Morgan Stanley Has Its Eye On China’s Luxury Market 30/9/10

It is certainly all eyes on China at the moment, as far as the luxury industry is concerned. China is a huge, lucrative cake, and everybody wants a piece. Investment banks are taking notice of China’s new found appetite for luxury goods, Morgan Stanley’s private equity arm has just bought a $42m stake in Sparkle Roll, which sells luxury brands such as Bentley, Rolls Royce and Lamborghini. It seems like a wise investment to us. They certainly have a knack for tapping into the money, and the Chinese, for tapping into the luxury brands.

At the rate they are going, there is no shortage of Chinese demand for the kinds of goods Sparkle Roll represents. Particularly in the cities of Beijing, Shanghai, Hangzou, Shenzen, Chengdu and Shenyang, the ‘nouveau riche’ just keeps on growing. China’s impressive economic growth has resulted in luxury brands bending over backwards to become popular. So far, the Chinese market has proved open, but particular. As we have seen, consumers have specific tastes– fashion houses have been tweaking their images to appeal. Will the investment banks care to invest in the proper marketing of the businesses they invest in? From what we have seen in China so far, marketing is make or break…

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Giorgio Armani goes Gaga 29/9/10

We’ve seen all sorts of collaborations recently, Hermes with Wally, Lanvin with H&M. This one is of a different variety, but certainly intriguing nonetheless. Giorgio Armani will design costumes for Lady Gaga’s Italian concert in December. Its not a collection that will be available to the masses, but it may as well be- this partnership will be worth millions in publicity, not to mention the clothing. An effort to rejuvenate one of the oldest names in fashion, there is not a doubt in our minds that this performance will be as much about the outfits as the music. Clever move by Armani, obviously aware of the pressure on fashion houses to keep up with the times or fade away.

Lady Gaga is at the top of her game. Controversial, vibrant, catchy and, above all, enormously popular, there is a risk that they are pinning a reputation built and refined over hundreds of years, to a firecracker that could burn out at a moment’s notice. Gaga has risen with more speed than the entire Formula 1 racing season put together, but how long does she have at the top? Is it to big a leap for fans of the more traditional GA, and will it reek of ‘selling out?’

As far as we are concerned, you could ask the same question of any bold move that’s ever been made. Fashion critics haven’t looked to Armani for new trends for years. Giorgio is on to a good thing that’s all about right now. If you think about it, this collaboration will be immortalised in a single production, but will not last forever. Gaga does not need to last another season. What will last is Armani’s perception as edgy and creative. What will last, is a whole lot of attention.

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Brand Confusion in China 28/9/10

Great news for international luxury brands. A recent study has shown that Chinese consumers prefer imported brands to domestic brands. We’ve discussed in detail the increasing importance of the Chinese market to the luxury industry- they are fast becoming the world’s number one consumer of luxury goods. So much do the Chinese prefer international labels, that many Chinese brands are presenting themselves ambiguously, of non-specific origins, faux-foreign, if you will. Will they succeed in crowding out the international competition? We aren’t convinced….

It is interesting that whilst domestic brands want to seem international in China, international brands are working hard to localise- See Hermes and the recent launch of its new Shang Xia label. Much attention is being given to the discussion over which brands will survive as the fittest in the increasingly overcrowded, but extremely lucrative, Chinese market. We think the real issue is going to shift from domestic vs imported, to whether brands can fight themselves apart from the blurry mass of competition.

It is important for brands to remember that identity is everything, but identity does not exist in a vacuum. Clever marketing involves adapting with your market. If the Chinese market demands an international, world-renowned, elegant but youthful, sophisticated but accessible, showy but modest, traditional but edgy brand in line with domestic taste and demonstrating good CSR…. Then that, it seems, is what they shall have. Too confusing? Hermes has it all sorted. Launching an international brand off the back of a global fashion powerhouse, all the while intertwining it with Chinese history and culture? Pure genius. We can’t wait to watch Shang Xia blossom.

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Bid speculation for Burberry? 27/9/10

Just a quick update for this morning based on reassuring data from the US. The FTSE has risen this month, 7.1 per cent so far. On track for the best monthly performance since August 2009, it seems that the global economy might be on the mend! Something that caught our attention, is the bid speculation surrounding Burberry (BRBY.L). The stock gained 6 per cent, with traders talking of bid interest from a US private equity firm... Very early days, but certainly something to watch! Head to Reuters for more info....

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LVMH and Rakuten go to War Against Fakes 27/9/10

LVMH and Rakuten Inc. have just signed a deal to band together in the fight against brand terrorism. As Japan’s biggest online retailer expands into Europe, Rakuten have developed a system that will flag and notify the real brand owners when fake items are sold on the site. It’s an online shopping service similar to Amazon.com, in that it connects consumers with small-scale vendors. We love that they are taking the initiative to ensure that the vendors being connected are legitimate ones only. This will be an enormous deterrent to counterfeiters, who generally like to evade responsibility for the fakes they peddle. By making vendors accountable for their product, it makes life very difficult for the frauds.

Luxury brands have certainly clashed with online retailers as of late- see ebay Vs Tiffany & Co. Brands are increasingly furious that online retailers facilitate the sale of fake goods, and that counterfeits are able to be sold anonymously with no apparent repercussions. Hopefully this move will set a precedent that will see stronger safeguards towards patent protection. It’s a great first step towards protecting the future of the brands we love.

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Luxury Brands Resist Selling Online 24/9/10

Luxury brands are usually at the forefront of all things cutting edge. So why have they been so reluctant to embrace online shopping? Perhaps they are learning from the success of others such as Net-a-porter and shopbop, because it seems some brands are slowly but surely coming around. This week, Marc Jacobs ventured into online retailing, last month Prada made a quantum leap by offering accessories. Stubbornly, not clothes.

It seems that consumer demand and fashion-house pride are engaged in a headlock. The almighty Internet could certainly serve luxury brands, used correctly. But perhaps it asks in return, for something they are not willing to give: their status. It makes sense for the online marketplace to be seen to undermine the aura that surrounds luxury brands. The commodification of luxury is something these brands desperately try to avoid. Will Prada still be ‘Prada’ when it arrives in a box on the front door? Of course. But the in-store ritual is half the experience. Despite the obvious convenience, there is something clinical about online purchases. In the same shopping session, one may as well order vacuum bags.

Nonetheless, the reality is that there is one luxury no amount of money can buy, that no brand nor legacy will ever supersede. Time. Consumers are strapped for time, and luxury brands perhaps must recognise this if they want to maintain their loyal followings. This is not to say that the Internet will ever take over entirely, but online is an option young markets are increasingly refusing to go without. It seems the time has come for luxury brands to shape up, and ship out.

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Luxury Brands Find Their Sea Legs 23/9/10

It seems that luxury brands are attempting to anchor in the super yacht market. Two worlds collide as Fashion goes nautical- and if you think we mean stripes and boaters, we don’t. Its an unusual collaboration, but one that is certainly intriguing.

Last year, Hermes and Wally co-created WHY (Wally Hermes yachts), a joint venture that, naturally, inspired a brand of luxury the world has never seen. Wally founder Luca Bassani Antivari, launched a $170 m AUD triangular yacht last year, co-designed, to be seaworthy and unrivalled in elegance. This month, Gucci partnered with PPR and last year, Armani and Ralph Lauren with Feadship.

These kinds of collaborations are much more than a race to the top. Beyond trying to out-do one another, the brands are strategically aligned to maximise their appeal to a very elite group of consumers. It’s a symbiotic relationship, whereby two brands combine their power to create a super brand! Gucci becomes more lifestyle, and PPR becomes more chic- are there any losers in this situation?

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