The Dior disaster
By now, everyone has read the one-month-old story about Dior and Giorgio Armani being investigated for their supply chain issues (subcontracting to businesses with questionable working conditions).
While the markup of a bag that costs $56 to make and be sold for $2000 is shocking to many, going by the comments, it is safe to assume that y’all know what it takes to run a business, so we will leave the markup debate to the fashion pundits and clickbait media outlets. Instead, let me walk you through a few ramifications that this might entail for luxury fashion and certain customer segments.
Top of mind - communication dichotomy
Dior has always been an incredibly strong brand, arguably the second most important one in the LVMH portfolio. It has also been going from strength to strength under its creative directors Slimane, Simmons, Churri and Jones. It has now effectively created a perception problem for itself. Luxury lives off the price elasticity it gains from strong positioning statements that the public is bombarded with thanks to sizeable media budgets. The problem now is that whatever messaging Dior is trying to put out will, for the time being, be met with the memory of the 35.7x multiplier. The illusion of luxury is now being confronted with the reality of being, relative to its MSRP cheaply, mass-produced goods. I will note that Dior isn’t on its back foot because neither craftsmanship nor leather goods were ever part of the brand’s essence (brand pillars - insert whatever terminology you are familiar with to describe the core associations a brand is meant to evoke with customers).
Current and future customers
This will inevitably turn customers away; how many and how big their customer lifetime value is/would be, will be evident as soon as the next Dior fashion campaign launches unless the brand chooses to wait it out. Especially aspirational shoppers who equate luxury with quality have found themselves confronted with a new reality - even if Dior bags never suffered from a lack of quality, there is an implied association between price and quality. Which, in our collective detachment from supply chains, is something that brands across all categories love to play with. Mature customers, on the other hand, will likely not give a flying flamingo about this situation because they either know or do not care about the COGS of their Dior handbags.
Current value
Logo-driven brands are in a constant balancing act of offering customers goods they can brag about while selling just enough to not oversaturate the market. While I have not (yet) seen a significant price drop of Dior goods in the secondary market, a lot of what the resale price implies is perceived current and future value - which was never Dior’s strength to begin with. Its residual value was mostly driven by fairly high MSRPs and the collective desire and hope of sellers that people would at least pay for the implied quality that a Made in Italy/France product for $2000 must have, and thus agreeing to the unspoken social contract that limits depreciation. However, seeing someone wearing a Dior bag will reflect negatively on the owner (even if this margin markup applies to many brands) and decrease its visibility across the Delta lounges, SoHo Houses, and Lexus dealerships.
While it is not impossible for Dior’s brand to suffer mid-term damage from this, I do not see this news cycle having a lasting impact on the maison. It will run the course of the VW diesel gate, causing a lot of short-term reputational damage, and we will likely see at least one follow-up piece of journalism that digs into either Dior or the leather goods supply chain. Dior is, overall, too big to fail because of an incident in one product category. The ready-to-wear apparel is still reasonably well made, Dior Beauty ($7.7 billion in revenues for FY 2022) is a behemoth in the luxury beauty space. So there will be, at most, a long-term association with their leather bags, like VW diesel engines, but consumers will return to buying them.
De Grimm
De Grimm is a family owned and operated leather goods brand from Bordeaux. Founded in 1945, De Grimm encapsulates the essence of Bordeaux’s art of living, passed down from mother to daughter like a family jewel. Prices range from €55 for cardholders, €230-€850 for bags and €99 for belts. Meaning, that De Grimm is very much an accessible premiu…
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Jewellery
Brother ewww, what’s that ? Let’s just say that there is sooo much more to jewelry than Bulgari, Cartier, and VCA. All of these are storied brands that produce beautiful pieces, but their most recognizable pieces like Cartier’s LOVE de Cartier or Juste un Clou, Bulgari’s B.zero1 and Diva Dream ranges, or Van Cleef’s inescapable Alhambra collection. So w…
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Valstar Milano
Valstar Milano, founded in 1911, has a long history, including being the first Italian company to produce water-repellent raincoats. Over the years, the brand has diversified into one with global appeal, maintaining a highly selective approach to quality raw materials and meticulous craftsmanship.
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Tagged elsewhere
Why would editors turn down a story about luxury handbags not being investment pieces ? Because it could potentially (albeit marginally) hurt their advertisers’ bottom line
Raspini - women’s boutique in Florence
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Should you find yourself in Florence, may I suggest you swing by Raspini ? Not only does the boutique offer highly curated
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