The IHT has a good article here about brand extension / licensing.
Here it is:
In recent years the term luxury brand has meant a lot more than just Christian Louboutin’s red-soled pumps or Versace’s gowns. Think chocolates, flowers and tropical resort hotels.
There is Bulgari’s Bali resort and Roberto Cavalli’s handmade vodka. Versace offers décor for private jets. And in November, Giorgio Armani plans to open his fourth multiconcept store, the Armani/Ginza Tower in Tokyo. Spread over 12 floors, it will include a spa, a nightclub and a flower shop.
Now that the major houses are dipping into so many areas, where do they go next for growth?
Luxury brands should consider how consumers perceive them, not how they want to be perceived, said Milton Pedraza, chief executive of the Luxury Institute, a ratings and research firm based in New York. And capitalizing on existing products and design skill are the best outlets, he added, like creating auto interiors, jets, or yachts.
Developing an aesthetic is a key consideration for luxury brand operators who want to avoid diluting the brands’ public appeal. “Are they about promoting a logo or a brand aesthetic?” asked Dana Thomas, Newsweek’s European fashion writer and author of a new book “Deluxe: How Luxury Lost Its Luster.”
“Are you getting your jet done in Versace because you like their neo-classic look or because you want those seven letters?” she asked. “When you start having Cavalli vodka and Prada phones, you just don’t want to see these names anymore. I think there will be a time when the market is saturated and they’ll do themselves in.”
But some brands have carefully maintained their images while creating new products, Thomas said. “Bulgari has taken the clean, modern lines that they use in their jewelry and used them in the design of their hotel. It makes sense.”
Bulgari opened a hotel in Milan in 2004, followed by a Bali resort in 2006; both properties feature Bulgari’s signature spare elegance. The company now plans to develop five city hotels and two resorts in coming years, saying its focus is on unusual locations.
A novice in the hospitality industry, Bulgari’s foray into hotels has been a joint venture with the Luxury Group, the upscale hotel division of Marriott International. And such partnerships between two established brands are becoming increasingly common, like Versace’s pairing with Lamborghini last year to create a special-edition, all-white car, while Prada teamed with LG to design a sophisticated cellphone.
“Extending a brand is a surgical process, not something you can experiment with,” said Pedraza of the Luxury Institute. “In co-branding, they combine complementary expertise. Each is bringing a skill to the table.”
Many luxury companies are attempting to change perception of their labels from fashion to lifestyle through such expansion.
For Armani, that has meant developing complementary products and styles like the Armani Casa furniture line, restaurants and bars, cosmetics and skincare, all housed in Armani multibrand shops. Its first multiconcept store, Armani/Via Manzoni 31, a 6,000-square-meter, or 64,500-square-foot, space in Milan, opened in 2000 with similar outlets in Hong Kong and Munich quickly following. And plans for a flagship New York store are being prepared.
Along with expanding the accessories and home furnishing lines – and opening the first Armani hotel in Dubai in early 2009 – the company is focusing on geographical expansion, exploring developing markets like China and India, said Robert Triefus, spokesman for the Armani Group.
“The notion of style cuts across so many things that we do and enjoy,” Triefus said. “It’s more than just retail. Mr. Armani is very careful not to extend the brand into areas that aren’t logical,” he said. “The aesthetic of Armani is so clear and well understood.”
When luxury houses license their trademarks to manufacturers, brand extension is one of the main goals. Yet, if quality and market are not considered carefully, it is also a risky initiative that can weaken a brand. Twenty years ago, indiscriminate licensing produced a wave of substandard products stamped with logos, and some brands, like Pierre Cardin and Gucci, paid the price.
Armani’s extensions have been carefully considered and the number of licenses strictly limited. “Mr. Armani believes fervently in protection of the brand,” Triefus said. “He maintains as much control as possible over products.”
Some luxury houses, like Gucci, have repaired the mistakes of over-licensing and other brands have been careful to avoid it. But, Thomas noted, many luxury companies now are headed by chief executives from other businesses who are not quite as aware of the pitfalls. “We’re really going to see a bad period of licensing again,” she predicted.
But with brand names already stamped on everything from underwear to eveningwear, opportunities for expansion are slim. “Pucci did astronaut uniforms – Pucci’s been to space!” Thomas said, referring to a collection from the ’70s. “I don’t know if there are any new frontiers left.”