Kering Eyewear and what it means…
On September 2nd 2014 Kering, owners of The Gucci Group, announced they’d no longer license their brands for eyewear. These include Gucci, Saint Laurent, Balenciaga, Alexander McQueen, Brioni, Puma, Stella McCartney, Bottega Veneta, and Volcom. Instead they’d start an eyewear division and handle it in-house by late 2016.
For years I’ve been wondering why such a move hadn’t already happened. It always seemed like madness established brands farmed out this lucrative accessory for 7% to 14% of net.
The main business paradigm of Luxottica, Safilo et. al. was always fragile. The inability to build a brand of one’s own has been an industry wide achilles heel. I’ve always considered it a real head scratcher that companies making consumer goods could grow into multi-billion dollar entities with almost zero brand equity. It was an anomaly that was begging for correction.
The industry’s historical inability to build brands and market them successfully to end consumers was never considered a problem by many currently successful players.
I can recall meetings with men running smaller companies that aspired to be junior Luxotticas. I’d explain the weakness of licensing as a foundation and how crucial it was for them to build brands within the category. A typical response would be: “It’s not worth the trouble to launch if sales don’t top $5 million the first year”.
I recall being told what great businessmen some of these guys were…
They’d better pray other big time licensors like LVMH and Chanel don’t join Kering in doing the obvious. If that happens Luxottica et. al. will move down the brand food chain and smaller companies producing licensed goods will find competition for the crumbs fierce.
Luxottica is hedged somewhat by their takeovers of what are now in-house brands. This move still spells trouble for them. For other companies who have few in-house brands it could well be cataclysmic.
The ball is basically Kering’s to drop. They’ll need to nail the product design. Beyond that they certainly have the resources to build a sales and distribution network where they need it. They could even come out ahead working with outside distributors or with reduced volume.
This just goes to show there are many potentialities that can reconfigure the industry. This is just the one happening today…
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