The contrarian forces – the recession in the western hemisphere and the sustained growth of the emerging economies – have together fostered some interesting, global dynamics that the luxury industry cannot ignore.
Dr. Shefaly Yogendra
The Customer Experience Company
I love luxury.
And luxury lies not in richness and
ornateness but in the absence of
Vulgarity is the ugliest word in our
language. I stay in the game to fight
it. - Coco Chanel
The contrarian forces – the recession in
the western hemisphere and the sustained
growth of the emerging economies – have
together fostered some interesting, global
dynamics that the luxury industry cannot
The core luxe consumer, traditionally
located in wealthy western economies, is
rethinking her consumption for several
reasons. The recession has forced a broader,
societal soul searching about the values we
have lived by and wish to live by.
Further published data recurrently show
that societal disparity is larger than ever,
making conspicuous consumption a tricky
choice to make.
As “vintage” makes a comeback in both
couture and jewellery, investment is clearly
as important a criterion for her to make a
monetary outlay on luxe as indulgence is.
At the same time, emerging markets such as
India, China and Brazil are booming, creating
what some have called a two-speed economy.
In these markets no luxe brand is too visible,
no indulgence too expensive, albeit for a select
few even as vast swathes of society remain
Most recently, Prada reported that its half-yearly
sales in Asia rose 35% to €368M mostly
driven by Greater China; Richemont’s sales in
the Asia-Pacific region soared 48% to US
$1.88B, primarily driven by mainland China;
Tiffany & Co revised its profit estimates buoyed
by a 30% growth in the Asia-Pacific market;
and Tod’s Group has attributed its 22% higher
earnings than a comparable period last year to
its growth in Asia.
There is an interesting duality at work
As western economies enhance regulatory
restrictions and clamp down on tax havens,
western wealth seeks alternative havens.
At the same time, Asian wealth moves in
search of assets and investments.
The luxe sector thus sees itself serving a
more globally mobile consumer with varied
cultural expectations of luxury.
There is the growing clamour for
“engagement” using social media with
consumers and stakeholders alike; this
creates further pressure on how to balance
exclusivity, aspirational value and premium
pricing of luxe brands, with open-access and
At the same time it is easier than ever to
debate and critique business practices in the
luxe sector with a record of using farmed fur,
blood diamonds and other ethically dubious
raw materials to make profitable goods.
Many luxe brands target women as
consumers, and with a renewed global focus
on governance, the minuscule role of women
as decision-makers in these luxury houses
will be increasingly challenged.
Amid this push-pull of market and societal
forces - or consumers and stakeholders - we
were curious about the strategic
commitment of the luxury industry to
corporate social responsibility (CSR).
Our research covered some of the highest
profile luxe brands and parent companies.
We used publicly available data on their
websites and supplemented it with
secondary data on the companies.
Environment | Social Inclusion |
Tiffany & Co
Do the luxe brands or their parent companies have an
executive commitment to, a stated policy on and a
published report on CSR?
There are several companies that have no stated CSR policies, no CSR reports, and
no executive or board level resource commitment to CSR. While internally consistent,
this represents one extreme of practice. Chanel, Hermès, Labelux, Prada and Tod’s
fall at this end of the spectrum.
Our research however yielded an encouraging, diverse range of thoughtful practices at
work and executive level commitment in LVMH, PPR, Richemont and Tiffany & Co.”
What is the scope of these CSR policies and
activities where they exist?
The CSR activities of the leaders in our research cover three main areas which, in the
order of breadth of activities and their link with the core business, are: environmental
impact of their business, social inclusion and cultural stewardship.
The scope of these activities covers the supply chain as well as broader communities
in which these businesses operate. ”
Finally how are the key markets influencing their CSR
This question was tougher to answer than the others we asked.
Indications are that the CSR activities, where they exist, are driven as central
strategic initiatives and not necessarily tailored to the presence in the local
Data are insufficient at this stage to draw any indicative conclusions. ”
There seem to exist two extremes in the
luxury industry’s CSR practices.
Accordingly we feel there are several
action points for companies that can best
be described as laggards in the space.
For instance, a company with a diverse
portfolio of luxury goods, such as Chanel,
could examine the global suppliers of cloth,
leather, precious and non-precious metals,
packaging and semi-finished goods, and
start thinking about how to change things
for the better.
Engage with your wider
communities, your customers
aren’t the only ones interested
in your business
Several good examples worth emulating exist here.
Tiffany & Co’s commitment and specific practices in
responsible sourcing of diamonds and precious metals –
both raw materials core to its business – cover strategic
choices both of commission e.g. responsible mining
practices and of omission e.g. refusing to buy diamonds
from Zimbabwe and refusing to use coral in its jewellery.
Likewise, LVMH, Richemont and Tiffany & Co have
programmes in place for making their packaging “green”
as well as for redressing the damage caused to mature
forests in the sourcing process.
Your choice to be responsible
can affect your entire value chain
– sometimes other industry
players too – positively.
Recently LVMH took majority ownership in
Singapore-based Heng Long,
One of the world’s top five suppliers and tanneries of
crocodile leather. Heng Long imports a diverse range of
crocodilian skins such as the Nile crocodile skins from
Africa, alligator skins from the United States and Caiman
crocodile skins from South America. By engaging actively
with Heng Long, LVMH can not only share best practices
but also make an explicit commitment to responsible
business in an emerging market. Heng Long is also a
supplier to Hermès, and any improvements in its
environmental footprint will no doubt burnish that of
inclusion, especially of
the gender to which you
are primarily selling.
If your company sells to women, then engaging
women only to sell more to women clients is a
Not having any women on board at all, such as the case
with Prada, with the exception of Miuccia Prada for
historical reasons, is worse. This practice just does not
cut the mustard any more. In our research, PPR comes
out looking the best in this respect, with three women on
the board of directors, one on the executive committee
and over half of the employees and new recruits in the
rank being women. This is in addition to the PPR
Foundation’s work to enhance women’s rights globally.
We think that all-encompassing reporting
standards will no longer drive excellence
but set a floor level, minimum that
businesses must comply with.
Excellence in strategic CSR will be driven
by industry’s own creativity and dialogue
with stakeholders who will demand,
educate, feedback and keep the industry on
its pointe toes.
We think that for publicly traded
companies, a corporate foundation may
be harder to create and implement, as it
should require explicit permission from
their shareholders, even as they will be
held to tougher public scrutiny and high
standards vis-à-vis their CSR strategy
We think this will need to change
especially as the luxe groups aim to profit
from countries like India, China and Brazil
with their rich heritage and cultural
legacies, existing side-by-side with abject
The challenge will be to be able to do both
wi thout looking ei ther cyni cal or
Finally our research is based on
publicly available data on this fast-evolving
We welcome corrections, additional
data, feedback and above all, the
opportunity to enter into a dialogue
with the luxury sector as well as its
Please do get in touch with us at
Dr Shefaly Yogendra specialises in strategic decision-making.
In sunrise sectors and in emerging markets.
Especially where technology, investment and regulation
meet. Twitter: @shefaly
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