The US has tech and France has luxury goods:

The roots of French dominance lie in a luxury ecosystem that dates to the court of Louis XIV, and a culture of corporate raiding that began with Bernard Arnault. After gaining control of LVMH in 1989, he set out to build the first house of luxury brands through serial acquisitions. Rivals followed his lead. Increasingly, the global luxury industry is based on goods that are still made by small Italian firms but sold by big French conglomerates. Gucci, Bulgari, Fendi — all are Italian brands now under French owners.

While US tech firms overshadow all rivals, the same can be said of French luxury. Among the top luxury firms, the French have annual sales three times higher than the Swiss, more than four times the Americans and Chinese and 12 times the Italians.

One of the most interesting things that LVMH is doing, though, is a combination of tech and luxury goods. In 2021, they announced, along with founding partners Prada and Cartier, a new luxury goods blockchain called Aura.

The idea behind Aura (an appropriate name, in my opinion) is to create a kind of digital passport that proves authenticity and ownership, and also allows for traceability. So if you want to sell one of your luxury items or you need to service it, now someone can easily see the chain of ownership and determine that it's real.

This to me is a perfect use case for the blockchain technology and, as of March of this year, the group was reporting 24 brands on board. At the same time, they also announced a new feature that allows brands to participate through public chains such as Ethereum or Solana.

All of this is probably still very esoteric to most. But eventually the tech will recede into the background and most will probably just see it as, "I'm buying this expensive purse and along with it I get this digital passport thingy that lives on my phone. I don't know or care how the tech works, but it makes me feel even more special."

However, a big question remains: What does all of this innovation do to industry concentration? (Which is one of the main points of the above article.) One promise of crypto is that it will be a decentralizing force in our economy. And while I believe this to be directionally true, I obviously understand that LVMH has an empire to maintain here.

For those of us who deal in real estate, it is also interesting to think about this topic of brands and authenticity when it comes to property. And so we will talk about that later this week on the blog.

The global luxury goods market is somewhere around US$300 billion if you exclude fancy cars. And in just 4 years, global luxury spending has flipped from over 60% of it being in Europe and the Americas, to now over 60% of it being in Asia -- with over 40% of it being in mainland China alone. See above chart from the Financial Times.

But I think what really happened is that when global travel shutdown in 2020, Chinese buyers just started spending all of their luxury goods money at home instead of flying to Paris for the week. Because if you look at Chinese luxury goods spending in 2018, somewhere around 1/4 of it was done in mainland China, whereas today it's close to 100%.

So the Chinese have been moving this market for quite sometime. But now that the consumption has moved entirely home, what does that mean for cities around the world? Hong Kong used to be one of the most important places for luxury consumption in Asia (no sales tax), but that has changed and it probably won't return. This is for reasons that go far beyond luxury goods.

But I think we'll see spending in Europe bounce back along with Asian travel. Because buying a luxury good is about much more than just the good itself. It's about the experience. It's about how it makes you feel when you buy it. And it's about signalling to others who you are as an individual. This may sound vacuous, but we all do it, with or without expensive luxury goods.

There are also new opportunities emerging by way of NFTs. I am sure that some brands are already doing this, but if I were in charge, I would issue a unique NFT with each luxury goods purchase that records, among other things, where it was purchased. Is a bag purchased on the Champs-Élysées worth more if there is a record of it that is etched in stone permanently? Maybe.

Here are a couple of cut-up snippets from a recent post by Seth Godin titled: “Waste and the new luxury.”

Luxury goods are built on a foundation of waste.

The front lawn is a luxury good, a sign that you don’t need to graze your cows on every square inch, and that you’re willing to waste the lawn.

There’s a new luxury that’s occurring, though, one that’s based on efficiency.

A luxury that’s based on investing in renewables, in resources that might be seen as endless, in smart design, in the satisfaction of knowing that others are benefitting, not paying, for the experience or the object you’re buying.

Waste vs. efficiency.

(Above is a photo I took this week in Dundas Square.)

The US has tech and France has luxury goods:

The roots of French dominance lie in a luxury ecosystem that dates to the court of Louis XIV, and a culture of corporate raiding that began with Bernard Arnault. After gaining control of LVMH in 1989, he set out to build the first house of luxury brands through serial acquisitions. Rivals followed his lead. Increasingly, the global luxury industry is based on goods that are still made by small Italian firms but sold by big French conglomerates. Gucci, Bulgari, Fendi — all are Italian brands now under French owners.

While US tech firms overshadow all rivals, the same can be said of French luxury. Among the top luxury firms, the French have annual sales three times higher than the Swiss, more than four times the Americans and Chinese and 12 times the Italians.

One of the most interesting things that LVMH is doing, though, is a combination of tech and luxury goods. In 2021, they announced, along with founding partners Prada and Cartier, a new luxury goods blockchain called Aura.

The idea behind Aura (an appropriate name, in my opinion) is to create a kind of digital passport that proves authenticity and ownership, and also allows for traceability. So if you want to sell one of your luxury items or you need to service it, now someone can easily see the chain of ownership and determine that it's real.

This to me is a perfect use case for the blockchain technology and, as of March of this year, the group was reporting 24 brands on board. At the same time, they also announced a new feature that allows brands to participate through public chains such as Ethereum or Solana.

All of this is probably still very esoteric to most. But eventually the tech will recede into the background and most will probably just see it as, "I'm buying this expensive purse and along with it I get this digital passport thingy that lives on my phone. I don't know or care how the tech works, but it makes me feel even more special."

However, a big question remains: What does all of this innovation do to industry concentration? (Which is one of the main points of the above article.) One promise of crypto is that it will be a decentralizing force in our economy. And while I believe this to be directionally true, I obviously understand that LVMH has an empire to maintain here.

For those of us who deal in real estate, it is also interesting to think about this topic of brands and authenticity when it comes to property. And so we will talk about that later this week on the blog.

The global luxury goods market is somewhere around US$300 billion if you exclude fancy cars. And in just 4 years, global luxury spending has flipped from over 60% of it being in Europe and the Americas, to now over 60% of it being in Asia -- with over 40% of it being in mainland China alone. See above chart from the Financial Times.

But I think what really happened is that when global travel shutdown in 2020, Chinese buyers just started spending all of their luxury goods money at home instead of flying to Paris for the week. Because if you look at Chinese luxury goods spending in 2018, somewhere around 1/4 of it was done in mainland China, whereas today it's close to 100%.

So the Chinese have been moving this market for quite sometime. But now that the consumption has moved entirely home, what does that mean for cities around the world? Hong Kong used to be one of the most important places for luxury consumption in Asia (no sales tax), but that has changed and it probably won't return. This is for reasons that go far beyond luxury goods.

But I think we'll see spending in Europe bounce back along with Asian travel. Because buying a luxury good is about much more than just the good itself. It's about the experience. It's about how it makes you feel when you buy it. And it's about signalling to others who you are as an individual. This may sound vacuous, but we all do it, with or without expensive luxury goods.

There are also new opportunities emerging by way of NFTs. I am sure that some brands are already doing this, but if I were in charge, I would issue a unique NFT with each luxury goods purchase that records, among other things, where it was purchased. Is a bag purchased on the Champs-Élysées worth more if there is a record of it that is etched in stone permanently? Maybe.

Here are a couple of cut-up snippets from a recent post by Seth Godin titled: “Waste and the new luxury.”

Luxury goods are built on a foundation of waste.

The front lawn is a luxury good, a sign that you don’t need to graze your cows on every square inch, and that you’re willing to waste the lawn.

There’s a new luxury that’s occurring, though, one that’s based on efficiency.

A luxury that’s based on investing in renewables, in resources that might be seen as endless, in smart design, in the satisfaction of knowing that others are benefitting, not paying, for the experience or the object you’re buying.

Waste vs. efficiency.

(Above is a photo I took this week in Dundas Square.)