\n<\/p>\n
When making luxury brand acquisitions, management firm executives have recently focused on the legacy (and, thus, the potential) of these brand names \u2014 no matter how well they are doing at present. WHP Global founder, chair and CEO Yehuda Shmidman emphasized Marc Jacobs\u2019s status as \u201cone of fashion\u2019s most influential brands\u201d. Marquee Brands CEO Heath Golden lauded Cavalli as \u201cone of luxury\u2019s defining Italian houses, with a bold creative identity and enduring brand ethos\u201d.<\/p>\n
This doesn\u2019t mean the way they operate is undergoing a 180. Brand management firms take a more practical, private equity-like approach to managing brands today, says Bernstein luxury goods analyst Luca Solca. \u201c[They] make sure they have a low BEP [break-even point] and good profitability prospects,\u201d he says. \u201cThey would not play in the premier league \u2014 100% full price, 100% direct \u2014 but they would look for a middle ground made of licensing, wholesale (wherever still available), and off-price.\u201d In this, the tension with luxury norms remains a barrier to success.<\/p>\n
Still, that these brands won\u2019t play in the top luxury league could actually be a positive, Solca flags. As the industry continues to price out shoppers who might once have splurged on top-end products, a white space has emerged where one-rung-lower \u2014\u00a0but still luxury-level brands \u2014\u00a0can take share. If done right, brand management firms could help steer their premium acquisitions into this arena. \u201cThere is a lot of demand orphaned by top-end brands and their price hikes that they could intercept,\u201d Solca says. \u201cIt is a good coming back to reality.\u201d<\/p>\n
This may be so, but if the function and goals of brand management firms sits at odds with what makes luxury brands successful, can a marriage between the two ever really work?<\/p>\n
Historically, the reason brand management firms have fumbled the luxury bag is because they\u2019ve wanted too much, too soon. If these groups take a long-game approach, they could see success in the luxury space, experts agree.<\/p>\n
To win, brand management firms need to build these brands more slowly \u2014\u00a0and at a smaller scale than they\u2019re used to with the more mass brands in their portfolios. \u201cLuxury brands derive value from scarcity, storytelling, and cultural relevance,\u201d Lepor says. \u201cThe challenge for large brand management firms is scaling these businesses without diluting the very attributes that make them valuable in the first place; the brand should always be bigger than the business.\u201d<\/p>\n
You can\u2019t simply flood the market with new products and categories to capitalize on short-term buzz, cautions Jessica Ram\u00edrez, retail consultant and founder of The Consumer Collective. Saunders wonders if the success of brands like Ralph Lauren<\/a> and Coach<\/a> \u2014\u00a0both of which have executed long-term, meticulously planned elevation strategies over the last five years \u2014 will encourage these firms to adapt their approach. It could happen, he says, but he\u2019s skeptical.<\/p>\n These companies would also need to bring in the right people. Saunders is not sure firms would be willing to cede some of the day-to-day control to a luxury leader, but points to Brooks Brothers as an example that worked. \u201cCatalyst Brands has done a very good job with Brooks Brothers. It has allowed the CEO of the division to drive the vision \u2014 but it is rare,\u201d he says. (Catalyst is a 2025 joint venture between JCPenney and Sparc Group, the latter of which acquired Brooks Brothers in 2020. Under CEO Ken Ohashi, the brand returned to profitability in 2023.)<\/p>\n<\/div>\n