Kors Buys Versace: What It Means for the Luxury Handbags and Jewelry Industry
The fashion world was rocked on September 25.
That’s the day Michael Kors purchased Italian brand Versace in a $2.1 billion deal that turned the company into the first truly global luxury conglomerate—a change that will have far-reaching effects on high-end handbags, jewelry and other accessories.
Rather than a collision of worlds, which many feared would spell the end of the Versace brand as they knew it, the result can be summed up in three words: It’s all good. In fact, some would say better than good. Disruptive for the industry, but in an extremely positive way for those who love fashion.
The new combined company will be called Capri Holdings Limited, a nod to the glamorous Italian island in the Bay of Naples. The new company now has three powerhouse brands: Michael Kors, Versace, and Jimmy Choo.
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Think of it, Michael Kors is known for its luxurious-yet-affordable leather handbags, Versace for boldly glamorous women’s clothing and accessories, and Jimmy Choo for super-stylish, handmade shoes. Together, the brands complement one another, while creating a formidable global fashion group—one that can easily rival French conglomerates LVMH (owner of Louis Vuitton, Moet Hennessy, Givenchy, Fendi and Christian Dior) and Kering (owner of Gucci, Balenciaga, Alexander McQueen, and Yves Saint Laurent).
What does it mean for the business?
The move by Kors to add the upscale Versace brand is brilliant on several levels. And the effects will be especially positive for accessories and jewelry. Here’s why:
- Positioned for future growth. Just as acquiring Jimmy Choo boosted Kors’ earnings, buying Versace can do the same for the new combined company, which plans to focus on accessories to grow sales from 35% of the brand’s total business to 60%.
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- Wider availability of accessories and footwear. A company with strong financials can soar to new heights and expand. In fact, the new owner of Versace is already planning to open 100 new Versace stores selling the latest trending fashions and accessories.
- Greater online presence. To date, Versace goods have been largely absent from e-commerce, whereas Kors invested roughly $100 million in a platform that can support multiple brands. At a time when online sales are the norm, the new company is sure to recoup its investment.
- Creates a family of luxury brands. While each brand can (and should) stand on its own, together the (Kors, Versace and Choo) complement and strengthen one another. For example, all three carry quality leather goods. All stylish in their own way, yet appealing to a different segment of the luxury market.
- Ongoing commitment to quality. Kors has no intention of changing the Versace experience. Instead, Donatella Versace has vowed to continue as Chief Creative Director. She sees this as an exciting moment that will “allow Versace to reach its full potential.” And to those who have been tweeting of the brand’s imminent, she replies “My passion has never been stronger.”
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- International opportunities. Versace is a highly desired brand globally, and Asia represents a particularly attractive market. Rising affluence in China means an increased demand for top luxury items making it a win-win-win situation for Kors, Versace and Jimmy Choo. And just how big is the lucrative Chinese market? The Boston Consulting Group projects it will drive 70% of the worldwide luxury goods market within five years.
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- Versace is hot-hot-hot right now. Versace sales made a big comeback in 2017 when Donatella revisited popular designs and patterns from the 1990s. Not long afterward, a Vogue interview with the fashion maven went viral. Most recently, several social media icons arrived at the New York Met Gala in May dressed in Versace.
- More jobs. According to Donatella, the acquisition of Versace means more jobs are on the way in Italy so that the company can meet the growing demand for its goods in emerging markets like China and the Middle East.
In short, the acquisition of Versace by Kors means a strong future for handbags, jewelry and other accessories in the luxury goods industry.