Recently I was looking at the list of richest people, and for the most part it makes sense to me, but one thing confuses me: why is Bernard Arnault so rich? It seems to me that one can’t get that rich simply off of fashion—you can get rich, but you can’t become the third richest person in the world off of fashion. It’s possible that I’m wrong, but I strongly suspect that there’s some part of the story that I haven’t heard yet- I suspect that one of his ventures is creating value in a way that goes beyond mere fashion, and I am curious to figure that out.
But that doesn’t answer my question. What is LVMH doing that makes them so valuable? Wikipedia says they “specialize in luxury goods”, but that takes us right back to what I say in my original post. What value is LVMH creating, beyond just “luxury”? Again, I may be wrong, but it just doesn’t seem possible to become the third richest person by selling “luxury”—whether real estate, champagne, clothes, or jewelry.
For most sectors, I think there’s tiers. Apple sells less devices at a slightly more expensive price point than e.g. Microsoft or Google. I think the highest tiers, that only a few can afford, but at the highest price point (which is actually a selling point of your product) makes intuitive sense as a path to being one of the richest, and real estate, as an asset class, makes intuitive sense to apply this strategy to.
An infographic I found shows that LVMH’s revenues are driven by the following sections:
“Fashion and leather goods” is 38% of LVMH’s revenues
“Selective retailing” is 28%
“Perfumes and cosmetics” is 13%
“Wines and Spirits” is 10%
Between these, they account for ~90% of the value of LVMH, with watches and jewelry making up most of the remaining 10%. So perhaps I should be asking: What is LVMH’s fashion and retail sectors doing to make them so valuable?
I will also note, that this is the percentage of revenues, not profits. I might want to find out the proportion each of these sectors contributes to profits (to ensure I don’t accidentally chase a high-revenue, low profit wild goose), and I could probably find that out by looking at LVMH’s shareholder report.
Recently I was looking at the list of richest people, and for the most part it makes sense to me, but one thing confuses me: why is Bernard Arnault so rich? It seems to me that one can’t get that rich simply off of fashion—you can get rich, but you can’t become the third richest person in the world off of fashion. It’s possible that I’m wrong, but I strongly suspect that there’s some part of the story that I haven’t heard yet- I suspect that one of his ventures is creating value in a way that goes beyond mere fashion, and I am curious to figure that out.
Most of his wealth comes from his stake in LVMH, a luxury real estate group.
Edit: Actually LVMH is involved in several luxury verticals, not just real estate.
But that doesn’t answer my question. What is LVMH doing that makes them so valuable? Wikipedia says they “specialize in luxury goods”, but that takes us right back to what I say in my original post. What value is LVMH creating, beyond just “luxury”? Again, I may be wrong, but it just doesn’t seem possible to become the third richest person by selling “luxury”—whether real estate, champagne, clothes, or jewelry.
Expensive real estate actually seems like a great way to become one of the richest people. Maybe we just have different priors.
Edit: apparently, the real estate isn’t where they make their money though...
I agree that real estate can make a person rich. But the path I see for that is only tangentially connected to luxury
For most sectors, I think there’s tiers. Apple sells less devices at a slightly more expensive price point than e.g. Microsoft or Google. I think the highest tiers, that only a few can afford, but at the highest price point (which is actually a selling point of your product) makes intuitive sense as a path to being one of the richest, and real estate, as an asset class, makes intuitive sense to apply this strategy to.
An infographic I found shows that LVMH’s revenues are driven by the following sections:
“Fashion and leather goods” is 38% of LVMH’s revenues
“Selective retailing” is 28%
“Perfumes and cosmetics” is 13%
“Wines and Spirits” is 10%
Between these, they account for ~90% of the value of LVMH, with watches and jewelry making up most of the remaining 10%. So perhaps I should be asking: What is LVMH’s fashion and retail sectors doing to make them so valuable?
I will also note, that this is the percentage of revenues, not profits. I might want to find out the proportion each of these sectors contributes to profits (to ensure I don’t accidentally chase a high-revenue, low profit wild goose), and I could probably find that out by looking at LVMH’s shareholder report.