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LVMH’s Billion Dollar Retail Bet

The luxury giant has spent 15 years and nearly $1 billion resurrecting Parisian department store La Samaritaine. Does it still make sense?
LVMH chief executive Bernard Arnault poses with his executive committee after the ceremony marking Paris' department store 'La Samaritaine' reopening after 16 years of closure. Getty Images.
LVMH chief Bernard Arnault poses with his executive committee following the reopening of Paris department store La Samaritaine after 16 years of closure. Getty Images.

LVMH’s newly reopened La Samaritaine department store in the heart of Paris is a spectacular luxury temple. It could not have launched at a worse time.

The French luxury group has spent 15 years and nearly $1 billion to resurrect the iconic art deco and art nouveau retail space sandwiched between Notre Dame and the Louvre, which was forced to close in 2005 over safety concerns.

The project to revamp the 19th-century store as a duty-free shopping mall and luxury hotel took years of planning negotiations to get off the ground, with a new glass facade proving particularly controversial. Plans to reopen last year were derailed by the pandemic.

It’s finally opened its doors as France emerges from months of restrictions that only allowed for indoor dining at the beginning of the month. The lavishly restored, 20,000 square metre retail space houses a dozen restaurants, alongside more than 600 brands and the largest beauty hall in Europe.


But the store’s reopening this week, marked by a ceremony attended by French President Emmanuel Macron, launched the retail playground to a Paris largely devoid of a key target demographic: high-spending tourists.

“You could say, without being provocative, that this is the worst time to open a big luxury department store in the heart of Paris,” said Thomas Chauvet, head of luxury goods equity research at Citi.

It’s a setback the company has largely shrugged off. La Samaritaine was always intended for local consumers too, even if international travellers were expected to help drive sales, said Eléonore de Boysson, regional president for Europe and the Middle East at DFS, the travel retail and duty free company majority-owned by LVMH that runs the department store. Things may start slow, but long-haul travel should return in the summer of next year, she added.

Near-term, “for sure it won’t be what we expected in terms of financials,” De Boysson said. But “it doesn’t really matter because we are doing this store for the next several decades.” Already, footfall has exceeded expectations, driving queues to enter the space this week, she said.

But in a world where the pandemic is redrawing where luxury’s most important consumers spend their money geographically and digitally, will LVMH’s big bet on retail pay off? Or is the group’s shiniest new luxury temple already a relic?

Even before the pandemic, there were questions about the relevance of the department store format. LVMH first acquired a stake in La Samaritaine in 2001, shortly before it shuttered. The group bought it outright in 2010 and the retail landscape has changed dramatically since then, leaving several once well-respected multi-brand retailers bankrupt.

The pandemic has only accelerated those trends. E-commerce is expected to be the leading channel for luxury purchases by 2025, according to consultancy Bain & Company. By contrast, department stores’ share of the luxury market is expected to continue eroding.

Meanwhile, the prognosis for tourism is murky. International travel is not expected to return to pre-pandemic levels before 2023 or 2024, according to BoF and McKinsey’s The State of Fashion 2021 report. And while France reopened to foreign tourists earlier this month, China, whose consumers drive luxury spending, is planning to keep travel restrictions in place for at least another year, according to a report in The Wall Street Journal.


And even when they start to travel again, tourists may be less inclined to do so to shop. By the middle of the decade, Bain projects around 30 percent of China’s luxury sales will take place domestically, up from 11 percent in 2019. Domestic duty free hubs like Hainan have boomed through the pandemic, while travel retail elsewhere has withered.

“Chinese consumers are getting more accustomed to buying in China, and there is a lot of competition,” said Bain partner Claudia D’Arpizio. “It’s a tougher environment.”

On the other hand, there is still space for retailers to distinguish themselves with the right product mix, atmosphere and service, she added. Bain’s projections see Chinese consumers making up half of luxury spending by 2050, leaving plenty of spending still taking place internationally.

Elsewhere, analysts pointed to luxury multi-brand retailers like Harrods in the UK or LVMH’s Le Bon Marché in Paris as examples of stores that make the model work, capitalising on their central locations and delivering luxury service and experience.

La Samaritaine is well positioned on those fronts. It’s already a historic landmark with the cultural credibility to become a destination in its own right. It has a carefully curated mix of stores to appeal to a wide audience with offerings ranging from luxury to contemporary labels and streetwear, several of which are exclusive to the space. Its restaurant offerings are intended to attract locals from nearby offices and around the city for lunch and after hours.

“Everything we give to clients are things you cannot give online,” De Boysson said. And this is not a space she intends to let feel dated in ten years. “The store will evolve and we will need to be very agile and adapt to the consumer.”

Current nods to the time include markings for the best angles for selfies throughout the store and ateliers where visitors can personalise champagne bottles.

LVMH is a long-term investor with deep pockets so whether and when La Samaritaine makes money is not going to shake the company’s balance sheet. The store is high-profile, but it’s a tiny part of the group’s portfolio. And while the Bernard Arnault-controlled group has consistently proved an aggressive dealmaker, it can afford to be agnostic if luxury shoppers choose to frequent its stores at home, leaving La Samaritaine as a valuable symbol of its brand.


“I’m not saying spending on luxury is zero sum... but you have to believe if it’s not happening at La Samaritaine, it’s happening somewhere in Asia,” said Chauvet.



Nike flagship in Guangzhou, China. Nike.
Nike flagship in Guangzhou, China Nike flagship in Guangzhou, China. Nike.

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EssilorLuxottica’s possible $8.6 billion legal dispute. The Ray-Ban maker is considering suing takeover target GrandVision after a court ruled the Dutch eyewear group breached the terms of their proposed acquisition agreement, Reuters reported.

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Kering invests in handbag subscription service Cocoon. The luxury giant’s participation in the funding round is the latest signal of its interest in exploring new business models like rental and resale.

Report: China to keep borders closed another year. The country will retain restrictions on travel until the second half of 2022, according to The Wall Street Journal. The news is a blow to retailers who had been hoping for a return of high-spending travellers.


Sephora store.
Sephora store. Shutterstock. Sephora and Zalando are partnering to sell prestige beauty. Shutterstock. (Shutterstock)

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Allure's editor in chief Michelle Lee is heading to Netflix. Getty Images.
Allure's editor in chief Michelle Lee is heading to Netflix. Getty Images. Michelle Lee is leaving Allure to join Netflix. Getty Images.

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Amazon Prime Day.
Amazon Prime Day. Shutterstock. Amazon Prime Day. (Shutterstock)

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Hypebeast records $9.1 million profit in 2021, forecasts strong growth. The Hong Kong-based publisher said Tuesday that profits rose 7 percent in its financial year ending March 31 compared to a year earlier, despite revenue declining 10 percent on pandemic headwinds.

Compiled by Joan Kennedy.

Disclosure: LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholders’ documentation guaranteeing BoF’s complete editorial independence.

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