Retail network expansion in the luxury sector seems to have plateaued,  but Dior has proved that it is possible to reach great heights with the stores brands already have in place. 

Shops are not what they used to be, but they remain important. Global investment management and research firm Alliance Bernstein (AB) has said its research shows that the number of luxury stores across the world may, at most, have grown by a little under 0.5% in the last four years. According to its analysis, brands ran a combined total of 6,479 own-brand stores globally in 2019, which has increased to 6,509 in 2023. Multi-brand stores form no part of these totals.

These figures are precise, but Alliance Bernstein’s managing director for luxury goods analysis, Luca Solca, says they do not represent an exact science and are, instead, AB’s best guess based on information available online; he says the firm is open to correction on the numbers themselves. The principle remains, though: the figure has changed very little since 2019 and retail network expansion seems to have plateaued.  Nevertheless, growth in the luxury goods sector has continued at impressive rates and few product segments show this more clearly than leathergoods; figures from the major Paris-based groups prove this conclusively.

Four times more

Across all its divisions, LVMH more than doubled its revenues in the six years between 2016 and 2022. Its total revenues for 2022 were €79.2 billion, more than double the €37.6 billion that it achieved in 2016. Over the same period, LVMH tripled the value of its leathergoods business. In 2016, its leathergoods brands achieved revenues of €12.75 billion. In 2022 this business division, which includes Louis Vuitton, Christian Dior, Celine, Fendi, Loro Piana, Loewe, Berluti and Marc Jacobs, posted revenues of €38.6 billion, a record figure. The 2022 value was almost four times the amount this part of the business brought in ten years earlier; the figure for 2012 was €9.9 billion.

The rise of e-commerce has made a contribution to this growth; this is likely to continue because buying online suits many aspects of life in the 2020s, but there is more to growth and more to life than websites. As soon as covid lockdowns kicked in, LVMH said it experienced a further “significant acceleration” in online sales, but it noted right away (in its results for the first half of 2020) that this acceleration had only partially offset the pain of imposed store closures. This announcement is unlikely to have surprised Luca Solca because he thinks what luxury brands are doing with bricks is much more interesting than their attempts to attract more clicks.

Address to impress

He raises one LVMH brand, Christian Dior, as an excellent example of this. In time to mark the company’s seventy-fifth anniversary in 2022, its parent group carried out an extensive renewal project at Dior’s flagship location at 30 Avenue Montaigne in central Paris. Mr Solca regards the refurbished brand headquarters as a perfect illustration of what it is possible for luxury companies to do with the physical presence they have in the shopping capitals of the world. It covers 10,000 square-metres and has a coffee shop, three restaurants (one named ‘Monsieur Dior’ with some of the founder’s favourite dishes on the menu), two gardens, a museum and a special penthouse apartment for very important customers. All of this is in addition to shopping areas devoted to the brand’s bags, shoes, clothes, perfumes and cosmetics.

When the store reopened in March 2022, LVMH described it as having undergone “a stunning metamorphosis” into a place that is now “the embodiment of limitless possibilities”. In these virtue-signalling times, high praise of this kind from companies for their own successes is familiar. What is less common is for seasoned analysts such as Luca Solca to agree. He seems completely captivated by what 30 Avenue Montaigne has become. 

“The space seems very inclusive,” he explains. “You enter it through the coffee shop, where anyone could walk in and buy a cappuccino and a brioche for €15. From there, if you want to, you move to beauty and cosmetics, where products cost a little bit more. Then, on to shoes, where the prices are a little higher again, then handbags, then ready-to-wear, then couture, going up all the time in price as you ascend physically inside the building. The space embraces people who might spend €50 and those who will spend €500,000 during one shopping trip.”

Beyond brioche budgets, it is these high-value customers, some of whom probably spend a few million euro a year on products from Dior, who will have the opportunity to spend the night in the splendid penthouse apartment, which has its own dedicated team of 12 service personnel. “The whole store is a formidable money-making machine,” Mr Solca concludes, “and it represents the most modern, most up-to-date retail development that it is possible to imagine.”

DNA testing

He goes on to list the characteristics that set the shop apart. “People who have engaged with us at AB in the past know that we often speak about retail as a means of revealing a company’s DNA,” he explains. “Stores and what customers can find there offer companies an opportunity to show that they are unique businesses. It’s also a question of connections between the architecture and the brand’s identity. All of this can make consumers’ encounters with a brand more meaningful.” He concedes that this may sound abstract, but insists you only have to pop down to 30 Avenue Montaigne to see what it means in reality.

He loves that the two-year refurbishment of the building has preserved a number of special spaces. These include the studio in which Christian Dior worked from the end of 1946 (when preparations began so that the company could launch the following year). In a similar vein, you can still see the small area that models used to use as a changing room when the company showed off its new collections on site in the 1950s. The in-house museum seeks to capture the magic of those years and the thread that runs through the whole of Dior’s history. “This makes 30 Avenue Montaigne a place that it would be impossible to replicate anywhere else,” Luca Solca says. “It could only belong to Dior. It is firmly rooted in the location and, above all, in the DNA of the Dior brand.”

He is convinced the Dior flagship is on the way to becoming one of the most attractive tourist sites in Paris, up there with the Eiffel Tower and the Louvre. Visitors from all over the world now have the store on their must-see lists and are enthusiastically photographing themselves at the site and sharing the images on social media. “It is a place with universal appeal,” he observes, “and all of this is excellent, free publicity.”

David and Goliath

Even if it were possible to replicate 30 Avenue Montaigne in other parts of the luxury shopping universe, almost no leathergoods brands would have the resources to do so. However, Mr Solca insists that there are still lessons from this project that even relatively small companies can take on board. “It’s a bit like David and Goliath,” he explains. “You can’t do battle against a giant using the same weapons as the giant has. You have to look for ways to do things differently. You cannot put up a big army, but you can employ guerrilla tactics.”

His retail version of this is to concentrate the available resources on a small number of stores in a small number of locations and seek to achieve what he refers to as “a very high level of execution” in each one. “It costs a lot more to run a big store than a small one,” he observes, “but it doesn’t cost much more to create a few fabulous shop windows than it does to create mediocre ones. And to do that is to say to shoppers: ‘Look, this is who we are, a beautiful business, and this unique shop, which reflects our beauty and our values, proves it.’ This is how smaller companies can emulate what Dior has done.”

Dior’s refurbished flagship store at 30 Avenue Montaigne in Paris.  
Credit: Dior/Adrien Dirand

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