The unstable international economic environment of the past 4 years, with emerging markets playing an increasingly important role for the luxury industry, has been proving most challenging to many players. Some of the major international luxury brands who were early entrants in emerging markets are now realizing that building a large retail presence may not, afterall, be the winning recipe, are realizing the opposite. Is therefore a large retail presence an indicator that the respective brand has actually understood and adapted its strategies to the local market? Many recent examples prove they have not and are now stumbling by taking hasty decisions.
When Louis Vuitton reported last month its lowest sales growth since 2009, many analysts have jumped to the conclusion that the main reason behind this slowing performance is the excessive number of stores, such a wide availability having erroded the brand’s luxury positioning and indirectly, its desirability. The company’s owner Bernard Arnault has indirectly admitted to the excessive retail presence and added that logomania is also to be blamed. As an immediate measure, Arnault announced a virtual freeze of international expansion and introducing more subtly branded products.
Louis Vuitton, Spring Summer 2013
In a company such as Vuitton, with probably the most sophisticated corporate structure among all major international luxury brands employing an army of middle and top management (all holding an esteemed MBA), these sudden changes in the company’s strategy, dictated overnight by the company’s owner, clearly reveal its weaknesses and huge vulnerability. It is well known that, despite its this highly sophisticated management structure, most retail development decisions for Vuitton, especially in major markets, were made by Bernard Arnault himself and CEO Yves Carcelle. They would very often travel together and take a decision based on their ”feel” of the market. This is how, without any research, Vuitton has created an oversized retail presence in major emerging markets such as India, China or Brazil.
But what about the creative direction of the product? Observed from the outside, Marc Jacobs seems to have been given immediate instructions to minimize the use of logo, add more colour and develop less ”volume driven” products (luckily he did not accept the position at Dior – or maybe he was never actually considered but the rumours were intentional to heighten the clout around his creative talent).
As for the interior design concept and the merchandising strategy of the Louis Vuitton stores, the company has made yet another risky move, by creating two different ”categories” of stores: the ”regular” stores which can be found in any mid size capital city (some of these Vuitton stores featuring only partial selection of products, i.e. only bags, shoes, accessories) and the ”Maisons”, larger stores with a wider range of products and an array of services exclusively available at these stores.
The Vuitton Maisons are indeed distinct in terms of architecture, with spectacular interiors, exceptional finishes and works of art by contemporary designers. Unlike regular stores which have a very standard creative concept, each Maison is individual in interior design and architecture. If Arnault’s strategic long-term vision would be to close all regular stores and keep only the Maisons (which is hard to imagine), this would be indeed a most sensible decision.
The scare of slower sales has impacted other major international brands, includingBurberry and Coach. Burberry’s response: larger stores, in store private events, opening separate men’s stores and women’s stores, but not a word on creative direction, which, in the past years has not only become predictable but has lost the luxury appeal that brand had when Angela Ahrendts took over as CEO. As for Coach, again no word on creative direction, i.e, looking into developing new styles but instead expanding into ready to wear and creating a ”total look”. I find this lacking any business sense.
Although it still reported positive results in 2012 without without any significant slowing sales in China, Gucci announced recently it will not open any new stores in China in 2013, instead it would enlarge or refurbish some of them. However, similarly to Vuitton, Gucci is not putting creative at the top of its list of priorities when making strategy changes. Or maybe Frida Giannini already received the same brief like Marc Jacobs, but in her case, not from the owner, but by her boss and boyfriend, Patrizio di Marco. Therefore, we should expect less ”double Gs” and more colour?!?
The same dormant ”bug” in terms of creative direction and predictability has taken overRalph Lauren too, which, instead of enforcing its luxury positioning by opening flagship stores, announced last week, it will once again, spread its countless Polo, Denim and other mid range label stores in 2013. As if the ‘Made in China’ controversy regarding the uniforms of the US Olympic team did not do enough damage to the reputation of the brand, last year, Ralph Lauren clearly shows it has not understood the importance of enforcing its luxury positioning. The fact that the company is not prepared to turn to directly operated stores, a winning proven strategy by many of the major players, although it does have the resources, indirectly suggests its priorities are still volume driven.
Speaking recently upon its catwalk show at Milan Fashion Week, Prada‘s co-owner and creative director, Miuccia Prada said ”I design what I feel. I am already obsessed with this – there is so much control that everything is forbidden and you cannot abandon yourself in anything”. Of all, Prada Group, has proven to the whole corporate world that herself and her husband cand run a listed company with the same ease as they used to, before the listing. Indeed she would be the last person to say, from next season there will be less logo on bags.
But how could the Prada family get away with it? It is because the brand continues to prove it has remained faifthful to its roots and it has not changed the way it creates products. That is probably why Prada has been defying the recent crisis growing at a double digit growth rate. And mention should be made, that Prada’s corporate structure is not even a tenth of Vuitton’s.
PPR Group acquired iconic Italian luxury menswear house of Brioni last year and the first decision by the new owners was to double the existing number of mono-brand stores. But was it really the lack of retail presence that has put Brioni in a shadow corner for the past 5 years, even shying behind the much younger Tom Ford whose men’s line is often compared to Brioni? … Afterall, besides Italian craftsmanship and the fact that its suits are made by over 500 tailors in ateliers North of Italy, has Brioni been able to stick up to its reputation? While direct competitors (also family owned) like Ermenegildo Zegna or Canali have been focusing on creative direction and innovation (especially Zegna), the heirs of the Brioni family were busy feuding over the control of the company – not to mention, the gloomy memories of the Brioni women’s line, which was a complete disaster, not only because of its financials but also because of the damage it created for the Brioni brand.
Valentino is probably the best postive example which illustrates the crucial role of creative direction. It is not because of Valentino’s acquisition by Qatars First Lady (last year) that the brand has been flourishing. It is because, the creative duo Maria Grazia Chiuri and Pier Paolo Piccioli who, have succeeded in re-creating the Valentino elegance in a way that is REAL, the brand breathing a new elegance, which not even its founder ever expected again.
Oliver Petcu in London
Valentino, Haute Couture, Fall Winter 2012-2013