consumers can help luxury brands stay relevant and innovative in an ever-changing market. Younger generations are often at the forefront of new trends and technologies, and by keeping up with their expectations, luxury brands can stay ahead of the curve and stay competitive.
What are the advantages for a luxury brand to be part of a conglomerate? ›
Advantages in luxury conglomerates: Savings on media spending. Better accessibility/negotiation on retail location. Professional management available for different brands.
What luxury brand has no social media? ›
First of Its Kind: Bottega Veneta
Bottega Veneta is the first brand that comes to mind when it comes to brands that prefer to stay away from social media. The brand's deletion of Instagram and Twitter profiles with 2.5 million followers without any explanation, and cleaning up Facebook posts made a big splash.
Why do Chinese people love Louis Vuitton? ›
Some Chinese people may have a positive perception of Louis Vuitton and enjoy the brand for its luxury status, reputation, and fashionable products. Louis Vuitton has a long history and is known for its high-quality leather goods, accessories, and fashion items, which can be appealing to some consumers.
How does Gen Z feel about luxury brands? ›
Secondly, the luxury industry often misunderstands Gen Z's attitude towards status and exclusivity. Traditionally, luxury brands have been associated with an opulent lifestyle. However, Gen Zers, unlike their predecessors, view luxury through a different lens. They value exclusivity, but not for its own sake.
Why are luxury brands not sustainable? ›
One of the big challenges for luxury brands in becoming more sustainable is the fact that some of the materials commonly used by luxury brands (particularly fur, leather and other skins) raise obvious ethical and environmental concerns.
What is a conglomerate advantages and disadvantages? ›
Two firms would enter into a conglomerate merger to increase their market share, diversify their businesses, cross-sell their products, and to take advantage of synergies. The downside to a conglomerate merger can result in loss of efficiency, clashing of cultures, and a shift away from the core businesses.
Why is a conglomerate important? ›
Benefits of Conglomerates
By participating in several unrelated businesses, the parent corporation is able to reduce costs by utilizing fewer inputs that may be shared across subsidiaries, and by diversifying business interests. As a result, the risks inherent in operating in a single market are mitigated.
What is the world's largest luxury conglomerate? ›
LVMH is the world's biggest and most diversified luxury goods conglomerate with leading positions in multiple businesses, including fashion and leather goods, jewellery and beauty distribution.
44 per cent of people believed the Louis Vuitton brand to be the most over-rated, closely followed by Gucci (38 per cent) and Hermes (37 per cent). Nordstrom's was the most owned or experienced brand and was found to be the least overrated brand (12 per cent).
What are inaccessible luxury brands? ›
An Inaccessible Luxury product is all about exclusivity, heritage, craftsmanship, creativity and prestige. A few of the most popular Inaccessible Luxury products are Dior, Ferrari and Hermes.
Can brands survive without social media? ›
You don't absolutely need social media to run your small business successfully. There are other marketing channels you can use as you start to scale. I've personally used them to flip my business from relying on ads and social media to getting people to find me, not the other way around.
How do Chinese afford luxury? ›
How do they afford high-priced purchases like designer bags, hot sneakers and jewellery? Two-thirds say they save up the allowances they receive to spend it on a coveted item, while others either use credit cards that their parents or other people pay for or even take out loans.
Which country buys most Louis Vuitton? ›
Revenue share of the LVMH Group worldwide in 2022, by geographic region
| Characteristic | Revenue share |
|---|
| United States | 37% |
| Japan | 6% |
| Rest of Asia | 20% |
| Other markets | 13% |
2 more rowsAug 29, 2023
Morocco and South Africa feature the lowest rates at $793 (-7 percent) and $850 respectively, followed by France's neighbouring UK at $863 (1 percent). The most expensive countries to buy the Louis Vuitton product are Brazil at $1,322 (55 percent), China at $1,138 (33 percent) and Russia at $1,093 (28 percent).
How do luxury brands remain competitive? ›
Artificial scarcity, limited production. Luxury brands often produce a limited number of products to maintain the exclusivity of their brand. By limiting the number of pieces, they can ensure that their products remain sought after and that their clientele feels they own something unique and special.
How do luxury brands stand out? ›
Luxury brands target high-net-worth individuals (HNWI) and aspirational consumers who are willing to pay a premium to own exclusive, high-quality products. These consumers are by nature hard to find, so data-driven approaches help identify and entice them by speaking to their aspirations and values.
Why is it important for brands to stay relevant? ›
Brands that are relentlessly relevant are those that enlarge the universe and engage customers in a living brand experience. That means constant, real-time engagement between customers and brand stewards, giving companies the ability to anticipate, adapt and respond in the context of customers' lives.
How do you maintain a luxury brand? ›
Quality product
Luxurious fashion brands are known for the quality of products they have been providing for years. To maintain the brand's image and popularity, these luxury brands focus a lot on producing high-quality products. It requires good material, suitable fabric, durable items, and much more.
 — Whatever is Lovely by Lynne G. Caine)