What LVMH can learn from Apple

We all know that part of Steve Jobs’ genius was taking the rules of fashion and applying them to technology, be it the importance of must-have seasonal design, or gadgets that are actually accessories, and hence identity totems. As Michel Kors pointed out to me recently, however, fashion has never exactly turned the tables; it hasn’t figured out what it should absorb from Apple. Well, today BCG is publishing a paper that suggests things might be changing. They have pinpointed a lesson. And they want the luxury world to learn it.

Specifically, they want them to see the benefits of doing something that would largely be considered heresy: cede control (the paper is called “Luxury Ecosystems: Controlling Your Brand While Letting It Go”). After all, the modern high-end business model, as defined largely by Bernard Arnault’s approach to Christian Dior and Louis Vuitton, as well as the rest of his brands, is to take as much control as possible – of licenses, retail, production, and so on – the better the ensure brand equity. And it’s clearly worked for them.

Yet, say Jean-Marc Bellaiche, BCG’s global leader in the Luxury, Fashion and Beauty sectors, while Apple also appeared to have a mania for control, they actually didn’t: though they were fanatic about design, they sourced components from elsewhere, worked with lots of contractors in the app store, and used outside retailers. They created – this is the term BCG is pushing – an “ecosystem.” And the consultancy thinks luxury should do it too.

Their reasoning is pretty basic:

First, the world is moving so fast, and markets are evolving so fast, it’s impossible for one single entity to learn expertise in every area as fast as they need to keep up.

Second, this is because growth will largely come from new technology, new product extensions (ie furniture), and new markets, all of which require highly specialised bodies of knowledge.

Third, consumers are demanding more transparency and seizing control of imagery anyway via sites like Pintrest and doing their own viral marketing, so luxury should adapt;

Ergo, it may be more efficient to outsource some aspects of the business to a partner.

Actually, Mr Bellaiche put it in a slightly different way, when explaining why own-retail, the current must-have for any aspiring luxury designer, might not be for everyone.

He said: “If luxury is a jungle, then you have baby gazelles, and baby giraffes, and baby lions. They can all succeed in the jungle, but they are different animals, and to do that a lion cannot be a giraffe.”

It may be my favourite metaphor ever from a consultant.

Anyway, I asked why this whole eco-system thing was different from the traditional licensing and concession model. Mr Bellaiche said in the future, you needed two partners that were equally incentivised for the same end – ie, not just one that gets a flat fee and one with a big up-or-downside. OK, I said, like what?

His example was Yoox and all the brands they build and administer web sites for (both sides get a cut of sales). But beyond that, he didn’t have much concrete to say. I asked If Chanel and its “metiers d’art” – the nine artisanal houses like Lesage they own, but did not absorb – were a case in point, and he said maybe. Then he said the point was the eco-system was “a new business model, and it does not exist yet, but it should.”

So what do you think? Is this the answer for luxury in the future, and if so, can anyone imagine what it would look like?