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Wednesday, 13 August 2014

The Key to Luxury Brand Revival - Is Evolution the Solution?

When it comes to luxury fashion brands I have this overwhelming need to be in the know; whether it’s following changes in their corporate line-up, or obsessively waiting for new campaign images to be released – it’s been somewhat of an obsession of mine to consume this information and catalogue it for later use. So when I recently read about some of the challenges that the Italian luxury brand, Tod’s, has been facing (they’re experiencing a continual slump in sales, profits, and the brand’s share price), it really got me thinking about how other fashions brands have turned things around when they were on a similar downward spiral.

In fashion, as veteran model Heidi Klum has been known to say, ‘one day you’re in, and the next day you’re out’ – the industry is notoriously competitive and brands need to consistently re-invent their products, the customer experience, and sometimes their brand ethos to stay relevant. There are very few brands (if any) that have the ability to get away with making very few changes to their business (think Rolex), but then they are often in a very niche market, and have products for which there is unwavering demand, and little competition.

Tod’s, which is predominately known for making high quality driving shoes, has in recent years branched out into designing luxury ready-to-wear clothing lines for both men and women, and has also been making accessories since the early 90s. The problem however is that footwear still accounts for around 75% of the Tod’s Group’s total sales, and when there is slower growth in the luxury market, there is greater reliance on this portion of it’s business to perform well. As mentioned in an article by The Business of Fashion, footwear is generally a lower margin product, and so most luxury brands diversify their product lines across several categories to stay profitable. Perhaps where Tod’s falls short on this strategy is that it has a reputation for producing high quality driving shoes, but perhaps not much other than that. The same article quotes Mary-Ellen Field, an intellectual property management and licensing expert, who sheds light on this problem from a consumer perspective – ‘Tod’s makes driving shoes. If you’ve been telling people you make great loafers for decades, it’s very hard to change their minds.’

Tod’s Iconic Driving Shoes (Source: www.tods.com)

This is a problem that many other brands in this industry have faced, and the most recent example of this is Coach, which has a long-standing reputation of selling ‘affordable’ designer bags and accessories. Although it was once a leader in this segment, it has failed to keep up with rivals Kate Spade, and Michael Kors, which have now gained more popularity among consumers in this market. Admittedly the situation with Coach is multi-layered, and attributed to several factors, however the challenge it now faces is similar to that of Tod’s, in that how does a brand known for one thing, begin to sell something else just as successfully?

The answer perhaps lie in the past, in that other fashion brands have notably built successful empires from a single signature offering. Burberry began with their iconic garbardine trench coats, Louis Vuitton had their flat bottom trunks, and Diane Von Furstenberg had her wrap dress - the list goes on. Fashion in itself is about reinvention and an evolution of ideas, so it can only be expected that brands in this industry be held to the same standard. But as simple as this idea sounds, the challenge most brands face in expanding their business is doing it in a way that is both logical to consumers, and still relevant to the brand.

It’ll be interesting to see how successfully Coach and Tod’s can turn things around in the next few years, but it’s probably safe to say that taking a step forward is still better than staying put where the fashion industry is concerned. I’ll issue a –watch this space – for now, but keep your eyes peeled for what is sure to be an exciting new chapter for both of these brands.

Salil Kumar
Current student in the Master of Marketing program at the University of Sydney Business School

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