I came across the bullwhip effect as a descriptor recently in discussions around the global chip shortage. Bullwhip effect is a concept that is well known in supply chain circles.
The bullwhip effect is also known as the Forrester effect. Disruption ripples back from the retailer, through the wholesaler, manufacturer, on to their suppliers and so on.
The usual causes for the effect are:
Demand forecast updating – this might be where a company might want to change their product mix to match consumer demand, if a product is very successful or grossly underperforms
Order batching – where members of the supply chain round up, or round down the quantity of orders. This happens with the periodic memory gluts or shortages affecting the technology sector
Price fluctuations – price discounts can encourage non-linear increases in purchases as it becomes worthwhile for customers to stock up, hedging against increased prices down the line. Oil reserves would be a classic example of this phenomenon
Rationing and gaming – buyers and sellers delivering over or under their order quantities. An example of this would be the actions of Enron in US electricity markets. This could be used in a positive way to promote changing the supply chain like renewable sources of electricity generation
What caused the global chip shortage that is driving the bullwhip effect?
There were three causes to the global chip shortage
Partial shutdown – The semiconductor industry went through a partial shutdown because of the COVID-19 epidemic. This meant that there was a smaller supply of chips.
Unusual increase in demand – Home working drove an increase in demand: increased sales in PCs, wi-fi routers, external hard drives, mice, keyboards, printers and so on. There was also a corresponding increase in home entertainment as consumers upgraded smart TVs, Apple and Roku set top boxes. This all coincided with the launch of the next generation of gaming consoles by Sony and Microsoft – which can usually drive a squeeze on their own
Supply chain disruption – A fire in Japan at Renesas Electronics. A trade war affecting Chinese semiconductor manufacturers. Freezing winter weather in Texas disrupting employees and their businesses. Now there is a drought in Taiwan affecting TSMC – the world’s largest semiconductor foundries
Liberation Day was a glorified press conference where the Trump administration revealed their tariff scale on every country around the world. Weirdly enough, Russia wasn’t tariffed. Here’s some of the interesting analysis I saw prior to, and after the event.
The Trump administration leant into an aesthetic influenced by patriotic memes, the steeliness of The Apprentice and generative AI – a look I call Midjourney Modern. Liberation Day was no exception.
The Economist did a hot take that calls the whole thing a ‘fantasy’.
America’s Cultural Revolution – by Stephen Roach – Conflict – Stephen Roach was an Asian focused chief economist at Morgan Stanley. The American Cultural Revolution narrative is something I have heard from a few contacts in China and Roach echoes that perspective in this article.
Opinion | I Just Saw the Future. It Was Not in America. – The New York Times – President Trump is focused on what teams American transgender athletes can race on, and China is focused on transforming its factories with A.I. so it can outrace all our factories. Trump’s “Liberation Day” strategy is to double down on tariffs while gutting our national scientific institutions and work force that spur U.S. innovation. China’s liberation strategy is to open more research campuses and double down on A.I.-driven innovation to be permanently liberated from Trump’s tariffs.
Beijing’s message to America: We’re not afraid of you. You aren’t who you think you are — and we aren’t who you think we are. – Thomas Friedman – Overall, I would agree with the sentiment, BUT, you have to remember what he’s been shown is the best view of what China can do and reality is much more complex. I still think that there is a lot of the future being made in places like France, Finland, Latvia, Japan, Singapore, South Korea and Taiwan – as well as China. What China does best is quantity that has a scale all of its own, something America has historically excelled at.
DIY Birkin? China’s Gen Z 3D print dupes, share on RedNote | Jing Daily – Armed with affordable 3D printers and free design templates, young consumers are crafting their own versions of iconic luxury accessories. – Homage flowerpots or penholders rather than ‘dupes’ but 3D printing feels mainstream
Online
Revealed: Google facilitated Russia and China’s censorship requests | Censorship | The Guardian – After requests from the governments of Russia and China, Google has removed content such as YouTube videos of anti-state protesters or content that criticises and alleges corruption among their politicians. Google’s own data reveals that, globally, there are 5.6m items of content it has “named for removal” after government requests. Worldwide requests to Google for content removals have more than doubled since 2020, according to cybersecurity company Surfshark.
WeRide to open driverless taxi service in Zurich | EE News – Chinese operator is set to launch a fully unmanned taxi service in Zurich in the next few months. This follows the launch of its latest generation Robotaxi, the GXR, for fully unmanned paid autonomous ride-hailing services in Beijing. The GXR, with a L4-level redundant drive-by-wire chassis architecture, is WeRide’s second Robotaxi model to achieve fully driverless commercial operations in the city following pilot trials.
Welcome to my March 2025 newsletter, this newsletter marks my 20th issue. Or one score, as they used to say down the Mecca bingo hall. A score is a common grouping used in everything from selling produce to indicating the scale of an accident in a news headline. In Japan, it signals legal adulthood and is celebrated with personal ceremonies.
I didn’t know that March was Irish-American Heritage month. I just thought that we had St Patrick’s Day.
Hopefully April will bring us warmer weather that we should expect of spring. In the meantime to keep my spirits up I have been listening to Confidence Man.
New reader?
If this is the first newsletter, welcome! You can find my regular writings here and more about me here.
Things I’ve written.
I curated some of the best analyses on DeepSeek, and more interesting things happening online.
Pharmacies are blatantly marketing prescription-only medicines. It’s illegal, there is no GLP-1 permission that allows consumer marketing of prescription-only medicines used for weight loss and weight management.
Clutch Cargo – how a 1960s animation managed to transform production and show the power of storytelling.
A look back at Skype. I will miss its ring tone when it shuts down in May.
Looking at the Majorana 1 chip promising a new generation of quantum computing, generative AI production, refrigeration and an oral history of Wong Kar wai’s In theMood for Love&2046.
Books that I have read.
Now and again you come across a book that stuns you. Red Sky Mourning by Jack Carr, is one such book, but not in a good way. Carr is famous because of his service in the American military which he has since parlayed into a successful entrepreneurial career from TV series to podcasts. So he covers all things tactical knowledgeably. Conceptually the book has some interesting ideas that wouldn’t feel that out of place in a Neal Stephenson or William Gibson novel. So Carr had a reasonably solid plan on making a great story. But as the saying goes, no plan survives first contact with the enemy. Carr’s enemy was his own writing style without aggressive editing. The editing process is a force multiplier, breathing the artistic brevity of Ernest Hemingway into a manuscript and protecting the author from their own worst impulses. I found the book hard to read because I would repeatedly run up against small niggly aspects, making it hard to suspend disbelief and get into the story. Carr loves his product brands, in this respect Red Sky Mourning reminded me a lot of early Brett Easton-Ellis. Which got me thinking, who is Carr actually writing for? Part of the answer is Hollywood, Carr’s books have been optioned by Amazon, one of which was adapted as The Terminal List. I imagine that another audience would be young (privileged caucasian male) management consultant types who need a bit of down time as they travel to and from client engagements – after a busy few days of on-site interviews, possibly with a tumbler of Macallan 12 – which was purchased in duty-free. The kind of person who considers their Tumi luggage in a tactical manner. The friend who gave it to me, picked it up for light reading and passed it on with a degree of incredulity. On the plus side, at least it isn’t a self-help book. It pains me to end a review so negatively; so one thing that Jack Carr does get right is the absolute superiority of Toyota Land Cruisers in comparison to Land Rover’s products. If you have it in hard copy, and possess sufficient presence of mind, it could serve you well in improvised self-defence as it comes in at a substantial 562 pages including the glossary and acknowledgements.
The Decagon House Murders by Yukito Ayatsuji is a classic murder mystery. A university crime club with each member named after a famous fictional detective gather to investigate a murder on an isolated island. The book slowly unravels the answer to the K-University Mystery Club’s annual trip bringing it to a logical conclusion.
She Who Became the Sun by Shelley Parker-Chan was an interesting piece of Chinese historical fiction. It is less fantastic than the wuxia works of Louis Cha that dominated the genre previously. More here.
Chinese Communist Espionage – An Intelligence Primer by Peter Mattis and Matthew Brazil tells the story of modern China through the story of its intelligence services. From the chaos under Mao purges and the Cultural Revolution to forces let loose by ‘reform and opening up’. More here.
In the early 2000s, as we moved towards a social web, we saw a number trends that relied on the knowledge of a group of people. Crowdsourcing channeled tasks in a particular way and became a popular ‘innovation engine’ for a while. The wisdom of crowds captured the power of knowledge within nascent question and answer platforms. Prediction markets flourished online. Superforecasting by Tetlock and Gardner try and explain who and why these models work, particular where they rely on knowledge or good judgement. The book does a good job at referencing their sources and is readable in a similar way to a Malcolm Gladwell book.
Things I have been inspired by.
Why does humour in advertising work?
My Dad is a big fan of the Twix bears advertisement, so much so, that he repeats the script verbatim when it comes on. We know that humour works and that it’s under-used in advertising, but it would be good to have data behind that in order to support it as a suggestion to clients.
Humour as a memory hook: Comedy surprises and delights, it makes consumers stop, engage and then remember. Over time it builds into nostalgia.
It relies on universal insights – that work across age cohorts, cultures and geographies. Its also intrinsically shareable – and not just on social platforms.
Celebrity x humour drives fame: Well-executed humour paired with celebrity endorsements, (Ryan Reynolds being a standout example) boosting brand impact.
Well executed humour can supercharge marketing ROI. Ads with humour are 6.1x more likely to drive market share growth than neutral or dull ads.
Accessible advertising
The Ad Accessibility Alliance have launched The Ad Accessibility Alliance Hub, which made me reflect on accessibility as a subject. I can recommend the hub as it provides good food for thought when considering mandatories for creative. ISBA’s reframing accessible advertising helps make the business case beyond the social benefits of inclusivity. The ISBA also provides links to useful assets. Finally, I can recommend Designing Interactions by Bill Moggridge which provides a broader context to help think about accessible advertising as part of a system.
Social platform benchmarks
RealIQ have done great research of engagement rates across thousands of brands in a number of sectors. What we get is an engagement benchmark set across platforms and industries. We can debate the value of engagement, and the different nature of platforms, so you can’t compare across platforms.
Chart of the month.
What I could compare in the RealIQ data was the rate in change in engagement rates year-on-year. The clear losers over time were Facebook and Twitter at an aggregate level. This also explains the x-tortion (as Forrester Research described them) tactics being deployed by Twitter. Combining high rates of engagement decline and reduced reach means that Twitter doesn’t look particularly attractive as a platform vis-a-vis competitors.
Things I have watched.
Hunt (헌트) is a great Korean film. It provides a John Le Carré style spy hunt story in 1980s era South Korea prior to the move towards democracy. It’s a stylish, if brutal film that touches on parts of South Korea’s history which we in the west tend to know very little about. Hunt takes an unflinching look at the legacy of the military government as well as their North Korean rivals.
Philip Kaufman‘s The Right Stuff is a movie adaptation of Tom Wolfe’s account based on US post-war fighter development through to the height of the Mercury space programme. The film went on to receive eight nominations at the Academy Awards. You have an ensemble cast of great character actors who deal with the highs and lows at the cutting edge of aerospace technology. The Right Stuff is as good as its reputation would have you believe. The film captures the drama and adventure that Wolfe imbued his written account of the journey to space. As a society it is good to be reminded that if we put our mind to it the human race is capable of amazing audacious things.
Disco’s Revenge – an amazing Canadian documentary which has interviews with people from soul and disco stars including Earl Young, David Mancuso, Joe Bataan, Nicky Siano – all of whom were seminal in the founding of disco.
It also featured names more familiar to house music fans including DJ Spinna, Frankie Knuckles, Kevin Saunderson and John ‘Jellybean’ Benitez – who was key in proto vocal house productions.
The documentary also shows hip-hop was influenced by disco mixing.
Along the way it covers the fight for gay rights in the US and its easy to see the continuum onwards to house music and the current dance music scene. It’s one thing knowing it and having read the right books, but the interviews have a power of their own.
It takes things through to ‘club quarantine’ during the COVID-19 lockdown.
I hate that’s its streaming only, rather than Blu-Ray but if you can put that one issue aside and watch it. If you try it and enjoy it, you’ll also love Jed Hallam‘s occasional newsletter Love Will Save The Day.
I picked up a copy of Contagion on DVD, prior to COVID and watched it with friends in a virtual social manner during lockdown. This probably wasn’t the smartest move and I spent the rest of lockdown building my library of Studio Ghibli films instead. It’s a great ensemble film in its own right. Watching it back again now I was struck by how much Contagion got right from Jude Law’s conspiracy theorist with too much influence and combative congressional hearings.
The film makers had the advantage of looking back at SARS which had hit Hong Kong and China in 2002 – 2004. Hong Kong had already been hit by Avian flu H5N1 from 1997 to 2002. Both are a foot note in history now, I had a friend who picked up their apartment on the mid-levels for 30 percent below 1997 market rates due to the buffeting the Hong Kong economy took during this time. The only thing that the film didn’t envision was the surfeit of political leadership in some notable western countries during COVID, which would have added even more drama to Contagion, not even Hollywood script writers could have made that up.
Hong Kong film star Leslie Cheung was taken from us too early due to depression. But the body of work that he left behind is still widely praised today. Double Tap appeared in 2000. In it Cheung plays a sport shooter of extraordinary skill. The resulting film is a twisting crime thriller with the kind of action that was Hong Kong’s trademark. It represents a very different take on the heroic bloodshed genre. At the time western film critics compared it to The Matrix – since the US film was influenced by Hong Kong cinema. Double Tap has rightly been favourably compared by film critics to A Better Tomorrow – which starred Cheung and Chow Yan Fat.
Useful tools.
Knowledge search
Back when I worked at Yahoo!, one of our key focuses was something called knowledge search. It was searching for opinions: what’s the best dry cleaner in Bloomsbury or where the best everyday carry items for a travelling executive who goes through TSA style inspections a few times a week. Google went on to buy Zagat the restaurant review bible. Yahoo! tried to build its own corpus of information with Yahoo! Answers, that went horribly wrong and Quora isn’t much better. A more promising approach by Gigabrain tries to do knowledge search using Reddit as its data source. I’ve used it to get some quick-and-dirty qualitative insights over the past few months.
Digital behaviour ‘CliffsNotes’
Simon Kemp launched this year’s Digital 2025 compendium of global online behaviours. It’s a great starter if you need to understand a particular market.
Encrypting an external hard drive
I needed to encrypt an external hard drive to transfer data and hadn’t used FileVault to do it in a while. Thankfully, Apple has a helpful guide buried in its support documents. From memory the process seems to have become more complicated over time. It used to be able to be done by using ‘control’ and click on the drive before scrolling down. Now you need to do it inside Disk Utility.
The sales pitch.
I am now taking bookings for strategic engagements; or discussions on permanent roles. Contact me here.
Ok this is the end of my March 2025 newsletter, I hope to see you all back here again in a month. Be excellent to each other and onward into spring, and enjoy the Easter break.
Don’t forget to share if you found it useful, interesting or insightful.
Get in touch if there is anything that you’d like to recommend for the newsletter.
The IT director is seeing a return to power and its thanks to the power of hackers and AI. The smartphone, the resurgence of Apple and SaaS saw IT decisions become more organic thanks to increased access to online services that provided better features than traditional enterprise software companies and the rise of knowledge working. IT teams found management of mobile devices onerous and faced hostile users.
Michiko Fukahori of the Japanese National Institute of Information and Communications Technology at ITU TSB – 8th Chief Technology Officers (CTO) Meeting
This meant that the IT director became less important in software marketing. A decade ago marketing had pivoted to a bottom up approach of ‘land and expand’. This drove the sales of Slack, Monday.com and MongoDB.
Two things impacted this bottom up approach to enterprise innovation:
Cybercrime: ransomware and supply chain attacks. Both are not new, ransomware can be traced back to 1989, with malware known as the AIDS trojan (this had much cultural resonance back then as a name). Supply chain attacks started happening in the 2010s with the Target data breach and by 2011, US politicians were considering it a security issue. Over COVID with the rise of remote working, the attacks increased. The risk put the IT director back in the firing line.
AI governance: generative AI systems learn from their training models and from user inputs, this led to a wide range of concerns from company intellectual property leaving via the AI system, or AI outputs based on intellectual property theft.
The most immediate impact of this is that the IT director is becoming a prized target on more technology marketers agendas again. This takes IT director focused marketing from back in the 1980s and the early 2000s with a top-down c-suite focus including the IT director. This implies that established brands like Microsoft and IBM will do better than buzzier startups. It also means I am less likely to see adverts for Monday.com in my YouTube feed over time.
This doesn’t mean that the IT director won’t be disrupted in other parts of his role as machine learning facilitates process automation in ways that are continuing to evolve.
Brands plan for a quiet Pride Month | News | Campaign Asia – The hesitation around Pride may also be related to executives’ increasing reluctance to speak out on social issues more broadly. Wolff pointed to Edelman’s Trust Barometer, which found that 87% of executives think taking a public stance on a social issue is riskier than staying silent. “Essentially, nine out of every 10 executives believe that the return on investment for their careers is not worth the support during this turbulent time,” said (Kate) Wolff. “This is clearly problematic for both the community and the progress we have made in recent years.”
Chinese Firms Are Investing Heavily in Whisky Market | Yicai Global – Although international liquor giants have developed the local whisky consumption market for many years, the market penetration rate of overseas spirits in China, including whisky, is only about 3 percent. This means domestic whisky producers will need to develop new consumption scenarios, Yang said. Whisky consumption in China centers mainly around nightclubs, gift-giving and tasting events held by affluent consumers, Yang noted, but in these scenarios, imported whisky brands with a long history tend to be more popularly accepted,, so it will be difficult for domestic rivals to compete. According to the latest report from alcohol market analysts IWSR, China’s whisky market was worth CNY5.5 billion (USD758 million) last year, having grown more than fourfold over the past 10 years. It is expected to reach CNY50 billion (USD6.9 billion) in the next five to 10 years.
Yoox Net-a-Porter exits China to focus on more profitable markets – Multi-brand luxury clothing sales platform Yoox Net-a-Porter is closing its China operations, this against a backdrop of other brands also pulling out of Chinese e-commerce including Marc Jacobs fragrances. The corporate line from Richemont was “in the context of a global Yoox Net-a-Porter plan aimed at focusing investments and resources on its core and more profitable geographies”.
Ignite the Scent: The Effectiveness of Implied Explosion in Perfume Ads | the Journal of Advertising Research – Scent is an important product attribute and an integral component of the consumption experience as consumers often want to perceive a product’s smell to make a well-informed purchase decision. It is difficult, however, to communicate the properties of a scent without the physical presence of odorants. Through five experiments conducted in a perfume-advertising context, our research shows that implied explosion, whether visually (e.g., a spritz blast) or semantically created, can increase perceived scent intensity, subsequently enhancing perceived scent persistence. It also found a positive effect of perceived scent persistence on purchase intention. In conclusion, the research suggests that implied explosion can be a powerful tool for advertisers to enhance scent perception, consequently boosting purchase intention.
Mat Baxter’s Huge turnaround job | Contagious – interesting perspective on his time at Huge. What I can’t square it all with is what we know about marketing science and declining effectiveness across digital media
On my LinkedIn, I couldn’t escape from the Cannes festival of advertising. Partly because one of the projects I had been involved in was a shortlisted entry. One of the most prominent films was Dramamine’s ‘The Last Barf Bag: A Tribute to a Cultural Icon’. It was notable because of its humour, which was part of this years theme across categories.
震災復興から生まれた刺し子プロジェクトをブランドに！ 15人のお母さんの挑戦！ – CAMPFIRE (キャンプファイヤー) – ancient Japanese craft – KUON and Sashiko Gals are part of a new generation of designers keeping the traditional Japanese technique of sashiko alive. And together, they are bringing the decorative style of stitching to our favorite sneakers (including techy Salomons!). Sashiko is a type of simple running stitch used in Japan for over a thousand years to reinforce fabrics. It’s typically done with a thick white thread on indigo fabric and made into intricate patterns.
Nationalism in Online Games During War by Eren Bilen, Nino Doghonadze, Robizon Khubulashvili, David Smerdon :: SSRN – We investigate how international conflicts impact the behavior of hostile nationals in online games. Utilizing data from the largest online chess platform, where players can see their opponents’ country flags, we observed behavioral responses based on the opponents’ nationality. Specifically, there is a notable decrease in the share of games played against hostile nationals, indicating a reluctance to engage. Additionally, players show different strategic adjustments: they opt for safer opening moves and exhibit higher persistence in games, evidenced by longer game durations and fewer resignations. This study provides unique insights into the impact of geopolitical conflicts on strategic interactions in an online setting, offering contributions to further understanding human behavior during international conflicts.
The West Coast’s Fanciest Stolen Bikes Are Getting Trafficked by One Mastermind in Jalisco, Mexico | WIRED – “Not so long ago, bike theft was a crime of opportunity—a snatch-and-grab, or someone applying a screwdriver to a flimsy lock. Those quaint days are over. Thieves now are more talented and brazen and prolific. They wield portable angle grinders and high-powered cordless screwdrivers. They scope neighborhoods in trucks equipped with ladders, to pluck fine bikes from second-story balconies. They’ll use your Strava feed to shadow you and your nice bike back to your home.” – not terribly surprising, you’ve seen the professionalisation and industrialisation in theft across sectors from shoplifting, car theft and watch thefts so this is continuing the trend.
OpenAI Just Gave Away the Entire Game – The Atlantic – The Scarlett Johansson debacle is a microcosm of AI’s raw deal: It’s happening, and you can’t stop it. This is important not from a technology point of view, but from the mindset of systemic sociopathy that now pervades Silicon Valley.
Apple Intelligence is Right On Time – Stratechery by Ben Thompson – Apple’s orientation towards prioritizing users over developers aligns nicely with its brand promise of privacy and security: Apple would prefer to deliver new features in an integrated fashion as a matter of course; making AI not just compelling but societally acceptable may require exactly that, which means that Apple is arriving on the AI scene just in time.
‘Rare, vintage, Y2K’: Online thrifters are flipping fast fashion. How long can it last? | Vogue Business – as secondhand shopping becomes increasingly commonplace, this latest outburst brings to light the subjectivity of resale. What determines an item’s worth, especially in an age of viral micro-trends and heavy nostalgia? Is it ethically moral to set an item that’s the product of fast fashion — long criticised for not paying workers fairly — at such a steep upcharge, and making profit from it? If someone is willing to pay, does any of it matter?
As a trend omakase has expanded geographically with Japanese cuisine. But it has also expanded in terms of categories covered.
Koreans have taken omakase and pushed it into other areas:
Coffee
Dessert tasting
Barbecue restaurants which are normally a local neighbourhood staple
Wine and champagne-tasting
So how can omakase and luxury come together in the future?
In order to understand how omakase and luxury in the future it is worthwhile paying a good deal of attention to the pressures that the luxury industry is currently under.
Luxury is under pressure
Undoing the mistakes of the past
Luxury has expanded to be the size of industry it currently is due to ‘massification’ by most of the maisons. The exceptions to this would be the likes of Hermés.
Massification
Massification means lowering quality, using globalisation in the supply chain as well as the retail network to manufacture products cheaper. Massification occurred over a three decade period and was covered extensively by former fashion editor Dana Thomas in her book Deluxe.
Around about 2014, Gucci led the way for luxury brands to do streetwear, leading to a more accessible luxury product. Louis Vuitton did the archetypical collection with its 2017 Supreme collaboration.
Contrary to what most people believe luxury is aimed at the middle classes rather than the wealthy. But targeting middle class customers rather than the wealthy poses a number of problems:
Increased capital outlay due to the scale required.
Scale brings challenges in terms of supply chain management and consistency of customer experience. Greater control can be obtained by vertical integration within the supply chain and owning the retail channels. But all of this requires greater expertise and management oversight.
Increased economic sensitivity to shocks such as interest rate and cost of living rises.
Increased risk of devalued stock during an economic downturn. Gucci earnings were down 20 percent alone in Q1, 2024.
Bigger might not always be better over a longer view.
Secondary markets
Secondary markets have been both a boon and a bane for the luxury sector. At one time pre-owned was seen as an ‘entry-level’ product. I bought my first nice watch secondhand once it had depreciated. It was often said that the best entry-level Porsche was a secondhand one.
But gone are the days when you may buy a pre-owned Louis Vuitton purse on a second hand market stall in Paris. Now that will be on Vinted, Vestaire or some other platform.
Secondary market inflated pricing affected luxury businesses in a number of ways
You would be interviewed to go on the waiting list for a Porsche or a Rolex.
Authorised dealers became order takers and dealer customer service slipped.
Your purchasing history would acquire you the rights to buy a Hermés bag over time.
Luxury groups extended their businesses into the pre-owned market. LVMH owned part of secondhand watch retailer Hodinkee. Richemont owned Watchfinder and Yoox-Net-a-Porter who sold a mix of new lines and vintage preowned items. Rolex rolled out its ‘CPO’ programme selling inspected pre-owned Rolex watches through its authorised dealer network.
Things looked really good for the luxury industry, they managed to managed to scale, to a point that LVMH is one of the largest companies in the world:
Massification through global manufacturing supply chains.
Keeping margins high, while letting quality go low.
Address a rising middle class in China, Korea, Japan, the Gulf countries and Russia to counteract the hollowing out of the middle class in the US and western Europe.
Maximising margins through controlling costs via vertical integration up and down the supply chain, from raw materials to retail.
Market change
A few things underpinned the craziness of COVID:
Money was put in consumer pockets, for which they had few outlets.
Supply chains were disrupted as factories closed down or pivoted to manufacturing essential products. For instances Perfums Christian Dior made hand sanitiser for hospitals for free.
A Forrester effect (also known as a bull whip effect) resulted, driving inflation that the world’s economies are coming to terms with now. Secondary effects of this event were the increased interest rates used to reduce demand driven inflation.
Other secondary effects include increased crime levels. London has gone from a luxury shoppers paradise, to having a global reputation amongst elites of being plagued by violent watch and bag robberies. COVID-19 isn’t the only driver of this crime wave, but is a contributing factor.
It has also had a catalysing effect on reducing globalisation to increase national resilience.
Consumers know that a good deal of luxury goods don’t match up with the European artisan heritage story that brands try to sell them. Experts like William Lasry has made public which brands make what kind of products where. Luxury brands often make in places like China due to capability and scale – similar reasons to why Apple products are designed in California and assembled in China. (Seriously, check out William Lasry’s channels, I love some of his visits to high-end Japanese manufacturers).
China
China has been a key focus for luxury brand, but it has changed in a number of different ways:
Chinese consumers have changed in their confidence of native brands and have a lower opinion of many foreign brands. This is partly down to a change in attitudes called guo chao. Guo chao can be traced back to the increased confidence in the run up to the 2008 olympics in Beijing. This was partly fuelled by a series of essays published in 1996 by the likes of academic Wang Xiaodong called China Can Say Now which advocated a modern robust form of Chinese nationalism, which was in stark contrast to the Deng-era vision of globalisation and biding one’s time. In the April before the olympics Chinese consumers boycotted French supermarket brand Carrefour. Over time the negativity of these boycotts have become more-and-more performative and extra-territorial in nature. The current Xi administration has seen fit to weaponise this nationalist sentiment by directing (wrangling is a more accurate term, like cowboys with a cattle train in the Old West) public opinion to further its own ends. A more positive aspect of it has been a more open market for domestic ateliers and brands than had been seen previously. Since before 2019, there have been Chinese efforts to build a rival luxury groups to LVMH and Kering and this fits in with Xi’s distaste for irrational worship of the west.
Xi-era growth. China under Xi Jinping faces multiple challenges around growth. The population is aging and in decline which has implications for declining consumption. Secondly economic growth has slowed compared to the double digit annual economic growth of the Deng, Jiang and Hu administrations. Foreign direct investment in China has declined for a mix of reasons including unattractive Chinese government policies, decline in China’s country brand and long term economic growth forecasts.
Regulatory change
I know what you’re thinking ok, this is very well Ged, but what does it have to do with omakase and luxury futures? Give me a little bit more time and all will be revealed.
While China is an economic superpower with a desire to export its world view and the United States is a hard and soft power super power; the European Union’s super power is legislative in nature.
European regulation drove the globalisation of the GSM mobile telephony standards during the 1990s and 2000s. They have also driven increasing internet privacy standards on web services, much to the chagrin of Alphabet, Meta and Twitter.
Now they are driving environmental standards across a range of areas including:
A carbon tax to take into account the use of fossil fuels in extraction of raw materials, transportation, energy as an input to manufacturing and processing materials.
Product passports from raw materials to product end-of-life encouraging a circular economy and sustainable manufacturing.
This means that the luxury sector has new restrictions on how it operates in the future.
In summary:
We’ve likely reached peak massification due to economic and trade changes.
Market share in China looks uncertain due to changes in consumer sentiment and tastes, meaning, a more local approach might be required or a strategic withdrawal.
Secondary markets show that consumers are open to ownership beyond pristine new products.
Product passports and European legislation means re-examining the whole supply chain and the data to better control it through an entire product life.
Finally, omakase and luxury futures!
Omakase and luxury look like a happy meeting in the future. Think about the tenets of omakase.
An expert provides a personalised experience that is about quality, ceremony and theatre.
The expert decides what you will have and prepares it for you. You are there from selection to the provision of the item.
The ingredients are of fine quality (and often locally sourced).
Going back to go forward.
The future of luxury is about looking back. Tailors who suited generations of families and made alterations to Grandfather’s suit that the son is now wearing. The shirt maker replacing the collars and cuffs. The shoe-maker who refurbishes your shoes and has a set of lasts with your name on, for when he has to make a new set. Getting measured, having your foot cast for a last or getting your watch could be memorable events once again. So there this a precedence for expertise and service levels. But it implies a retail experience that will change dramatically.
New techniques and questions.
Previously with the exception of measuring sessions, these processes were largely concealed from the consumer and were difficult to scale. So it’s worthwhile thinking about how luxury’s omakase future could be extended with modern technology? We have some experiments that might give us some ideas. First up, L’Oreal has showcased bespoke make-up manufacture for a while.
How could high-end perfume makers adapt for products beyond make-up? Improved analysis equipment from the likes of Oxford Nanopore could facilitate individually formulated fragrance products based on skin chemistry.
Adidas experimented with its Speedfactory concept that blended the retail and shoe assembly together.
Technologically there is a lot of promising ideas. Adidas have worked with up-cycled plastics retrieved from the debris brought together by an ocean gyre made into 3d printed soles and fibres. (Look for the Parley label, who Adidas partnered with on this.)
How can additive or automated manufacturing and other processes feel luxe? In what way could they add to the theatre?
This hybridisation of retail and manufacturing changes the nature of both offline and online retail completely. Would even the largest concession in Selfridges or a shopping mall be big enough, or would fashion houses need a single purpose brand experience?
Given that there is likely to be a bit more time between manufacture and presentation of the product than there would be in a sashimi restaurant, what else would go into the maison experience? LVMH is already investing in hotels and resorts like Cheval Blanc which gives it a better understanding of more areas in luxury experience and service.
Localisation would likely to be needed to handle omakase and luxury due to culture and the need for local materials. This might include new materials, such as fungus-derived leather. Of course, this might have negative implications for luxury house supply chains, whether it’s Louis Vuitton’s iconic plastic coated leather, or the Hermés crocodile farm.
Which means that product line-ups could no longer be global in nature. So luxury companies may revisit that the creative process looks like. Should there be a single global vision anymore? Luxury maisons instincts would be to say yes, but could this be an opportunity to own local ateliers in markets like China or the US?
Will there be more local brands instead?
What will a maison’s heritage mean in the future? A luxury maison is about what remains the same as much as what changes. What will happen to long-standing motifs?
Will there be a greater opportunity for more auteurs who are closer to the customers?
How to bridge the tension in terms of choosing for the customer and creativity as well as quality?
We’re talking a very different profile of creative in terms of thinking, attitudes and skills compared to the present.
Service, repair and reuse could learn a lot lessons from traditional tailors and the service networks of watchmakers like Rolex or luggage maker Rimowa.
I could not think of a more exciting or scary time to be setting the brand direction for a luxury maison, let alone the overall direction or the likes of LVMH. But by wrapping local materials, expertise, ritual and a bit of theatre the future could look like a fusion of omakase and luxury.
