One of the most googled terms this year is “how to make easy money”. This term can vary, like “easy money from home”, “without initial investment”, etc. Making money has never been such an obsession. Since Covid, modern society has realized how fragile one personal situation is. New heroes appear and set up new dreams. Heroes come from nowhere and become billionaires overnight. It all started with Cryptocurrencies, then with NFTs, and now anything can become a focus of speculation. People believe that by choosing well, they can become rich quick enough. In this context, there are no barriers, rules, or morals. Making a lot of money only counts. Some people become sex workers 2.0 by selling their bodies online. Others learn how to mine crypto-currencies.
Honestly, brands are speculation targets, and people believe that acquiring the correct item will make them rich when reselling it. Speculation is also the preferred activity of many human beings around the world. After speculating in the stock exchange market, in the raw materials market and even assuming about countries’ debts, people now start imagining anything speculative. While some brands embrace this trend, others are fighting it as it distorts the initial purpose of the brand.
Allowing or orchestrating speculation about a brand is good. Is it?
Why should brands fight speculation anyway? If brands can make a lot of money, would it be a mistake not to embrace this mechanism? It creates new demand and potential new opportunities for growth. When Dolce & Gabanna launched a whole collection of NFTs and raised more than USD 6 million, was it good or bad for the brand? Only this year, Adidas, Nike and Gucci raised more than USD 137 million in NFTs.
Louis Vuitton x Nike by Virgil Abloh: Speculation paradise
When Louis Vuitton launched (today) the new collection of sneakers LV and Nike by Virgil Abloh, the entire mechanism created a demand for rarity; therefore, it was a success. People worldwide will precipitate themselves to the Louis Vuitton website to make their way to the restricted collection page. The brand knows that once Virgil Abloh passes away, anything the so regretted artist does become pure gold. The Nike AirForce 1 collaboration is composed of 9 different pairs of sneakers, all sold between USD2000 and USD2500. The sale is available only online, and the brand will allow a random choice of 10 users to access the specific online store every minute. Each user will have 10 minutes to buy only one pair of sneakers. Everything is set up to create a new speculative product:
- Limited quantities
- Not everybody will be able to acquire one
- Iconic brands products
- Cherish on the cake: The artistic mind passed away last year (even more rare)
We know that most people will try to acquire one pair of sneakers and resell it immediately after for at least double the price. And things can get very far in this speculation mode. After a couple of hours, you can already find the sneakers sold between USD 15’000 up to USD 41’000! So we can see most people do not care about the last tribute to the great artist Virgil Abloh. How authentic can fans be robbed by people who do not even appreciate the collaboration exercise? They are only looking for easy money. It is a pity that Louis Vuitton orchestrated such an exercise in that sense.
Bugatti: Where are the cars? In a Luxury prison…
Bugatti also has a very challenging situation. While the French constructor is very proud of the cars produced, most of them disappear from circulation. Indeed, Bugatti is suffering from high speculation about its vehicles. By definition, each model produced by Bugatti is a limited edition. When a new car is built and delivered, the previous one is not made anymore. Therefore, the happy few who managed to buy a new Bugatti are aware that the car is, by default, a collector. When Bugatti created the Chiron, only 500 units would be produced. Currently, only 40 production slots remain for the Chiron. Generally, Bugatti releases its cars on a ten years cycle.
Take, for example, the Bugatti Veyron. Between 2005 and 2015, you could acquire that car for around USD 1.5 Million (today’s indexed price rates). Today, it is worth USD 3 Million. It becomes an excellent investment. So the problem for the brand is that cars have become an item of speculation. The consequence of this situation is simple. The supercars end up in private garages, waiting to increase their value yearly. Some of them have never really burned asphalt since their acquisition.
What can be done? Bugatti is increasing the complexity of the process of buying a car. They will conduct a proper investigation to understand the potential acquirer’s motivation, what usage will the person do with the car, etc. This should help prevent those beautiful machines from disappearing from daily life.
Bugatti does not do much advertising. You will rarely see a Bugatti ad on TV, in the press or even online. The best advertising is when we see the cars circulating and driven by famous people like Cristiano Ronaldo. If all the cars end up in golden prisons, then the brand disappears from the world.
Petrus: Never tasted the wine.
Another exciting company suffering from speculation is the prestigious wine house, Pétrus. This legendary name is a wine estate in Bordeaux, France, on the Pomerol appellation’s eastern boundary with Saint-Émilion. It is a modest estate of only 11.4 hectares (28 acres) that produces red wine entirely from Merlot grapes (since the end of 2010) and no second wine. Jean-François Moueix and his children own the estate.
Although Pomerol wines have never been classed, Pétrus is primarily recognized as the appellation’s best. Pétrus is one of two Pomerol estates, along with Le Pin, that routinely ranks among the world’s most costly wines. A 750 cc bottle of Pétrus wine costs around $2,630 on average. The price of a bottle varies from 1,000 euros for a “small” vintage to more than 2,500 euros for a great vintage or even 6,000 euros for an exceptional vintage such as 1947 or 1961. According to the Wine-searcher site, Petrus is the sixth most expensive wine in the world, after five Burgundy wines, and an average price of US$625,000 (about €600,000) for all vintages and countries combined.
Petrus produces 30,000 bottles per year on average. Before bottling, the wine is aged for 12 to 16 months in oak barrels, half of which are new. The grapes are picked by hand over the course of two to three days. A thorough pre-assemblage vat selection eliminates specific parcels from the Grand Vin.
With such limited quantities and such a reputation, Pétrus is experiencing high speculation activity around certain vintages today. Private investors will purchase exceptional bottles to increase the price in time. Their main objective is to resell those bottles and make a capital gain. So they will never open those bottles and taste the wine. Today, restaurants are having difficulty acquiring certain bottles from specific years because they are no longer available to resell. Isn’t it a strange situation in which one of the best wines in the world cannot be tasted?
Worse, prices are rising, and some wine resellers will end up with many fantastic vintage bottles that will not find a suitable buyer as the big fan does not always have the budget to fulfil his ambition.
Rolex: at this stage, it is beyond simple speculation
Probably the biggest victim of speculation of all is Rolex. Each year the demand for Rolex watches is exponential, and many people found a way to make good money from reselling watches. A look you purchase today can be easily resold tomorrow the triple the initial cost. People get organized and try to buy any Rolex watch they can find just for reselling. The Swiss brand is trying to fight this organized speculation as it is unfair to the real fans who would hardly be able to fight those speculators.
How brands can react to this?
If a premium brand wishes to fight speculation, this means they need to pay attention to whom they sell and to be able to track their products. This situation will procure two main consequences: The first is that brands will only sell certain products to people they know as trusted customers. The second point is that distribution will be compromised. Is it a good thing? Probably we would go back in time when certain products would be a rarity owned only by some happy few, generally outstanding brand advocates.
When CHANEL released its eponymous fragrance, Chanel N 5, in 1921, nobody could purchase it as it was offered as a gift to their best customers. So if you saw someone wearing that fragrance, it was a brand advocate or a customer.
We can imagine that more and more brands, especially those mentioned above, will pay attention to who is buying their products. This would help make the difference between actual customers and mercantile speculators. Warren Buffet, a renowned speculator, summarizes things very well: ” It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you will do things differently“.
Information sourced by the author for luxuryactivist.com. All content is copyrighted with no reproduction rights available. Images are for illustration purposes only.