Taking Measured Steps to Bolster Luxury Brands – Harvard
By Nancy Brumback
BOSTON — Careful and controlled brand extension is the best way for luxury houses to further leverage brand equity, executives from several such companies told their potential successors.
Speaking at a daylong conference on luxe product and retailing last month at the Harvard Business School, top executives from Jimmy Choo, Tumi, Salvatore Ferragamo USA, Derek Lam and LVMH Moët Hennessy Louis Vuitton outlined plans for new products and stores. The session, sponsored jointly by the Luxury Goods & Design Business Club and the Retail & Apparel Club at the business school, drew about 300 almost-MBAs, double the attendance from the first such event last year. While twothirds of the students were from Harvard, students from business schools around the Northeast and as far south as Duke attended.
Robert Bensoussan, chief executive of Jimmy Choo, said the iconic shoe company plans to expand into fragrances, eyewear and other accessories and even into jeans, following the successful launch of a handbag line in 2003. ”We don’t want Jimmy Choo just to be known as a shoe brand,” Bensoussan said in the conference keynote speech, but added brand extensions will be done “very carefully.” He declined to give a timetable for new product additions when asked later. While Jimmy Choo’s sales are about 70 percent shoes and 30 percent handbags in its established markets of the U.K., the U.S., Asia and the rest of Europe, the sales mix is closer to 50-50, he said. Jimmy Choo will have 54 branded stores by the end of the year, up from 36 at the end of last year, and has finally found a location on Rodeo Drive “that we can afford,” he said. By the end of 2008, store count, including franchises, will be close to 80 worldwide.
Tumi, the luggage maker, will launch a line of men’s performance activewear in July, and a similar line for women in spring 2007, said Wendee Lunt, vice president of global marketing and new business development. The line is being developed jointly with Umbro and will be called Umbro for Tumi. It’s aimed at business travelers, with such features as antimicrobial treatment and rapid drying. Lunt told WWD the lines will be offered to department stores and specialty luggage shops, but not sold through athletic apparel retailers.
Tumi also continues to open its own stores. The 50-store retail division will be the company’s largest division in volume this year, she said, adding that online sales will account for about 10 percent of its business. Ferragamo has adopted a “very deliberate” strategy of brand extension, said Dana Gers, senior vice president of marketing at Ferragamo USA. A new line of watches fits the strategy of remaining close to the core product category, she said.
Ferragamo decided not to extend its brand through licensing so it could retain control, she added, noting the extensive licensing agreements done by many large manufacturers have “overexposed” the brands.
Ferragamo is cultivating the next generation of customers with products such as sunglasses and fragrances at prices younger shoppers can afford, but it will not produce lower-priced lines of handbags and shoes just to woo that customer, she said. Derek Lam, meanwhile, plans to expand its branded offering with accessories rather than developing a second, bridge line of women’s apparel, noted ceo Jan Schlottmann, who was joined on a panel by founder Derek Lam. Pamela Baxter, president and ceo of LVMH perfumes and cosmetics for North America, described how the company revitalized the Dior fragrance brand in the U.S. by closing about 30 percent of the retail outlets, primarily department stores, that didn’t match the fashion image of the apparel brand. Federated Department Stores’ acquisition of May Co. has led to some pressure from the retailer for Dior to reenter department stores, “but we are not going to do that,” Baxter said, noting the Dior brand will remain at the upper end. “We’ve reopened at Neiman Marcus and expanded with Saks Fifth Avenue and Nordstrom.” The company will support other product lines at the department store level. Bob Lamey, founder and ceo of Shopbop.com, said customers at the trendy Internet site have become older and more sophisticated as the brands carried have moved to higher price points. New York and Los Angeles are its largest markets, which, he said, initially surprised the company since customers in those cities already have retail access to the latest fashions. New Yorkers, he speculated, don’t have time to shop, and Los Angeles is too sprawling. “We try to be the resource for busy people who love fashion.” In a final panel on global supply chain strategy, executives from Target, Tiffany & Co., Limited Brands Inc. and New Balance outlined the challenges of overseas sourcing. Stacia Andersen, president of Target Sourcing Services, who is responsible for domestic and international sourcing for Target, noted the mass retailer ultimately aims for half of its sales to be its own brands, sourced through TSS. “We are close to that in softlines and apparel, and more like 25 percent in home goods,” she said. Remarking on the luxury goods part of the conference, Andersen commented that, at Target, “as the luxury lifestyle reaches the mass market, we are benchmarking ourselves to continued elevation of our brands and products.” Gers of Ferragamo encouraged the business school students to go into the luxury goods and retail industries, noting a change from designer-based or family-owned businesses to “large companies in need of management skills.” But she acknowledged these industries still lag behind others in compensation. “There’s very little money, but it’s a fun business — and sometimes you get a clothing allowance and great discounts on shoes.”