Last week, Michael Kors and Versace announced that Michael Kors Holdings will be purchasing Versace for $2.1 billion and immediately the industry was abuzz. Some questioned whether it was the right move for Michael Kors or for Versace.
While its uncertain what the future holds for this acquisition, it is definitely one to watch for many reasons. Firstly, no other American fashion goods conglomerate has acquired such a storied European brand. Secondly, this could be the start of the first American luxury goods conglomerate that is on par with giants LVMH and Kering.
The question that comes up the most about the Michael Kors’ acquisition of Versace is how it will succeed when the two are so different. One is the epitome of Italian luxury and decadence, while the other is synonymous with accessible fashion. How could a company who has built its success on satisfying the fashion desires of a segment of the market who loves luxury but can’t quite afford the handbags of Gucci, Dior and the like take over a brand that is in the same league as Gucci, Dior and the like?
To start off, they are implementing a brand image change of the conglomerate. Michael Kors Holdings will change its name to Capri Holdings. Capri, like the island off the southern coast of Italy, the home of clear blue water, delicious pasta and the perfect Instagram pictures courtesy of your favorite fashion bloggers. This name change will effectively remove the holding company from the limited image of Michael Kors. This is the first step to Capri Holdings being on the same playing field as LVMH and Kering.
What they actually do with Versace remains to be seen. They could take what they have learned with Michael Kors and their recent acquisition of Jimmy Choo and help Versace grow. While Versace has some of the best brand awareness and goodwill that any brand could have (think “Versace Versace Versace” by Drake or the tv show The Assassination of Gianni Versace: An American Crime Story), it has struggled to stay profitable. Capri can leverage their strategies used with Michael Kors and Jimmy Choo and grow the company and with it, its sales.
However, there is a delicate balance between growth in sales and dilution of brand image. Many luxury brands remain luxurious because of their inaccessibility. For example, you can’t buy an Hermès bag without having previously been a customer of Hermès. This age old strategy of “I can’t have it, so I want it” is what makes Hermès and Chanel, Hermès and Chanel, and oftentimes is what defines luxury as luxury. But, there is a way to make a luxury brand profitable without losing its edge. Kering has done that with Gucci, and Capri could do that with Versace, if it properly leverages the brand goodwill to develop a strategy of creating a devoted customer base who want all things Versace, much like the current Gucci obsession. I can’t scroll through Instagram without seeing the GGs on belts, bags and clothes and the ever ubiquitous Gucci t-shirts or sneakers.
Finally, it will be interesting to see how Capri Holdings grows from this acquisition. Is this the start of the first true American luxury goods conglomerate? Will Capri be able to leverage this acquisition and add more luxury brands to its portfolio? Will it be in the same conversation as LVMH and Kering?
These questions and the future of Versace remain to be answered. I, a business of fashion nerd, cannot wait to see what happens next.