Hello BoF Professionals, welcome to our latest members-only briefing: The Week Ahead. Think of it as your "cheat sheet" to what everyone will be talking about on Monday.
THE CHEAT SHEET
Kering Acquisition Chatter Ratchets Up
- Luxury conglomerate Kering reports first-quarter earnings on April 17
- Gucci generated 63 percent of revenue and about 80 percent of operating income for the group in 2018
- Kering is attempting to build Balenciaga and Alexander McQueen into billion-dollar brands alongside Saint Laurent
Every quarter, Kering reports Gucci's sales grew a little slower, and talk of the need for a major acquisition grows a little louder. To be sure, the brand is still running circles around most rivals, growing 28 percent in the fourth quarter. But Kering is a multi-brand conglomerate competing with the more-diversified LVMH. Saint Laurent, white-hot Balenciaga and McQueen may someday take the pressure off Gucci to perform, but a big acquisition would produce a new centre of value creation in a single stroke. Unfortunately for Kering, there are a limited number of targets — it would take a brand on the scale of Valentino, Prada or Chanel to move the needle, though the latter would be a big meal for the company to digest. There's also chief executive François-Henri Pinault’s aversion to bidding wars. It's unlikely for an offer to go uncontested, with so few independent luxury houses on the market and LVMH able to match Kering euro for euro. Plus a host of American, Chinese and Middle Eastern strategics and investment firms are potentially in the running.
The Bottom Line: With Gucci going strong and the big luxury houses seemingly immune to any China jitters, Kering can afford to wait for the right moment to do a deal.
For Brands at Coachella, the Real Audience Is at Home
- The Coachella music and arts festival runs April 12-21 in Indio, Calif.
- Brands see the influencer and celebrity-filled crowds as a prime marketing opportunity
- However, influencer campaigns have replaced events and pop-ups for some companies
In recent years, Coachella has transformed from a music festival into a virtual tent city of elaborate brand activations extending far beyond the Empire Polo Club. The pendulum appears to be swinging the other way. A growing number of fashion and beauty brands are opting out of expensive parties and stunts, preferring to instead send fleets of influencers to tag products in their posts from the festival (h/t to Glossy for chronicling this shift). This year's no-show companies likely took note of the success of brands like Anastasia Beverly Hills, which featured in festival posts from 185(!) influencers last year despite having minimal on-the-ground presence, according to Tribe Dynamics. Indeed, H&M's festival hashtag had 434 posts by influencers of all stripes as of Saturday afternoon. Even the big branding initiatives seem designed for distant audiences; YSL Beauty’s makeshift “gas station” this weekend is a partnership with Chinese e-commerce platform Tmall.
The Bottom Line: Instagram’s introduction of an in-app shopping feature will accelerate the tilt toward influencer marketing, as it raises the potential to turn a mention in a trending hashtag into real money.
Allbirds Jumps Wool-Sneaker-Clad Feet First Into China
- Allbirds launches in China on April 20 with a store in Shanghai and an online shop on Tmall
- China is the sneaker brand's first Asian market, and first outside the English-speaking world
- Allbirds does not work with wholesalers, rare for a digital native brand
In a few short years, Allbirds has emerged as one of the stars of the current crop of digital fashion brands. Much like the similarly buzzy beauty brand Glossier, Allbirds relies on its own stores and distribution infrastructure rather than wholesalers, a slower but potentially more rewarding growth strategy. That the brand chose China for its first stores outside the US is a sign of how the country's retail market has matured. Allbirds had plenty of potential partners eager to help it set up shop, and a thriving e-commerce sector that's already home to dozens of Western brands. There are challenges as well, from the potential for cultural missteps to counterfeiters, a serious threat for Allbirds, which relies on a few simple silhouettes for the bulk of sales and has had to fend off imitators in the US.
The Bottom Line: Allbirds saw China as a promising market in part because so many Chinese tourists were buying the shoes while abroad. With Chinese consumers spending more on fashion at home, the start-up, following the lead of luxury brands, is wise to open stores where its customers live, rather than continuing to rely on the tourist trade.
COMMENT OF THE WEEK
"Social media is amazing but your number of followers is not going to help your career" -advice from Fanny Bourdette-Donon, international PR and special projects manager at Dior Beauty.
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- What a tax cut reveals about China's luxury climate.
- Why do fashion brands still advertise in print?
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