Can Louis Vuitton Ever Measure Up to Hermès? Just Ask Bernard Arnault

Not long ago, it seemed that LVMH CEO Bernard Arnault and his trawler-full of luxury brands could be stopped at nothing. He charged ahead devouring both heritage and startup luxury brands with almost reckless abandon, bankrolled by his cash cow, Louis Vuitton.

But there has always been one brand that shines high up in his diamond sky, barely beyond his reach: Hermès. Ah, Hermès, the holy grail of luxury goods with bags seemingly sewn by angels, and blessed by a gleaming virgin resembling Grace Kelly.

In recent years the Hermès brand has managed to show a staggering increase in sales — even during the bleakest period of the 2009-2011 recession. So it came as some surprise when LVMH reported that Vuitton has suffered its slowest quarterly growth since 2009. Arnault knows it is time for a major strategy change.

“Of course it would be easy for Louis Vuitton to boost its revenue; all it would take would be to launch ten new products with the monogram product, but down the road it’s not a good strategy,” said Arnault in an earnings call. He announced that effective immediately, the brand would be opening “far fewer” stores and focus more on service (which quite frankly, they should have done long ago), while increasing production of leather goods and non-monogram products.

LVMH CEO Bernard Arnault: “We want instead to be friendly supporters of one of France’s finest companies – and that’s all.”

Arnault’s singular focus on Hermès is well-known, bordering on lust, and at last month’s annual general meeting it was revealed that the LVMH group owns not 17.1 percent of Hermès company stock, as was originally reported, but an astonishing 22.6 percent. “We found ourselves owning shares in this company [rather] unexpectedly,” said Arnault, at a recent annual meeting, a comment that reportedly caused nervous laughter from those assembled. “We had not planned to be shareholders in this firm.”

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Arnault made LV the Starbucks of luxury brands giving little thought to the fact that the brand had become cheapened by its ubiquity.

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Of course nothing could be further from the truth and everyone in the room knew that.

You can’t get more golden than a brand like Hermès because its brand equity has managed to withstand the vagaries of fashion. “Same as it ever was” could almost be their tagline, and when you think about it, not many brands can truly say that. Most have been severely tweaked, rebranded, and manipulated beyond their original incarnation.

Long before the word “luxury” was bandied about so casually, the luxury terrain was a far less competitive place and Louis Vuitton easily climbed to the top, creating a frenzy for its monogrammed bags. Back then, Hermès was perhaps too discreet, too conservative, and well, too expensive for anyone but a very elite customer.

LV took an almost shockingly commercial strategy of luring a younger and decidedly less sophisticated generation in order to make Vuitton the undisputed Leader of Luxe.

From Top: The exterior of an LV store at the peak of the frenzy for the brand’s collaboration with Takashi Murakami; a bag from the Murakami collection; and Paris Hilton and Kim Kardashian on the beach in Miami.

By the early 2000’s LV was really pulling out all the stops and churning out new bags and accessories at a dizzying rate. Marc Jacobs enlisted pop artist Takashi Murakami to add a healthy dose of irreverence and kitsch with limited edition pieces. Murakami’s bags and accessories layered Japanese animé images such as smiling cherries over the house monogram, which became overnight best sellers.

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“People are assigning us motives in a totally unfounded way.”

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Still why, you might ask, why would Arnault even want Hermès when he already has a brand with an enviable pedigree (and several others including Christian Dior), an unrivaled network of fans and stores, and extraordinary success?

Because quite simply, Hermès has the dignity, integrity, and respect that LV more or less gave away when it began its aggressive overhaul and expansion of stores and product categories. For better or worse, Arnault had made LV the Starbucks of luxury brands and given little thought to the fact that the brand had become cheapened in its ubiquity.

At top, an artisan at Hermès works on the creation of a scarf; An advertisement for Louis Vuitton which  attempts to draw a similar parallel regarding the brand’s “handmade” products. The ad was banned in the UK for being “misleading.”

Hermès’ increasingly burnished image of “pure luxury” has always made Arnault wish he had been a bit less brash and commercial with Vuitton, and while he denies his intentions with Hermès, that denial somehow rings false.

“People are assigning us motives in a totally unfounded way,” said Arnault, in a Vogue UK story from April 2013. “We have no intention at all of increasing our stake to play a role in this company. We want instead to be friendly supporters of one of France’s finest companies – and that’s all.”

How that “support” is represented by stock purchases was not explained, especially when the stock was purchased secretively and against the will of the Dumas family, which owns majority shares of Hermès and has several members sitting on its board.

In the end, true luxury has very little to do with branding and a whole lot more to do with an obsession with quality, pure craftsmanship, and a refusal to compromise for the sake of “fashion.” Just ask Hermès.

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