The theme of this years FT Summit, What Price Luxury?, was designed by fashion editor, Vanessa Friedman, to address the ‘not-publicly-sexy, but internally fascinating conversations’ that have never been more relevant to luxury executives.
Over twelve sessions, luxury brand CEO’s, asset managers, commodities experts, journalists and even lawyers, ran the gauntlet of macroeconomics, licensing, pricing, currency and counterfeiting, with particularly timely conversations about the Chinese economy, mergers & acquisitions and how the internet and social media are impacting all of the above.
Here we present the first in our series of round-ups, exploring the insights and strategies shared when Thierry Andretta (Lanvin), Lionel Breton (Martell Mumm Perrier-Jouët), Frederick Lukoff (Stella McCartney), Adrianne Shapira (Goldman Sachs) and Vanessa Friedman (FT) discussed Licensing vs Collaboration: The Economics of Brand Penetration.
“ Adrianne Shapira: brands that buy back licenses regain control of their customer, image and growth ”
The End of Licensing
When it came to the issue of licensing vs collaboration, there was an undeniable consensus that the days of the license are over. Lanvin CEO, Thierry Andretta, revealed the only existing licenses in operation for Lanvin, are currently Korea and Japan, and ideally, he would like these to be bought back by the business in the coming years.
Adrianne Shapira, MD global investment research at Goldman Sachs, cited the success of Ralph Lauren as a case for the importance of re-acquiring licenses. A move successfully executed by Burberry in July 2010, when Angela Ahrendts spearheaded the buyback of 50 stores in 30 cities from Chinese trading partner Kwok Hang Holdings. Whilst the deal may have cost Burberry £70 million, their operating revenue of £1.5 billion this year surely justifies the price.
Mr Andretta went on to elaborate that he would consider franchising as a way to enter particularly foreign or unchartered markets, but stressed that this would only be considered if Lanvin were to have total and absolute control of image and operations. As the discussion continued, it became clear that the current ‘best practice’ thinking for luxury brands, is to own, control and financially benefit, from brand owned stores.
“ Thierry Andretta: collaboration only if it’s right, licensing no. we want to control our destiny ”
The Art of Collaboration
As licensing experiences a dive in popularity, collaboration has shown itself to be a formidable tool in the game of brand awareness and market extension. Of particular interest were three growth strategies, driven by collaboration, that have allowed Stella McCartney to move into new geographical markets and spaces.
CEO Frederick Lukoff cited examples of hi-low collaborations in Australia (Target) and Brazil (C&A), as a way to penetrate new geographical markets with low brand awareness, where the more expensive mainline might not yet be viable. Secondly he highlighted Adidas by Stella McCartney, not only as a way for the brand to credibly penetrate a new category and provide an on-going revenue stream, but also to fill a niche market gap for technically advanced sportswear that has been fashionably designed.
Finally he noted the evolution between Stella’s collaboration with the Gap for children’s wear and the recent launch of Stella McCartney Kids, where the brand initially leveraged their collaboration with US giant retailer, to better understand the manufacturing and market for kids. Reconnaissance if you will.
However the most important piece of advice Mr Lukoff could offer, was to go into collaborations ‘with a full divorce mentality’, with extensive contracts to cover every aspect of the project. He went on to explain that Stella McCartney never cedes control of design, communications or distribution, and that kicking off contract negotiations with potential partners, was a great way to determine the seriousness of a relationship.
We look forward to sharing many more key insights from the summit and it’s speakers in the coming weeks.
“ Frederick Lukoff: we go into collaborations with a full divorce mentality ”