Richemont As Focused Luxury Conglomerate

International Journal of Affective Engineering Vol.13 No.1 (Special Issue) pp.1-10 (2014)

Special Issue on ISAE 2013 ORIGINAL ARTICLE

Richemont as Focused Luxury Conglomerate

Shinichiro TERASAKI and Shin’ya NAGASAWA

Graduate School of Commerce, Waseda University

Abstract: This paper clarifies the competitive advantage of Richemont in comparison to LVMH particularly from the angle of portfolio strategy. Unlike LVMH, limited numbers of people know Richemont that does not comprise the name of maisons under the umbrella. Even though LVMH gradually dominates global luxury market, Richemont as the second largest luxury conglomerate must have unique advantages over LVMH to compete, which could help examine the way to tackle the market’s dominant company as a follower. Through this study, one similarity and two differences are found in terms of a business strategy. The similarity is that both Richemont and LVMH commit two kinds of portfolio strategies: product portfolio strategy and regional portfolio strategy. In contrast, the differences are as follows: (1) way of brand expansion, and (2) the nature of each conglomerate i.e. designer-driven or craftsmanship-driven conglomerate. Keywords: Luxury, strategy, brand, Richemont, LVMH

1. INTRODUCTION 2. LITERATURE REVIEW

Concentration by leading transnational companies has Luxury as a segment that was previously associated been a long-lasting trend in many industries. Luxury simply with design and creativity, production and retail, it industry also follows this trend led by Moët Hennessy formerly attracted marginal interest among researchers Louis Vuitton (LVMH), Richemont and Kering. Even because its impact on the academia and business worlds major maison such as BVLGARI merged by LVMH lacked tolerable importance as a business domain or in 2011 is no longer an exception. More and more discipline [1]. Before 1980s, most luxury maisons were independent maisons are exposed to the concentration. operated as family businesses, and in many cases, they As such, the competitive environment changes from had little management expertise. However, it became competition among maisons to rivalry among difficult to communicate consistent brand messages to conglomerates. This research focuses on the latter multinational consumers particularly after 1980s. As a particularly between Richemont and LVMH. Richemont result, many luxury maisons went bankrupt [2]. is a Swiss-based luxury conglomerate established by This difficulty was overcome by the birth of luxury Johann Rupert in 1988. At present, Richemont ranks the conglomerates that is characterized as strategic business second largest luxury goods company worldwide. In fiscal management. Bernard Arnault firstly developed luxury year 2012, the sales of Richemont recorded 8,967 million conglomerate named LVMH in 1987. Wetlaufer calls Euros, 29% growth versus the last year. In contrast to Bernard Arnault as masterful in his capability to manage LVMH, Richemont executes merger and acquisition of creativity for the sake of profit and growth [3]. many jewelry and specialty watch brands much before The growth of luxury conglomerate promotes the LVMH “collects” such brands as Chaumet, DeBeers, democratization of top of the range brands as new rich Hublot, and Zenith. Currently, Richemont has two jewelry increases [4-6]. In the US, household income had brands and nine specialist watchmakers, all of which increased more than 50% in the past 30 years due to operate worldwide, supporting the sustainable sales women’s social progress [7]. Credit card sustained growth. growth in the democratization of luxury, and was allowed Even though LVMH gradually dominates global luxury to appear consumer schizophrenia [8-10]. The blossom market, Richemont as the second largest luxury conglom- of duty-free shop also contributes to the luxury democra- erate must have unique advantages over LVMH to tization [11]. DFS Gallerrias is a typical example of compete. The competitive strategy of Richemont could duty-free shop, and it is under the umbrella of selective help examine the way to tackle the market’s dominant retailing in LVMH that accounts for roughly 30% of the company as a follower. entire turnover of LVMH in 2012.

In addition, each luxury conglomerate is required to Other than the analysis above, we explore the overview increase sales and profits in short-term view because of luxury conglomerates in global economy from the angle they are listed companies [12]. This accelerates the of (1) the value of luxury brands, referring to Best Global acquisition of independent luxury maisons into luxury Brands from Interbrand, (2) the scope of luxury goods & conglomerates. services industry, (3) the definition of luxury goods, and (4) Unlike LVMH, the name of Richemont does not the scale of luxury conglomerates, focusing on the top three encompass the name of brands under the umbrella; few actors: LVMH, Richemont and KERING. people know Richemont holds many distinguished luxury brands: Cartier, Vacheron Constantin, Dunhill, and Mont 4. LUXURY CONGLOMERATE IN GLOBAL Blanc, for instance. Hence, many researches related to ECONOMY luxury industry target LVMH, referring to, for example, “Gucci Competition” versus Pinault Printemps Redoute, 4.1 Value of Luxury Brands and Kenzo merger. We can see such issues in “An The value of luxury brands indicates the positioning of Unpainted Face of the Empire of Luxury Brands: LVMH luxury brands among brands in all industries from Moët Hennessy Louis Vuitton” [13] and “Why many buy manufacturing to information technology. There are two Louis Vuitton” [14] and many other references. types of brands; one is a luxury brand, and another is Except for LVMH, most researches do not explain the a power brand like Procter & Gamble, which targets the management of luxury conglomerates. Instead, many mass shoppers. In Japan, “brand” generally equals to luxury researches focus more on the category management of brand, whereas many researches have focused on power luxury goods such as “Luxury Fashion Management” [15], brands rather than luxury ones since Aaker began to “Luxury Fashion Branding: Trends, Tactics, Techniques,” explore brand marketing [19]. In fact, only Louis Vuitton [16] both of which focus on fashion & leather goods. and Gucci rank within top 50 in Best Global Brands, and In contrast, few references that explore watch & jewelry five to seven luxury brands appear in top 100 (Table 1). business are available presently, and other luxury-related Louis Vuitton constantly ranks within top 20 since researches examine consumer perception and trend 2005, keeping a leading status in luxury industry. Gucci towards luxury industry: for instance, “The Luxury also ranks within top 50 since 2001 followed by Hermès, Market in India” [17] and “Luxury China: Market Oppor- Tiffany and Cartier. Given the scale of luxury business, tunities and Potential” [18]. luxury brands readily outperform over many power This research takes unique approach to clarify the brands; more than six luxury brands rank within top 100. strategy of Richemont as a luxury conglomerate in comparison to LVMH, focusing especially on the strategy 4.2 Scope of Luxury Goods & Services Industry of portfolio management in each conglomerate. Before 1980s, luxury industry had not introduced modern expertise of business management, for most 3. METHODOLOGY luxury maisons had been operated as a family business. Yet, the scope of the luxury industry has been quite diver- This paper unveils the competitive advantage of sified after the late 1980s when luxury conglomerates Richemont over LVMH particularly in terms of portfolio started to be formed. The figure below visualizes the strategy by comparing the following issues: (1) brand overview of the current luxury industry (Fig. 1). portfolio, (2) turnover and profitability by business category, (3) regional contribution of turnover. Quantitative Table 1: Ranks of Luxury Brands references largely derive from annual reports of each 2008 2009 2010 2011 2012 Louis Vuitton 16 16 16 18 17 conglomerate, referring to the last five years to explore the Cartier 79 77 77 70 68 business trends. Comments from executives in Richemont GUCCI 45 41 44 3 38 and LVMH are also added to support the arguments. Such Chanel 60 59 - - - ROLEX 71 68 - - - comments came from the authors’ face-to-face semi- Tiffany 80 76 76 73 70 structured interviews in Richemont SA headquarter and Polo Ralph Lauren - - - - - ARMANI 94 89 95 93 - exclusive meeting room in Basel World 2012. We also PRADA 94 87 - - 84 refer to executive presentations at LVMH chair luxury Hermès - - 69 66 63 BVLGARI - - - - - branding module in Waseda University organized by the Burberry - 98 - - 82 authors of this paper. Source: Best Global Brands

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Figure 2 is created based on the following two studies: “Defining Three Levels of Prestige” [21] and “A Hierarchy of Luxury Goods Products” [24]. Vigneron and Johnson regard luxury brand as the most prestigious brand within prestige brands followed by premium and upmarket brands. Alleres splits luxury brands into three categories: exclusive luxury, intermediate luxury and democratic Figure 1: Scope of Luxury Goods & Services Industry [1] luxury in keeping with social hierarchy: elite, professional and middle class. Leading luxury conglomerates generally According to Fig. 1, the luxury industry is divided into covers three types of luxury brands based on the degree of two types of business: luxury goods and luxury services. accessibility, and the details are explained in section 5.2 Both LVMH and Richemont do not run the following and 6.2 in this paper. business: automobiles & air transportation. In addition, Richemont does not have wines & spirits. However, both 4.4 Scale of Luxury Conglomerates conglomerates generally form well-balanced business The scale of luxury conglomerates is measured by sales, portfolios. and operating profit rate. Since 1990s, luxury conglomerates have accelerated concentration, leaving a small number of 4.3 Define Luxury Goods independent maisons: Hermès and Chanel. Currently, Despite the development of luxury conglomerate, the LVMH ranks 1st as a luxury conglomerate followed by definition of luxury brand is still ambiguous. Richemont and Gucci group in turnover. In 2012, the Vickers and Renand pointed out that academia does not turnovers are 28,103, 8,867 and 6,212 million euros have the consensus in the definition of luxury brand [20]. respectively while the operating profit margins are 21%, This is because luxury has many dimensions: conspicuous- 23% and 26%. Although Richemont has lower profitability ness, uniqueness, quality, extended-self and hedonism [21], than Gucci group, the operating profit ratio of the watch and the definition varies according to socio-economic and jewelry category records 30%. Figure 3 represents the context [22], and interviewee and context [23]. As such, comparison of luxury conglomerate in business scale. it is virtually difficult to define luxury in one sentence. In Figure 3, wines & spirits and Gucci Group are To simplify the definition, luxury and the similar concept excluded from LVMH and Kering respectively to make brands are categorized in accordance with the following the comparison simple; Richemont and Gucci group do two aspects: the degree of prestige, and that of accessi- not operate wines & spirits business, and Kering includes bility (Figure 2). non-luxury business such as Puma. The scale of LVMH except for wines & spirits is still larger than the sum of Gucci Group and Richemont, whereas such plain comparison could not clarify the features of each conglomerate. We also need to explore the category contribution to the overall turnovers to clarify the characteristics of each conglomerate.

Figure 2: Positioning of Luxury Brands Figure 3: Comparison of Luxury Conglomerates

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5. LVMH MOËT HENNESSY LOUIS VUITTON

5.1 Overview LVMH was born after the merger of Louis Vuitton with Moët Hennessy in 1987. The conglomerate includes many long-standing luxury maisons such as Moët & Chandon established in 1743 and Louis Vuitton in 1854. Presently, LVMH has five business categories with 46 brands in total excluding DFS, Miami Cruiseline, Sephora and Le Bon Marche Rive Gauche, all of which belong to selective retailing.

Originally, Louis Vuitton continued the family business, Figure 5: Brand Portfolio (ex. Selective Retailing e.g. DFS, focusing on the travelling bags more than 100 years. Since Sephora, and Le Bon Marché) Louis Vuitton held a shop in 1854, the owners had been craftsmen from generation to generation. In the 1970s, the the joint venture LVMH/DeBeers establishment with shop owner tried to separate ownership and management DeBeers group in 2001 from the late 1990s. according to the advice of consultants. As a result, the As such, LVMH gradually expands business portfolio owner built a holding company, Louis Vuitton Malletier in from “Intermediate Luxury” e.g. apparels and wines to 1977, hiring management professionals outside the both “Democratic Luxury” and “Exclusive Luxury” maison. After the formation of LVMH, internal struggles (Figure 6). This implies that LVMH covers all types of within the conglomerate induced the further merger by luxuries by launching new luxury brands or expanding Bernard Arnault, current owner of Christian Dior and business categories, deploying the names of existing LVMH. luxury brands. Bernard Arnault executes multi-brand strategy since the Here, the sales contribution of each business category is reborn of Christien Dior. The multi-brand strategy is a analyzed as shown in Fig. 7. sequential process to grow the conglomerate as shown in As shown in Fig. 7, sales contribution of each category Figure 4. By circulating this sequential process, LVMH chronologically unchanged, and fashion & leather goods grows much faster than independent maisons. constantly keeps around 50% followed by wines & spirits and perfumes & cosmetics at the same rate of 20%. While 5.2 Brand Portfolio perfumes & cosmetics is categorized as a different category LVMH divides the business portfolio into four categories from fashion & leather goods, most brands in perfumes & as shown in Figure 5. According to Figure 5, LVMH assumes wine & spirits and fashion & leather goods the core, and transfers an existing brand into other business categories by developing the brands in fashion & leather goods to perfume & cosmetics, watches & jewelry strengthening a business portfolio with a low risk. Watch & jewelry is a comparably new business category in LVMH, and the business scale in the group is around 10% as of 2012 on the whole. However, LVMH strengthens the business portfolio by the acquisition of TAG Heuer or

Figure 4: Multi-brand Strategy Figure 6: Brand Portfolio Extension

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given the market size because watch & jewelry market is the biggest in personal luxury market, accounting for more than 1/3.

5.4 Sales Contribution by Region As a French-based company, the contribution of European market is still the largest: Europe shares approximately 31% as a region as shown in Figure 9. On the other hand, a share of Asia-Pacific area grows year by year, and it became larger than Americas since 2009. In China, the sales of department stores, a main channel of the luxury goods, have achieved double digits growth since 2003 (Table 2). This contributes to the overall growth of luxury market in Asia-Pacific region. Even in global financial crisis, the shares of the US Figure 7: Sales Contribution by Category. Unit: mio EUR comparably remain stable, whereas a gradual downward trend continues in Europe and Japan. Yet, executives in cosmetics originate in fashion & leather goods: Kenzo LVMH described Japan as follows; “The Japanese has the and Fendi. Watch & jewelry gradually contributes to the sternest eyes for quality and a new product concept” [26], overall sales, sharing 14% of group total. Since watch & and “Successful business model in Japan is transferable to jewelry is categorized as exclusive luxury in Fig. 6, the worldwide. I convinced that Japanese market leads a global contribution of inaccessible brands is becoming higher luxury market especially in both product development and and higher. This will contribute to enhance the rarity of customer service improvement” [26]. As such, Japanese luxury brands under LVMH. market is still significant except for sales contribution by region. 5.3 Turnover & Profitability The relationship between turnover and profitability is 5.5 Short Summary analyzed in this section. According to Figure 8, fashion & LVMH increase the number of maisons under the leather goods leads LVMH in profitability followed by umbrella through incessant acquisitions. At present, wines & spirits. LVMH manages over 40 brands regardless of national Although both wines & spirits and perfumes & cosmetics boarders, with sustainable growth of each business perform equally in sales, the former earns three times category. The conglomerate is particularly competitive in as much profit as the latter. Wines & spirits compensates fashion & leather goods that attract consumers through the volatility of profits in fashion & leather goods: it does fabulous images of celebrities and creative designers. not correlate to the intense trends. Watches & jewelry records higher profitability than perfumes & cosmetics. The profitability of watches & jewelry could be improved given the internal shared service works in the business category. Turnover of watch & jewelry might also grow

Figure 9: Sales Contribution by Region

Table 2: Sales by Channel in China [25]

Figure 8: Business Scale & Profitability by Category Unit: bio CNY

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In addition, most perfumes & cosmetics brands under the umbrella were born from fashion & leather goods maisons: Parfums Christian Dior, Parfums Givenchy and Parfums Kenzo in the process of brand expansion strategy. The importance of Asia-Pacific market is becoming crucial for sustainable growth. However, mature market like Japan where sophisticated consumers live is still important for further development of products and Figure 10: Brand Portfolio services. LVMH will promote further market diversifica- tion to hedge the risk of external environments such According to Figure 10, 9 out of 18 brands belong to as wars, financial crisis and environmental disasters. specialist watchmakers, all of which are certified as “Swiss Meanwhile, the company will accelerate product and Made” and have strong reputation in mechanical watch- service development, sharing the knowledge of consumer making with long brand history. Richemont leads specialist experiences in both growing and mature markets. watchmakers category in comparison to LVMH who embarked on the business in the late 1990s. Unlike LVMH, 6. COMPAGNIE FINANCIÈRE RICHEMONT Richemont perfectly dominates the invitation only watch fair named Salon International Haute Horlogerie, excluding 6.1 Overview many other prestigious watch brands such as Breguet, Richemont could be too unfamiliar, but it ranks the world’s Blancpain and Rado. Instead, Richemont does not join second largest luxury conglomerate. Under the umbrella, Basel World, the biggest “open” access world watch fair, to there are 18 brands from Cartier, Piaget, Mont Blanc and avoid Swatch Group. Dunhill as time-honored brands to a relatively young brand Keller identified three most notable trade-offs luxury such as Shanghai Tan, a luxury brand born in China in the marketers face; exclusivity versus accessibility; classic mid 1990s. Unlike Louis Vuitton and Gucci, Richemont did versus contemporary images; and acquisition of prospec- not start the business from brand creation; Richemont was tive customers versus retaining existing customers [27]. born in 1988 by the spin-off from Rembrandt Group Limited Richemont intends not to attend Basel World not to dilute of South Africa that originated in small tobacco business in the brand equities under the conglomerate even though South Africa. During the World War II, Johann Rupert, a they might scale back volumes and sales points. Carcano father of Anton and current executive chairman, purchased a and Ceppi points out that the key to exclusive scenario is small tobacco factory with a friend. to preserve first profitability and brand equity, and then to After the war, Anton expanded the business from tobacco keep growing revenues [28]. Richemont follows this to financial services, wines & spirits and gold & diamond exclusive scenario better than LVMH at least in watch & mining. Through a series of acquisitions, Richemont jewelry business. invested in Rothmans that owned the shares of Cartier and Each brand in Richemont has long history. For instance, Dunhill, a parent company of Mont Blanc and Chloé. The Vacheron Constantin was established in 1755, approxi- acquisition of Cartier accelerated the growth of Richemont; mately 250 years ago while Cartier and Dunhill in 1847, at present, approximately 50% of sales derived from watch 1893 respectively. 13 brands out of 18 started before & jewelry business, mainly Cartier, and the core business 19th century, and except for Chloé and Shanghai Tang, it of Richemont is radically different from LVMH that is said that Richemont is aggregate of the European well- focuses radically on fashion & leather goods. established brand. Richemont ranks the second largest luxury conglomerate Newcomers in Richemont mostly belong to other after LVMH, recording 8,867 million euros of turnover businesses that comprises relatively young apparel brands in 2012. Even after Lehman shock of 2008, the sales such as Chloé and Shanghai Tang. Especially, Shanghai recovered quickly, improving the operating income ratio. Tang stands out in that it could be the first non-European luxury brands born in Hong Kong in 1994. As such, the 6.2 Brand Portfolio portfolio extension of Richemont is shown in Figure 11. Richemont divides businesses into the following four According to Figure 11, Richemont expands the business categories: jewelry maisons, specialist watchmakers, portfolio from Exclusive Luxury to Intermediate Luxury writing instrument maison and other businesses as shown by the acquisition of relatively young luxury apparel in Figure 10. brands as mentioned the above. However, it is safe to say

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portfolio, focusing fundamentally on watch & jewelry as main financial source followed by “others” that comprises apparel brands. The relationship between sales and profitability is analyzed in this section. According to Figure 13, jewelry maisons lead Richemont in profitability and turnover followed by specialist watchmakers. Writing instruments achieves the same level of profitability as specialist watchmakers, whereas writing instruments only account for approximately 8% of sales in Richemont. Other businesses recorded operating income ratio of minus 6%, which proves this category is still on the way to break-even-point. In fact, Yutaka Nishimura, CEO of Richemont Japan told us that fashion brands might not incompatible in Richemont in that Hackett and Old England were sold between 2004 to 2006 [29]. However, we cannot discard other businesses for the Figure 11: Brand Portfolio Extension following reason; other businesses that range from established brands like Lancel and Dunhill to Chinese first that the core of Richemont is still Exclusive Luxury given luxury brand, Shanghai Tang could have a great opportu- the sales contribution of watch & jewelry brands (See nity for the future business portfolio strategy of Richemont Figure 12). given growing Chinese market. In addition, maisons in other businesses could embark on perfumes & cosmetics 6.3 Turnover & Profitability as LVMH does even though this business expansion may Unlike LVMH, around 80% of turnover comes from dilute the exclusive brand portfolio of Richemont. jewelry maisons (52%) and specialist watchmakers (26%) as shown in Figure 12. 6.4 Sales Contribution by Region Sales contribution by business category has generally In Richemont, the contribution of Europe is slightly unchanged except for writing instruments that include higher than that of LVMH by 4% as shown in Figure 14. only Montblanc, and jewelry maisons substantially led by Like LVMH, the share of Asia-Pacific excluding Japan Cartier account for 50% of group. increases from 25% in 2008 to 42% in 2011. Conversely, In contrast, around 10% of turnover comes from watch that of both Americas and Japan decreases significantly to & jewelry in LVMH; Richemont has a unique business 14% and 9% respectively in 2012. This is partly because department stores, the primary sales channel in luxury goods, have suffered constant recession in Americas and Japan, meanwhile other sales channels have grown rapidly such as fast fashions e.g. Hennes & Mauritz, Uniqlo and online or television shopping.

Figure 12: Sales Contribution by Category. Unit: mio EUR Figure 13: Business Scale & Profitability by Category

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Other key differentiation point is that Richemont’s maisons are mostly classified as craftsmanship driven rather than fashion driven because few designers and celebrities are seen in the advertisement of watch & jewelry. Fashion & leather goods brands focus more on celebrity endorsement while watch & jewelry use craftsmanship to promote the products. This differentiation point might negatively affect the management of fashion & leather goods in Richemont in that Richemont compa- Figure 14: Sales Contribution by Region rably lacks the expertise of celebrity driven promotional activities than LVMH. Richemont, however, embarked on ecommerce in 2010 by the acquisition of NET-A-PORTER. At the website, 7. IMPLICATIONS & RESEACH LIMITATIONS Richemont’s fashion & leather goods are sold, including Bottega Venetta and Chloé even though rivalry brands like Through a series of the analysis, one similarity, and two Gucci, Donna Karan and Yves Saint Laurent are also differences that can be the competitive advantage of available through the website. For watch & jewelry, the Richemont over LVMH are found. internet will not alternate the existing sales channel as it has seen as a place where secondhand ones are sold. 7.1 Similarity According to CBS News.com, online luxury goods market Firstly, both Richemont and LVMH deploy portfolio is expected to grow by 20% in 2010 as younger shoppers strategy that is divided into business portfolio strategy and and workingwomen shop by clicks instead of bricks [30]. regional portfolio strategy. Business portfolio strategy Kenzo and Pink from LVMH also opened owned online helps to balance the volatilities of profits in each business. shopping site. CEO of Van Cleef & Arpels explains that In Richemont, watch & jewelry compensate the low “our goal is to remain very exclusive while we open new profitability of fashion brands while wine & spirits plays geographies” [31]. “New geographies” may include the same role in LVMH. e-commerce in Van Cleef & Arpels even though only In contrast, regional portfolio strategy contributes to fashion maisons like Bottega Venetta and Chloé operate hedge the risk of external environment such as recessions, e-commerce in Richemont. Although it takes time to make environmental disasters, wars. Both Richemont and luxury e-commerce prominent in luxury conglomerates, LVMH operate in four regions, Europe, Asia-pacific, the internet channel could change the regional contribu- Americas and Japan even though they are focusing on tion of turnover particularly in the mature market. Asia-Pacific where middle class population, and the number of department stores rapidly grow. The recent 6.5 Short Summary socio-economic interdependence might weaken the effi- Richemont clearly differentiate its business from LVMH cacy of regional portfolio strategy, whereas the operating with regard to business portfolio strategy. The core income ratio of approximately 20% in both conglomerate business in both conglomerates stays completely opposite: is worthy of special mention. fashion & leather goods for LVMH, and watch & jewelry for Richemont. In regional portfolio strategy, both 7.2 Differences conglomerates highly diversified the selling regions In terms of differences, two major implications are from Europe to Asia-Pacific, focusing on Asia-Pacific as found: (1) the way of brand expansion, and (2) the role of a growing market. E-commerce, however, could become designers and craftsmen within conglomerate. Brand another “region” given the rapid growth. expansion means the expansion of product range and Even though the number of umbrella brands is far less grade within a brand, and LVMH applies pyramid model than LVMH, the exclusiveness of Richemont brands as shown in Figure 15. seems higher than LVMH. Richemont does not commit LVMH often applies pyramid model brand expansion down grade brand expansion like clothes to fragrances, especially to perfumes and cosmetics. Even though brand and does not join open watch fair such as Basel World. expansion helps to strengthen business portfolio with low Instead, Richemont holds booths only in Salon Interna- financial risk, this often damages the exclusiveness of the tional Haute Horlogerie, invitation-only watch conference. products. LVMH follows pyramid model that may, in

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7.3 Research Limitations and Future Research In conclusion, Richemont has two unique competitive advantages e.g. way of brand expansion and the role of designers and craftsman over LVMH, sharing one similarity: portfolio strategy. In future research, we examine brand autonomy under luxury conglomerate, exploring value chains of each group because creativity is generally said to be uncontrollable; it is interesting to examine the management of creative brands. This research could be also helpful to verify the competitive advantage of independent maisons Figure 15: Pyramid Model [32] such as Chanel, Rolex and Patek Phillipe, all of which have distinctive brand propositions. The limitation of this paper many cases, let product grade move downwards. could be the extensive use of annual reports. Due to the Richemont, in contrast, does not basically commit brand confidentiality, we commit the limited use of comments expansion except for Montblanc. Montblanc breaks the from face-to-face interviews of luxury executives. rule of pyramid model by the launch of luxury watches, making product grade move rather upwards. Thus, Richemont keeps the exclusiveness of the affiliated REFERENCES brands, avoiding the simple application of pyramid 1. U. Okonkwo; The luxury brand strategy challenge, model. Journal of Brand Management; 16, pp.287-289, 2009. The role of designers and craftsmen is also different. 2. T. Agins; The End of Fashion; William Morrow & Co, For the brands of fashion & leather goods, the influence New York, 1999. of designers is much larger than watch & jewelry brands. 3. S. Wetlaufer; The Perfect Paradox of Star Brands, The innovation of fashion & leather goods mostly Harvard Business Review; Oct, 2001. depends on designers; Marc Jacobs in Louis Vuitton, 4. C. Bialobos; Luxe: le palmarès européer des marques, Gianfranco Ferré in Christian Dior, for instance. L’expansion; 412, Sep, pp.122-125, 1991. However, in watch & jewelry brands, designers are 5. E. Villacampa; Luxe et magasins popularizes, L.S.A; mostly “unknown” because such brands promote crafts- 1238, pp.50-52, 1995. manship rather than cut-edging designs. In addition, 6. A. Sharpe and K. Banting; Understanding of Produc- watch & jewelry were not consumption products; you tivity: An Introduction and Overview, The Review bought a Piaget watch and you would have it for the next of Economic Performance and Social Progress; 2, generation [33]. pp.1-28, 2002. Brands under luxury conglomerates are largely classified 7. M. J. Silverstein and N. Fiske; Understanding of as fashion driven or craftsmanship driven. Given the Productivity: An Introduction and Overview, The brand portfolio, Richemont is generally said to be crafts- Review of Economic Performance and Social Progress; manship driven conglomerate, focusing on watch and 2, pp.1-28, 2003. jewelry brands while LVMH can be said as fashion 8. M. J. Sonimers; In Marketing & Research Today driven conglomerate. According to Terasaki [34], (Netherlands); Feb, pp.35-43, 1991. perceived value of luxury goods varies with category. 9. E. Kardon; Consumer Schizophrenia, Planning Review Terasaki conducted hierarchical cluster analysis, (USA); July-August, pp.18-23, 1992. employing Kapferer (1998) scale [35] to clarify the 10. A. De Moulins; L’explosion du Marché de 1’art, perceived value of both fashion and watch category. The Problems économiques, pp.22-24, 1993. samples were 40 part-time business school students in 11. J. L. Nueno and J. A. Quelch; The Mass Marketing of Waseda University in Japan. They were all working Luxury, Business Horizons; Nov-Dec, pp.61-68, 1998. students who had enough disposable money to purchase 12. V. De Barnier, S. Falcy and P. Valette-Florence; Do luxury goods. Consequently, category specific clusters consumers perceive three levels of luxury?, Journal of were found in fact: while luxury fashion has “Creative Brand Management; 19(7), pp.623-636, 2012. and the Forefront,” luxury watches has “Craftsmanship 13. S. Nagasawa; An Unpainted Face of the Empire of with Tradition.” This supports the “fashion driven or Luxury Brands: LVMH Moët Hennessy. Louis Vuitton; craftsmanship driven” argument. Nihon Keizai Shimbunsha, Tokyo, 2002 [in Japanese].

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