Letter #41: Alexandre Arnault (2022)
Alexandre Arnault at the Oxford Union
Hi everyone – it’s been a while since I rolled this newsletter into Cloud Valley or shared a compilation, but somehow people are continuing to discover this newsletter and I frequently get asked to restart it. I’m thinking about if it makes sense to reboot it (please reach out if you have any suggestions or ideas or just want to see it back!).
In the meantime, one of my favorite operators in Alexandre Arnault recently spoke at the Oxford Union, and I enjoyed it so much I transcribed it for easier consumption and revisiting, and thought I’d share it here. (Any errors are mine.)
Alexandre has done a phenomenal job of marrying heritage and modernity and East and West at Tiffany, each of which are impossibly difficult tasks on their own. In fact, he may be the only person I’ve come across who is able to do this at scale. And this was a fascinating peek into his mind.
I hope you enjoy this conversation as much as I did!
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Host: Thank you very much for joining us, Mr. Arnault. I suppose we should start at the beginning with your...
Alexandre Arnault: Please, call me Alexandre.
Host: Alexandre, perfect. At the beginning with your family and upbringing. As the son of Bernard Arnault, and then your mum's a gifted pianist and top athlete. You had a sort of very, well, one might say, unconventional, and very privileged background. Is the reality more nuanced? Is there anything that's misunderstood about your upbringing and what shaped you going forwards because of your family life?
Alexandre Arnault: Sure. First, thank you. Thank you for being here tonight. Thank you for having me. It's a great pleasure and honor to be at Oxford tonight. You mentioned, yes, I was very lucky, obviously. And I think one of the things that is very important with my upbringing is the values that were given to me, values of family, values of work, values of merit, nothing was granted. Everything was always earned, whether it was through school, through sports, through music, through achievements in a way, which I think are foundational to everyone's education today, including mine, and I think that's what makes the beauty of the group as well, the LVMH group is a family group. And the first most important value is definitely family. And any of you work for LVMH, or have, or want to work for LVMH, that's sort of what you'll feel by joining the company is that yes, it's a publicly traded company that's very big with a lot of employees. But in the end, it's a family that's represented by our family. And that was the biggest value that was transmitted to me, which I hopefully will translate to my own children as well.
Host: That sort of upbringing of everything must be earned and the sort of certain expectations, did you feel like there was pressure put on you to sort of follow in your father's footsteps, or indeed, your mother's footsteps into the corporate or musical worlds?
Alexandre Arnault: So, there was never official pressure when it's always like, Oh, you can do whatever you want, of course, but when the moment comes, I guess you feel the pressure. One of the things that I like to say is that I feel like I've been in an MBA since I'm born, because every lunch or dinner conversation is probably about the business. And it's a great chance, because obviously I learned a lot and the group was made, since the 80s, I was born in 92. So I could have seen it through its inception and its creation, which is a huge advantage to understand the market better. So, there is pressure, of course, but it's also only if I meet the expectations. So it's, that's how it's measured.
Host: Do you think having that family connection with the company has changed how you've worked and how you view your job in the various parts of LVMH that you've worked in?
Alexandre Arnault: Of course. So, being younger than most executives, I think this MBA since I'm born, that I've been talking about, is definitely something that gave me a competitive advantage to understand the luxury market, the luxury industry, from a very young age. So that's, I would not have had that had I not been a part of the family, which is great. And I think then, also, people are very respectful of the family and of what we do to the group. So I think two things. One, meritocracy is key. So nothing is taken for granted. For example, when I started running Rimowa, it was a coincidence. To be fair, I found the company, I started to lead the acquisition process, and I wasn't at all going to work there. And the former owner and CEO said, I'll only sell the company if you become co-CEO next to me. So then, I was 23 years old, 24 years old. I said, Okay, well, I have to move to Germany. I had not planned this at all. It came this way, so, meritocracy is very important within the group. So you'll never see us, when I say us, it’s my siblings and myself, jump from a position to another with nothing earned. And then two, I think what's also super important as being part of the family is respect. We're a very respectful organization of people's careers, people's developments, and that was definitely taught to me from a very young age.
Host: You said that LVMH is a very, sort of family-oriented company and Rimowa, who as you mentioned, you were co-CEO of, was also a family business before LVMH acquired it. The number of family businesses has been going down over the years and now only 10% of family businesses make it to third generation. Do you think there is something inherently beneficial in a company being a family business?
Alexandre Arnault: I mean, yes, it's, of course, I think it's extremely beneficial for a few things. I was mentioning to one of your colleagues today that I was with a few private equity folks right before coming here who have a very different vision of how they view business. Private equity is a great industry, I was working in there before, but they acquire businesses with the mindset of turning them around quickly and selling them. What we do as a family company, and what I've seen in most family companies, like Rimowa, for example, is very long-term thinking. And we always like to say that we never think of what we do for the next quarter, for the next year, for the next five years, but for the next 50 years. And every decision we make, some of them I think we're going to talk about later, are not necessarily, or often never financially driven, but they're always driven towards the desirability of the brand. So I was I was hearing you talk about Beyonce and Jay Z earlier, before I came in. We made that decision at the very beginning of Tiffany, when the world was always still locked down, and we weren't seeing the end of it. But we thought, Hey, why not try and do this, which will hopefully drive desirability for the next 10, 15, 20 years for the brand, which it's easy to say now it was successful. But back then, it's sort of things that you can do in a family business that you can't do in a publicly traded company that's not controlled, that has to deliver quarterly earnings or things like that. So I think, for that, family businesses are very valuable. And then, being a part of a family is also very important for people who work for us. I think there's 160,000 people working in LVMH today, which is big, but they feel as part of the family, can move from a brand to another. And it's, you can't find that in other places, in my view.
Host: What do you attribute the decrease the number of family businesses in sort of global business world?
Alexandre Arnault: It's tough. I don't know. I think you've seen a lot of examples of families that have fought, families that haven't understood how to work with each other. And I think it all comes from the founder, and then how it's all done in the next generations to make sure that everybody gets along, everybody has a clear set of responsibilities. And what I was mentioning to you, like meritocracy, and earning your way in and proving yourself or sometimes working outside is very important to start learning and make sure that all the decisions you make are for the business first and for yourself. I think that's the few examples I can think of family businesses that weren't successful, didn't follow these rules.
Host: Going back to yourself, you said you had this sort of MBA since birth style of upbringing and education. And yet you went on to do a degree in science, in computer science. What was the motivating factor behind that if you'd sort of already clocked in your head that you wanted to go into business?
Alexandre Arnault: So a few things. Number one, I think in France, every country has its different perspective on studies in France. Engineering is often perceived as the most prestigious studies you could do. And I don't know if some of you are familiar with the French school system, but it's all anonymous. Like when you do what you call a Classe Preparatoire, you go there and you're with, whatever, 10,000 people, and your name doesn't matter if everything's blanked out. So, whatever success you have, is really up to what you've done, what you've learned, and what you've studied. So it's very important to me, coming from the family that I have with my last name, to do something that I could do on my own, that I couldn't buy, that nobody could pay for, that was just fully linked to my studies, my work, my rigor, and I think that's one of the reasons why I did that, for sure. Then also, I thought that I was always interested in math and like science, so it was definitely something that I was interested in studying, and the business studies per se, I didn't feel like could give me as much as science, because as I told you, I was shown to business very early on.
Host: So linking that in with some of the decisions you've since made in businesses and Tiffany's marketing since you took over as the EVP has been full of very bold statements like a yellow store, crypto punks, TIFF coins, and then some of the campaigns that you've launched. Has this partly been driven by your scientific education? Or is it instead, as you said, driven by this desire to make the brand continually desirable in 10, 20, 50 years time?
Alexandre Arnault: A bit of both. I mean, obviously crypto isn't necessarily something that's embraced by a lot of executives in luxury today. So I was lucky to be shown to that world very early and very interested. So that's why we started doing little things in that space. I think that the science upbringing gave me more, the rigor and the way of working more than like the inspiration to do these things. So it was definitely more desirability-driven, for sure. And like when we bought the company, which is a year and a half ago already, we did an assessment pretty quickly of its strengths, its weaknesses, like you've learned this many times. And marketing was the easy pillar, the first easy pillar that you can actionate, because in these businesses, I always say there's three levers that you can work on, which is one, the stores, two, the product, and three, the marketing. There's 350 stores at Tiffany's. So renovating everything or changing everything takes five years. It's very capital intensive, labor intensive. Product, it's not like fashion. Fashion, you bring in a designer, there's new collection and things change. Jewelry, you need to buy stones and make molds and buy gold. And it takes minimum two years to really launch something. So marketing was the first thing that we could do. And we really saw that the brand was so powerful. At Rimowa in the US, when I joined the company, the awareness. So if you take 100 people, and you put them in the room, and you ask them, Do you know Rimowa, two of them would say yes, 98 would say no. When I left, five people would say yes, 95 would say no. So people were like, wow, it grew so fast, and everything. At Tiffany, if you take 100 people in a room, 99.5% of these people know the brand, so it's a very, very different scale. And it's so strong in people's minds that you could actionate marketing really easily in a way to rejuvenate it and to take risks that had never been taken before.
Host: As well as those bold statements that I mentioned, you've also been known for all of the culture-led collaborations, including the Jay Z and Beyonce one I mentioned, but also on the Supreme and Off-White, Patek Phillipe. Do you, some of these have been quite controversial, including your Not Your Mother's Tiffany campaign. Does all of this link back to a belief that all publicity is good publicity?
Alexandre Arnault: So I don't say, I don't think all publicity is good publicity. There's, especially today, with social networks, it's very difficult to have an authentic and organic message to share. And you see a lot of things that are not successful at all, people get criticized, and a lot of bashing and everything that can really ruin brands. So we're very cautious with what we do. You're mentioning Not Your Mother's Tiffany, I was looking into the numbers two days ago, actually. And our silver business grew the fastest in five years, the month of that campaign. So it was probably controversial, but it had a great impact on sales, which is in the end what we look for. So with those collaborations, what's important to us, and obviously, you see a lot of brands that are doing collaboration after collaboration, which are good or bad, you don't know. But we're really trying to be as authentic as we can. And I'll just take one example, which is Supreme. A lot of brands now say, Oh, we have to target millennials, and they make these matrixes of matrices of saying, Hey, what are the brands that talk to millennials. They have a list, and they say, Okay, we're going to do Supreme to tick a box of millennials. And those recipes can work really well. That's just not what we do. We actually took a call from Supreme, and then they called us at Rimowa and said, Okay, they've never done bags before. They talked to a street skate culture that we like, let's do something that's super authentic with them. And then it ends up targeting millennials. But it's never done in a marketing way, but more in a very authentic and organic way, which leads to selling out and hopefully success.
Host: So with both of those moves, the Not Your Mother campaign and targeting brands like Supreme, or not targeting but working with brands like Supreme, some critics have argued that you are targeting this sort of new base of customers, and in turn sacrificing some of your loyal long-term or older customers. Do you think that this is a fair criticism? And do you think it is a sort of approach that all luxury brands need to take at some stage to risk themselves becoming outdated?
Alexandre Arnault: So I don't think it's fair for a few reasons. One, the Supreme collaboration that we did was probably the time where I had the most surprising people call me to get a suitcase. They were old and not at all working in design, luxury, or anything. So it shows that even with these kinds of products, you can reach people that are not necessarily the average skateboarder with its hoodie or something that you're looking for. Obviously, we're never going to try to alienate anyone from our customer base, which is why we're trying to do things at different scales. And if I take Rimowa or Tiffany, we're working with contemporary artists, or Supreme. We're working with very known brands like Dior, Virgil Abloh, or things like that. So we really try to do everything we can. That being said, I think I always forget the number, we think it's 64% of the world is below 40 in age, so all their consumption is ahead of them. And 92% of these people are connected somehow to the internet. So it's definitely these people that are the future of what we're doing. So in my view, it's not alienating yourself, the old customers to the new customers, and, taking a few shortcuts to what your question was, but it's more about how to be relevant with this consumer base who's not necessarily your target consumer base now, so that when they become the target consumer base, they think of you and not of other brands. And by doing that, still, talking to the customers that are existing today. And one of the things behind Not Your Mother's Tiffany campaign is also that, Hey, a lot of mothers want to look like their daughters too. So if they want to be cool, like their daughters, or things like that, so by targeting younger people, you also get to their parents.
Host: Do you think it's a frequent and long-term problem that luxury brands have, is that they tend to be associated with wealthier and older people, and that over time, that can sort of lead to them dying off and fading into irrelevance?
Alexandre Arnault: For sure. For sure. I think one thing that you're mentioning is wealth, obviously. I always like to say I don't like the word "luxury" because it's too linked to price. You go to Tiffany, you can spend 180 pounds and you can get something great made by hand in the US with a great packaging that gets you into the brand. You can argue 180 pounds is a lot of money for sure, but not close to the $5,000, you would find at other brands as a starting price. So I don't think price is an issue to me. Or a bottle of Moet champagne for 30 euros, Moet is a brand we own too, that's a product that's made with great craft with amazing attention to detail. And it's a luxury product in [unintelligible]. I do think that it is linked to what you're saying. However, as long as you maintain relevance and you're able to stay culturally relevant to today's world, I don't see the brands extinguishing anytime.
Host: Do you think that the, that was an interesting point with Tiffany there about the lower end sort of items that you sell going away,
Alexandre Arnault: They're not low end.
Host: Not low end. Low price.
Alexandre Arnault: Fair enough.
Host: Going all the way up to sort of 10s, 100s of 1000s of pounds pieces of diamond jewelry? Do you think that by having such a large price spectrum, you debase the luxuryness of the top price end products?
Alexandre Arnault: I think so, because we try to be super accessible. We want to be a place where everybody can get in the store and find something for themselves. I like to say you can go in and spend 200, 2,000, 20,000, 200,000, 2 million, 20 million. Name one brand where you have such an array of spend. There's not that many that I can think of, and so... A lot of people tell me the story, it's now under construction, but that when they visit New York, the first stop they make is the Tiffany store on 57 and 5th of Audrey Hepburn. And one of the key things, the key attributes of the brand is its accessibility. A lot of luxury stores can feel very scary or very obnoxious. Hopefully, in our group, we try not to do that. But I've definitely felt like this before. And at Tiffany we try to do the exact opposite. Everyone's welcome, whether they're spending, 200 to 20 million pounds. And that's one of the greatest characteristics of the brand. So, yeah, it's really what we're trying to build.
Host: Focusing back on you. Going from being a co-CEO of Rimowa, which is a multi-hundred-million-pound company to being EVP at Tiffany, a much bigger company, would have been a bit of a shift. How did your experience as President of Rimowa prepare you for the challenge of working in Tiffany?
Alexandre Arnault: Two different businesses, from suitcases to diamonds, so it has nothing to do with each other. But I think being CEO of Rimowa for, I think was four or five, four years, and taught me a few things. One is entrepreneurship, taking decisions and being accountable for the decisions you make. I was discussing with someone right before, I worked at McKinsey and I was a consultant and it was great experience but I was helping people make decisions. I was not making the decisions myself. Making decisions per se is definitely something that was extremely insightful. And you're on the line. Like, whatever you do, you're responsible, you're accountable. And at Tiffany's, it's the same thing, whether it's deciding to press play on Not Your Mother's Tiffany or Beyonce, or whatever crypto punks we're doing. Those things then are out in the world. And you're accountable for them. So I think the decision-making process was definitely something that, the first thing that Rimowa taught me. Building a team, also, is the first thing I did when I was at Rimowa, was like, how to build a world class executive team to help me in different areas. Tiffany, same thing, we went out to build a completely revamped team of talents that we believe could help us take the brand to where it was supposed to go. And then three is, long-term. Again, back to this family thing. Rimowa and Tiffany were two different companies. Rimowa was a family business, so it was already operating on a super long-term vision. So when I came, I perpetrated this tradition. Tiffany was a uncontrolled, publicly traded company that was taking decision on quarterly basis for the stock price. And so we, the CEO, myself, really tried to stop those decision-making processes to make them much more long-term, even if that meant much more investment. Year one, year two, year three, which will not be great for profits in the first year, but in the end will be super beneficial to the brand. And the customers.
Host: That shift also saw you go from being co-CEO to EVP. Have you felt there's been a loss of your individual agency or your ability to make decisions as part of that?
Alexandre Arnault: No, not at all. Because no, there was 3000 people at Rimowa, 15,000 at Tiffany. So it's a very different scale. And I'm very, we, I view, today, work as being really team work, whether you're a CEO, or EVP, or whatever you do. We have, at Tiffany today, we have weekly meetings with the whole exec team. And if I want to launch a product, and everybody says, we don't really believe in that product, I'm not gonna say let's do it because I believe in it. It's all about working together. And it was the same when I was CEO at Rimowa, you can't just make decisions by yourself, because there's just too many variables in the business that each and every person has their own expertise on.
Host: Looking at LVMH more generally, of its massive international conglomerate with dozens of what, I know you don't like to call them luxury brands, but people would sort of perceive them as luxury brands within it, do you think that luxury brands are mainly purchased as status symbols rather than appreciations of craftsmanship and what connotations this has for the business model of LVMH companies?
Alexandre Arnault: Sure. So I disagree with that statement. Obviously, there will always be this, the people that want to buy logos, or whatever to flex, as you were saying, but I think what differentiates us to a lot of other brands is craftsmanship, quality, entrepreneurial spirit, and investment level. Like, if you walk into a Vuitton store, Tiffany store, Dior store, you'll find products that were made by hand with exquisite materials that took weeks, or years sometimes, to design, to master. And that, you don't buy this just to show off. I think you buy this because it's a) it's an investment, usually. Yes, there are some products that are priced lower, but most products are very expensive. So when you spend that amount of money, it's for something that you know will be durable, that you know you like and enjoy, I believe, much more to show off. At least that's the kind of clients that we interact with. Or sometimes we sell super expensive pieces of jewelry at Tiffany that people don't necessarily want to wear because they're too expensive, they're scared, but they like to look at them, put them in their house, because they understand stones or metals and appreciate craftsmanship. And sometimes necklaces take three years to make, three years of work for three craftsmen. That's all they do for three years. So I mean, that has to have some appreciation within the clients. And I think that's definitely something that differentiates us to a lot of competitors.
Host: Really high-end products like those pieces of jewelry that you're just mentioning, in the sort of old world even 10 years ago, 20, 30 years ago, where luxury products were the sole domain of areas of limited real estate like Harrods, and a limited pool of ultra-wealthy people. It was very easy for LVMH and LVMH companies to control the market. Do you think that that has changed and the desirability of ultra-high-end products has changed with the eruption of ecommerce, of social media, and with the increased rapidly changing trends that we see...
Alexandre Arnault: I think so. I think today access is much easier, whether it's first-hand products, second-hand products, even now, like drops that will sell out from any brand, you can find on resale marketplaces. So access is much easier thanks to the internet, thanks to social media. I do believe that physical retail remains very important. We just opened a new Dior store in Paris last month, which is probably the most extraordinary luxury store in the world, we took three years to build it and invested a lot of money into it. And there are lines in front of the store every day, so you could think that ecommerce revolutionized shopping, people still want to go in and be treated with white gloves, and try on jackets and taste or feel leather. So I think a combination of both is where the world is going. Amazon definitely made shopping super easy, two clicks, it's great. But shopping, going shopping on a weekend and strolling down Fifth Avenue or Avenue Montaigne on a Saturday on a great day, is an experience you can't really replace online. So we're really investing heavily into both areas to make sure that we can be wherever our clients want us to be. And for us, luxury is exactly this, giving our clients what they want.
Host: How do you think LVMH can retain its current level of relevance in the coming decades?
Alexandre Arnault: That's a question to ask 260,000 people. It's, I think, continuing to be at the forefront of creativity, of innovation, and craftsmanship, is exactly how we can stay relevant. And we're trying to do so, always hiring the most cutting-edge designers, opening in the most fashion forward places, buying brands that are on the market that are very desirable. And building upon that is for us how we think we can stay relevant. We don't have a recipe. It's year after year after year of creative processes across different industries. But this is definitely what we're trying to do.
Host: You've worked at Tiffany for about a year now. And you're clearly really enjoying it and getting your sort of teeth into various projects. Are there any LVMH companies that you really look at and think I want to work there someday?
Alexandre Arnault: I'm focused on Tiffany right now. There's a lot of work. There's a lot of work to do. I try not to look ahead too much, and really focus on what I'm doing. Same on my previous job at Rimowa was really like, trying to make sure that I'm building the most desirable brand and what I'm doing. And then opportunities come for sure.
Host: Again, a bit less of a sort of serious question, but do you find yourselves mainly wearing, eating, drinking LVMH brands?
Alexandre Arnault: Yes, though not today. I think those are not LVMH shoes, but I tend to do so for sure.
Host: Do you have a favorite?
Alexandre Arnault: Tiffany? I don't know.
Host: I should have expected that one. I suppose looking more at the brand, the conglomerate nature of it. Do you think that having multinational conglomerations of dozens and dozens of brands is healthy for the business world.
Alexandre Arnault: So for us and for luxury, I do think it is very healthy for a few reasons. One, there's a lot of synergies that can be built between different brands, which you couldn't have if you were an independent. I think a lot of independent brands now struggle because of the space that we or Kering, or Richemont, the three large luxury conglomerates take. And so for smaller brands to develop themselves, it's way quicker and easier to do so within a conglomerate. If I look at Rimowa also, for example, without LVMH, I don't know how the company would have weathered through COVID. Like nobody was traveling or buying a suitcase for two years. We kept every single employee, we didn't give any pay downgrades, we paid everyone every month and that's because of the power of a group like LVMH, that we could do so, and take losses. And now, all the competitors were discounting the products, closing stores, not paying their partners or suppliers. We didn't do any of that. And now we're ready now the travel is picking up again. It's booming again. So having a group like LVMH and conglomerate helped us to do so. Then, I also think that for creativity, it's amazing because having a conglomerate like this allows people to, like I said, go from a brand to another but also across different industries. So we often have people that go from wines and spirits to fashion or to jewelry to perfumes and that applies creative minds and creative brains to total different industries and problems, which, in my view, are beneficial to the industry as a whole. Because you're applying what you learned in different areas to something new that needs this level of creativity to grow.
Host: A question I suppose then about the consequences of having such a large conglomerate: Obviously, your father is a very wealthy man. And lots of his contemporaries in the world of very wealthy men are well-known for what they do with their money. They buy other large companies or go to space or whatever else. Do you believe that...
Alexandre Arnault: I want to go to space. Yes.
Host: Do you believe that people, individuals with that level of wealth have certain responsibilities to the global community? And do you think it is irresponsible to use that wealth in the manner that some individuals do? Not your father.
Alexandre Arnault: He hasn't been to space... that I know of. So it's not my place to talk about what people do with their money, obviously. But when it comes to my family, one thing that's important to us is you see a lot of numbers in Forbes and all these places, and a lot of people think that it's a big bag of cash on there under a bed somewhere. The truth is, all of this is invested into the business. It's all into shares that we've never sold, that we will never sell. And it's invested into growing the business, hiring more people, opening plants, investing into countries. I think we hire 10,000 or 15,000 people every two or three years, we open plants around the world, we acquire companies, we do a lot of things with this. So obviously, we have a big responsibility, which we're trying to live with and do things with that. But the money is invested into the company and not planning to be used to go to space or do any other things.
Host: I'll just asked one more question before we hand over to questions from our audience. But you are in a room of supposedly, future world leaders in various fields. At least that's what the Oxford Union tries to sell itself on. In a world in which leaders of politics and business and finance are becoming older and older, what advice do you have for young people trying to enter into the world of business and finance as you did at quite a young age?
Alexandre Arnault: Yeah. I think, be curious. For me, curiosity is one of the most important virtues one can have. And being interested in a lot of different areas of life, from business to science to whatever. Two, and that's not common, is be street smart. I think one of the things I value the most in people when I hire them is the street smartness. And I learned that from being at Rimowa, joining a company that was already super big in sales, but that had basically zero infrastructure, where you hire 40 year olds that are doing things that they were doing when they were 22. And that allows you to be super polyvalence as you say in French, I don't know the word in English, but work in different areas and be very flexible. And then I think, what's also super important is to do what you love. It's a very boring thing, but I think not be forced to follow a path because it's a path that people set for you. But I always feel like people are much better at what they do when you can feel that they love what they do. And at Rimowa, I always like to tell people if you don't like traveling, don't join the company. Because we're selling suitcases and I want you to want to travel on the weekends. So you can give me feedback. And same for Tiffany. Like you have to like jewelry, whether you're a middle-aged man or a young woman getting married and who wants a diamond ring, or whatever it is. I think it's the love for the product is what's the most important to us.
Host: Thank you very much.
Alexandre Arnault: Thank you very much.
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Host: I'm sure you've had enough of my questions. So if any of you have any questions for Alexandre, please put your hands up. The member in the front row to my right.
Question: Thank you, and thank you very much for that interview. It's really interesting. Oh, wait, stand up. Okay. Thank you. I was wondering, I thought it was really interesting what you said about reaching out to future generations and remaining passionate to new customer bases and people who are interested in upcoming trends and so on. Some of what your work has involved around, for example, your NFT launches, for example, the TIFF coin that also has pertinence to some of the things we're organizing at the Oxford Union, we're doing like a debate on the metaverse in a couple of weeks and so on too. I was just wondering, how do you, like, as quite a young, relatively young CEO, how do you balance that contemporary energy and that eye to innovation, with retaining the traditions which Tiffany and LVMH more generally holds? And sort of stemming from that, What trends and so on would you recommend young people like us who are interested in the fashion and art industry to keep in mind going forwards?
Alexandre Arnault: So first part, keeping a balance between tradition and modernity is the essence of what we're trying to do. It's always the balance of super traditional trunk making as Vuitton linked to Nike sneakers made by Virgil that are very futuristic. It's all about balancing everything that we're trying to do the best we can. So far it's working. So we're very lucky and fortunate for that. But that's definitely been the essence of what all of our brands do. As for new trends, I'm not going to say the metaverse because everybody's bored by that already. And I think there's a lot of misconceptions and easy things that are said in there. But I do think that new communities are trends that are extremely exciting for fashion, art, and other areas. Because for us, we come from a world where 30 years ago, the only way you could give your message to people was by taking the back page of Vogue magazine, and you would tell like, Hey, this is my brand, this is who I am. And you don't have a say to it. Now with Instagram, Twitter, and Tik Tok and everything, like you can still give this message but people can come and tweet, reshare, talk about it, trash, love, and build communities around this. And so getting access to these communities and understanding how they work is very important, in my view, to grow businesses organically in a way that's community-led versus super authoritarian, like it was in the past. And I don't think it's contrarian to building a brand in a very cold mindset. But it's important to be a part of this. And so I think it applies to art, NFTs, Metaverse, a lot of a lot of categories.
Question: Thank you very much. That's a big help.
Host: Thank you. Now moving to the next question. The [unintelligible] in the floral dress in the front row here.
Question: Thank you very much for sharing your insights with us. My, the focus of my DPhil research is on loyalty, and what drives really truly loyal behavior. Now, a lot of luxury brands focus very much on transactional loyalty. I like to ask you, since arriving at Tiffany, you mentioned that you sort of brought a new long-term vision to the company. Have you brought in sort of a new vision of loyalty and a new approach to loyalty? And can you share that with us?
Alexandre Arnault: Sure. So it's a very interesting question. And loyalty is obviously the most important or one of the most important metrics that we track in our businesses. It's repeat business, as we call it in a very transactional way as you're saying. It's early to talk about new ways of loyalty. However, I do think that the arrival of social media and cell phones basically allowed customers to have a much more privileged relationship to brands. Because in a former world, you could live in a place where there's no store in the three hours around from you and you would have to literally drive to the store to get access to something. Now, you can talk to a sales representative on WhatsApp, or wherever you want. And you're able in that way to create a relationship between you and the brand that is completely personalized to who you are. And we will wish you happy birthday. And we'll know kind of what you're looking for, because of what you've spent in the past or if you're, whatever, getting married, having children, or god knows what part of your life you're at. And then we're able to talk to you and target you in a way that's much more personalized, which is also not driven by Salesforce or like CRM kind of softwares, but is human driven and so, all about relationships. And I feel like this has been a big part of what we've been trying to drive in consumption at Tiffany or at other brands of the group, which has had a lot of success. Because then, if you feel emotionally connected to the company and you actually have someone to talk to, you know something's coming out, you ask for it in advance and things like that, and it drives a lot more repeat business, loyalty, and excitement between you and the brand. For sure.
Question: Thank you very much.
Host: If my sister's carefully curated display of light blue boxes is anything to go by, I think Tiffany is doing quite a good job of loyalty. The other member in the front row.
Question: Thank you very much for taking the time to speak to us today. What are your key priorities for Tiffany going forward? And if we think in five years time, what excites you the most about the brand? And if you think about what Tiffany can bring to the broader watches and jewelry division at LVMH, what would you highlight there? And similarly, what learnings can you take from the other brands in the group, maybe the acquisition of Bulgari? Thank you.
Alexandre Arnault: So five years from now, it's a long time. Our priorities are to grow the business in a very organic way and desirable way. Tiffany is one of the most well-known brands in the world, in the US especially. We know that and we're trying to make it regain desirability that it had in the past that it could have lost a little bit. And little by little, all initiatives you're seeing us do, since a year and a half now, has been to go through this path. So it's really desirability first. Then I think product is very important to us. We have four product categories, basically, I'm not gonna bore you with details, but it's silver jewelry, gold jewelry, engagement jewelry, and high jewelry. And so all areas have different priorities, per se, and are growing themselves in a way that we want to make sure that craftsmanship, and quality is maintained and even higher going forward regardless of category, whether it's a $180 trinket or a $200,000 necklace. So regardless of price point, and category. When it comes to engagement jewelry, it's also very interesting. Because it's a more macro business unit. Like the less weddings, the less people are going to buy wedding rings. So people are getting married less and less other than this year, because there were two years without weddings, but like the trends are decreasing. So it's more of a market share gain than a pure product innovation. Because a diamond ring is a diamond ring in the end. Then, new categories also is very important to us. We used to be the reference for tableware, for accessories, for example, which we still do, but in a way that's not as successful as it used to be. So we're in the plan of relaunching that in the next few months. Watches, also, a lot of people talk about the Patek Philippe watches that we sell, which are great, but they're not Tiffany made. They're made in the Patek Phillipe watch factories. So we're definitely super interested in that category too. What can you bring to the watch and jewelry division of LVMH? Well, it's the largest brand now. So whatever it brings, it shows quickly because it's the largest acquisition in luxury. And it's the largest brand by far in the division of the group. So learnings, buying power, synergies, are very important of what we can bring in that end, when it comes to buying diamonds or things like that. Bulgari is another interesting story. What it taught us was that we didn't know a lot about the jewelry business before because we were very fashion driven. And Bulgari taught us to be patient, which is one of the few things that I am not. And like I said earlier, designers come into a fashion brand, three months later, you have a new collection and things can just shift like this. Jewelry takes a lot more time. So it taught us to be patient and I think we were able to make decisions like these, which were not too rushed, which we could have done a little bit in the beginning at Bulgari because we didn't know the industry as well. Just to maintain growth also, and not take too drastic decisions that could have been not the right ones to make. For example, discontinuing product lines. I heard a lot of people say when we bought the company like, Oh, they're going to stop silver because it's not expensive, and it's not at all what we're planning to do whatsoever, which we can do now by understanding patience.
Question: Thank you.
Host: Thank you very much. The member right here.
Question: Hi. You mentioned classe prepa and all that kind of thing. I was just wondering where Oxford, if you give us an insight into what student life was like at the Ecole Polytechnique, and if you think it resembles British student life or Oxford or American student life, etc.
Alexandre Arnault: So I've just spent one hour in Oxford in my whole life, which is this hour. So what I can tell you about classe prepa, for sure, is from 18 to 20 years old, basically when you graduate high school you go to these very generalist science classes, which are math, physics, chemistry, a little bit of English and like literature we would do, and it's a competition with an age group of people that go against you. So after these two years of intense studying and when I say intense, it's very, very intense. The first 15 get into the best school, the next 15 get into the best school, it's et cetera, et cetera, all in a super anonymous way, as I mentioned earlier, unlike Oxford, where I feel like when you come here and correct me if I'm wrong, but you can choose what you want to study. Classe prepa, you can choose if you want to do scientific or business focus, but then you're all in the same boat, and shakin, shakin, shakin in the same boat, and you can only specialize much later. So I started studying computer science when I was 22. Until I was 22, I was just doing math, physics, chemistry, like all my other classmates, we're learning the same things. It's academically very difficult and I hated my parents for letting me do that, but now I'm very grateful. Because it teaches you a lot of things like hard work and effort and that you can't learn anywhere else at that age, to be honest, especially, like me coming from a very privileged background, like, the only thing that talks in the end is your result in the exam.
Question: Was it fun, was student life fun eventually, once like the academic was...
Alexandre Arnault: It wasn't super fun, no. And the thing is, also, like, the one broken thing of the French system, I don't know how to unbreak it, is that like, you have these two or three years, two years, for the most smart, three for the less smart, I did three, of classe prepa that are very, very intense. And then once you get into the school, after this competition, you get your results, whatever, like in July, you have the best summer of your life. This school is laid back, you don't, like I remember when I arrived, I came from a world where I would go to school from 8am to 7pm. And then study till midnight, every day for three years to having a day and a half of classes and the rest of the time just like just do whatever. So I was, I started working immediately because I was bored, but it's a big disconnect between what you do once you're inside the school, that's the prestigious thing to do versus when you're when you're in the classe prepa. So I really think that classe prepa is the real training program that you can get.
Host: The member at the back in the Hawaiian shirt.
Question: Thank you for being here. I'm curious about your experience, going through this transaction, and then now leading the company with the background of COVID. Now what are very much so unprecedented issues of supply chains, globalization, all sorts of other... war ongoing right now, things that really haven't happened in your lifetime. And then also just are quite circumstantially different from the past, and what experiences you've had in your working career up to this point that helped you through that. And then also what you've learned from the last two and a half years in that environment.
Alexandre Arnault: Sure. So super disrupt times. When I joined Tiffany in January of last year, for the first three months, there was no offices, I didn't meet a single person face by face. And I had to assess who was doing a good job, not a good job, who was doing what, all over Zoom, which people think that young people love zoom, I hate zoom. It was extremely, extremely difficult to understand and make right decisions like these and review products and designs and campaigns all behind the screen. So that's the first very, like, pragmatic impact that it had on the acquisition from joining the company. Then, the US was closed to the world for the first 12 months when I was there, so nobody could come, either talents or anything you wanted to do, you couldn't get out of the country or in the country because of the border closures, which was a huge difficulty to run the business in a good way. Then, obviously, supply chain is a huge issue for everyone. So I could go on and on about shipments of diamonds and gold and materials that are not getting in time or things like that, but I think everybody's facing that. So it's less proper to what we did at Tiffany. I think the fact that the acquisition happened right in the middle of COVID is definitely something that was the most disrupting to running the business, for sure. Then, I think it's the street smartness that I was talking about earlier is what allows the company and us to make decisions that can help you grow and go quicker in uncertain environments and environments where you haven't, never experienced that before. Hopefully, you'll never experience them again. You were asking for the last two and a half years. I remember in March of 2020, I was CEO of Rimowa and we were talking about COVID a little bit, and then the borders closed from a day to another, and we were saying suitcases. So we're like, Okay, what's going to happen? Like, we have 2300 factory workers, we're building 1000s of suitcases a day, like, what's going to happen to demand? Are we supposed to close the factories, let go of people, and it's very, very day by day, and then all that with lockdowns and things where you don't expect your business to be run this way ever. But it's just day by day you take it and you try to make the right decisions that you can for the business.
Host: We have time for probably one or two more questions. The member in the black jumper in the second row on my right.
Question: Hi. How do you think the popularity of fast fashion and increasingly short trend cycles and younger demographics impacts companies like Tiffany, who focus on the quality of their craft rather than the speed of production?
Alexandre Arnault: It's a great question. I think, and again, I'm not going to talk bad about fast fashion or competitors. I do think that it's a completely different business model that we have. We don't view ourselves at all as fast cycle companies, even if our fashion brands do six to eight collections a year sometimes. Everything is done with the utmost creativity, we never copy anyone, which I think a lot of fast fashion companies tend to do just for the sake of being fast. And I think, as long as we stay creative, we stay at the heart of what we do best, hopefully, we'll stay successful. So we really don't need to look at this this industry too much because it's just a different business. It's just like, if you were asking me of what I thought of food delivery, it's a great business. But like, it doesn't have a lot to do with what we do given the business model, even if we share a lot of customers. A lot of customers shop at Tiffany and also shop at fast fashion companies or get food delivered in their houses. So it's an ecosystem of people that we share, but we don't work the same way at all.
Host: Thank you. Next question, please. The member in the red coat in the front row.
Question: Hi. Thank you so much for coming. It's been such an interesting talk and everything. Thank you. You mentioned earlier, the Patek [unintelligible] watch, and obviously LVMH has been behind some incredibly high demand products like the like Dior Air Jordan, or the Supreme Rimowa suitcases that have all like, that are all like reselling at inflated prices. And I was just wondering what your thoughts were on this, like massive inflation on the resale market, and the resale market more generally? And what LVMH's approach is in that regard, especially as, like one of the criticism that can be is that it takes away the opportunity, like from loyal customers to shop? And yeah, thank you.
Alexandre Arnault: Yeah, so a few things. I think the inflation on the resale market for us is a matter of supply and demand. You have this in every industry, whether it's a company going public and the stock soaring on the first day, because supply and demand are not equal. We try not to look at it too much, even if a lot of people are excited about it. So, the resale market is very new, it's like, whatever, five, seven years old. Before that, it was much easier. Now, the first few collaborations we made, it was difficult to understand how we could allocate pieces to people. Because you want to please your loyal customers, you want to give a chance to everyone also to become a new customer and not having to be a customer for eight years to get access to this product. So it took a little bit of learning. I think every brand does it differently. But the way I view it is a combination of both. Whenever you know that you're doing a limited quantity product that you feel is going to be successful, A) it's not always successful, but when it is and the resale value skyrockets, we try to sell it to a combination of people who are loyal customers and new customers to make sure that we can be fair and equitable to everyone. That being said, products like the Patek Phillipe, for example, are completely disproportionate, because you can buy it for I think 50,000 or $60,000 and it's sold for 6 million. So that's like a real real money present you can make to someone. So we're trying to also find people who we know, actually want the product and not want the asset, if it makes sense. Because they consider this as an asset, and we sell products and craftsmanship and quality. We don't sell options or derivatives or things like that. So we really try to make sure that every client we pick to buy those products, whether they're loyal or new, we give them like an interview or a vetting or background check of some sort to make sure that it's going into the right hands. We make mistakes all the time, you'll see these products on a resale website at auction all the time, but we try to do it least we can.
Question: Okay, thank you so much.
Host: Very quickly, then, the gentleman in the blue jacket, last question, I'm afraid. Sorry.
Question: I did check with my friend for his question. I think I have a better one, so I'll stick to mine. Which brand that you presently don't own would you really like to acquire? What is it in those brands that you think would make it a good fit for LVMH?
Alexandre Arnault: Yeah, I can't really answer that question, I'm sorry. Because public markets and...
Alexandre Arnault: Or Tesla. It depends.
Host: Maybe the second part of the question, what do you look for in a brand that really gives it an LVMH stamp something?
Alexandre Arnault: Yeah, sure. I think what we look at is the core values of the company, which is the ones that we shared in the beginning. Quality, craftsmanship, and strong DNA. We don't want to buy, acquire gimmicky brands. We want acquire brands that have been here for a long time, that are proven, that have proven to be successful, at some point in time, it doesn't have to be the hottest brand at the moment, but brands that we believe we can also continue to grow along the lines of extraordinary product in terms of quality, craftsmanship, with a very strong DNA. I think more and more also, we look at, now that we're so large, we look at barriers to entry, to make sure that we're not buying another fashion brand that's going to compete with all the other fashion brands we have. But we would acquire a fashion brand that had strong barriers to entry, compared to the others that has a different value proposition for customers as well. Yeah, I think those are the key things that we look at. And then obviously financial performance is important for us, also, but that really comes at the end.
Question: Thanks. I did follow your work at Rimowa, I did buy a suitcase. I think you did a great job.
Alexandre Arnault: Great. Great. Buy another one.
Question: Actually, since you left, I'm switching to Globetrotters. So something's not working there right now.
Alexandre Arnault: You're switching to Globetrotter?
Alexandre Arnault: Why?
Question: I think they have better innovation, better design and better product?
Alexandre Arnault: Interesting. Well, if it breaks, don't call me. Go back to Rimowa.
Host: Before we finish, two quick questions from me. One that we ask all our speakers and one that I'm just personally curious about. We'll start with the latter. Diamonds. As someone who works at Tiffany, you must work with lots of diamonds. Do you have a preference between natural diamonds and synthetic diamonds? And which would you choose?
Alexandre Arnault: That's a great question, which I'm surprised no one has asked for now because it's very, very in the moment, so we don't sell lab grown diamonds at Tiffany. We have a very clear view, and I share this view, that we believe strongly in natural diamonds for a few reasons. One, it's a part of history. They take millions, thousands of years to be created inside of Earth. And it's a beautiful stone and product that has hours of craftsmanship also, once it's found. Then two, I think the story of the diamond. You can buy diamond for yourself or for someone you want to give it to. And would you rather own something that has been a part of the planet forever, almost forever, or that has been done in a microwave somewhere? I can't answer that for you, I know the answer for myself. Then, I think, a couple of things also to note. Number one is that the diamond industry is very present in Africa. If the lab grown diamond industry would take over the natural diamond industry, I think you put 13 or 14 million people out of work in Africa. And that could create extraordinary unrest that I don't see why you should create it. And then two, I think one of the things that's super important with diamonds is ethical diamonds. And at Tiffany, we pride ourselves to say that since 30 or 35 years, since we can, every single diamond is sourced in the most ethical way. And when we sell you a diamond, we'll know where it was found, who found it, how much that person was paid, who they were working for, where it was cut, etc, etc, because we really value ethical sourcing and ethical journey towards the diamond, from end to end. So once you have those criterias that are met, which, we pride ourselves to meet, I think natural diamonds are the way to go, for sure.
Host: And finally, a question we asked all of our speakers: in two or three sentences, what advice would you give to the members of the Oxford Union and the members of Oxford University, more generally, going forwards in life?
Alexandre Arnault: In general? In life?
Host: Yes, two sentences, anything. Any advice.
Alexandre Arnault: Kind of what I said earlier. Be curious. Listen to what you love more than to what people tell you, even if what you studied is what you're studying. I studied engineering and ended up working in diamond industry or jewelry industry, which has nothing to do with each other. So I would encourage you to do the same thing. And have fun along the way, also. Because I just turned 30 last week, so my 20s are gone forever. And it happens. It comes by.
Host: My 20s haven't started yet. That makes you feel old. Ladies and gentlemen, thank you very much.
Alexandre Arnault: Thank you very much.
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