In Part I we looked at how premium brands use own flagship stores and retail partners that project exclusivity to keep their glow while extending their distribution. Horizontal geographic expansion around the globe – rather than penetrating a single market deeply – is another means and so is ‘compartmentalizing’ sales through different levels of service – physically and in the mind of consumers.
The now very popular and increasingly many “Outlet Store” is another creation born from the desire to sell more without looking like you do. Initially, they were an outlet for selling at a discount those fashion items that did not sell in the ‘regular’ boutiques, in time before the next season. Rather than expensively burning –or otherwise destroying – these items to preserve exclusivity, they were sent to a far-away place to sell in the context of ‘warehouse’, ‘outlet’, ‘sample’ and often deprived of their original labels or otherwise ‘marked’, to lessen their perceived ‘originality’ and value. The thought was to protect the regular boutique customers from feeling cheated, if they should come across such an ‘outlet’ item – despite the remoteness of the store. This strategy proved so financially attractive – that brands like Ralph Lauren started to create products just for outlet malls. Gross margins on luxury items are often 65-85%, after all, and that far-out mall rent comes at a significant discount versus the 5th Avenue flagship store. This is the “le monde a l’envers’ (the world in reverse) as Coco Chanel would say. Lower-cost outlet products are made to look like higher-end boutique products sold at a discount!
Increasingly, premium brands discover e-commerce as another stealth way to sell more broadly without it being as apparent (and expensive) as selling through the brick-and-mortar approach. As a relatively low cost, global and ‘long tail’ way of retailing, e-boutiques also allow premium brands to extract high margins of items that have relatively low absolute price and good profits of items that sell infrequently. Just ask Renova the Portuguese maker of luxury toilet paper. Yes, their roll in a yogurt cup
might sell ‘only’ for $3 and the 3-roll tube for $6 and only the most artsy people will buy more than one a year but thanks to the internet, that Brazilian stock trader can show off with lightly scented green toilet paper and Renova can make good money because he not only pays the premium price but “shipping and handling” on top. That way, Renova does not need to penetrate Iberian supermarkets with their Art line to make some money and grow the business.
All these approaches thus help to sell more of your product while preserving perceived exclusivity and increasing your profit.
But at one point, the popularity of a brand will get felt as certain products become omnipresent. Just think of iPhones or Starbuck’s Lattes and the respective stores they come from – not so ‘special’, anymore, and exposed to price pressure. What else can a brand do, then, to prevent ‘massification’ but still continue to grow?
Ferrari might say “increase your prices” – and that might be a good start. But as we will see below, there are horizontal and vertical expansion strategies based on the brands “soul” rather than physical distribution that can help to continue its growth trajectory.
Horizontal Expansion – Where brand believes and values allow you to go and ad to the myth.
The more a brand has ‘soul’ (“faith and a deeper devotion” as Billy Joel sings), the more we might accept and, in fact, follow its convictions and tastes across multiple products and services it might offer. The brand being rooted in a person helps. That person might be actual, past or imagined:
Giorgio Armani is a prime example. He has applied his distinctive ‘griffe’ not only to fashion for men, women and kids, but all sorts of accessories and to as diverse products as chocolates, flowers and furniture and experiences like bars, restaurants, clubs and hotels. Rather than diluting his brand, the consistent storytelling and reflection of Armani’s taste has cemented his brand as a lifestyle 1.
Alfred Dunhill is not with us anymore but the current guardians use his reported and newly interpreted character as a guide in manifesting the brand. Dunhill is gentlemanly sophisticated with very British quirks at the edge. You can experience Dunhill at ‘home’ through its blazers, briefcases, a barber service, a visit to the bar or … a snow-board. Dunhill honors the modern gentleman – whether explorer, actor or ballet dancer – in spirit and in outfitting them properly.
The Australian gentleman – Murchison-Hume – however, was never actually involved in creating the namesake luxury household care brand. Rather, he is the muse (and father in law) of brand creator Max Kater who imagined the brand for “us Gucci girls who stay at home, care for the kids but do not want to give up on style or wholesome living”2. This philosophy translates to sleek “Boys Bathroom Cleaners” lightly scented with Australian White Grapefruit just as well as “Decidedly Rich Hand Cream”, stylish jute bags or “Luxury Laundry Soak”. It is easy to imagine this brand proposing us all sorts of housewares that are inspired by some Victorian tradition but whimsically modern in execution.
Another Australian “lifestyle” brand – Aesop – becomes much more philosophical – quite literally. It was not founded by the namesake ancient Greek fabulist, though. As you can read in our in-depth case study, the founder’s very personal fascination with disciplined and original thought, product- and brand design has created a brand myth that is naturally attractive to a certain segment the modern, urban intelligentsia. To them, the brand transcends the creams, perfumes, dog shampoos, wines or teas. It is a way of thinking that makes the purchase of Aesop’s “poo drops” (toilet bowl perfume) not only interestingly playful but also a cultural statement (more on that later).
The “Brand Extension Research” Agency lists “Eight Types Of Brand Extensions” on their website. Only the last is not based on the functional benefit, current expertise or customer of a brand. They call it the “Designer Image/Status” and talk about the designer’s image as ‘status provide’ as allowing these brands to stretch. But what provides that ‘status’ in the first place. John Lobb makes luxury shoes that certainly project status (note the royal seal of approval) but the brand has not successfully expanded horizontally. Compare this to a Hermes which is also masterfully crafting leather, has supplied many royals but has also been able to expand into articles ranging from their famous scarfs to fashion, home ware to jewelry. I think the difference lies in Hermes constantly elevating their purpose to a higher level from being a fine saddler, to being a leather craftsman, to being a preserver of fine crafts in France (eg silk making in Lions, perfume making in Grass) and then in the world (eg. fine Chinese craftsmanship through Shan Xia) and then of the arts… And all this done in the magical storytelling way that is a signature of all things Hermes. Just put on “les ailes de Hermes” (the wings of Hermes) and fly into their world here. There are few limits to the products you could imagine being part of this world – wallpaper, anyone?
To Be continued…
Sources and Further Reading
Read more about the growth strategies of Ueberbrands in our book “Rethinking Prestige Branding – Secrets of the Ueberbrands”
1 Read how an influencer relates his Armani hotel experience, the “Armani touch from the muted palate of soft, subtle colours to the symphony of textures and nuance” in a Luxe Chronique blog
2 Max Kater in a phone conversation on what inspired and guides the brand creation and design 05/12. Explore the Murchison-Hume brand here.