Robin LewisContributor
Michael Kors, the brand, is becoming ubiquitous, and that’s the kiss of death for trendy fashion brands, particularly those positioned in the up-market younger consumer sectors. Its distribution is racing towards ubiquity, wholesale and retail (online, its own stores, outlet stores and internationally). Even worse, a rocket-propelled accelerant to ubiquity is its expansion into multiple product categories and sub-brands, so they can compete at all price points. Some would argue all of those segments will simply end up competing with each other, thus cannibalizing the top end of the spectrum.
Ironically, a similarly positioned Tommy Hilfiger brand, under the same financial “engines” of Silas Chou and Lawrence Stroll, came tumbling down in the late 90s for the same reasons. The seductive thing about the Kors-type of “hot” trajectory is in the initial delight of consumers as the brand becomes to stand for everything for everybody, everywhere. I mean everyone can own a Michael Kors-something. And everyone can even have the “it” bag during this of-the-moment serendipitous cultural zeitgeist – for the moment. Or should I say for about a nano-minute. Because all of a sudden, in a nano-split second, the largely young and trend-fickle consumer base wakes up and realizes the brand is slapped on everything and is being worn by everybody, everywhere. And, crash! Wonderful becomes awful. The brand stands for nothing for anybody – everywhere.
Michael Kors ss14-51 (Photo credit: CHRISTOPHER MACSURAK)
Yet a lot of people, Michael Kors himself and many executives running the company, along with a lot of shareholders, become billionaires from ubiquity. Speaking of which, Silas Chou and Lawrence Stroll just get to add to their already-billions of net worth.
The Two Canaries in The Mine??
So, by the way, could these guys be the proverbial “canaries in the mine?” In 2012 they decreased their share ownership from about 52% of the company (just before the IPO in 2011), to just over 15%. I’ll let you do the data mining to determine what they netted on that sell-off.
More importantly, did they know, even two years ago, something we don’t know? Did they speculate what the ultimate fate of this brand would be? Did they anticipate a Tommy Hilfiger sequel?
All I know is that these guys are brilliant investors, particularly in the fashion space. And I also know they have now demonstrated their ability to spot brands on the edge of becoming “hot,” and they know how to rocket-fuel them into the stratosphere — fast. Something like Jeff Bezos“get big fast” while the getting is good. This insight kind of led me to the thesis of this short dispatch.
Related to all this is another bit of perspective that deserves its own article. The Coach COH +0.92% brand is in the middle of its own unraveling, mostly because of its ubiquity. Roughly 70% of its revenues are currently coming from its outlet stores, which gives us more than a hint of its devaluation. And two more ironies: first, much of Coach’s demise is due to Kors stealing big share chunks from them; and second, Coach is expanding into other product categories, mainly apparel, to regain growth, in parallel to Kors that built apparel to accelerate growth. Finally, Coach is pinning a lot of their turnaround hopes on a new designer, the revered Stuart Vevers.
Sorry folks. Once a brand is declared as too accessible and overexposed by its loyal customers, no amount of fashion trickery will bring it back.
So think about it. Any clear-minded person can see the freight train coming straight on at Michael Kors.
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