The world of luxury fashion is a battlefield where iconic brands compete to sit on the throne. Fashion houses like Gucci, Louis Vuitton, YSL and Balenciaga are the top players in an industry driven by status, exclusivity and trends. Here’s an inside look at this glamorous yet cutthroat business.
In the 2000s, Versace, Coach and Tory Burch dominated high fashion. But today’s royal houses are Gucci, Louis Vuitton and YSL. Smaller disruptors like Moncler and Balenciaga also fight for the crown.
To outsiders, luxury fashion seems fragmented. But in truth, it’s an oligopoly. Top brands are subsidiaries of two conglomerates:
- LVMH owns Louis Vuitton, Dior, Givenchy and Marc Jacobs
- Kering owns Gucci, YSL, Balenciaga and Alexander McQueen
LVMH rules with $54 billion in annual revenue. But Kering challenges through popularity of Gucci, YSL and Balenciaga amongst millennials.
When you buy from multiple brands, the money still flows to these parent conglomerates. Fashion resembles Game of Thrones, where houses battle for the iron throne.
The Winning Strategy of House Gucci
Gucci dominates through aggressive marketing, trendy revamps and blitzscaling distribution.
- Grew revenue from €4.3 billion to €9.6 billion in 3 years
- 500 stores worldwide for massive retail presence
- 85% of sales from directly operated stores
- Spends 12% on advertising – over €1 billion per year
- Frequently rotates product mix and marketing to capitalize on trends
- New products drive 30% of total sales
Gucci’s rockstar growth, trendy image and 40% margins make it a standout. Over half its customers are millennials.
The Traditionalist Ways of House YSL
With iconic black leather bags, YSL plays it safe.
- Grew revenue gradually from €1.5 billion to €2.1 billion
- Only 200 stores worldwide
- No outlets or licensing
- Appointed BLACKPINK’s Lisa as brand ambassador to attract youth
- 25% operating margins but slow growth
Unlike Gucci, YSL avoids risks. It struggles to modernize its heritage image for younger buyers.
Insurgent House Moncler Disrupts Puffer Jackets
The youthful Moncler resembled YSL with 15% growth annually to €1.6 billion.
- 250 stores worldwide
- Known for shiny $1500 down jackets
- Spends just 6% of revenue on marketing
- 28% operating margins
This smaller brand replicated the measured approach of fashion’s old guard.
The Art of Exclusivity by House Hermès
Hermès plays by its own rules. This ultra-exclusive house surpasses Gucci in cachet and profits.
- Grew revenue from €5.5 billion to €6.8 billion in 3 years
- 300 stores globally
- Luxury leather bags cost tens of thousands
- Never sold online – only available privately to elite clients
- Bags increase in resale value over time
- Manual production in France with 5600 craftsmen
- Low marketing budget, high loyalty
No other brand can replicate Hermès’s mastery of scarceness and handcrafted luxury. They are the true emperor of fashion’s empire.
Battle Tactics of the High Fashion Houses
Luxury brands rely on different strategies in their constant battles for supremacy. Here are the signature moves of fashion’s top houses:
House Gucci
- Massive product selection from sneakers to furniture
- Aggressive advertising across all media
- Constant new product drops to capitalize on trends
- High-profile celebrity partnerships
- Inclusive distribution across own stores, department stores and outlets
House Louis Vuitton
- Iconic, traditional leather goods with emphasis on travel
- High prices but lower than top-tier exclusives
- Global but selective distribution focused on own stores
- Occasional capsule collections with streetwear/hypebeast appeal
- Influential celebrity endorsers and ambassadors
House Chanel
- Ultra-luxurious positioning and pricing
- Consistent elegance and heritage polish
- Selective distribution through 100+ global boutiques
- Avoidance of seasonal trends and fads
- Mystique and exclusivity maintained through low product availability
House Dior
- Merchandise centered on feminine couture and beauty
- Romantic, dreamlike marketing imagery
- Focus on VIP red carpet and celebrity connections
- High-concept fashion shows and events
- Emphasis on limited edition “it” bags
House Balenciaga
- Bold, futuristic designer pieces
- Anti-establishment, convention-defying ethos
- Outrageous shoes that spark conversation
- Mesh and leather materials in dark colors
- Must-have status among hip hop stars and hypebeasts
- Rare “drops” sell out instantly, creating frenzy
The endless one-upmanship between fashion houses is creatively exhausting but thrilling. Their distinctive styles and battle tactics enthrall consumers worldwide.
Inside the Exclusive World of High Fashion Marketing
For luxury brands, marketing drives desirability. They deploy various tactics to spark consumer demand:
Mesmerizing Fashion Shows
- Grand productions with elaborate themes, music, sets
- Feature next season’s designs worn by top models
- More spectacle than selling event
- Build anticipation and set trends
- Dior once brought a forest, Chanel a rocket ship
Glossy Print Campaigns
- Evocative photography expressing brand aesthetic
- Showcase products in aspirational lifestyles
- Convey emotional fantasies and yearnings
- Often feature celebrities as brand ambassadors
- Run in high-end magazines like Vogue and Vanity Fair
Influencer Marketing
- Gift products to top influencers, who style them on Instagram
- Target influencers with strong personal brands and aesthetics
- Achieve authentic, favorable placement among taste leaders
- Micro-influencers may have more niche appeal
- Leverage influencer followings for awareness and buzz
Product Placement
- Dress A-list celebrities for red carpets and events
- Have products featured in movies, TV shows and music videos
- Pursue organic exposure versus paid sponsorships
- Adds realism when characters wear real designer brands
- Especially impactful when placed in youth-oriented media
Simple Yet Striking Store Design
- Flagship stores in prime luxurious locations
- Sleek, elegant designs with ample open space
- Theatrical lighting and finishing touches
- Merchandise displayed like works of art
- Convey brand mystique through unique architecture
Luxury marketing is about sustaining an aura of prestige. Clever campaigns make brands objects of desire around the world.
The Anatomy of a Luxury Fashion Conglomerate
Beneath the glamour, luxury groups are sprawling business empires. LVMH and Kering comprise 100+ brands across 5 sectors:
Fashion & Leather Goods
The biggest revenue and profits come from luxury clothing, bags, luggage and accessories. Flagship brands include Louis Vuitton, Dior, Gucci, YSL, and Balenciaga.
Wines & Spirits
Prestige wines and liquors like Dom Pérignon, Veuve Clicquot, Glenmorangie, Belvedere and Chandon. High margins but smaller business.
Perfumes & Cosmetics
Mass market fragrances and makeup from legacy brands like Christian Dior, Guerlain, YSL and Marc Jacobs.
Watches & Jewelry
Luxury timepieces and jewelry lines such as TAG Heuer, Bulgari, Chaumet and Fred. Accessible entry points to groups’ ecosystems.
Hospitality
Global chain of hotels, resorts, restaurants and bars. Provides branding opportunities and experiences.
Diversification reduces reliance on any one sector. But fashion and leather drives 50-60% of sales and over 75% of profits.
How LVMH Stays on Top
LVMH dominates through:
- Size – 4X bigger than Kering in revenue
- Broad brand portfolio spanning every sector
- Focus on long term prestige over short term gains
- Loyalty programs, CRM and clienteling
- Centralized supply chain control
The world’s largest luxury group resembles a massive yet nimble army. It efficiently integrates and operates an empire of elite brands.
The Secrets of Luxury Marketing to Affluent Buyers
Selling high fashion requires understanding the wealthy mindset. Luxury brands tailor their tactics to appeal to rich consumers:
Convey Heritage and Craftsmanship
- Share brand histories and founder stories
- Emphasize artisanal materials and handmade details
- Remind they have served royalty clients for centuries
Create Scarcity and Exclusivity
- Limited production quantities
- Private experiences available only on invitation
- Special products reserved for top spenders
- Build VIP lists and first access for elite clients
Avoid Overt Selling
- Lure people to explore the brand on their own terms
- Interactions should feel organic not salesy
- Build mystery and let consumers uncover
- Offer personalized advice and guidance
Focus On Clienteling
- Assign sales associates to nurture relationships
- Provide individualized experiences in-store
- Surprise-and-delight with gifts and perks
- Make shopping effortless for top customers
Inspire Aspirations
- Show beautiful people living enviable lifestyles
- Align with exciting contemporary culture
- Represent wealth, glamour, and the in-crowd
- Idealize the person buyers wish to become
Selling luxury is subtle. It’s about flattering egos and making people feel part of an elite inner circle. Master these nuances, and clients will pay premiums forever.
Scandals That Rocked the Fashion World
Behind the glitz, fashion houses face controversies that tarnish their images:
Gucci’s Blackface Scandal
- 2019: Gucci product resembles blackface imagery
- Sparks outrage and accusations of racism
- Company apologizes and implements diversity initiatives
Burberry’s Burning Merchandise
- 2018: Burberry burned £28M of clothes to stop discounting brand
- Wastefulness criticized as unethical and unsustainable
- Changed practices to emphasize reducing waste
Dolce & Gabbana’s China Ad Debacle
- 2018: D&G ads show Chinese model struggling to eat Italian food with chopsticks
- Provokes boycotts and banned from Chinese sites
- Huge sales and branding implications in this market
Chanel’s Executive Transition Drama
- 2022: Unexpected changes in leadership at iconic house
- Rumors of internal power struggles and politics
- First change in creative director in 36 years
Sexual Harassment At Victoria’s Secret
- 2020: Report revealed sexist and abusive company culture
- Supermodel angels promoted unattainable beauty standards
- Parent company L Brands struggled to change culture
YSL and Gucci Executive Convicted on Tax Charges
- 2019: Top executives convicted of tax evasion in Italy
- Highlights ubiquity of tax avoidance in luxury business
Luxury brands must carefully guard their images. Corporate dramas risk tarnishing perception of their prestige and exclusivity. Scandals like these show how fragile fashion empires really are. With one inflammatory misstep, billions in brand equity can go up in flames.
The Rise of Athleisure Brands Like Lululemon
A new category of luxury brands has emerged selling “athleisure” – stylish, comfortable clothing for exercise and everyday wear. The top disruptor is Lululemon.
How Lululemon Found Success
- Pioneered sleek, technical yoga and workout apparel
- Emphasized community and in-store experiences
- Created aspirational lifestyle brand beyond products
- Expanded into casual apparel, shoes, self-care, and more
Lululemon’s Competitive Moat
- Innovative fabrics and fits unmatched by rivals
- Fiercely loyal customer community
- Brand halo inspires consistently high prices
- Vertical operation from design to retail
Growing The High-End Pie
- 2021 revenue hit $6.3 billion, up from $3.3 billion in 2018
- Opens posh new stores regularly
- Stock has nearly tripled since 2018
- Profit margins double that of Nike and Adidas
Future Opportunities
- Further expansion into menswear, shoes, accessories
- Build digital community features and membership model
- More brick-and-mortar stores globally
- Brand partnerships and high-profile collaborations
Lululemon assembled the perfect formula appealing to health-conscious, affluent consumers seeking luxury in casualwear. Their success shows the enduring potential of aspirational lifestyle brands even in competitive retail environments.
The Rise and Fall of Forever 21
Once a fast fashion leader, Forever 21 filed for bankruptcy in 2019 from mismanagement and market changes.
Forever 21’s Formula
- Opened hundreds of stores rapidly
- Made own brands copying high-end styles
- Ultra-low prices on tons of trendy merchandise
- Speedy supply chain and inventory turnover
Cracks Emerge in Model
- Global overexpansion diluted brand
- Shifted away from core focus on teens
- Cluttered stores and declining quality
- Didn’t adapt to ecommerce disruption
Ultimately Outpaced by Rivals
- Zara and H&M offered better fast fashion value
- New brands captured youth attention on social media
- Unable to pay $471M in owed rent at filing
What Led to Bankruptcy
- Founders resistant to change from original approach
- Didn’t comprehend generational tastes
- Dismissed need for strong online business
- Took on unsustainable debt
Forever 21 expanded recklessly without evolving. New digitally savvy entrants did fast fashion better. The brand lost relevance by clinging stubbornly to what once made it big.
How Supreme Established Cult Streetwear Credibility
Skater brand Supreme grew into a multi-billion dollar streetwear icon through careful brand moves:
Product Scarcity
- “Drop” new products weekly in limited quantities
- Drive hype through constant sell-outs
- Makes customers feel part of an inner circle
Anti-Establishment Ethos
- Edgy counter-culture vibe since founding in 1994
- Do unexpected stunts like selling bricks
- Shroud brand in secrecy to build mystique
Avoid Overt Commercialization
- Selective about brand collaborations
- No ecommerce – online sales dilute prestige
- Minimal advertising and press engagement
Ruthless Aftermarket Control
- Refuse to make enough product to meet demand
- Ban buyers who flip products for profit
- Forge tight relationships with resellers
Cult Following
- Celebrity and influencer devotees
- Community driven by status and clout
- Fans proudly display logo and stand in lines
By deliberately leaving money on the table and marching to its own beat, Supreme created irrational customer loyalty rarely seen in fashion.
How Some Luxury Brands Became More Accessible
To tap new markets, iconic houses modernized with entry level merchandise:
Louis Vuitton
- Sofia Coppola designed playful, youthful handbags
- “LV Trainer” sneaker rode athleisure trend
- Opened smaller stores in less exclusive locales
- Capsule collections with Supreme and artists
Gucci
- Hip hop embrace drove popularity with youth
- Logo belts, loafers and handbags at lower price points
- Creative director Alessandro Michele boosted cool factor
- Vibrant vintage-inspired clothing resonated digitally
Tiffany & Co.
- “Return to Tiffany” heart tag bracelet – icon for millennials
- Paloma Picasso olive leaf became top seller
- Ramped up celebrity and influencer marketing
- Collaborations with streetwear brands
Rolex
- Introduced colorful Submariner, Daytona and GMT watches
- Strategic product placement in rap music and pop culture
- Pushed vintage Rolex models to ride booming resale demand
While expanding access, these brands ensured lower priced products enhanced their auras versus diluted them. Affordable luxury is a careful balancing act.