Just a short post on some information I find very interesting. Many people know the LVMH company. Essentially it is an aggregator of luxury brands and is headed by billionaire Bernard Arnault. Mr Arnault recently made news with his proposed change of residency to Belgium to avoid France's extremely high tax rates for the rich. The snapshot below shows you the portfolio of their brands:
Australian readers may also find it interesting that LVMH has bought a stake in RM Williams.
What I find extremely interesting is that as a group, the spend on marketing is about the same as what is spent to make the actual products (cost of goods sold). See the latest financials below:
This trend holds true over previous years.
So that means for example when you spend $2,000 on a LV handbag, you are paying roughly the same amount for marketing as the actual product itself. I guess it makes sense: luxury is just as much about the image it creates for us as the actual product. All that advertising and high end stores generates a perception in our minds. I'd be a hypocrite to say I'm immune to the charms of luxury brands: I own a German car, Italian suits and a Swiss watch. Truth be told I don't need these things, but sure like how they make me feel.
Kristian
Disclosure: no position in LVMH. Long in some of their products!
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