Dymant’s David Klingbeil: “Will people go back to old luxury brands if there’s better quality online at half the price?”
Winter is coming for luxury conglomerates, he says. And it should make them very nervous.
Dymant’s David Klingbeil has a chilling message for many of today’s luxury megabrands: “You’re standing on a burning platform.” A born and raised Parisian, Mr. Klingbeil, 29, is a young man bursting with informed opinion about today’s transformative marketplace in which traditional luxury and modern luxury models are crashing into each other head-on.
His ambition is palpable, and you also get the sense, when weighing the merits of what Dymant is doing, that it is, just maybe, what Hermes would look like if it were to start life today as a digital-first upstart. Nearly four years old now, having launched in 2013, the brand’s calling card is its leather goods items: its totes, handbags, and cases. Dymant also makes sure each product is created to address a particular need, rather than produced just to fill out a collection, similar to the way that Everlane, Ten Thousand, and Cuyana, for instance, all operate.
In 2013, Mr. Klingbeil raised a $1.35 million seed round from Partech Ventures and IDinvest, and won a €1 million ($1.1 million) grant from the European Commission’s Horizon 2020 program this year for finding new business models for craftsmen — Dymant works directly with traditional makers to produce its products — and for creating new jobs in Europe. The business is hovering around profitability, choosing to invest heavily in product development and marketing (in agreement with their investors) in order to stay ahead of the market, rather than taking those would-be profits out.
But while Dymant may be making clear progress, Paris itself is not the first place you would think to look for modern luxury thinking. It’s a city famous for its luxury tradition, having birthed the likes of Louis Vuitton, Chanel, and Hermes, and is the place these giants still call home. A digital-first operation like Dymant seems at odds with the Parisian luxury protocol, which mainly means avoiding e-commerce for as long as you can muster, and opening a brick-and-mortar shop instead.
But Mr. Klingbeil is something of a luxury anomaly in Paris, having spent three years in venture capital as an analyst for French-American VC firm, Partech. So if anyone is tailor-made to update Paris’ outdated luxury blueprint, it is certainly Mr. Klingbeil. Our conversation with him shows why. Here are the excerpts:
He realized early on that the system was broken:
“My family has been in the luxury business for quite a long time. I grew up learning about the quality of materials, craftsmanship, the creativity of the design, and so on. But I was never educated on the price structure.
At one point, I started to realize that many people — I was not the only one — felt like the system was broken. Of course, luxury goods very often create products that are super high in quality, but more and more people started to question the price and the origin. Is it really made in France? Is it really made in Italy? Or is half of the product made somewhere else?”
How Dymant is hacking the luxury model:
“My friends and I started to question things. I felt that in today’s digital age where everything is being upended, that luxury should also be hacked.
The idea behind Dymant is very simple. We wondered, was there a new way of going about luxury that still had roots in traditional things like craftsmanship, beautiful materials, high-touch service, and a top experience? We thought yes. But we also decided to avoid the bad things of traditional luxury — the high prices, the distance and coldness, the opacity, the high margins.”
On the benefits of operating a modern luxury upstart out of Paris:
“If you’re create a startup and you’re in the Valley, you can go and have lunch with the best investors, you can and have lunch with the best programmers, you can go and a coffee break with the people who created some of the most amazing companies in the world. They’re all in the Valley.
For us, we’re able to meet with the leaders from the main luxury groups at different events and meetings. They’re all based in Paris. So when we want to meet people from LVMH, they are headquartered ten minutes from our office. If you want to meet with Richemont, even though they’re based in Switzerland, they have one of their main offices a few minutes from us too. If you want to meet with the designers, the design schools, the best ones with the best designers are very close to us.
I think it’s really a matter of ecosystem. We only work with craftsmen that work with luxury brands. We have more than 400 craftsmen with whom we work, and they’re all located less than a few hours’ drive or plane ride from Paris, because they’re in France or Italy or Switzerland or Spain. So it’s a real asset for us. There is a sense of proximity.”
On why luxury megabrands are standing on a burning platform:
“I was talking to an executive from one of the biggest luxury groups recently. He asked me what my opinion on the luxury market was today because I’m part of Generation Y. There was an article written about Nokia when Android and iPhones started to arrive, titled, ‘We stand on a burning platform.’
Remember a few years ago, it was impossible to imagine that Nokia wouldn’t be the leader of phones forever. They made the best phones, and they sold very well. But then smartphones arrived, connections got better, and we got internet on our phones. Now Nokia is nothing.
I told this executive, ‘Ok, I think in the luxury market today — you, the luxury brands, stand on a burning platform.’ There’s a real threat for them that people from a younger generation, but also older generations, are starting to question their version of luxury. They start to say, ‘Ok this other brand that I found online — maybe it’s not labeled as traditionally, but has good quality, a good price, and good service. I can order their stuff from my phone, they deliver it in a few hours or in a few days, and I can customize it. Maybe this is as good as [traditional] luxury in many areas.’
I’m not saying tomorrow you’ll be able to do luxury champagne like Veuve Clicquot from scratch just by planting a few grapes in your backyard. Some industries will take longer to destruct. But in many industries such as accessories, leather goods, and fashion (which in fact count for more than 50 percent of the luxury market), in all those areas, change is coming. I don’t know if you’re a fan of Game of Thrones, but for them winter is coming. Destruction is coming in the luxury market.”
On paying homage to the luxury groups that have paved the way:
“I think we have to be cautious, because Hermes and Louis Vuitton are still huge businesses even though they’re not doing as well as they were before. Even though we look at these brands, and it’s not our style, it’s not what we like, it’s not what we buy, we’re still looking at them with a lot of veneration and respect, because of what they’ve done.
To put it in an historical perspective. A few decades ago, luxury was not even a market. Even today, luxury is around €300 billion, depending on what you count as luxury. It’s a small market. But a few decades ago, it was even smaller.
Since the development of groups like LVMH, like Kering, and like Cartier, what has changed is that this little industry has come from like a few tens of billions euros worldwide to hundreds of billions euros worldwide. It’s a market that’s fascinating to many people. So I think we should thank these big brands because they have democratized luxury. Now everyone can dream about luxury, now everyone knows about it. You can be in Shanghai, in New York, in Africa, in Europe. So, to take a startup word, they’ve evangelized the market from the ‘80s to now, and they did a great job transforming a very small industry into a real market.”
How brands like Everlane have stripped luxury of its superficiality:
“I think that traditional luxury today is based on a level of opacity that doesn’t exist in the digital world. Recently, there was a TV show about Louis Vuitton in France that revealed the margins of Louis Vuitton. In the end you could see that on a Louis Vuitton canvas bag they would make something around a 90% gross margin.
Then you have Everlane. They put all the prices of their products on their pages. So you see that this cashmere sweater costs $100. It costs $40 for Everlane to produce it. That’s still half cheaper than any other brand. I think when Everlane does this, it’s hard to go back to traditional luxury. I’m not going to pay $3,000 for a bag that’s worth $1,000. I’m ok to pay $1,000 if it’s worth $1,000, but I don’t see the point of paying for the marketing, the advertising.
My question is, will people be able to go back to traditional luxury brands when you’ll be able to find the same quality, maybe better quality, more customization, a better experience online at half the price?”