Saturday, February 03, 2007

Luxe, calme et volupté (part 2)

If we look at the revenue figures of leading fashion groups, we may find some surprise.
Valeria Maltoni, in a recent post, was posing some questions about luxury brands and the need to grow:

  • Can a company really go for high-end and mass market under the same name brand? Ironically, what appeals to mass market is what high-end customers shy away from.
  • Would you rely on customer focus groups to make a decision on which end of the market to preserve? Tiffany did after complaints about crowding were beginning to appear in internal consumer research.
  • Would you be willing to sacrifice sales growth while you recalibrate the brand one way or the other? In publicly traded companies investors may have you for dinner.
  • We often talk about how spreading ideas can be fantastic in exposing people to your brand story. Is overexposure the price you're willing to pay?
If we look at the figures mentioned above, apparently most of the luxury brands are able to balance between aspirational and mass market.

Gucci revenues are generated for a 55,7% from leather goods ( wallets, keyrings, bags), 13,8% from shoes, 12% from women and men wear, 3%from royalties and licences, 15% others;

Bulgari revenues are generated by 45% from the entry level ring;

50% of Richemont sales are from jewellery and 50% from watches, leather and writing instruments (which are the fastest growing business).

Where are they so clever? Selling one bag at 10.000 usd to the high end consumer, create a hype for the brand, the halo effect and then selling tons of wallets at 150 usd each to the mass.
It's the call for being part of a world of dream.

But some other significant difference is in the way luxury companies use their brands portfolio.

Some of them use the same brands for products with different price range: Tiffany does so, and Gucci, Bulgari, Montblanc, Louis Vuitton.

Some others differentiate brands for price range but making clear the holding they belong to: Armani and Emporio Armani, Pomellato and Dodo, Dolce and Gabbana and D&G, Prada and Miù Miù just to name a few.

In any case brands are not endangered by the mass market products diffusion but, on the contrary, revenues are soaring.
The mass market products have definetely higher margins because it's the brand and the logo and not the product itself to make its value.


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