Retail therapy apparently soothes the fear of oncoming mortality—at least in the luxury sector.
That was the message offered by Valentino chairman Rachid Mohamed Rachid on the sidelines of the World Economic Forum in Davos, Switzerland on Thursday.
Rachid, who is the CEO of Mayhoola, the investment fund that owns Valentino and other luxury brands like Balmain, noted that most of the money that countries pumped into the market during the pandemic has found its way into the hands of the rich. As a result, “there’s lots of money within a segment of the population, and they’re trying to spend it on luxury goods,” Rachid told BloombergTV.
But there is an unusual motivator behind the spending habits of the rich, according to Rachid: the fear of death.
“After the pandemic, rich people are more aware they are going to die and want to spend the money on luxury and more exclusive things,” Rachid said, noting that the more exclusive the item, the more in-demand it is.
Indeed, luxury goods have been shown to help individuals cope with death-related anxiety, according to a study published by researchers at the University of Geneva and Haute Ecole Pédagogique Lausanne.
Buried in a Valentino jacket
Much of the boom in luxury spending has come from the U.S. Also speaking at Davos, both Gildo Zegna, CEO of Ermenegildo Zegna, and Antoine Arnault, CEO of LVMH’s Berluti brand, insisted their businesses will enjoy continued strong growth in the booming U.S. market.
Luxury giant LVMH singled out the U.S. as its best-performing market in terms of sales in 2021—accounting for 26% of sales last year. LVMH also beat analyst expectations in its latest earnings report in April, with luxury labels propelling a 30% rise in sales of LVMH’s largest division—fashion and leather goods.
Faced with strong demand, luxury brands are limiting supply and increasing prices. Chanel has limited the number of handbags clients can buy in certain markets, Chanel’s CFO Philippe Blondiaux said in an interview with Reuters, noting that the French brand won’t let consumers buy more than two quilted Classic Flap handbags a year. The company is planning an additional $1 billion investment this year with the help of the price increases.
Luxury industry prices have increased by around 8% over the last six months, with hikes in the range of 20%–23% at Louis Vuitton and Tiffany, according to recent estimates from HSBC.
