THE BULLETIN: Monthly analysis of the luxury headlines, Feb. 2010

In this month’s luxury news round-up, Robb Young asks whether the iPad will really save the glossy magazine trade; how PPR should decide the fate of McQueen’s legacy; and why the whole luxury world has gone black & white.

Institutional Rebound in the Art Market

As stock markets began to recover toward the end of last year, so too did the valuation of many museum endowments, much to the relief of directors and curators. Because the annual income of such institutions is calculated as a proportion of the value of their endowments, 2009 was a devastating year both in terms of new acquisitions and operational budgets. It was all looking rather grim as the generosity of patrons and philanthropists appeared to be drying up but now there’s a mood of cautious optimism, according to The Art Newspaper. Taking the temperature of the institutional segment of the market, the publication surveyed 25 leading museums and found the most resilient among them to be: Boston’s Museum of Fine Arts and the San Francisco Fine Arts Museums while giants like the MOMA and MoCA fared worse. Meanwhile, art money was a hot topic in Europe last month too but for altogether different reasons. Christie’s was accused of share manipulation by Artprice, the art data firm that alleges the auction house is trying to scare off potential investors just before it released earnings figures. The feud dates back to a 2008 case when Christie’s claimed copyright infringement damages from Artprice worth €2 million ($2.7 million). Last month, Christie’s raised its claim to a whopping €63 million ($86.5 million).

Sources:
The Art Newspaper – 28 Jan 10
ARTINFO – 18 Feb 10

Leveraging Common Brand Values

Brands have been collaborating across different luxury sectors for decades. In recent years, the trend had become so popular that some deals appeared more like fleeting (and often hollow) commercial transactions than bona fide partnerships. Now the industry seems to have taken a step back, focusing on collaborations which are more intuitive and based around common brand values. Hermès has joined forces with Wally Yachts to launch their first WHY Yacht, a multi-story 58 metre-long co-branded cruiser that’s intended to “redefine the art of living on the sea”. At last month’s Abu Dhabi Yacht Show, Bentley secured an exclusive showcase for two of its most powerful supercars, the Continental Supersports and the Continental Flying Spur Speed, making practical use of a common target market shared by the event, yacht brands and the automaker. During New York fashion week, Mercedes-Benz finally released the new ads featuring an outfit by designer powerhouse Gareth Pugh alongside its new sports coupe, the SLS AMG. Because the German automaker’s sponsorship of luxury fashion has been active since the early 90s and since Pugh was such a perfect fit, Mercedes could afford to take risks with such a provocative partnership. Perhaps in the future, luxury brands will follow this example and be more scrupulous when choosing partners for the long haul.

Sources:
AME Info – 21 Feb 10
Sfilate – 31 Jan 10
BusinessWeek – 17 Feb 10

McQueen without McQueen??

After you get over the initial shock and grief of losing a creative genius in his prime, the mind soon ponders the fate of the man’s precious business. The McQueen brand is at that stage where it’s nigh impossible to know what the right thing to do is next. For McQueen’s legacy; for his clients; for the investors; for all concerned really, it’s a minefield. Replacing such a maestro sounds both callous and naive. So too does retaining his anonymous team of protégés for more than a season or two. Allowing the brand to die with its founder isn’t a practical option either, least of all because it has only just become profitable after a decade of investment. McQueen himself once said that he hopes his brand is still around in 150 years, long after he’s “pushing up daisies.” For its part, PPR has announced that the trademark will “live on” (according to PPR’s CEO François -Henri Pinault) and that the upcoming A/W show will go ahead. But the decisions that PPR and its luxury division CEO, Robert Polet of Gucci Group, will have to take in the coming months will be some of the hardest yet. No corporate contingency plan can ever prepare for something this tragic.

Sources:
The Times – 12 Feb 10
Bloomberg – 12 Feb 10
The Daily Telegraph – 17 Feb 10
BusinessWeek – 18 Feb 10
Reuters – 18 Feb 10

The Delicate Matter of Family Investments

Deborah Ball’s book, House of Versace: The Untold Story of Genius, Murder, and Survival, couldn’t have come out at a better time. According to several reports, Donatella Versace has regained power at the Italian brand and is poised to bring back the vavavoom. After a tumultuous couple of years that saw management pitted against her and reports of an arduous battle with drug abuse, fans are hoping that the financial fortunes of the family firm will finally turn around. However, the future hinges not only on the Donatalla – but also on whether Gianni Versace’s principal heir, Allegra, Donatella’s daughter, will sell up her share or take a more active role in the company. Across the Atlantic, another scion has decided to roll out her jewellery brand on a global scale. Donald Trump’s daughter, Ivanka Trump, says she’ll open 30 locations in the US and 10 in Asia for her growing namesake collection over the next few years. A far more discreet family fortune, meanwhile, has been identified as the silent investor in what analysts are calling one of the fastest growing luxury brands in New York: Devi Kroell. The Bartel family of Switzerland has taken a stake in the brand only months after a 12.5% stake in Lanvin last year.

Sources:
Financial Times – 3 Feb 10
Wall Street Journal – 30 Jan 10
WWD – 1 Feb 10
Wealth Bulletin – 23 Feb 10
WWD – 8 Feb 10

Will the iPad Tablet Really Rescue Publishing?

The publishing world has been waiting with baited breath for Steve Jobs to unveil Apple’s tablet device. And now the iPad is finally here. Over the past few months, it was widely reported that the major publishing groups were in consultation with computer companies developing the tablets. This time around, publishers are hoping that their advice will make the tablet environment more user-friendly for their products and the business model of e-magazines more profitable – not like when they were too slow transitioning to the internet and smart phones years ago. In the luxury industry, the million dollar question is whether the tablet and its related software will recover enough subscription revenues for glossy publications – and in turn create a place where selling glossy ads can bring them back from the brink. Time, Hearst and Condé Nast have already created mock-ups of their publications for iPad and others are sure to follow suit. But while everyone is in agreement that the iPad itself will be a hit, analysts can’t seem to agree whether readers of Vogue, Architectural Digest, The Robb Report and the like will purchase enough e-magazines to make a real difference.

Sources:
Brand Channel – 27 Jan 10
Reuters – 28 Jan 10
WWD – 5 Feb 10
Biz Report – 29 Jan 10

Too Many Brands Are Betting on Heritage

Anyone could have guessed that the recession would trigger marketing manoeuvres that reaffirm brand heritage. It’s the most obvious response to allay consumer fears in an unpredictable market. After all, the one thing that many luxury brands do have is a long heritage to exploit. But a recent feature in WWD has demonstrated just how far and wide the trend is being applied across the fashion industry. Louis Vuitton’s tweets on the history of its iconic accessories and Gucci’s revamped black and white ads from the 1960s are just the tip of the iceberg. Baume & Mercier has created an interesting campaign on Facebook that reveals its long legacy through a series of diary style “family secrets” – personal behind the scenes revelations from the Swiss firm’s founders and protagonists. Dior, Prada, Chanel…they’ve all found ways to present the concept of heritage, some more exciting than others. But when so brands hum the same tune, won’t consumers find it hard to hear which has the best voice? Perhaps Suzy Menkes will have some answers at this year’s IHT Luxury Conference. This year’s theme is…heritage. Where else? In old world London.

Sources:
WWD – 2 Feb 10
The Luxe Chronicles – 27 Jan 10
Agenda Inc – 6 Feb 10

LVMH’s Educational Advantage

Preparing for a career in the luxury industry used to mean meandering along an unchartered road, acquiring a bunch of disparate diplomas and degrees in the hopes that you could fill in the gaps with practical experience. But ever since Paris’s ESSEC ratcheted up its luxury MBA programme, other academic institutions have responded with dedicated programmes and special initiatives of their own. Luxury brands have begun to intensify their presence at American universities’ most renowned business and design institutions. LVMH recently partnered with Parson’s The New School for Design for a programme called The Art of Craftsmanship Revisited, in which LVMH’s North American chairman, Renaud Dutreil, adjudicated students’ projects as part of an ongoing collaboration. And at last month’s Columbia University Business School Retail & Luxury Club Conference, Dutreil’s colleague, Daniel Lalonde, the Louis Vuitton North America CEO, spoke about profitability strategies. Snuggling up to future talent while they’re still in the classroom is certainly a clever move on the part of the big conglomerates but could smaller brands be missing out on recruitment opportunities as a result? Could this translate to a widening “talent gap” in the years to come?

Sources:
Vanity Fair – 20 Feb 10
WWD – 27 Jan 10

China’s Growing Gourmet Grocery Market

So much focus has been placed on fashion and big ticket luxury items like cars and private jets that news about China’s growing appreciation for gastronomy has gotten buried between the margins. When we do hear about the increasingly sophisticated Chinese palette, it’s usually a tale of fine dining establishments and the wine & spirit market. But long before the upper middle classes become regular patrons of Michelin star restaurants or splash out on vintage whiskeys, they tend to whet their appetite with gourmet groceries. Foie gras from makers like Rougie and premium chocolates like Godiva are already doing a roaring trade and some market observers believe that the sector is going to be one of the most dynamic in China in the years to come.

Sources:
Luxuo – 21 Feb 10
The Independent – 3 Feb 10
Luxuo – 3 Feb 10

M&A Advice for the Conglomerates

One surprising outcome from the crisis was just how quiet the big three luxury fashion groups have kept on the mergers and acquisitions front. Despite non-stop market speculation that predicted a major shake-up, Richemont, PPR and LVMH have done precious little buying and selling. Their cautious approach to M&A is certainly understandable but what about the adage that one man’s crisis is another’s fortune in the making? A report by Bernstein Research advises that PPR should split off and float its retail division that includes Conforama and Fnac, rather than divesting it, as CEO François-Henri Pinault says he may do in order to build a mass market fashion group to complement the Gucci Group portfolio. Bloggers on the Wall Street Journal are also offering some M&A food for thought. They suggest that Richemont would be wise to look into snapping up a minority share in Polo Ralph Lauren and Salvatore Ferragamo instead of the other brands being bandied about, most notably Prada.

Sources:
The Guardian – 7 Feb 10
Wall Street Journal – 27 Jan 10
WWD – 15 Feb 10

Never-ending Headlines

When we decided to probe our members for their feelings about the social media frenzy, we knew that new reports would keep coming in – but even we were surprised at just how much momentum has grown in the weeks since we planned this issue. This fall/winter fashion season marked a new chapter for the runway show that saw a record number of designers streaming their catwalks live on the internet. As a key part of building anticipation for the public screenings, many brands intensified their presence on Facebook and Twitter, giving a play by play account of their preparations. Although no one dares dismiss the channel any more, social media is still the “wild west” of marketing strategies. Whether it’s putting a value on total social media investment or measuring how successful a particular campaign is, quantifying its benefits is the biggest challenge. This hasn’t stopped a few experts-in-the-making from trying. According to Mobile Marketer magazine, Ralph Lauren’s social media strategy was the best in 2009 and a marketing company called Stylophane has created an index to rank brands by the number of followers they have on Facebook. At the top of its fashion table, Burberry, Chanel, Gucci and Ralph Lauren were the most popular luxury contenders. Sure, ranking brands by the sheer number of fans seems a rather crude way to assess social media – but at least it’s a start.

Sources:
Mashable.com – Feb 10
WWD – 15 Feb 10
PR Leap – 28 Jan 10
Fashionista.com – 27 Jan 10
The Independent – 16 Feb 10
Business of Fashion – 17 Feb 10