LYCOS RETRIEVER 
Bernard Arnault: Brands
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Arnault faced a host of challenges in early 2004. The luxury market struggled from declines in tourist travel, crucial to the sale of designer goods, and several LVMH brands suffered from their own financial troubles. Japan's economy was another factor; in 2001 the country accounted for 40 percent of sales at LVMH, but Japan's economy had been in a recession since 2003. It even seemed questionable that mass-market brands could continue to command top dollar. Nonetheless, Arnault was optimistic that he could continue to generate a steady flow of profit from his brands while ensuring the highest level of quality and creativity. As he told the Washington Post (April 28, 2002), "The possibility of creating very appealing products with architects, with designers and making it commercially very successful is what I am good at, I think, and what I like to do."
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Arnault, 50, says the Web will never replace the sensory pleasure of shopping in one of his luxury boutiques. Still, he's covering his bets. In October, LVMH's Sephora cosmetics chain is opening an enormous store in New York's Rockefeller Center. The same day, Arnault is launching a Web site for Sephora. With that brand of fancy footwork, Arnault could in short order move from being a leading financier of e-commerce to becoming a leading practitioner of it.
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Suzy Menkes interviewed Bernard Arnault at the IHT luxury seminar in Moscow. The video is below, but in a nutshell, Arnault thinks the U.S. economy will slow down, but not go into recession. This, he says, would make it an ideal time for LVMH brands to gain market share as they have done in past periods of crisis. On the acquisition front, he's not ruling out another buy if prices come down to a more reasonable level, which he thinks they will now that the funds are getting out of the game. And, while he's happy to be using the net to boost his brands -- did you know Sephora is now the largest e-retailer of cosmetics in the U.S.? -- he seems disinclined to make another pure internet play.
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In more recent times, Arnault has talked publicly about his “star brands†theory, explaining how they take time to grow, how they need heritage. Arnault estimates that it takes a decade to build or rebuild a brand into what he calls a “star brand,†that is, a brand that is “timeless, modern, fast-growing, and highly profitable.†Arnault describes the compelling offer to customers of his star brands: “You feel you must buy it, in fact, or else you won’t be in the moment. You will be left behind.†He argues that the history and tradition of a brand are not enough. Aristocratic links and status certainly help a brand, but they do not guarantee a star brand that makes products that people have to have now, right now.
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Arnault was not just interested in moving his brands to the net. Europ@web squirted 80m euros into Zebank, which was to be the continent's premier online bank, and bought 35% of internet service provider LibertySurf for 54m euros. By the end of 1999 Arnault had holdings in 19 companies.
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Arnault calls his company a “federation†of brands. He has built his luxury goods empire on his two favorite things: creative force and hard-nosed business, principles he calls “the artist’s vision and the logic of worldwide marketing.†Arnault buys the history, tradition, prestige, and recognition of a brand and takes it from there. He reinvigorates each brand, not just the products themselves but the business from end to end, the design, the manufacturing (all brought back in-house to maintain quality control), the distribution (no licensing, all in-house) and sales, all with the help of impossibly glamorous, high-end advertising campaigns
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