Over the weekend, Yves Carcelle, former leader of the luxury brand Louis Vuitton, passed away in Paris at the age of 66. In obituaries and social-media posts, friends and colleagues have remembered him as a warm, charming character, someone with "a rare human touch."
Writing in Vogue, fashion journalist Suzy Menkes conveys a story that captures how that charm and a keen understanding of other people alloyed his business success. As Menkes tells it, Carcelle loved to recount an early trick of his from his early days as a traveling salesman, long before he had risen up the ranks of the luxury product world:
Taking to the road with a girlfriend, the young Yves would send her into a hardware store, asking with flirtatious enthusiasm for a new product he was hoping to sell. Ten minutes later, he would knock on the door of the same door, offering to supply the goods. The success was instant.
But a focus on his character perhaps gives short shrift to the aggressive business strategy that Carcelle employed in order to make Louis Vuitton into the fashion-industry leader that it is today. Vanessa Friedman argues in The Times that "his real, lasting contribution to the industry" was "extreme verticalization."
What is meant by this? In a word: control—control of product (and, with it, image) from production to store shelf. As Friedman writes:
From the beginning, one of his biggest strategic moves for Vuitton was to seize control of distribution (Vuitton has no wholesale business, and only in the Middle East do they have a local partner), so that the company controlled not only the creation of the product but what happened to it from the moment it left the factory to the moment of consumer interface.
This gave the company not only extraordinary information about its customers (big data before there was big data), but the ability to shape its image and inventory. It also meant, as he told me often, that the products never went on sale and they never sold “in airports,” important both in terms of exclusivity and positioning.
Carcelle was not alone in the luxury-goods industry in a push to vertically integrate in recent decades. A paper by French economist Franck Delpal says that, in an age when many industries are characterized by ever-more-extensive outsourcing, the fashion industry has been in a "deep movement of vertical integration" for 30 years, pulling in all aspects of their business, from sourcing to selling, under their roofs. (During this period, due in part to globalization and a growing elite class around the world, the luxury-goods market has grown rapidly. According to Delpal, citing figures from Bain & Co., "sales of luxury products passed from 72 billion euros in 1994 to 168 billion euros in 2010, that is to say an average annual growth rate of five percent.")
Louis Vuitton, Delpal's paper shows, was a leader in that vertical-integration movement, adding a new tannery in Belgium; controlling the manufacture of leather goods in more than 20 production plants in France, Spain, the U.S. and Italy; and adding, between 2003 and 2010, more than 100 new stores, including one in Ulaanbaatar, Mongolia. It was for this expansion that the current CEO of Louis Vuitton remembered Carcelle as "the Christopher Columbus of luxury."
Vertical integration makes sense for an industry that traffics in the value of a label; with such precise control, the company can ensure that the label stands for exactly what it wants. The effects, however, go beyond merely quality control for products, Delpal says, and shape the entire industry: All that growth in luxury goods in recent decades has come from the biggest, oldest players, not new brands. They can't afford to enter. This is the reason why, Delpal writes, "in spite of the strong growth of this market, few companies have emerged during the last 20 years."