Following last year’s acquisition of Jimmy Choo and its interest in the Kate Spade brand before it lost out to Tapestry Group, we can view Michael Kors’ latest deal with Versace another step towards curating a brand portfolio to rival the likes of Kering, Richemont and LVMH. Versace is a brand that is undergoing a transformation. While the brand had its heyday in the nineties, the recent drama series The Assassination of Gianni Versace and continued celebrity endorsement has helped to renew interest in the brand for a younger audience, particularly at a time when nostalgia for nineties trends is helping to drive consumer culture.
While the majority of brands owned by LVMH, Kering and Richemont sit firmly in the high-end luxury space, Michael Kors is far more accessible. Both Jimmy Choo and Versace sit slightly higher in terms of typical price points, but Versace offers a broader price architecture. Michael Kors also expects to grow the Versace network. There are therefore a number of benefits that group membership represents. Firstly, the ability to unify data sources for the different target customer groups served by the brands, which can help the group to triangulate nuances in both the luxury industry and the local markets where the brands are present. Secondly, the ability to trade younger consumers up the price architecture through different brands in the portfolio as their affluence and buying power grows. Thirdly, the efficiencies that can be created throughout the value chain via shared manufacturing and fulfilment networks etc.
We’re exiting an age where numerous brands and businesses have grown rapidly on their own terms but are now reaching saturation point. In order to scale further and switch on growth, it’s necessary to join forces and we can see this happening more and more – not just in fashion or retail, but the wider business arena too. In some cases, like Michael Kors and rival Tapestry Group, companies will continue to grow by joining forces with complementary businesses. Conversely, we can also see businesses adopting strange bedfellows that would otherwise be rivals. Facebook’s acquisition of Instagram is a prime example of this trend. Looking forward, we expect to see more consolidation taking place in the market, with more conglomerates emerging in a bid to compete effectively.
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