Whether we’re selling hotel rooms or stilettos, the luxury marketplace is riddled with similar challenges and opportunities suggesting greater collaboration could be useful to brands in both industries in their pursuit of becoming lifestyle brands for affluent consumers.
What is the similarity between a $864 heel and an airplane seat? More than you think.
Both the luxury fashion and travel industries are consolidating, striking that balance between brick and mortar and online sales, doing that dance between exclusivity and approachability for the aspirational and affluent.
Traditionally considered “middle market” of the luxury sector, Michael Kors and Coach are looking to transform themselves into true luxury brands that compete on the same level as European powerhouses LVMH Moët Hennessy Louis Vuitton, Kering, and Richemont.
The first concrete sign of these ambitions came last month when Kors announced it would acquire Jimmy Choo for $1.2 billion — on the tailwind of Coach’s $2.4 billion acquisition of Kate Spade. With acquisitions, these companies can gain new revenue streams, achieve distribution efficiencies and diversity their offering.
Fashion may be in for consolidation and competition more often seen in the travel industry. And there are important parallels between the two industries.
Mergers and Acquisitions
“United States-based groups have turned toward mergers and acquisitions to better position themselves in front of a wide variety of consumer demographics. Marriott International’s purchase of Starwood increased its luxury portfolio, but also gave a boost to its premium hospitality brands such as W Hotels, for instance. France’s AccorHotels made a similar deal with its acquisition of Fairmont Hotels, thus giving its premium-level properties a jolt of luxury,” explains Jen King, associate editor on Luxury Daily, to Skift.
“We feel this is similar to Michael Kors’ purchase of Jimmy Choo, but in the opposite direction — a premium designer label purchasing a luxury brand.”
Exclusivity, or the perception of exclusivity, is as important in fashion as it is in travel. It’s always a balance between maintaining that exclusivity and being accessible enough to attract new peeps.
“Today’s luxury market is about maintaining the illusion of exclusivity, while selling units by the millions. Shatter the illusion and brand cachet is lost,” Luca Solca, head of luxury goods at Exane BNP Paribas wrote earlier this year.
“The idea behind these deals is that its beneficial for a company to have upmarket and more accessible points to attract as many consumers as possible to help their bottom line. Moving upmarket is also a good strategy because the luxury industry tends to be more insulated and immune to fluctuations,” echoes King.
Also, who is taking over the company and their respect for its history is an important factor. Michael Kors CEO John Idol wants to focus on brands with heritage.
Jimmy Choo will stay independent with both its CEO Pierre Denis and creative director Sandra Choi – who have been with the company since its inception – will stay on.
“I was afraid it would fall into the hands of a Chinese private equity fund with no experience in luxury,” former Jimmy Choo investor and former CEO Robert Bensoussan said in Business of Fashion.
This is a fear that’s been echoed among the founders of legacy travel companies that we’ve spoken to in the past.
The Daily Newsletter
Our daily coverage of the global travel industry. Written by editors and analysts from across Skift’s brands.
Have a confidential tip for Skift? Get in touch
Photo credit: Mannequins with their heads decorated with Great Britain's union flag display fashion designers' clothes in a tailoring shop in Barcelona, Spain, Sunday, June 25, 2016. Emilio Morenatti / AP Photo