Bullish Note Sounded At Luxury Conference

Bernard Arnault, at least, is bullish about America. Worries over the holiday shopping season, spiraling gas prices and the mortgage credit crisis aside,...

MOSCOW — Bernard Arnault, at least, is bullish about America.

This story first appeared in the November 29, 2007 issue of WWD.  Subscribe Today.

Worries over the holiday shopping season, spiraling gas prices and the mortgage credit crisis aside, the LVMH Moët Hennessy Louis Vuitton chairman believes the U.S. still represents a golden opportunity for luxury goods brands.

“The United States has massive untapped potential,” Arnault said Wednesday at the International Herald Tribune’s “Supreme Luxury” conference here. “It represents only 16 percent of global luxury sales, but 28 percent of global [gross domestic product].”

Arnault said that, despite the economic downturn in the U.S. spurred by the subprime mortgage crisis, global spending on luxury goods worldwide is expected to double in the next five years, to 300 billion euros, or $447 billion at current exchange. Russia, India and China will account for one-third of all luxury goods sales within 10 years, he said.

His optimism was echoed by other executives at the conference. “The growth of high-net-worth individuals will grow despite any economic problems,” said John Demsey, group president of the Estée Lauder Cos.

But amid talk of rapid growth in developing nations and the U.S., Tom Ford warned attendees that overwhelming consumers with new stores and products could fatally damage the luxury business.

“Luxury has gone from hard to find to hard to miss,” he suggested. “To be blunt, we make too much stuff.”

Ford later told WWD that, because firms now produce goods on such a vast scale, their quality has been compromised. “I don’t think many luxury goods companies are luxury goods companies,” he said.

This city of conspicuous consumption was an obvious choice for host: While a political clampdown is worrying Western governments, Russia’s oil-fueled economy is booming. The country’s flamboyant elite as well as a growing middle class are spending ever more money on luxury goods. Along with China, which is also experiencing rapid growth, Russia was singled out by most speakers as a crucial market for their companies.

The shift in fashion’s purchasing base, from West to East, was underlined by the conference’s guest list: Many participants were from China and the Middle East.

The speakers on stage toward the end of the day, dealing in less weighty matters, seemed to arouse most interest among the audience. After showing a video of catwalk and red-carpet shots set to thumping dance music, Donatella Versace told how she cultivated interest in her brand among celebrities (for more on her visit, see related story).

And a panel of Russians were breathy and excited as they discussed the evolution of fashion sense here.

“We like to be sexy, we like to be beautiful and we take more time and effort to do this,” said Alla Verber, the vice president of Mercury Distribution, which distributes luxury clothes to Russian stores. “Everything they have in London, Milan and Paris we have right now in Moscow.”

The conference continues today with talks on how brands can succeed in Russia.

While sweatshops and global warming were only mentioned in passing, one topic likely to be added to the program next year is ethical business practices.

“Green issues are actually ‘in’ in fashion, everyone’s talking about them,” model Natalia Vodianova said. “I think big brands should take notice.”

Vodianova had one particular suggestion to cut down on waste: “Don’t be afraid to wear a dress again. Come on. You can always change a look around.”