Ben Gilbert: evaluation

Transcript context

…Yup. At a certain point, they're 50%, 60%, 70% of the products that are going into department stores to take care in the US like Nordstrom, Neiman Marcus, and the like. They go to the department stores, to the retailers, and they're like, look, the old model, where we sold you our goods wholesale, you bought it from us, and then you retail them, we're not going to do that anymore. We are going to retail our own products within your stores. This is the store within the store concept. We're going to pay you rent. We're going to lease space from you for a boutique within your department store. We're going to own the inventory. We're going to have the employees. We're going to control the selling experience. And we're going to make a lot higher margins, and you're going to be reduced to essentially like a third-rate landlord. The really interesting thing is, this all started happening in the early 90s before LVMH really went on their shopping spree. The department store folks were like, what do you mean you're just going to do this to us with Louis Vuitton and Dior, which even though it was owned separately, Bernard treated them all like one empire and operated as if it were rolled into LVMH, which it would later become but not for many years? When act this way and over time, he won the battle where department stores said, okay, we need your stuff in the stores to bring people in because you're starting to spend all this money on advertising, you're the products that people want, you're the brands they want to associate with, so we have to capitulate. I don't think it was economics first. I don't think it was, hey, these department stores are controlling all the margin, so we want to go in and just have a fixed cost with them rather than a rev share with them. I think it was more around, we want to start controlling the customer experience. Almost at admission that the department stores had figured out how to be the best at that, that was a thing that if Bernard wanted to really create multi-generational brands in this multi-generational holding company, they would have to have the direct relationship with the customers, too. It all works into the strategy. If you think about what you're doing when you're selling luxury, you are selling the experience. You're not selling a piece of leather. You're selling a dream. The idea that you would outsource the selling process of that to somebody else is an anathema to what it is you're doing.…

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