Deep Dives
On Thursday, Gucci and Balenciaga teamed up for a collaboration collection, in which Alessandro Michele and Demna Gvsalia, the two brands’ respective creative directors, have taken their individual house staples, silhouettes, and branding, and mashed them up for a social media-dominating offering. The collection, itself – or better yet, the dynamics behind it – are interesting given that high fashion houses generally are not prone to collaborating with one another in the same way that other market participants are not in the business of rolling out partnerships with rivals. Having said that, the shared ownership of Gucci and Balenciaga by Paris-based conglomerate Kering made for something of a seamless pairing – albeit, still a rather rare one.
What is potentially even more striking that the coming together of two of the biggest names in fashion, which was unveiled in short films published online, is the literal pairing of their logos and other trademark-protected assets, as could be found on no shortage of garments and accessories – from a Gucci monogram-covered Balenciaga Hourglass bag, complete with the staple Balenciaga “B” to oversized outerwear that consisted of a base layer of Gucci’s interlocking “G” and an overlay of repeating “Balenciaga” wordmarks. In mashing up their famous iconography, Gucci and Balenciaga are the latest example of a larger pattern of industry-wide co-branding. And with their combined star power, they may have even taken the cake in doing so.
While the two Kering-owned companies did not go back to the drawing board to create new(ish) branding for the collaboration in the way that the Gap and Yeezy did, for instance, they were clearly willing to tweak these existing elements by melding them together and slapping them on some high-margin products – something that many luxury brands have been hesitant to do to date. Such an unwillingness to alter their source-identifying assets is due, in part, to the fact that in the luxury sphere, companies spend decades – even centuries, in some cases – and vast sums of money to carefully craft themselves into brands that can demand thousands of dollars per handbag, and have consumers readily pay up because the brands, themselves, are so intrinsically synonymous with “luxury” and other reputation-specific elements that are communicated by way of their branding.
As a result, a company’s branding amounts to an asset with extraordinary value that is based largely on consistent use and consumer recognition, making it enticing for brands to stick to the status quo. This staunch dedication to consistency is certainly part of why Marc Jacobs initially had trouble making a case to revamp Louis Vuitton’s world-famous toile monogram during his tenure as creative director. “It took some time for Jacobs to convince the Vuitton powers that be that scrawling all over their time-tested bags was a good idea,” Amy LaRocca wrote for Vanity Fair back in 2008, reflecting on Vuitton’s collaboration with artist Stephen Sprouse. “Vuitton did, eventually, come around,” she noted, and in the process, became the first artist to scribble on Louis Vuitton’s now 125-year-old logo-and-floral pattern.
Part of the impetus for Jacobs to push to put neon graffiti on Louis Vuitton handbags back in 2000 when developed countries were in the midst of a budding economic downturn, according to LaRocca? Well, the design great “doesn’t live in a vacuum: he knows that these luxurious, spirited bags will hit the market at a touchy economic time for conspicuous consumption,” but simultaneously, he was aiming to tap into the time-tested effect of “retail therapy” (when the times get tough, the rich go shopping), and banking on the potential for the buzzy bags to inject some relevance into the brand and attract a new pool of consumers. And it worked. “Vuitton did reach a new customer — $300 million worth of them, Jacobs has said — and has continued to do so through similar partnerships with artists like Takashi Murakami and Richard Prince.”
Fast forward 20 years and Gucci is in need to an injection of relevance. Kering’s marquee brand reported a “disappointing 10 percent drop in revenue” in February, with the Wall Street Journal noting that the “worse-than-expected Q4 numbers sent Kering’s shares down 8 percent in early European trading.” Given the money-making properties held by Gucci (the Italian house generated 83 percent of Kering’s operating profit in 2019) and the pressure that comes with wearing that crown, and in light of its larger inability to “keep pace with LVMH’s fashion brands since early 2019,” much discussion has revolved around how Kering can disperse some of its dependence on Gucci either within the group or via a major acquisition.
Questions have also loomed about what Gucci will do to reinvent itself as its revamp under the watch of Mr. Michele – which got its explosive start roughly six years ago – “appears to be running out of steam,” as the WSJ’s Carol Ryan put it.
In terms of the former, a read between the lines early this year suggested that the group may be looking to prioritize other brands in its stable, which also counts Bottega Veneta and Saint Laurent, among others, as subsidiaries. Citing takeaways from Kering’s FY20 conference call in mid-February, Bernstein analyst Luca Solca stated that the “focus of the Q&A was predictably on Gucci – both its weakness in 2020 and potential going forward.” But interestingly, he noted, while analysts were keen to zero-in on the Milan-based powerhouse, the conglomerate “subliminally … put forward the other brands: Bottega Veneta appeared on the front cover of the presentation slides and Saint Laurent at the conclusion. In terms of imagery Gucci was virtually absent from [the] talk.”
All the while, industry rumors have swirled that Kering has been eyeing acquisition targets. The group reportedly approached Cartier-parent Richemont early this year with a merger proposal, but as off now, has failed to tempt its Swiss counterpart.
As for a revival of Gucci’s previously stellar growth, it seems that Kering is banking on the only other things that it may be more reliant on than Gucci: its valuable trademarks and the Asian market. By taking the assets of not only but two of its biggest brands – from the Gucci and Balenciaga word marks and logos to the companies’ likely trade dress-protected bag shapes – and putting them together, the group is doing what modern luxury goods groups do best. It is capitalizing on its intellectual property and the goodwill associated with it (i.e., what those symbols mean to consumers), and seemingly declaring that business as usual might not be good enough anymore.
At the same time, in adopting a co-branding approach, Kering is dealing in a decidedly successful trend in the Asian market, which is the real cash cow here for Kering, Gucci, and the luxury goods industry as a whole. The Asian Pacific region was responsible for 35 percent of Kering’s revenue for the 2020 fiscal year, after all, followed by North America at 21 percent. And in its FY20 revenue report, Kering highlighted the sheer might of the Chinese consumer, stating that Gucci, in particular, was buoyed by “robust and encouraging sales momentum” among local buyers in Mainland China.
Proving particularly compelling in China’s hyper-competitive market, where conventional marketing methods are no longer effective, companies with strong common interests – Gucci and Balenciaga, included – are looking to co-branding collaborations. If done well, such partnerships are “a powerful legal and marketing tool that uses the cross-licensing of trademarks from different companies to brand a new product” in order to “mutually increase their customer bases, sales channels, market share, customer loyalty, brand image, positive associations, and perceived value,” according to Beijing-based Rouse attorneys Josh Mandell and Ya Wen.
In tying its two buzziest brands (according to recent rankings, such as Luxe Digital’s “15 Most Popular Luxury Brands Online” list) together, Kering is angling for double the impact, and offering consumers two-times the branding for the price of one.
Given the robust rebound in luxury spending in Asia that is currently underway as evidenced by LVMH’s stunning Q1 results, and the media hype that is already surrounding what has been coined “Balucci” on platforms like Weibo (where Chinese fashion fans anxiously awaited the debut of the collection videos in recent days amid industry rumors of mega-collab), Instagram, and beyond, this could be the boost that Gucci needs to hold it over until the enduring Kering-specific M&A chatter comes into fruition, that is.