Business of Luxury Part 12: Licensing Your Luxury Brand

While the luxury brands micro segment their customer bases and become more relevant, meanwhile extending the experience to an immersive retail experience augmented by online media, they are increasingly looking to licensing that brand to companies with narrow domain expertise in a certain product segment. The best case in the industry today is the almost total domination by two firms within eyewear: Luxottica and Safilo. Similar examples exist within fragrances. Dior sunglasses, for example, will be manufactured by Luxottica and sold through a number of Luxottica controlled outlets and distribution channels, as well as though Dior's own stores.

The reason fashion brands don’t manufacture or simply outsource certain product categories is that that playing in the market either is associated with high technical barriers to entry, has distribution channels that are somewhat locked up or has economies of scale around manufacturing or raw materials or access to craftsmen.

Pambianconews of Italy is probably the best source for tracking the luxury licensing world. The company is the leading strategy consultancy in the space. Carlo Pambianco was at the FT Business of Luxury Summit and liberally shared his experiences within the licensing space.

Carlo Pambianco seems to believe in brand extension, and expressed the view that the luxury players are far from maximizing the opportunities their brand reach affords them. Most could safely extend their brand into products that are consistent with their audience’ needs and desires, but chose to play it extremely safe after the Pierre Cardin disaster, where a brand was essentially ruined though poor licensing control and declining quality.

One brand that has mastered broad brand extension is Ferrari.

The perceived value of their cars, and the myth around them, only seems to have been strengthened by the broad availability of branded goods. I just passed though Munich airport and within 2 minutes walk saw both Ferrari branded trainers and a Ferrari branded fragrance. Last week in Las Vegas I saw Ferrari Branded pens, key chains, a laptop computer and even children's go-carts.

I do believe even super exclusive brands like Bottega Veneta could safely, though cautiosly, extend into a number of adjacent products and successful merchandize them in their stores, extending the monetization of the brand.

I think we will increasingly see what people today would deem as unexpected product categories, even services, under the brand umbrellas. Why not a Giucci branded travel alarm clock, a Ducati branded motorcycle vacation, or an Armani branded high-end cruise? If Rosie O’Donnell can do it so can Giorgio.

Comments

[anina.net]

hi there! this was a great article.

[Stephan]

you make some very interesting points here.