2/21/2016

Luxury Brands: In non-luxury times A Review & Commentary Nnamdi O. Madichie

BRAND WOES, What BRAND Woes?

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Setting the Scene

The Wall Street Journal reported a series of brand crises:

Ex-Lululemon CEO is advising Adidas (p. B1) - embracing the women market segment "Porsche trial weighs new evidence" (p. B1) Luxury car maker "Aston Martin Lagonda plans joint venture with Chinese partner LeEco for Electric car projects (p. B4) "Slowdown in China weighs on" Prada (p. B4) "Wal-Mart is Feeling Boxed in" (p. B5) (WSJ, Thursday 18 February 2016)

And the BIG one: "Apple fights Judge's order" (cover page) - challenging privacy and security of customers against a federal investigation to unlock an iPhone 5C once used by a suspect in the San Bernadino, California attacks.

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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“When you flip through the pages of a fashion magazine, what do you see? An array of luxury fashion advertisements, featuring colourful and alluring pictures of models displaying products that tease your eyes and sensitivity. When you switch on the television, you’re constantly bombarded with celebrity news and reality shows that touch your natural human craving to feel beautiful, important and recognized. The gorgeous people in the magazines and on television unconsciously speak to you, telling you that their lifestyle and material possessions like their clothes and accessories can also make you beautiful and help you become a part of their world. All you need to do is to obtain the right fashion goods by the right designers. You then begin to crave the Gucci watch, the Louis Vuitton bag and the Chanel glasses, not to mention the Jimmy Choo shoes or the Bvlgari jewellery that beckon you every time you see a picture of a celebrity icon. Welcome to the luxury fashion land.” – Uche Okonkwo (2007) Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Image Title Caption

Purpose

To provide a general overview of the Luxury fashion Brand industry and trends especially in these nonluxurious of times

To reflect upon the ranking of luxury fashion brands in the most recent brand value report – i.e. Interbrand 2015 Top-100

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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No one who visits the high street this season, be it in the US, the UK or Europe, can fail to notice that the retail sector is having a tough time. Stores are relatively empty for the time of year. Sales have started weeks in advance of the traditional date. Incentives to buy scream from every window. […] Where, in this despondent picture, are the fashionistas? (Strategic Direction, 2009)

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Literature Review This study follows publications on luxury brands over the last decade from Ghemawat and Nueno (2006); Okonkwo (2007) to Arli, Cherrier and Tjipotono (2016). It explores luxury brands at a broader level and two particular brands that have gained more traction than others, Prada and Zara.

Inspired by a 2008 article on the troubled luxury brand, Prada (Kapner, 2008) which has now become a focus of scholar investigation in the course of the last decade (see Arli et al., 2016; Moore and Doyle, 2010; Phau and Teah, 2009: Teah et al., 2015)

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Literature Review Cont. Moore and Doyle (2010: 915) embarked upon “a review of the key fashion industry‐related themes […] in the context of luxury fashion brand Prada and in so doing identifies four key change phases in the evolution of the brand.”

Drawing upon a review of the literature spanning 20 years, these overarching general themes comprise (Moore and Doyle, 2010: 915): fashion retailer brands, internationalisation of fashion retailing, emergence and challenges of on-line fashion retailing, changes in the supply chain and changes in consumption. Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Review of the Literature – some key pointers

Big Bad Recession (Friedman, 2008) Luxury Fashion Branding – Trends (Okonkwo, 2007) Fast fashion lessons (Sull and Turconi, 2008) Zara fast Fashion (Ghemawat and Nueno, 2007) Burberry Business Model (Moore and Birtwistle, 2004) Prada “Goes shopping for Money” (Kapner, 2008) Gucci’s “Borrowed Corporate Heritage” (DeFanti, Bird & Caldwell, 2014) The Anatomy of an International Fashion Retailer (Moore and Wigley, 2004)  Devil continues to wear “Counterfeit” Prada (Phau and Teah, 2009; Teah, Phau, and Huang, 2015)        

See Table 1 (for a brief review of the literature). Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Table 1. A brief review of Luxury brands

Study (Author/ Title)

Arli, Cherrier, and Tjiptono (2016) God blesses those who wear Prada: Exploring the impact of religiousness on attitudes toward luxury among the youth of Indonesia Moore, and Doyle (2010) The evolution of a luxury brand: the case of Prada Kapner (2008) Prada goes shopping – for money, Fortune, Vol. 158 No. 3, September 1, pp. 30-8. Phau and Teah (2009) Devil wears (counterfeit) Prada: a study of antecedents and outcomes of attitudes towards counterfeits of luxury brands Teah, Phau and Huang (2015) Devil continues to wear “counterfeit” Prada: a tale of two cities

Brand Explored (Challenge) Prada (Counterfeiting) Prada (Luxury) Prada Prada (Consumer Behaviour/ Attitudes) Prada (Counterfeit)

Ghemawat and Nueno (2006) Case Zara, Fast Fashion, Harvard Business School Study Case, Boston, Zara MA. Anon (2009) From Prada to Zara: Is the global recession out of fashion? Zara, Prada (Recession) Moore and Birtwistle (2004) The Burberry business model: creating an international luxury fashion Burberry brand DeFanti, Bird, and Caldwell (2014, July) Gucci’s Use of a Borrowed Corporate Heritage to Establish a Gucci Global Luxury Brand. Moore and Wigley (2004) The Anatomy of an International Fashion Retailer – The Giorgio Armani Group. Friedman (2008) The business of fashion: who’s afraid of the big bad recession? Financial Times, September 22, pp. 1-17, (supplement).

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

Giorgio Armani Group General, Global Recession

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Interbrand 2015 - Observations

In the most recent Interbrand Top-100 brands only six luxury fashion brands made the cut. Indeed only three made the Top-50 – notably Nike (#17), Louis Vuitton (#20), H&M (#21), Zara (#30), Hermes (#41), and Gucci (at #50). Ralph Lauren and Hugo Boss ranked #91 and #96 respectively.

Despite its 54% upward trend from last year, Facebook falls outside the Top20 with a ranking of #23 (just ahead of Pepsi) and a brand value of US$22,029 million. Apple, by the way clinches top spot at #1. See Table 2 for a summary of the Luxury Fashion Brands.

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Table 2. Luxury Fashion Brands in the Top-100 Rank 1 Rank 2

Brand

Sector

1

17

Nike

9 10 11

73 91 96

Burberry Luxury Ralph Lauren Apparel Hugo Boss Apparel

2 3 4 5 6 7 8

20 21 30 41 50 57 62

Louis Vuitton H&M Zara Hermès Gucci Cartier Adidas

Sporting Goods

Luxury Apparel Apparel Luxury Luxury Luxury Sporting Goods

Brand Value Change

23,070 $m

22,250 $m 22,222 $m 14,031 $m 10,944 $m 8,882 $m 7,924 $m 6,811 $m 5,873 $m 4,629 $m 4,270 $m

+16%

-1% +5% +16% +22% -14% +6% -8% +5% -7% +3%

Source: Rankings 2015 Best Global Brands Best Brands Interbrand http://interbrand.com/best-brands/best-global-brands/2015/ranking/#?listFormat=ls

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Conclusions

The landscape of luxury fashion is changing

 Recession is biting and consumer tastes and purchasing patterns are changing;  Flagship stores are being supplemented with omnichannel siblings (notably ecommerce);  Counterfeit brands are posing some serious challenge (China has been widely cited in the literature);  Fast fashion is becoming ever more aggressive (Zara challenging the devil in Prada);  Brands are aggressively extending both upwards and downwards (premium and lower-end respectively). Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Conclusions Cont.

This presentation sets the tone for the next issue of the LSBM Working Paper Series, which is currently open for “Business”.

The theme would be on “Branding“ – broadly defined to include person branding (including CEOs and celebs), nation branding (with variants such as place and city branding), luxury brands and/or not-for-profit branding (including higher education). Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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Some Food for thought

In these non-luxurious times some interesting insights have begun to emerge. For example, and according to Wang and Griskevicius (2014, p. 848):

“Consistent with the current findings, past research finds that women more than men want gifts from their romantic partner […] there is one gift that women want to receive more than any other, topping the wish list of fully two‐ thirds of women […] The gift is not jewelry, clothing, flowers, or anything that is considered romantic. Instead, the most coveted present is a gift card to a luxury store.” Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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References

1.

Anon (2009) From Prada to Zara: Is the global recession out of fashion? Strategic Direction, Vol. 25, Issue 3, pp.9 - 11. 2. Arli, D., Cherrier, H., and Tjipotono, F. (2016) God blesses those who wear Prada: Exploring the impact of religiousness on attitudes toward luxury among the youth of Indonesia. Marketing Intelligence and Planning, Vol. 34, No. 1, pp. 61-79. 3. Friedman, V. (Ed.) (2008) The business of fashion: who’s afraid of the big bad recession? Financial Times, September 22, pp. 1-17, (supplement). 4. Kapner, S. (2008), “Prada goes shopping – for money”, Fortune, Vol. 158, No. 3, September 1, pp. 30-8. 5. Kumar, A., Lee, H.J. and Kim, Y.K. (2009), “Indian consumers’ purchase intention toward a United States versus local brand”, Journal of Business Research, Vol. 62, No. 5, pp. 521-527. 6. Li, N., Robson, A. and Coates, N. (2014), “Luxury brand commitment: a study of Chinese consumers”, Marketing Intelligence and Planning, Vol. 32 No. 7, pp. 769-793. 7. Moore, C., and Doyle, S. (2010) The evolution of a luxury brand: the case of Prada, International Journal of Retail & Distribution Management, Vol. 38, Issue 11/12, pp.915 - 927. 8. Okonkwo, U. (2007) Luxury Fashion Branding: Trends, Tactics, Techniques. Basingstoke: Palgrave. ISBN 9780-230-59088-5 9. Phau, I. and Teah, M. (2009), “Devil wears (counterfeit) Prada: a study of antecedents and outcomes of attitudes towards counterfeits of luxury brands”, Journal of Consumer Marketing, Vol. 26 No. 1, pp. 15-27. 10. Saxena, R. P., and Khandelwal, P. K. (2010) Is the magic of “feel good” and “look great” at Giordano still working? Management Decision, Vol. 48, Issue 3, pp.440 - 455. 11. Teah, M., Phau, I., and Huang, Y. (2015) Devil continues to wear “counterfeit” Prada: a tale of two cities, Journal of Consumer Marketing, Vol. 32, Issue 3, pp.176 - 189

Luxury Brands A Commentary (Nnamdi Madichie, 2016)

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