Dior’s $57 Handbag Retailing for $2800

Welcome to the 45th edition of Maximalist! Dive into the ultimate guide, filled with insider insights into the world of fashion, art, real estate, travel, jewelry, and horology.

The world of luxury is never boring, and this week is no exception. Let’s dive in!

Markets

On this week’s agenda:

1. Dior’s $57 Handbag Retailing for $2800

2. LVMH Set to Replace Rolex in Formula 1 Sponsorship

3. Porsche to Discontinue 718 Models by 2025

4. ACCOR and LVMH Forge Strategic Alliance to Revitalize Orient Express

5. $2.65 Billion Deal - Neiman Marcus Merger with Saks Fifth Avenue

Dior’s $57 Handbag Retailing for $2800

Recent investigations into the labor practices behind some of the world's most prestigious luxury brands, particularly Dior and Giorgio Armani, have unveiled a disconcerting disparity between the cost of production and the retail pricing of luxury handbags, coupled with alarming working conditions. These brands, symbols of elegance and opulence, are now under scrutiny for the exploitation of workers in their Italian manufacturing units.

Economic Discrepancies and Labor Exploitation

Dior, owned by the French luxury conglomerate LVMH, has been reported to pay a mere 53 euros for each handbag, which then sells for approximately 2,600 euros in retail outlets. This stark price discrepancy raises significant ethical questions about the margins being made on the backs of low-wage labor. Similarly, Giorgio Armani’s practices have come to light, where handbags are procured from suppliers for 93 euros and sold for 1,800 euros. These revelations have emerged from investigations led by Milan prosecutors who have been examining the supply chains of these brands.

Working Conditions in the Spotlight

The conditions under which these handbags are manufactured are particularly troubling. Workers are reportedly paid between 2 to 3 euros per hour, enduring shifts that can extend up to 10 hours a day without adequate breaks. Many of these laborers are migrants who lack proper contracts, and some are even illegal immigrants, exploited for their willingness to work in substandard conditions. Investigations have revealed that some workers were forced to sleep at their workplaces, a clear violation of labor laws and human dignity.

Safety practices are equally concerning, with reports that some factories had removed safety devices from machines to increase production output, compromising worker safety for economic gain. These practices not only endanger the workers but also highlight a systemic issue within the supply chains of luxury brands.

Legal and Regulatory Responses

In response to these findings, the Milan court has taken significant measures by appointing commissioners to oversee the operations of the implicated manufacturing units, ensuring they adhere to labor laws while continuing to operate. This intervention aims to rectify the immediate issues and set a precedent for legal and ethical compliance in the industry.

Both LVMH and Armani have expressed their commitment to resolving these issues, stating that they have implemented control measures to minimize abuses within their supply chains and are collaborating transparently with the authorities to ensure improvements.

Broader Implications for the Luxury Market

These investigations shed light on a pervasive issue within the Italian luxury goods sector, which is responsible for 50-55% of the global luxury goods production. The 'Made in Italy' label, long revered in the fashion world, now faces challenges as these practices come to light, prompting a reevaluation of what ethical production should look like in the luxury fashion industry.

This scrutiny is not just about correcting individual abuses but also about addressing a widespread, systemic problem that affects competition and the very essence of what luxury brands stand for. As Milan's court system president Fabio Roia stated, eradicating labor exploitation could diminish profits but would foster legal competition and elevate industry standards, ensuring that luxury remains synonymous with quality, not just in craftsmanship but also in ethical practice.

LVMH Set to Replace Rolex in Formula 1 Sponsorship

In a significant shift, Rolex might conclude its sponsorship with Formula 1 by the next season, after an 11-year partnership. According to a report from Coronet, a French online magazine that covers Rolex, the luxury group LVMH is expected to take over the role with a substantial deal. This transition was first reported by sources in Geneva.

Rolex has been the official timekeeper of the Formula 1 World Championship since 2013, a role that did not include sponsorship of individual teams but rather a broader partnership with the race's organizer, the International Automobile Federation (FIA). During its tenure, Rolex ensured its presence across all 23 race stages, unlike other brands that often sponsor specific teams and drivers.

Forbes has noted that Rolex's annual sponsorship fee stands at about $50 million. In contrast, the deal with LVMH is reportedly valued at $150 million per year, significantly elevating the financial stakes.

Starting January 2025, LVMH is slated to become the official timekeeper of Formula 1. This sparks curiosity among watch aficionados about which of LVMH's renowned brands, such as TAG Heuer or Hublot, might appear at F1 events. TAG Heuer, in particular, is noted for its deep roots in motorsport.

Beyond Formula 1, Rolex has a strong presence in sponsoring high-profile sporting and arts events, including tennis, golf, and equestrian activities. Meanwhile, LVMH has made its mark in football, with Hublot holding partnerships with both FIFA and UEFA.

Porsche to Discontinue 718 Models by 2025

Porsche is set to phase out the combustion engine versions of its 718 Cayman and 718 Boxster by mid-2025, making way for new electric variants. This decision was confirmed by Porsche's production manager, Albrecht Reimold, in an interview with the German publication Automobilwoche. The move is not due to declining sales but rather to accommodate the upcoming electric versions of these beloved sports cars.

The end of the internal combustion 718 models marks a significant shift in Porsche's lineup. Reimold has tested the electric replacements himself and assures that they retain the thrilling driving experience Porsche enthusiasts expect. The new electric 718 models will be available in both coupe and convertible forms, similar to their predecessors.

This transition has been more abrupt in Europe, where recent cybersecurity regulations have expedited the discontinuation of the gasoline-powered models, including the Macan SUV. The change has been partly driven by limited availability of parts for the gas versions and a strategic move towards electric vehicles.

While specific details on the electric 718s are still sparse, their anticipated debut in 2025 is highly awaited. In the meantime, Porsche fans might consider acquiring one of the last gas-powered 718s before they become relics of a bygone era.

ACCOR and LVMH Forge Strategic Alliance to Revitalize Orient Express

In a landmark move in the luxury travel industry, the Louis Vuitton Moët Hennessy (LVMH) group, a global leader in luxury goods, has entered into a strategic partnership with the Accor group. This collaboration, formalized in June 2024, is set to enhance the legacy and operations of the iconic Orient Express.

Advised by Véronique Dahan and Charlotte Gauvin of Joffe & Associés, who handled the intellectual property aspects of the deal, this partnership aims to expand the Orient Express brand into new dimensions of luxury travel. The initiative includes the development of new trains, luxury hotels, and sailing ships under the Orient Express banner.

The Orient Express, which began its journey in 1883 connecting Paris and Vienna and later expanded to include routes to Venice and Istanbul, has long been a symbol of European luxury travel and cultural exchange. The train route is celebrated for connecting diverse cultures across Europe, epitomizing the blend of Eastern and Western heritage.

Since its acquisition by Accor in 2022, the Orient Express has seen a resurgence with the restoration of historic trains and the planned launch of a sailing yacht in 2026. Moreover, the brand is set to open its first branded hotels in Rome and Venice soon, with more locations underway.

Bernard Arnault of LVMH and Sébastien Bazin of Accor both expressed great optimism about the future of this partnership. They highlighted that this new venture not only aims to open new horizons in luxury travel but also to reinvent and enrich the art of travel while preserving and celebrating the historic and cultural significance of the Orient Express.

$2.65 Billion Deal - Neiman Marcus Merger with Saks Fifth Avenue

In a significant move in the luxury retail sector, Saks Fifth Avenue's parent company, HBC, has acquired Neiman Marcus Group for $2.65 billion. This merger gave birth to a new entity, Saks Global, which aims to redefine technology-powered luxury shopping. The deal also involves a strategic partnership with Amazon, who will collaborate with Saks Global post-transaction to innovate customer and brand partner experiences.

Neiman Marcus Group CEO Geoffroy van Raemdonck expressed his optimism about the acquisition, emphasizing the proactive strategy behind the merger and its potential to enhance value for customers and brand partners. "This announcement is a testament to our team's unwavering commitment to building rewarding customer relationships, driven by our differentiated business model," van Raemdonck noted. He highlighted the shared vision with Saks Fifth Avenue in delivering top-tier luxury fashion.

Saks Global will manage an impressive portfolio of brands including Saks Fifth Avenue, Saks OFF 5TH, Neiman Marcus, and Bergdorf Goodman, all continuing under their current brand identities. Marc Metrick, the current CEO of Saks.com, will lead Saks Global.

The merger is not only a consolidation of luxury retail giants but also a leap towards integrating advanced technology in the retail experience. Saks Global plans to enhance its personalized shopping experiences through the use of first-party data and AI, enabling sales associates to provide superior service. The companies aim to drive further advancements in online functionality, improve fulfillment processes, and provide broader access to merchandise.

Metrick, enthusiastic about the merger, said, "Saks has remained steadfast in our commitment to be at the forefront of luxury fashion, meeting customers not just where they are, but where they are going." He praised Neiman Marcus Group for its significant contributions to the luxury sector and is excited about the future growth and career development opportunities that Saks Global will facilitate for its partners and employees.

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