LVMH’s Tiffany reboot is working, delivering what the group called a “remarkable performance” in its third quarter results.
The revamp certainly hit the ground running. Following its acquisition of the American jeweller in January 2021, LVMH lost no time in appointing a heavyweight management team, speed being a vital ingredient in successful M&A and brand turnarounds.
Chairman Michael Burke, one of Bernard Arnault’s most trusted lieutenants, is surely applying lessons learned at Louis Vuitton to sell ‘exclusive’ products by the millions of units. CEO Anthony Ledru brings almost 15 years of experience working not only for Vuitton, but for some of the top fine jewellery companies in the world: Cartier, Harry Winston and Tiffany itself. Meanwhile, Alexandre Arnault, EVP of product and communication, is largely onboard to bring millennials to the brand through blockbuster collaborations and a new brand identity, much as he did at Rimowa. In March, Tiffany & Co also announced a new creative director: Ruba Abu-Nimah, a jewellery outsider and a wild card worthy of a “big bang” revival.
‘Shock and awe’ marketing
Since then installing its new team, Tiffany has deployed an effective “shock & awe” communication strategy, dusting off the company’s brand image. It started in July 2021 with a provocative guerilla-style campaign. The slogan — “Not your mother’s Tiffany” — appeared on posters plastered around New York and Los Angeles featuring denim-clad models wearing the brand’s edgiest pieces, a clear rupture with Tiffany’s past and a nod to the zeitgeist. Social media response was divided: some saw it as a “dis” to loyal customers, but it certainly succeeded in grabbing attention.
Tiffany has also begun to emphasise its high-end products, in sharp contrast to some of its past communications, bolstering perception that the jeweller is a legitimate luxury brand. The brand “broke the internet” with its August 2021 ‘’About Love’' campaign, its most visible piece of marketing since the reboot, featuring Beyoncé and Jay-Z, a rarely-seen Basquiat painting from 1982 whose dominant colour closely resembles Tiffany’s signature blue and the 128.54-carat Tiffany Diamond, one of the largest yellow diamonds ever discovered. (The Tiffany Diamond, which has only been worn by five women — among them Audrey Hepburn and Lady Gaga — will also appear on the big screen in February 2022, worn by Gal Gadot in Death on the Nile)
To further highlight the stone, Tiffany has turned its April Fool’s joke (a yellow rebranding of the iconic Tiffany blue) into the theme of a new pop-up concept: currently on Rodeo Drive, but soon to travel the world, the store features the Tiffany Diamond itself, along with yellow furniture, yellow bags and a Yellow Diamond Café serving yellow-hued turmeric lattes and honeycomb ice cream.
LVMH has also pushed Tiffany online with new vigor. The new campaigns have been heavily promoted on social media, with Tiffany seeing an 8 percent increase in Instagram uploads in Q3 versus Q2 2021, more than double hard luxury peers.
While Tiffany is currently gaining followers at a slower rate than Bulgari, Van Cleef & Arpels and Cartier, the brand is among the top jewellery brands on Instagram (12.6 million followers) and new campaigns and ambassadors should boost these metrics.
Indeed, new brand ambassadors are at the core of Tiffany’s rebranding. In the age of influencers, the use of actors, musicians and athletes seems an old-fashioned marketing strategy. However, Tiffany & Co. has chosen well, drafting in the likes of British tennis star Emma Raducanu, alongside Jay-Z and Beyoncé. In terms of marketing ROI, ambassadors are as important as all the other media channels taken together, generating on average almost half of total media impact for luxury brands.
Luxury houses have, over time, used association with the arts as a way to upgrade their brand positions and enrich their brand equity. Tiffany debuted a collaboration with popular artist Daniel Arsham on September 6, 2021, to recontextualise its iconic blue box and launch its Tiffany Knot collection. The resulting Bronze Eroded Tiffany Blue Box — building on Arsham’s signature “Future Relics” series — updates Tiffany’s packaging for the 21st century and is available for purchase in limited edition.
Tiffany needed to fill the $2,000 to $10,000 price range with more design jewellery and the September launch of its Knot collection did just that. While it only features 23 products at the moment, the core of the collection is priced in the $2,000-to-$10,000 sweet spot. Adding more design jewellery is bound to increase both space productivity and operating margin. In fact, our analysis suggests that gross margin can be significantly higher for design jewellery (where the cost of precious metals is marked up about 10x) than with stone jewellery, Tiffany’s original focus.
Tiffany is also benefiting from market tailwinds. Jewellery is the fastest growing segment in personal luxury goods, expanding by 10% CAGR in the 5 years leading up to the pandemic. What’s more, fine jewellery has been one of the most resilient categories during the Covid-19 crisis because hard luxury is seen as both an investment and a collectible item by consumers. The smaller price premiums on watches and jewellery also mean the category benefits more from spending repatriation to China compared to other categories. And, in the short term, pent-up demand for weddings and other events will provide a further boost for jewellery sales.
There remains much for LVMH to do. But the group seems to have taken a page from Kering’s playbook (as well as its own) in implementing a “big bang” revival at Tiffany. It’s a recipe based on mixing creativity (the ability to come up with strong new creative ideas that resonate with the zeitgeist but link to the brand DNA), commercial acumen (the ability to articulate these ideas into a commercially smart collection and pricing architecture) and entrepreneurial courage (the ability to go “full in” with all the company functions and resource to support the new creative and commercial ideas.
Luca Solca is head of luxury goods research at Bernstein.
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