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The handbag manufacturer Michael Kors announced Tuesday that he would buy the famous Italian fashion house Gianni Versace for $ 2.1 billion, an initiative that will add an exclusive but aging luxury brand under his belt.
In a statement, Kors said he would change his name to become Capri Holdings. Donatella Versace, 63, who has helped direct the brand since the murder of her brother in 1997, will remain under the deal.
The deal is the latest effort in Kors' attempt to turn into a major fashion conglomerate, following the acquisition of Jimmy Choo, a luxury shoe brand, for $ 1.2 billion in 2017. But in some ways, it's a strange union. The names of luxury fashion are under the umbrella of a brand known for offering high-end items at affordable prices. Again, it's a strange moment in luxury fashion.
According to Bain & Company, this market share is up, with $ 289 billion in global sales last year. However, changes in the landscape – driven by a younger, more digital audience – are prompting some historical societies like Versace to develop geographically and demographically. While brands are struggling to adapt, some, like Kors, are turning to the conglomerate model of fashion to stay afloat in such a flow.
By 2025, Millenials and Generation Z will account for nearly 40 percent of luxury goods consumers, according to Deloitte's Global Powers of Luxury Goods (2018) report. According to Pam Danziger, a market researcher who has spent her career studying the wealthy United States, they are more concerned about a personalized shopping experience and the values that the product represents than with the heritage of brands or the notion of luxury goods in general. consumers.
"They are not attracted by the glitz and prestige of a brand like Versace, they are looking for something more meaningful and more values-based," said Danziger.
Last year, Michael Kors and Coach (renamed Tapestry after buying the Kate Spade handbag company) evolved into the conglomerate model in the mold of European luxury juggernauts such as LVMH Moet Hennessy, Louis Vuitton and kering. Brands like Dior, Gucci, Yves Saint Laurent, Balenciaga and Alexander McQueen. For Milton Brand, director of the Luxury Institute, a research firm conglomerate in New York. But this is only success if the conglomerate defends the integrity of the brands.
"Part of the secret is knowing how to take advantage of brands and know what to leave alone," said Pedraza. "Versace is one of the brands that has a truly iconic look. It is indisputable and it must be nurtured. "
But some, like Danziger, doubt that these brands can remain relevant when they are run by conglomerates, which often focus on the profits rather than the brand identity.
"These luxury brands have become excellent by being controlled by visionaries, not by what they accumulated every month in sales," Danziger said.
Since the murder of the founder Gianni Versace, the Italian fashion house has been barred by the sister of the designer, Donatella. Long known for its audacity – its eclectic prints, its bright colors, its striking logo of the head of Medusa – Versace has struggled to adapt. After Blackstone Group, a private equity firm, bought a 20% stake in Versace in 2014, Versace called for a public offering, but never made it public.
With his sportswear and classic handbags, Michael Kors offered personal luxury products at a relatively affordable price. The company has been criticized for using discounts to move its products to department stores and shopping malls. Yet, according to a PMX agency study in New York, the company has kept pace with digital distribution, with the highest web traffic of all luxury brands in 2017. Kors shares have fallen by 7.6% Monday.
The spokesman for Versace and Michael Kors did not respond to requests for comments before the announcement of the agreement. Shares of Michael Kors fell more than 8% after the publication of the information on the deal.
In a statement released Monday, Donatella Versace said: "It's a very exciting moment for Versace. It has been more than 20 years since I took over the business with my brother Santo and my daughter Allegra. I am proud that Versace remains very strong in fashion and modern culture. "
John D. Idol, Managing Director of Michael Kors added, "The acquisition of Versace is a milestone for our group. With all the resources of our group, we believe that Versace will generate over US $ 2.0 billion in revenue. We believe that the strength of the brands Michael Kors and Jimmy Choo, as well as the acquisition of Versace, allow us to achieve several years of revenue and profit growth. "
Gianni Versace has recognized the strength of her brand's rise through models such as Cindy Crawford and Naomi Campbell, and Versace has attracted young stars like Gigi Hadid and Karlie Kloss to connect with a younger audience. Versace has more than 14 million followers on Instagram – perhaps the most influential social media platform for luxury brands.
The expansion of Versace under Kors could be based on the fact that it becomes more of a brand "from Monday to Friday," said Pedraza, which is difficult to ask a brand that has made a name in exclusivity . And although Kors is known for its accessibility, some analysts doubt that it is able to reign effectively in Versace.
"Some of the work Versace needs to do to soften some of the brand's coolest elements, which are now out of sync with the more subtle tone preferred by modern consumers, are precisely the issues that Michael Kors has had to deal with. has not yet succeeded. resolve satisfactorily, "said Neil Saunders, managing director of GlobalData Retail.
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