WEBVTT - Fan Favorite: Staying Above Water 0:00:02.720 --> 0:00:17.440 Bloomberg Audio Studios, podcasts, radio news. 0:00:19.920 --> 0:00:23.160 This is Wall Street Week. I'm David Weston bringing you 0:00:23.440 --> 0:00:27.479 stories of capitalism this week. As luxury brands fight to 0:00:27.560 --> 0:00:31.480 regain their momentum, does a secondary market help or hurt? 0:00:32.360 --> 0:00:36.000 And what the facts show about deregulation and its effect 0:00:36.040 --> 0:00:39.960 on growth and productivity. Plus when a so called zombie 0:00:40.040 --> 0:00:43.200 company can come back from the living dead. We tell 0:00:43.280 --> 0:00:46.120 you the story of the return of Barnes and Noble, 0:00:47.000 --> 0:00:50.760 but we start with a story of true conflict when 0:00:50.760 --> 0:00:53.479 the approach of the largest country in the world seems 0:00:53.479 --> 0:00:57.200 at odds with the fifth largest economy. When President Trump 0:00:57.240 --> 0:01:00.560 met with Indian Prime Minister Mody earlier this month, the 0:01:00.600 --> 0:01:03.840 tone was cordial, but it was a step back from 0:01:03.840 --> 0:01:07.360 the so called bromance that started in Trump's first term, 0:01:07.720 --> 0:01:11.039 and what the two men said were their core interests 0:01:11.080 --> 0:01:16.920 appeared to be in true conflict. I will very simply 0:01:17.480 --> 0:01:24.240 put America first, Make in India, make for the glow. 0:01:25.440 --> 0:01:28.399 Until now, the Indian growth story has been one of 0:01:28.440 --> 0:01:32.080 the biggest of the post pandemic world. Its growth rate 0:01:32.160 --> 0:01:36.440 touched eight percent. Its benchmark stock index, the Nifty to fifty, 0:01:36.959 --> 0:01:39.240 has outpaced the S and P five hundred since the 0:01:39.360 --> 0:01:44.560 start of twenty twenty one, at least until recently, and 0:01:44.720 --> 0:01:49.080 investors have started to look elsewhere. Indian equities saw almost 0:01:49.200 --> 0:01:52.520 twenty one billion dollars of foreign inflows in twenty twenty three, 0:01:53.200 --> 0:01:56.400 but they plummeted to just one hundred twenty four million 0:01:56.480 --> 0:02:00.880 dollars last year, and investors have withdrawn more than twelve 0:02:00.920 --> 0:02:04.360 billion dollars so far this year. So has something gone 0:02:04.440 --> 0:02:08.120 wrong with the India growth machine? And if so, where 0:02:08.720 --> 0:02:12.200 are we seeing a slowdown or just a blip. Rasher 0:02:12.280 --> 0:02:15.920 Sharma is the chair of Rockefeller Capital Management and author 0:02:16.080 --> 0:02:19.880 most recently of The Rise and Fall of Nations. 0:02:20.360 --> 0:02:23.880 Ever since I've been investing in this country for over 0:02:23.960 --> 0:02:25.920 three decades, which is that this is a country that 0:02:26.040 --> 0:02:28.519 consistently disappoints the optimists in the pessimists. 0:02:29.200 --> 0:02:29.880 Yet over the. 0:02:29.880 --> 0:02:33.280 Long term it's a very good equity market story. In 0:02:33.320 --> 0:02:37.480 particular because even after the Indian stock markets big correction 0:02:37.720 --> 0:02:40.760 over the last few months, the only stock market in 0:02:40.800 --> 0:02:43.760 the world in the last thirty to forty years which 0:02:43.800 --> 0:02:47.400 has produced comparable returns to America has been India. So 0:02:47.760 --> 0:02:50.600 it's this very steady compounding story. But yeah, there are 0:02:50.639 --> 0:02:54.200 times when people get a bit ahead of themselves, the 0:02:54.240 --> 0:02:56.919 excitement gets a bit too much. I think we may 0:02:56.919 --> 0:02:59.720 have reached that point last year when India became the 0:02:59.760 --> 0:03:03.040 most expensive equity market in the world, literally even more 0:03:03.040 --> 0:03:05.840 expensive than America at the top. So that was just 0:03:05.880 --> 0:03:08.160 telling you that the excitement had gone into a head. 0:03:08.160 --> 0:03:10.120 And what we have seen in the last few months 0:03:10.440 --> 0:03:13.840 is a bit of a reset where the optimists are 0:03:13.880 --> 0:03:15.080 getting a bit disappointed. 0:03:15.120 --> 0:03:15.360 Now. 0:03:15.400 --> 0:03:18.120 After sort of thinking that maybe India can break out 0:03:18.440 --> 0:03:21.120 and grow at seven to eight percent, there's a realism 0:03:21.160 --> 0:03:23.600 setting in that India's trained growth rate is closed to 0:03:23.639 --> 0:03:26.800 six percent rather than seven to eight percent, a pretty 0:03:26.800 --> 0:03:29.360 decent growth rate, and that they'd still need to carry 0:03:29.400 --> 0:03:32.560 out some positive reform steps to even keep a six 0:03:32.600 --> 0:03:34.639 percent type growth rate going. So I think what we're 0:03:34.680 --> 0:03:38.720 seeing just now is a return to that old reality, 0:03:38.760 --> 0:03:41.240 so to speak, which has been the case for India 0:03:41.280 --> 0:03:43.440 for thirty to forty years, that it's a country which 0:03:43.680 --> 0:03:46.240 steadily compounds, steadily grows. 0:03:46.520 --> 0:03:49.280 But that might not be enough to reach Prime Minister 0:03:49.400 --> 0:03:52.880 Motive's target of making India a developed nation by twenty 0:03:53.000 --> 0:03:56.600 forty seven. Ragharam Rajan is a former governor of the 0:03:56.640 --> 0:03:58.040 Reserve Bank of India. 0:03:58.760 --> 0:04:01.600 I think we're reverting around the six percent now. The 0:04:01.720 --> 0:04:05.440 blip downwards recently has more to do with the fact 0:04:05.520 --> 0:04:09.680 that we had elections across the board last year and 0:04:09.880 --> 0:04:12.920 spending on infrastructure, which has been a big part of 0:04:12.960 --> 0:04:16.479 the growth story, has sort of faltered over this period. 0:04:16.640 --> 0:04:19.719 I think that will come back, so we'll get back 0:04:19.720 --> 0:04:20.320 to six now. 0:04:20.320 --> 0:04:22.400 The question for India is six. 0:04:22.360 --> 0:04:27.039 Enough, And unfortunately the answer is not, because we're also 0:04:27.080 --> 0:04:29.800 a country that's growing old, and we do want to 0:04:29.839 --> 0:04:32.640 grow rich before we grow old, and that's unlikely at 0:04:32.640 --> 0:04:33.280 six percent. 0:04:34.360 --> 0:04:37.919 The Indian government has stepped up efforts to re energize growth, 0:04:38.240 --> 0:04:41.200 announcing tax cuts in its annual budget in an effort 0:04:41.200 --> 0:04:42.960 to boost middle income spending. 0:04:43.320 --> 0:04:46.080 We have a lot of young people and as a result, 0:04:46.160 --> 0:04:49.600 the dependency ratio, the number of very young people who 0:04:49.640 --> 0:04:53.200 can't work and very old people who can't work, that's falling. 0:04:53.680 --> 0:04:54.440 And this is the. 0:04:54.440 --> 0:04:59.080 Time that every Asian economy has experienced a burst of growth, 0:05:00.080 --> 0:05:03.479 still growing at the old six percent and not enjoying 0:05:03.480 --> 0:05:08.119 that burst. Something is not working as well as it should, 0:05:08.200 --> 0:05:09.080 and that's jobs. 0:05:09.520 --> 0:05:12.680 What you see around India is not enough young. 0:05:12.520 --> 0:05:15.880 People have jobs, not enough jobs are being created, so 0:05:15.920 --> 0:05:18.480 in a sense, we're not making full use of our 0:05:18.520 --> 0:05:20.720 capacity even at six percent growth. 0:05:21.880 --> 0:05:24.680 Some foreign companies have seen potential in the growth of 0:05:24.720 --> 0:05:28.640 the Indian market as an alternative to China. Apple has 0:05:28.680 --> 0:05:32.039 been slowly growing iPhone production in the country, while more 0:05:32.040 --> 0:05:35.919 recently Tesla stepped up hiring in India ahead of a 0:05:36.000 --> 0:05:39.960 possible entry into the market. This so called China plus 0:05:40.040 --> 0:05:43.720 one strategy of India being a substitute for manufacturing in 0:05:43.800 --> 0:05:47.160 China may have worked in the past, but some question 0:05:47.240 --> 0:05:51.000 whether it will in the future. Ridika Bachra is Mahindra 0:05:51.080 --> 0:05:55.120 Group's Vice president of Americas and a senior fellow at 0:05:55.120 --> 0:05:56.400 the Atlantic Council. 0:05:56.720 --> 0:05:58.920 What I have come to realize in the last twelve 0:05:58.960 --> 0:06:04.320 months is there is a strange realization with the Indian 0:06:04.320 --> 0:06:09.560 policy makers that they cannot sell themselves anymore as a 0:06:09.640 --> 0:06:14.040 China plus one strategy. It has to be much beyond that, 0:06:14.680 --> 0:06:17.320 because if you look at it, the Indian consumer is 0:06:17.360 --> 0:06:21.719 not only inclined towards luxury and lifestyle products unlike a 0:06:21.760 --> 0:06:25.320 lot of other emerging markets, but also has a very 0:06:25.360 --> 0:06:30.280 strong middle class consumer base which is also price conscious. 0:06:30.520 --> 0:06:34.280 So if you put these things together, where India is 0:06:34.320 --> 0:06:36.679 trying to sell itself as not just a China plus 0:06:36.680 --> 0:06:40.080 one strategy, but an innovation in manufacturing hub with a 0:06:40.120 --> 0:06:44.440 skilled workforce, with a solid consumer base, and trying to 0:06:44.480 --> 0:06:50.520 differentiate itself with available worker versus available skilled workers. I 0:06:50.520 --> 0:06:52.240 think it's a great story to tell. 0:06:53.480 --> 0:06:56.960 Whatever the theory, foreign investors have not always had an 0:06:57.000 --> 0:07:01.440 easy time investing in India. Just ask Olkswagen. They were 0:07:01.480 --> 0:07:04.359 hit with a record one point four billion dollar tax 0:07:04.400 --> 0:07:08.560 bill from the Indian authorities for alleged tax evasion, and 0:07:08.640 --> 0:07:12.360 the German automaker raised questions about the very survival of 0:07:12.400 --> 0:07:13.520 its India unit. 0:07:13.520 --> 0:07:15.800 Well, because I think it's still a very difficult place 0:07:15.840 --> 0:07:18.760 to do business on the ground. David, this is something 0:07:18.800 --> 0:07:20.520 which you know, we have felt for a long period 0:07:20.520 --> 0:07:24.400 of time that to negotiate the Indian landscape is toff 0:07:24.520 --> 0:07:27.960 given the regulations that you still have in place, given 0:07:28.000 --> 0:07:30.880 the fact that you can have the tax authorities or 0:07:30.920 --> 0:07:34.760 other people come up and present bills to you in a. 0:07:34.720 --> 0:07:35.840 Way that you don't really know. 0:07:36.200 --> 0:07:39.960 A lot of the state chief ministers in India realize this, 0:07:40.080 --> 0:07:42.040 and I think this is something which we need to 0:07:42.080 --> 0:07:44.720 focus on, which is that a lot of the attention 0:07:45.080 --> 0:07:49.960 is on more the center and what DELI is doing 0:07:50.320 --> 0:07:54.080 and what initiatives they're taking. But India is a very 0:07:54.240 --> 0:07:58.160 federal country and you have so many state chief ministers 0:07:58.200 --> 0:08:00.480 with a lot of power to do what they have 0:08:00.560 --> 0:08:02.520 to do on the ground. And I think what we 0:08:02.640 --> 0:08:04.800 need to see in India foreig and we see some 0:08:04.920 --> 0:08:09.880 signs of that is much greater so called competitive federalism, 0:08:09.920 --> 0:08:12.880 where the states compete with each other to get foreign 0:08:12.920 --> 0:08:16.760 investment because a lot of these regulations and the tough 0:08:17.280 --> 0:08:20.120 environment it is to do business in India is something 0:08:20.120 --> 0:08:23.000 that some of these state chief ministers need to make 0:08:23.200 --> 0:08:25.120 friendlier and not just the center. 0:08:25.320 --> 0:08:27.760 Whatever direction it's going right now, what is the current 0:08:27.840 --> 0:08:30.720 state of competitive federalism when it comes to economics? Are 0:08:30.720 --> 0:08:34.200 there certain states that it's more conducive to invest into 0:08:34.320 --> 0:08:36.160 in India today than others? 0:08:36.600 --> 0:08:38.480 Well, that's been the case in India for a while 0:08:38.520 --> 0:08:41.160 now that if you look at India, about twenty percent 0:08:41.200 --> 0:08:45.000 of India's population is in the southern states, and yet 0:08:45.080 --> 0:08:49.680 those states account for more than thirty percent of India's 0:08:49.720 --> 0:08:53.520 GDP and the per capita income is also a lot higher. 0:08:53.880 --> 0:08:56.480 Now there are states in the south, such as Karnataka, 0:08:56.760 --> 0:08:59.719 which we know well because of Bangalore, which is the 0:08:59.720 --> 0:09:03.160 tech capital of India for all practical purposes. And what 0:09:03.240 --> 0:09:07.160 we see there is that places like Bangalore and Karnataka 0:09:07.360 --> 0:09:10.720 tend to attract much greater foreign investment. And generally some 0:09:10.760 --> 0:09:17.040 of the southern states like Karnataka and Telangana and Tamil Nadu, 0:09:17.160 --> 0:09:21.480 those states have attracted much more foreign investment over time. 0:09:22.080 --> 0:09:25.840 There is a historical reason for why South has managed 0:09:25.880 --> 0:09:29.600 to sort of lead from the front, and those reasons 0:09:29.600 --> 0:09:33.640 are the ports that are situated in southern area. They 0:09:33.720 --> 0:09:37.400 were the most important reason for traders to come to 0:09:37.440 --> 0:09:40.959 India to begin with, and that led to a huge 0:09:41.000 --> 0:09:45.160 amount of trading community moving and living in South of India. 0:09:45.320 --> 0:09:49.480 In the recent past, we see inphasis taking a lead 0:09:49.679 --> 0:09:52.760 in ensuring that they become the global service providers for 0:09:52.840 --> 0:09:55.920 technology and that started in South of India and Bangalore, 0:09:56.640 --> 0:09:59.560 and one thing led to another where a huge amount 0:09:59.600 --> 0:10:02.880 of other tech companies started sort of launching based out 0:10:02.960 --> 0:10:07.520 of South India because of the skill availability of engineers 0:10:07.760 --> 0:10:09.000 in the southern part of India. 0:10:09.920 --> 0:10:13.000 But even if India is moving to loosen restrictions on 0:10:13.080 --> 0:10:17.319 foreign investment. It is slow progress and Rajah and warrens 0:10:17.360 --> 0:10:20.560 they might be focusing on the wrong sectors. Prime Minister 0:10:20.679 --> 0:10:23.840 Motor is pushing to grow the manufacturing sector. Does that 0:10:23.880 --> 0:10:24.440 make sense. 0:10:24.679 --> 0:10:28.679 I think the days of growing manufacturing to get strong 0:10:28.720 --> 0:10:32.080 growth in jobs are over. I think it's as true 0:10:32.120 --> 0:10:34.640 of India as it is of the United States. And 0:10:34.679 --> 0:10:40.040 the reason is simply this that increasingly manufacturing is becoming 0:10:40.160 --> 0:10:44.120 much more automated, much more dependent on machines. If you 0:10:44.160 --> 0:10:46.800 look at an assembly plant for cell phones in India, 0:10:47.240 --> 0:10:50.240 it's a sequence of machines, not a sequence of people 0:10:50.320 --> 0:10:54.800 sitting soldiering stuff onto motherboards. So the kind of jobs 0:10:54.880 --> 0:10:59.440 that traditional sort of low skill manufacturing assembly, electronics assembly 0:10:59.480 --> 0:11:01.400 and so on generate. 0:11:01.240 --> 0:11:03.920 They far fewer today. But there are other problems. 0:11:04.320 --> 0:11:07.880 Every country wants to expand its manufacturing and is growing 0:11:07.960 --> 0:11:13.000 protectionist against manufacturing manufactured goods coming from somewhere else. So 0:11:13.280 --> 0:11:17.920 the space for manufacturing exports is also shrinking. India has 0:11:17.960 --> 0:11:22.400 other opportunities in services. It's been a giant in service 0:11:22.440 --> 0:11:23.800 exports in recent years. 0:11:24.120 --> 0:11:26.079 That's where it should focus its attentions. 0:11:26.120 --> 0:11:30.560 More on Modi's push to build up India's own manufacturing 0:11:30.559 --> 0:11:33.840 base comes as President Trump looks to bring back economic 0:11:33.880 --> 0:11:39.000 activity within US borders. It creates a dilemma. Both leaders 0:11:39.040 --> 0:11:42.520 talk up their relationship with one another, but can modis 0:11:42.720 --> 0:11:47.680 made in India and Trump's America first be reconciled and 0:11:47.760 --> 0:11:49.760 if not, which will prevail. 0:11:50.880 --> 0:11:56.200 Every country is turning nationalists now, and everybody is also 0:11:56.480 --> 0:12:00.319 has a certain sense of manufacturing fetishism. They want their 0:12:00.360 --> 0:12:03.400 own manufacturing industries, and of course this collides. 0:12:03.880 --> 0:12:04.880 I think the. 0:12:04.880 --> 0:12:09.160 Way to reduce this gap is by recognizing that each 0:12:09.200 --> 0:12:13.839 country has specialties and by working to ensure that there 0:12:13.880 --> 0:12:17.520 is more trade on those specialties. So, for example, lots 0:12:17.520 --> 0:12:21.679 of oil and natural gas being manufactured in the United States, 0:12:21.960 --> 0:12:23.040 India could buy more. 0:12:23.600 --> 0:12:25.400 There are defense products. 0:12:25.000 --> 0:12:28.400 That are manufactured in the United States, India could buy more. 0:12:28.600 --> 0:12:30.760 So I think rather than seeing. 0:12:30.800 --> 0:12:35.360 Deficits trade deficits as a problem, see it as part 0:12:35.559 --> 0:12:38.880 of a process of collaboration and just make sure that 0:12:38.960 --> 0:12:41.120 the playing field is level for both sides. I think 0:12:41.240 --> 0:12:42.720 that's something that can be worked on. 0:12:44.160 --> 0:12:47.520 Coming up, Luxury brands are looking to get their mojo back, 0:12:48.000 --> 0:12:50.840 but do we have too little of them or too much? 0:12:51.559 --> 0:12:53.160 That's next on Wall Street. 0:12:52.880 --> 0:12:57.760 Week you're listening to Bloomberg Wall Street Week with David 0:12:57.760 --> 0:13:06.840 Weston from Bloomberg Radio. This is Bloomberg Wall Street Week 0:13:07.120 --> 0:13:09.840 with David Weston from Bloomberg Radio. 0:13:11.880 --> 0:13:14.840 This is a story about too much of a good thing. 0:13:15.559 --> 0:13:20.120 Every brand lives and breathes for exposure, but sometimes it 0:13:20.120 --> 0:13:23.560 can be too much. Luxury brands have reaped the benefits 0:13:23.559 --> 0:13:27.160 of consumers the world over seeking them out, but now 0:13:27.240 --> 0:13:30.040 the red carpet may be getting pulled out from under them, 0:13:30.360 --> 0:13:33.160 and my colleague Danny Berger tells us why. It may 0:13:33.200 --> 0:13:36.160 be because they are too available to too many people 0:13:36.640 --> 0:13:37.640 in too many places. 0:13:39.880 --> 0:13:43.360 Luxury brands are everywhere, from the bags we carry to 0:13:43.400 --> 0:13:46.000 the clothes we wear, down to the shoes we step 0:13:46.040 --> 0:13:49.880 into every day, but luxury brands are at a crossroad. 0:13:50.480 --> 0:13:53.960 LVMH seen as a bellweather for the luxury sector, sort 0:13:54.040 --> 0:13:57.120 close to two hundred and fifty percent between twenty nineteen 0:13:57.160 --> 0:14:00.880 and twenty twenty four, but it's since fallen around twenty 0:14:00.880 --> 0:14:03.560 percent from the highs of last year, with a recent 0:14:03.600 --> 0:14:07.119 bounce offsetting some of those losses and leaving investors struggling 0:14:07.160 --> 0:14:10.440 to try a path forward for the luxury brands. Joelle 0:14:10.520 --> 0:14:13.600 Grunberg is partner at Mackenzie who leads the firms apparel, 0:14:13.679 --> 0:14:17.000 fashion and luxury sector in North America and co authors 0:14:17.040 --> 0:14:19.000 a yearly report on the state of Luxury. 0:14:19.320 --> 0:14:22.680 When you look at economic profits of the luxury industry, 0:14:23.080 --> 0:14:27.160 it basically nearly tripled between twenty nineteen and twenty twenty four. 0:14:27.600 --> 0:14:31.560 So it's really been amazing years, and I think at 0:14:31.600 --> 0:14:35.240 some point everybody started believing this was the new normal 0:14:35.400 --> 0:14:39.120 and started to expect that this would continue. But as 0:14:39.160 --> 0:14:43.280 we all know, you know, at some point things stabilized 0:14:43.360 --> 0:14:46.400 or normalize, So as we know, in twenty twenty four, 0:14:46.480 --> 0:14:50.280 things slowed down in a significant way for the luxury industry. 0:14:50.880 --> 0:14:53.560 It has been a tale of different stories. In all fairness, 0:14:53.720 --> 0:14:58.520 not all the rounds, not all the corporations have suffered 0:14:58.560 --> 0:15:01.240 in the same way, and some are doing great in fact. 0:15:01.840 --> 0:15:04.240 But what we think is that twenty twenty five will 0:15:04.240 --> 0:15:08.120 overall be a year of normalization. We obviously see continue 0:15:08.160 --> 0:15:10.800 to see growth, but I would say in a more 0:15:10.920 --> 0:15:15.120 muted way, and it will also significantly depend on the 0:15:15.200 --> 0:15:18.200 region and the market. It would also depend on what 0:15:18.400 --> 0:15:22.680 category you mainly operated, and it also depends, I would say, 0:15:22.800 --> 0:15:26.240 on again the situation of the round overall, because some 0:15:26.480 --> 0:15:28.960 runs are doing much better than the others. 0:15:29.560 --> 0:15:32.640 Armez is one of those brands outperforming its luxury peers, 0:15:32.720 --> 0:15:35.920 but they are very much the outlier. Just last week, 0:15:36.040 --> 0:15:39.440 Armaz reported a jump in fourth quarter revenue, while LVMH 0:15:39.520 --> 0:15:43.200 and Karen posted declines, and Grundberg says there's a range 0:15:43.240 --> 0:15:45.680 of global headwinds challenging the luxury sector. 0:15:46.040 --> 0:15:49.040 Two main factors contributed to the huge growth that we've 0:15:49.080 --> 0:15:53.840 seen since twenty nineteen. One first factor is clearly the 0:15:53.960 --> 0:15:57.080 rise of prices in luxury. Most of the rounds have 0:15:57.200 --> 0:16:00.880 increased prices in a very significant way, more than double 0:16:00.960 --> 0:16:05.080 digit every year, and so that has contributed to eighty 0:16:05.080 --> 0:16:08.440 percent of the growth in revenue of these companies. The 0:16:08.520 --> 0:16:12.120 second factor is the pool of China. As we all know, 0:16:12.240 --> 0:16:15.800 the Chinese customer has been a very very strong contributor 0:16:15.880 --> 0:16:19.360 to the growth of luxury globally, and so that you know, 0:16:19.480 --> 0:16:23.160 pool has been extremely strong and is slowing down right now. 0:16:23.840 --> 0:16:25.760 And what has happened in the past year and a 0:16:25.800 --> 0:16:30.280 half is that the aspirational luxury customer, and more specifically 0:16:30.360 --> 0:16:34.640 in the US, has been challenged because there's been a 0:16:34.680 --> 0:16:38.120 lot of people losing their jobs and so therefore there 0:16:38.160 --> 0:16:41.680 have been much more cautious and on pause. So part 0:16:41.680 --> 0:16:45.000 of the explanation is linked to that aspirational customer being 0:16:45.000 --> 0:16:45.960 a bit more on hold. 0:16:48.080 --> 0:16:51.240 You know, that perfect storm has resulted in some aspirational 0:16:51.280 --> 0:16:54.920 customers being priced out of the first hand luxury market. 0:16:55.040 --> 0:16:58.120 We're very happy to receive them. 0:16:58.320 --> 0:17:02.400 Maximilian Bitner is the CEO a Vestier Collective, a platform 0:17:02.440 --> 0:17:05.240 for pre owned designer and luxury products founded in two 0:17:05.280 --> 0:17:08.959 thousand and nine, aimed at making fashion more sustainable and 0:17:08.960 --> 0:17:11.639 a more strained consumer means. The second hand market is 0:17:11.640 --> 0:17:15.439 seeing significant growth, expected to reach three hundred and fifty 0:17:15.480 --> 0:17:18.960 billion dollars globally in twenty twenty eight. That's up from 0:17:18.960 --> 0:17:22.080 one hundred and ninety seven billion dollars in twenty twenty three, 0:17:22.280 --> 0:17:25.720 with Vestier estimating eighty two percent of its orders prevent 0:17:25.800 --> 0:17:26.960 a first hand purchase. 0:17:27.560 --> 0:17:32.520 We definitely do cater to the demand of the aspirational customer, 0:17:33.440 --> 0:17:37.560 as certain brands are more affordable, more accessible than they 0:17:37.600 --> 0:17:39.719 would be in a first hand store. And I think 0:17:39.760 --> 0:17:42.800 we've especially seen this over the last one or two years. 0:17:43.320 --> 0:17:45.879 You know, in a period of economic uncertainty, which in 0:17:45.960 --> 0:17:50.440 parallel has seen luxury brands increase prices you know, significantly 0:17:50.720 --> 0:17:53.359 over the last four or five years. When I joined 0:17:53.400 --> 0:17:56.640 vis Year at the end of twenty eighteen early twenty nineteen, 0:17:56.800 --> 0:18:01.399 you know, I recognize the incredible brand and community, but 0:18:01.480 --> 0:18:04.440 I also recognized the need for us to build a scalable, 0:18:04.560 --> 0:18:08.119 profitable business you know, for the next twenty thirty forty years. 0:18:08.400 --> 0:18:13.040 Even the last two years, the business has proven extremely resilient, 0:18:13.160 --> 0:18:16.720 growing with more than twenty percent revenue growth. So the 0:18:16.760 --> 0:18:20.280 business has been you know, throughout the up and down 0:18:20.359 --> 0:18:25.000 cycles of pre COVID COVID post COVID remained extremely resilient, 0:18:25.280 --> 0:18:27.040 which is great for us to see. 0:18:27.560 --> 0:18:30.080 Vestier is not alone in writing the second hand wave. 0:18:30.440 --> 0:18:34.400 The Real Real and Rebag offer similar services, and Rebag's 0:18:34.400 --> 0:18:36.760 reach got a lot bigger this year when it partnered 0:18:36.800 --> 0:18:39.639 with Walmart to sell its catalog of about twenty seven 0:18:39.680 --> 0:18:44.440 thousand items on the retail giant's website, targeting the aspirational customer. 0:18:44.560 --> 0:18:47.320 What might seem like a threat to luxury retail, in 0:18:47.400 --> 0:18:50.720 reality could be a mutually beneficial relationship. 0:18:51.240 --> 0:18:55.000 I think overall, the mood and the attitude of luxury 0:18:55.040 --> 0:18:59.240 brands have dramatically improved over the last five six years 0:18:59.560 --> 0:19:04.959 towards secondhand because you know, fundamentally, we are not cannibalizing 0:19:05.000 --> 0:19:09.399 their sales. If anything, you know, we pay homage to 0:19:09.960 --> 0:19:13.679 their brands by showing to the consumers, both the buyers 0:19:13.680 --> 0:19:18.480 and the sellers, how much value is retained in these 0:19:18.520 --> 0:19:20.159 products that they're buying firsthand. 0:19:20.720 --> 0:19:23.160 Norma Kamali rose to the top of high end fashion 0:19:23.240 --> 0:19:26.280 with the iconic Sleeping Bag coat that she designed in 0:19:26.359 --> 0:19:29.520 nineteen seventy three. Since then, the New York based designer 0:19:29.600 --> 0:19:33.080 has proven her ideas fresh and innovative time and time again. 0:19:33.760 --> 0:19:36.800 Like Bittner, Kamali sees the value of secondhand markets in 0:19:36.880 --> 0:19:37.760 luxury fashion. 0:19:38.160 --> 0:19:43.840 I think anything that's a creative process that's fun is 0:19:44.119 --> 0:19:48.960 good for people, right And if in that secondhand you 0:19:49.040 --> 0:19:52.719 get a great better price and you get a brand 0:19:52.800 --> 0:19:57.359 that you haven't been able to buy before. There's a 0:19:57.440 --> 0:20:01.640 whole cult of people who look for Norma Kamali vintage 0:20:02.280 --> 0:20:07.760 and it's fascinating to me. But I see how great 0:20:07.840 --> 0:20:12.240 that is because in that generation, there's something I did 0:20:13.560 --> 0:20:17.359 when I was that age that is connecting with them. 0:20:17.480 --> 0:20:20.560 Would you say, Norma Kamali is also luxury. 0:20:20.960 --> 0:20:30.800 Luxury to me is something that is accessible, affordable, and 0:20:31.080 --> 0:20:35.680 will last in your wardrobe forever. It can't be a 0:20:35.720 --> 0:20:40.240 purse that you spend thirty thousand dollars on and sort 0:20:40.240 --> 0:20:43.080 of collect in a closet with other purses. 0:20:43.359 --> 0:20:46.240 How do you strike that balance then, of being both 0:20:46.359 --> 0:20:49.040 accessible but not oversaturated. 0:20:48.280 --> 0:20:48.840 In the market. 0:20:49.080 --> 0:20:53.560 It's an important thing to do, and I think first 0:20:53.600 --> 0:20:59.480 of all, knowing your distribution, being careful about the distribution, 0:21:00.000 --> 0:21:05.080 make sure the distribution is to your customer, the person 0:21:05.160 --> 0:21:10.200 who connects with you. And we have a global distribution 0:21:10.720 --> 0:21:15.600 and we could still be reaching many, many more people. 0:21:16.080 --> 0:21:18.960 There's no question that more consumers are exposed to and 0:21:19.040 --> 0:21:22.040 have access to luxury than ever before. But at least 0:21:22.080 --> 0:21:25.359 one icon of the industry admits that change is inevitable. 0:21:25.800 --> 0:21:26.440 We start this. 0:21:26.400 --> 0:21:30.439 Conversation with this idea of luxury doesn't mean exclusivity. Do 0:21:30.480 --> 0:21:33.080 you think some of those secondhand apps are also changing 0:21:33.119 --> 0:21:34.240 the conversation. 0:21:33.840 --> 0:21:38.760 That reguly totally. I think the fashion industry clearly is 0:21:38.840 --> 0:21:44.000 going through a huge, huge change, and it's long. 0:21:43.760 --> 0:21:46.040 Overdue, it really is. 0:21:46.600 --> 0:21:50.680 And I think when an industry can have a lot 0:21:50.720 --> 0:21:53.560 of variety and a lot of choices and a lot 0:21:53.600 --> 0:21:54.640 of price ranges. 0:21:55.880 --> 0:21:59.840 Then it's healthy, healthy for the consumer, but a challenge 0:21:59.840 --> 0:22:02.760 for the luxury brands to overcome as they look to 0:22:02.800 --> 0:22:05.119 rediscover the growth of the last five years. 0:22:06.560 --> 0:22:11.160 This is a story about unintended consequences. Sometimes even the 0:22:11.200 --> 0:22:15.359 best intention to government regulations can do more harm than good. 0:22:15.920 --> 0:22:19.200 But then again, cutting back on regulation can also do 0:22:19.440 --> 0:22:20.320 real mischief. 0:22:20.560 --> 0:22:22.560 We did the right thing, that was a very important 0:22:22.560 --> 0:22:25.240 thing to get right finis and it was also a waste. 0:22:25.280 --> 0:22:27.240 I mean, number one, it was a bad group of 0:22:27.240 --> 0:22:28.040 people running it. 0:22:28.080 --> 0:22:32.480 If the CFPB is not there examining these giant banks 0:22:32.880 --> 0:22:35.399 to make sure they are following the laws on not 0:22:35.920 --> 0:22:39.040 cheating consumers, who is doing that job? 0:22:39.320 --> 0:22:41.200 I can say, no other federal regulator. 0:22:41.960 --> 0:22:45.400 So which is it? Is government regulation holding the US 0:22:45.440 --> 0:22:48.920 economy back? Or is it an important foundation for much 0:22:48.960 --> 0:22:51.960 of the economic benefits we've reaped? And if it can 0:22:52.000 --> 0:22:55.760 be both, how can we tell the difference. Jeff Myron 0:22:55.960 --> 0:22:59.359 is Director of Undergraduate Economics at Harvard and the director 0:22:59.400 --> 0:23:02.080 of Economics Studies at the Cato Institute. 0:23:02.560 --> 0:23:05.240 I don't think there is a definitive study on productivity 0:23:05.280 --> 0:23:09.800 and regulation. There are many studies of individual industries, of 0:23:09.880 --> 0:23:14.000 specific time periods, of special cases, but those are all 0:23:14.200 --> 0:23:19.960 relatively small pieces of information. Finding an overall clear assessment 0:23:20.040 --> 0:23:23.080 is pretty hard. I think many people would point to 0:23:23.560 --> 0:23:26.600 key environmental regulation in the United States, the Clean Air 0:23:26.640 --> 0:23:30.440 and Water Acts, as having been quite successful, but even 0:23:30.520 --> 0:23:33.720 those are not without some degree of controversy. One certainly 0:23:33.760 --> 0:23:36.639 finds that as a result of those acts, which are 0:23:36.640 --> 0:23:40.000 passed in the early nineteen seventies, air got cleaner, water 0:23:40.080 --> 0:23:42.639 got cleaner. But if you then go the next step 0:23:42.680 --> 0:23:46.840