Lanvin for H&M; (2010)

In our recent exploration of Celebrity Marketing in Luxury Communications we explained the two facets of luxury according to branding expert Jean-Noël Kapferer and luxury industry executive Vincent Bastien. “Luxury for oneself and luxury for others,” explained the duo. “To sustain the latter facet it is essential that there should be many more people that are familiar with the brand than those who could possibly afford to buy it for themselves.”

Whilst Kapferer and Bastien were referring to the power of celebrity in reaching those whom the brand are not targeting, they could just have easily been discussing the more recent – and perhaps just as effective – luxury brand high street collaboration. Where brands take the world of luxury and try make it relevant to a much wider audience using lower quality at lower pricepoints, without compromising the exclusivity factor by limiting the size and distribution of collections (Marketing Week).

Whether or not luxury brands have compromised this ‘exclusivity factor’ remains to be agreed upon, but it proves excruciatingly difficult to find but one example of a luxury brand high street collaboration that hasn’t been a roaring success. When you consider the distance between the offering of a luxury brand and the offering of a fast fashion retailer, one could be forgiven for expecting a marriage made in hell.

Fashion designers collaborating with retailers is not something necessarily new. Luxury retailers have long been commissioning capsule collections, to be distributed exclusively through their retail networks, in an attempt to differentiate themselves from other boutiques carrying the same labels and encourage traffic in-store.

That said, in the case of a capsule collection, quality is generally not compromised, price and positioning remained unchanged and communications strategies do not infiltrate the high street. Instead, the luxury fashion brand and the luxury fashion retailer collaborate on the same level, for the same clients, in the same environments.

That was until 2004, when H&M; launched its first designer-centric collaboration with Karl Lagerfeld, in a bid to fuel further growth, command higher margins and enter new markets. The outlandish success of this debut collection was followed by collaborations with Stella McCartney, Viktor & Rolf, Roberto Cavalli, Comme des Garçons, Matthew Williamson, Jimmy Choo and Sonia Rykiel. The most recent – and most stratospherically publicised – were by Marni, Versace and Lanvin.

Topshop, Target, Payless and Macy’s are just some of the copycats, who have managed to lure designers as diverse as Mary Katranzou, David Koma and Christopher Kane to Jason Wu, Alexander McQueen and Missoni. Macy’s is reportedly in talks with several other designers and has plans to churn out around five collaborations a year.

The Argument For

Perhaps the most obvious benefits lie with the high street retailer. Luxury brand collaborations are notoriously effective for driving foot traffic, frenzied sales and immeasurable buzz, which permeates both the mainstream media sphere and luxury consumers outside its current influence.

Designer collaborations call for higher prices, resulting in increased revenues and healthier margins. They also serve as a point of differentiation over other fast retailers and give consumers a new reason to visit stores. In terms of sell through, these limited ranges generally completely sell-out.

These collaborations can also greatly benefit the brand lending its cache, which often includes significant financial remuneration. It has been reported that Karl Lagerfeld and Stella McCartney were paid $1 million for their H&M; collections, while Proenza Schouler’s Target deal apparently “approached seven figures” (Coskill).

The brand is also able to raise awareness in consumer segments or geographical markets where awareness is low. Speaking at the 2011 FT Business of Luxury Summit, Stella McCartney CEO Frederick Lukoff cited the success of hi-low collaborations in Australia (Target) and Brazil (C&A;), in penetrating new markets with low awareness, where the more expensive mainline might not yet be viable.

The high street collaboration seems also effective for luxury brands seeking to connect with a younger audience, who will perhaps become important future clients. Lanvin’s collaboration with H&M; roughly coincided with the launch of its e-Commerce platform, its bolstered social media presence and was followed by the release of reasonably silly campaign videos for its SS12 and AW12 collections.

Collaborations with high street retailers also allow luxury brands to experiment with category extension in a less risky – and less costly – environment than their own retail networks. Alongside H&M;, Jimmy Choo was able to move from producing shoes into women’s clothing, whilst Matthew Williamson chose to produce his first line of commercial menswear (Marketing Week). Stella McCartney’s collaboration with GAP Kids eventually led to the launch of her own childrenswear line.

The Argument Against

The case against luxury brands collaborating with fast fashion retailers is far more conceptual and based on the opinions of marketing experts, than based on tangible measures like revenue, sell through or publicity. Though the luxury industry is one driven largely by intangibles – creativity, brand equity, emotion, experience – perhaps these arguments are equally as important?

There are no universally agreed-upon reasons as to why consumers buy luxury goods, but exclusivity has long been a cornerstone of what constitutes a luxury product – as has quality, longevity and craftsmanship. When a luxury brand attaches its name to a product that is none of these things, is it not defeating the purpose of its existence? And sending a confusing message to consumers as to what it stands for?

And what happens if high street consumers have a bad experience with the brand? If the collection sells out before they can make the purchase or the e-Commerce platform collapses under popular pressure? These collaborations have been accused of having high rates of returns due to poor fit and quality, leading to disgruntled customers, for whom this could be their first – and off putting – experience with the luxury brand, making them unlikely future customers.

Luxury brands also lose control of retail experience and distribution once the stock hits the floor, including prized sciences like merchandising, customer service and packaging. It’s not difficult to imagine one of Alber Elbaz’s tuille party dresses being stuffed into a plastic H&M; bag during peak hour on the Champs Élysées, as nubuck interpretations of the house’s famous ballerina flats litter the foor.

“Brands that want to straddle both sides of the brand fence will not do well in the next stage of consumerism,” explains Coskill in its paper The Future of Retail in a Luxury/Budget ’All or Nothing Battleground. “Brands must decide which end of the spectrum they want to occupy and tailor their collections (products) to satisfy the need of their audience to engage and succeed.”

Luxury brands that attempt this ‘both sides of the brand fence’ also risk alienating their core consumers, who may feel the brand has been cheapened by allowing itself to be accessed by the mainstream.

Randy Kabat, Executive Vice President of Marketing and Advertising for Prada USA, revealed that roughly 50% of the firm’s sales come from just 5% of its customers. Coskill muse that if Prada engaged in this tactic to attract a lower price ticket audience, they could risk disengaging the hugely influential 5% of its customers, which could have an enormous impact on its bottom line.

That Said

A Study of the H&M; Luxury Collaborations with Focus on the Images of the Luxury Designer Brands concluded that the general perception of the luxury designer brands after the collaborations was positive with consumers in all segments. The collaboration did not cause a significant backlash on the regular luxury consumers, as the majority of this consumer segment also stated that they were not bothered by the collaborations.

And perhaps they were not, but this hasn’t stopped brands like Chanel, Prada, Burberry, Hermès and Louis Vuitton staying well away from any kind of ‘both sides of the brand fence’ communication strategy. These are the companies that have put their prices up, bought back their distribution and taken communications in-house. Tom Ford will now, somewhat notoriously, not release any pictures of collections until they hit the retail floor.

In fact a quick look at the fashion brands that constitute PPR, LVMH and Richemont, and just two of twenty-two have participated in collaborations with high street retailers: PPR’s Stella McCartney and Alexander McQueen.

Whilst PPR have allowed some of its contemporary – and perhaps lesser globally understood – fashion brands engage such partnerships, it appears to have held back heritage brands such as Yves Saint Laurent, Gucci, Bottega Veneta and Balenciaga. It is particularly interesting to note that not one single LVMH fashion brand has ever collaborated with a fast fashion retailer. I have a feeling that with Bernard Arnault in the top spot, and the fact that Louis Vuitton doesn’t even go on sale, this is not an accident.

Brands that have collaborated with the high street are also distinctly absent from the 2011 Brandz Top 10 Luxury Brands league table, described by marketing expert Mark Ritson as “the single most insightful peek inside the golden robes of the luxury industry.” Of the fashion brands rounding out the Top 10 – Louis Vuitton, Hermès, Gucci, Chanel, Fendi and Burberry – not one has ever been near a high street collaboration. And these are the brands perceived as the most luxurious brands in the world.

The Final Word

Perhaps the real confusion is not in the collaboration but in the description. These collaborations so far exist for fashion brands and their designers, yet not as much for true luxury brands, and the benefits are completely different for each party.

For fashion designers – particularly young and independent designers – high street collaborations provide concrete opportunities for raising brand awareness, reaching new market segments, penetrating new geographical territories, experimenting with category extensions, boosting appeal to younger generations and often, receiving much needed injections of cash.

Yet when we use the term ‘luxury brands’, we are effectively referencing everything from timepieces to fine jewellery to luxury cars. Luxury goods that would lose all relevance if they were to make products within their category of low quality and/or price. Would anyone realistically want to buy a watch conceptualised by Rolex, realised by Timex? Or a necklace designed by Cartier, realised by Claire’s?

For luxury brands the benefits are far less explicit and the potential damages to brand pronounced. There is also the issue of necessity – perhaps these young fashion designers need this exposure to grow, whereas brands like Burberry and Louis Vuitton continue to conquer their peers and expand exponentially. Essentially one wonders, why would an established and successful luxury brand bother?
For more in the series of For and Against, please see our most recent editions as follows:

– For and Against: Consumption Slowdown, Luxury Goods
– For and Against: Celebrity Marketing in Luxury Communications

We invite all Luxury Society members to contribute their thoughts and continue the debate below