Deluxe: How Luxury Lost Its Luster (2 page)

And there luxury stayed, a domain of the wealthy and the famous that the hoi polloi dared not enter, until the Youthquake of the
1960
s. The political revolutions throughout the Western world at that time pulled down social barriers, including those that separated the rich from the rest. Luxury went out of fashion, and it stayed out of fashion until a new and financially powerful demographic—the unmarried female executive—emerged in the
1980
s. The American meritocracy came into full bloom. Anyone and everyone could move up the economic and social ladder and indulge in the trappings of luxury that came with this newfound success. Disposable income has risen significantly in industrialized nations in the last thirty years. Both men and women in have put off getting married until later in life, freeing them to spend more on themselves. The average consumer is also far more educated and well traveled than a generation ago and has developed a taste for the finer things in life.

Corporate tycoons and financiers saw the potential. They bought—or took over—luxury companies from elderly founders or incompetent heirs, turned the houses into brands, and homogenized everything: the stores, the uniforms, the products, even the coffee cups in the meetings. Then they turned their sights on a new target audience: the middle market, that broad socioeconomic demographic that includes everyone from teachers and sales executives to high-tech entrepreneurs, McMansion suburbanites, the ghetto fabulous, even the criminally wealthy. The idea, luxury executives explained, was to “democratize” luxury, to make luxury “accessible.” It all sounded so noble. Heck, it sounded almost communist. But it wasn’t. It was as capitalist as could be: the goal, plain and simple, was to make as much money as heavenly possible.

To realize this “democratization,” the tycoons launched a two-pronged attack. First they hyped their brands mercilessly. They trumpeted the brand’s historical legacy and the tradition of handcraftsmanship to give the products an air of luxury legitimacy. They encouraged their designers to stage extravagant or provocative fashion shows—at a million dollars a pop—to drum up controversy and make headlines. They spent billions of dollars on deliberately shocking advertising campaigns—Dior’s grease-smudged lesbian ads to sell purses, Yves Saint Laurent’s full-frontal male nudity shot to sell perfume—that made their brands as recognizable and common as Nike and Ford. They dressed celebrities, who in return told every reporter lining the red carpet which company had provided their gown, jewels, handbag, tuxedo, or shoes. They began to sponsor high-profile sporting and entertainment events such as Louis Vuitton at the America’s Cup and Chopard at the Cannes Film Festival. The message was clear: buy our brand and you, too, will live a luxury life.

Then the tycoons made their products more available, economically and physically. They introduced fashionable lower-priced accessories that most anyone could afford. They expanded their retail reach from the original polished-oak-paneled family shop and a few overseas franchises to a vast global network, rolling out thousands of stores that are as ubiquitous and approachable as Benetton or Gap. They opened outlets to sell leftovers at bargain prices, launched e-commerce sites on the Internet, and ramped up their share of duty-free retailing. In
2005
, travelers purchased $
9.7
billion worth of luxury goods, accounting for one-third of all global travel retail sales. And travel experts say it’s only going to increase: according to the International Civil Aviation Organization, annual global air traffic is expected to reach
2.8
billion passengers by
2015
, up from
2.1
billion today.

Luxury companies funded the expansion of their reach by listing themselves on the world’s stock exchanges. Going public brings many advantages to a luxury company: it raises capital, elevates the brand’s status, creates management incentives such as stock options, and makes the company more transparent, thus attracting a higher caliber of executive management. But it also makes the company beholden to stockholders who demand increases in profits
every three months.
“Going public does force you to change the way you do business,” former Gucci designer Tom Ford told me. “It forces you to be aware of how you are spending and where it’s going, to make some short-term decisions because that’s what shareholders respond to, and to juggle the long-term benefits with the short-term.” To meet those profit forecasts, the luxury companies have cut corners. Some use inferior materials, and many have quietly outsourced production to developing nations. Most have replaced individual handcraftsmanship with assembly-line production, much of it done on machines. Simultaneously, most luxury companies have raised their brands’ prices exponentially, and many justify the move by falsely claiming that their goods are made in Western Europe, where labor is expensive. To further pump up their numbers, luxury companies have introduced cheaply made, lower-priced accessories—such as logo-covered T-shirts, nylon toiletry cases, and denim handbags—and expanded their range of perfume and cosmetics, all of which bring in substantial profits when sold in great volume. The average consumer certainly can’t afford a $
200
,
000
made-to-order couture gown, but she can drop $
25
on a tube of lipstick or $
65
on a bottle of eau de parfum spray to have a piece of the luxury dream.

All this hyped-up marketing of dreams has made luxury companies wildly successful and their shareholders extremely happy. In their best year—
1999
—luxury indexes rose a remarkable
144
percent, according to the investment banking firm Bear Stearns. And analysts predict that luxury sales will soon surpass those record pre–September
11
,
2001
, levels. There have never been so many wealthy in the world. In
2005
, there were
8.3
million millionaires—an increase of
7.3
percent over
2004
—who possessed $
30
.
8
trillion in assets, according to the
2006
“World Wealth Report” (published annually by Merrill Lynch and Capgemini). The Swiss bank UBS’s wealth-management division had an influx of $
76
billion in new money in
2005
, an increase of
57
percent in one year. NetJets, the private jet-share company, saw a business increase of
1
,
000
percent from
2001
to
2006
. The private security firm Kroll reported that its business from clients with at least $
500
million in assets increased by
67
percent in just two years. And the “World Wealth Report” added that there has been a rise in “middle market millionaires” with assets of $
5
million to $
30
million.

But for some on the wrong side of this growth, those dreams are nightmares. Luxury brands are among the most counterfeited products today—the World Customs Organization states that the fashion industry loses up to $
9.7
billion (€
7.5
billion) per year to counterfeiting—and most of the counterfeiters’ profits fund illicit activities such as drug trafficking, human trafficking, and terrorism. Luxury incites other illegal activities, too. Japanese girls work as prostitutes in order to buy luxury brand handbags. Chinese “hostesses” accept shopping visits with their clients at luxury brand stores, which stay open until midnight, as payment for services rendered. The next morning, the hostess returns the purchase for cash, less a
10
percent “transaction fee,” thus inflating luxury brands’ sales figures in China and washing away any illegal cash transactions between the woman and her client. A true story, told to me over a summer lunch on the French Riviera in
2004
: A rich, hip New York banker met a pretty Russian girl in the bar of the Hôtel Byblos in Saint-Tropez late one night and took her home with him. The next morning, she told him pointedly: “I could really use a new pair of Gucci shoes.” He understood immediately that she was a working girl and took out his wallet. “No,” she said, “Gucci shoes.” And to the store they went.

The tycoons’ marketing scheme has worked. Today, luxury is indeed democratic: it’s available to anyone, anywhere, at any price point. In
2004
, Japanese consumers accounted for
41
percent of luxury sales, Americans
17
percent, and Europeans
16
percent. Expansion continues in India, Russia, Dubai, and of course China, luxury’s new El Dorado. While parts of China, like Xi’an, are still dusty and blighted, a new big-spending class is emerging at warp speed. When I visited the country in the spring of
2004
, luxury companies considered China to be an immature market and an investment for the future. Eighteen months later, China accounted for
12
percent of all luxury sales—and this figure was expected to grow exponentially. Luxury companies are opening stores not only in Beijing and Shanghai but also in rapidly growing second-and third-tier cities such as Hangzhou, Chongqing, and even Xi’an. By
2011
, China is expected to be the world’s most important luxury market.

And luxury’s barons have reaped the wealth. Bernard Arnault, chairman and CEO of the Paris-based luxury-brand group LVMH Moët Hennessy Louis Vuitton, is the most successful of them all. In
2006
,
Forbes
named him the seventh richest man in the world, with a net worth of more than $
21
billion. His fellow LVMH shareholders aren’t doing badly either. When Arnault took control of LVMH in
1990
, it had sales of about $
3.65
billion (about €
2.8
billion) with net profit of $
621
million (about €
480
million). In
2005
, it recorded $
17.32
billion (€
13.91
billion) in sales and net profit of $
1.79
billion, or €
1.44
billion. “What I like is the idea of transforming creativity into profitability,” Arnault once said. “It’s what I like the most.”

The luxury industry has changed the way people dress. It has realigned our economic class system. It has changed the way we interact. It has become part of our social fabric. To achieve this, it has sacrificed its integrity, undermined its products, tarnished its history, and hoodwinked its consumers. In order to make luxury “accessible,” tycoons have stripped away all that has made it special.

Luxury has lost its luster.

M
ARC
J
ACOBS
is the most influential creative voice in luxury fashion today. As creative director of Louis Vuitton, the world’s largest luxury goods company, Jacobs oversees the studio that in the last decade has produced sumptuous and witty versions of the classic Vuitton monogram handbag—like the denim jacquard one trimmed in chinchilla—that have sold by the millions. Yet Jacobs sees what he does at Vuitton as the antithesis of luxury today. “The way I define luxury isn’t by fabric or fiber or the amount of gold bits hanging from it,” Jacobs says, sitting in his Paris office, sucking on his umpteenth cigarette of the day as his bull terrier Alfred gnaws on a soup bone. “That’s an old definition. For me, luxury is about pleasing yourself, not dressing for other people.”

The contradiction between personal indulgence and conspicuous consumption is the crux of the luxury business today: the convergence of its history with its current reality. For most people, Louis Vuitton represents true luxury. The suitcase or handbag covered with its intertwining LV logo implies that its carrier appreciates the fine-quality craftsmanship, has the money to afford it, and travels in the same circles as other Louis Vuitton customers—in first class. Long ago, that assumption was true. Louis Vuitton supplied kings and queens, high-society matrons, and business titans. It was the luggage of the rich and famous. Today, however, millions of people from a wide range of economic backgrounds own Louis Vuitton products, ranging from a $
120
money clip to a trunklike humidor that holds a thousand cigars. Louis Vuitton is the greatest example of what executives in the fashion business call democratic luxury: it’s big, it’s broad-reaching, and it sells wildly expensive stuff that nobody really needs. “When you look at [Louis Vuitton], you see it is mass-produced luxury,” Jacobs tells me. “Vuitton is a status symbol. It’s not about hiding the logo. It’s about being a bit of a show-off.”

Louis Vuitton is the cornerstone of a publicly traded luxury conglomerate called LVMH Moët Hennessy Louis Vuitton—or LVMH for short—run by French tycoon Bernard Arnault. In
2005
, it had more than fifty brands—including Moët & Chandon champagne, Givenchy couture, and Tag Heuer watches—fifty-nine thousand employees and seventeen hundred stores, and did $
18.1
billion (€
14
billion) in sales and made $
3.5
billion (€
2.7
billion) in profits. Its flagship is Louis Vuitton, which does an estimated $
3.72
billion in sales annually, accounting for approximately one-quarter of the group’s total business. Vuitton is the McDonald’s of the luxury industry: it’s far and away the leader, brags of millions sold, has stores at all the top tourist sites—usually steps away from a McD’s—and has a logo as recognizable as the Golden Arches. “Luxury is crossing all age, racial, geographic and economic brackets,” Daniel Piette, an LVMH executive, told
Forbes
in
1997
. “We’ve broadened the scope far beyond the wealthy segments.”

The heart of Louis Vuitton is the trunk. Back in the mid-nineteenth century, when Louis Vuitton started his business, trunks were an integral part of travel, like suitcases on wheels are today. A traveler left for months at a time, with as many as fifty trunks in tow filled with everything from petticoats to porcelain. Today Louis Vuitton makes about five hundred trunks annually. Rarely are trunks used for travel anymore. If so—and it’s usually for nostalgic reasons—they’re often sent ahead by mail or boat, or loaded on private jets. More often Louis Vuitton trunks, old or new, are displayed in homes like art or used as shelves, coffee tables, or bars.

Louis Vuitton trunks are still made more or less the same way they were
150
years ago, mostly at the Louis Vuitton compound in the working-class Paris suburb of Asnières-sur-Seine. Entering the Vuitton compound is like stepping from drab, monochromatic Kansas into the rich Technicolor world of Oz. Across a thick green lawn framed by strong old trees and well-tended rose beds sits a simple two-story white stucco country house with gingerbread trim and a silvery zinc roof. Louis Vuitton, a hardworking artisan of humble roots, built the place in
1859
to move his family out of filthy, crowded Paris. Out back is a century-old, two-story, L-shaped workshop where
220
artisans build hundreds of trunks and sew thousands of handbags every year. It is one of fourteen official sites—eleven in France, two in Spain, and one in San Dimas, California—where Vuitton leather goods are produced.

The trunk’s structure is built out of okoumé, a hard, lightweight wood from Africa, by craftsmen in the big lumber shop on the ground floor. For the hinge, Vuitton craftsmen glue a piece of sturdy canvas to the inside, and another on the outside. Louis Vuitton invented this method in
1854
to replace the bulky metal brackets of the period. The canvas hinge doesn’t break, opens and closes easily, and creates a flat surface on the back of the trunk. The trunk’s exterior material—usually Vuitton’s waterproofed monogram or Damier check canvas—is glued onto the wood box and hinge. The corner covers are made of brass or of leather shaped by hot and cold pressure in a mold. The edge trim, known as
lozine,
is made of many layers of paper and cloth pressed together and dipped in a zinc solution. Upstairs, workers nail on the poplar belts around the middle, the
lozine
trim on the edges, the corner covers, and the hardware. The banging is so loud that most of the eight workers in the “hammering department” wear earplugs. The lining, made of a pearl gray cotton canvas called Vuittonitte, or a synthetic suede called Alcantara, is glued inside; khaki woven cotton straps that read “Louis Vuitton” are attached to hold items in place. The trunk is then cleaned up, inspected, and sent off to be packaged and shipped.

Thousands of handbags are made at the Asnières compound each year as well. The steamer bag—originally designed in
1901
as a laundry sack for steamship travel and today one of the Vuitton’s most popular items—is made by hand. Steamer bags, handbags made of exotic leathers such as crocodile and ostrich, and special-order items are all made by one artisan rather than on the assembly line. Vuitton gets about
450
to
500
special orders each year. Some are simply new editions of an existing model, like the trunk bed first designed for French explorer Pierre Savorgnan de Brazza in
1868
for his African travels through the Congo; others are a reworking of something that already exists, like a jewelry box covered in an exotic skin instead of the monogram toile, or something designed to the customer’s specs. When I was in Asnières, one artisan was finishing up a tennis bag in Damier canvas that holds two rackets; it took two weeks to produce and would be the only one in the world.

The rest of Vuitton’s production is assembly-line work, most of it done on machines. In a big sunlit room on the second floor, a dozen seamstresses were running up hundreds of LV monogram denim Pleaty handbags on their machines. These bags would sell for $
1,150
apiece and be so popular they’d be back-ordered within weeks. “High profitability comes…in the atelier—the factory,” Bernard Arnault once explained. “Production is organized in such a way that we have unbelievably high productivity. The atelier is a place of amazing discipline and rigor. Every single motion, every step of every process, is carefully planned with the most modern and complete engineering technology. It’s not unlike how cars are made in the most modern factories. We analyze how to make each part of the product, where to buy each component, where to find the best leather at the best price, what treatment it should receive. A single purse can have up to
1
,
000
manufacturing tasks, and we plan each and every one.”

Today, there are three Vuitton family members employed by the Louis Vuitton company: Patrick-Louis, a fifth-generation descendent of the founder, who oversees special orders and serves as a house ambassador; his youngest son, Benoit-Louis, born in
1977
, who is watch special orders manager at the headquarters in Paris; and Pierre-Louis, his oldest son, who works as a craftsman in Asnières. I ran into Pierre-Louis as I visited the workshop in the spring of
2006
. Pierre’s a kind-looking fellow, rather pale, with hazel eyes, closely clipped dark hair, and protruding ears. He was dressed in a white lab coat over a checked shirt and jeans. On the pocket of his coat was an LV logo embroidered in brown thread. He was walking some bits of canvas for jewelry boxes from one station to another. Pierre had joined the company about a year and a half earlier, after a short stint in computers. He had visited the Vuitton factories in the provinces and was so moved by the craftsmanship that he asked Vuitton owner Bernard Arnault for a job. Arnault said, “Of course.”

“I love this company,” Pierre told me. “It’s in my veins.”

And then he got back to work.

L
UXURY AS WE KNOW IT
today is rooted in old Europe’s royal courts—primarily those of France, which set the standards for lavish living. In the seventeenth century, French king Henri IV’s second wife, Marie de Medicis, wore for the baptism of one of her children a gown embroidered with thirty-two thousand pearls and three thousand diamonds. Louis XIV dressed in satin suits with velvet sashes and frilly blouses, high-heeled shoes or boots, and wigs of flowing curls topped with ostrich-plumed chapeaux. To maintain control over his courtiers, he dictated to them what they could wear, when to wear it, and how to wear it. He declared what height necklines should be, and the length of gown trains. To please the king, the ladies of the court wore wigs so tall that their servants stood on ladders to assemble them.

Madame de Pompadour, the mistress of Louis XV, personally encouraged and supported the luxury artisans and helped found the Sèvres porcelain factory to provide the Château de Versailles with its royal services. Louis XVI’s wife, Marie-Antoinette, overran her annual clothing budget of $
3.6
million by buying gowns encrusted with sapphires, diamonds, silver, and gold—but according to observers, it was money well spent. She was “an object too sublime and beautiful for my dull pen to describe,” wrote John Adams, a U.S. diplomatic envoy to France in the late
1770
s and later the second American president. “Her dress was everything that art and wealth could make it.” Napoleon’s wife, the empress Josephine, spent half of the $
15
million France earned selling the five-hundred-million-acre Louisiana territory to the United States in
1803
on clothes in ten years. “French fashions must be France’s answers to Spain’s gold mines in Peru,” declared Louis XIV’s finance minister Jean-Baptiste Colbert, for whom today the Committee Colbert, the French luxury brand trade association, is named.

It was in the world of nineteenth-century French aristocracy that Louis Vuitton was able to rise from nothing to the world’s most famous luxury travel brand. Louis Vuitton himself was born in
1821
to a family of farmers and millers in the Jura, a mountainous region at the foot of the Alps in eastern France. At the age of thirteen, Vuitton set out by foot for Paris, then the city of opportunity. The
292
-mile trek took two years; along the way, Louis earned his keep by working as a stable boy or kitchen hand. When he finally arrived, Paris was a booming town of one million, a city of opulent palaces and horrific slums. “Here you find at the same time the greatest luxury and the greatest filth, the greatest virtue and the greatest vice,” the pianist Frédéric Chopin wrote to a friend, according to Paul-Gérard Pasols in his book
Louis Vuitton: The Birth of Modern Luxury.

Vuitton became an apprentice to a master trunk maker named Monsieur Maréchal on the corner of the rue Saint-Honoré and the rue du
29
Juillet—the site today of the trendy fashion boutique Colette. In
1854
, Vuitton quit, opened his own business on the rue Neuves-des-Capucines (now known simply as the rue des Capucines), and set about reworking the basic design of the trunk. He changed the traditional domed lid to a flat top (to allow for easy stacking on the backs of coaches) and replaced the leather, which turned moldy and cracked, with lightweight poplar covered with a waterproof dove gray cotton canvas he developed called Trianon gray, after the Grand Trianon Palace at Versailles.

Trunk makers back then not only built trunks but also packed and unpacked them. Throughout the mid-
1800
s, women wore voluminous gowns with layers of petticoats known as crinolines, made of wool and horsehair, under their skirts or, later, with bustles. The master of such creations was a young Englishman named Charles Frederick Worth, an acquaintance of Louis Vuitton’s who had a dress shop in Paris on the rue de la Paix. Today Worth is known as the father of haute couture. Rather than producing dresses to order like his confreres, Worth designed seasonal collections from which his clients could choose. He was one of the first to stage fashion shows to present his collections, and the first to put a signature label on his clothes. He became luxury fashion’s first true arbiter of style: he dictated what the fashion would be, and the public followed. “Women will stoop to any depths to be dressed by him,” wrote historian Hippolyte Taine at the time. “This arid, nervous, dwarfish creature receives them nonchalantly, stretched out on a couch, a cigar between his lips. He growls, ‘Walk! Turn! Good! Come back in a week and I will have an appropriate toilette for you!’ It is he, not they, who chooses. They are only too content to be dominated by him—and even so they need references.” Worth’s dresses required some fifteen yards of fabric—such as floss silk, painted chiffon, or lamé gauze—and could take three to four hundred hours to embroider. Buttons were embroidered, too, each one requiring three to ten hours of work. His dresses were so popular that he could have a team of thirty seamstresses working full-time for one client all year long. His prices were stratospheric, his vanity legendary: he considered himself a “great artist,” on par with Delacroix. He snidely dismissed clients who questioned his skills, and shamelessly catered to aristocrats above all others. Vuitton so excelled at packing these delicate frocks and baubles that he became the official packer and trunk maker for the empress Eugénie, the extravagant Spanish-born wife of Napoleon III. Having her royal warrant was the ultimate seal of approval.