Spending on luxury handbags, jewelry, shoes and clothing could triple over the next four years, with companies that focus on a single brand, such as Burberry Group Plc., more likely to benefit than companies like LVMH that oversee a stable of brands, according to research released on Monday.
Sales of luxury goods rose 2 percent annually from 2001 to 2005, but that growth rate is expected to jump to 6 percent yearly through the end of this decade, consulting firm Bain & Co. said in a report.
Luxury goods spending in Asia is expected to rise the fastest -- at about 9 percent per year -- Bain predicted, defining luxury goods as high-priced personal items sold in an environment that emphasizes exclusivity.
In the 10 years ended 2004, Bain found that so-called monobrands, including Polo Ralph Lauren Corp., Tiffany & Co. Inc. and Chanel, which market their products under a single brand name, grew 60 percent faster than a group of top multibrands including cosmetics company Estee Lauder Cos. Inc. and apparel and handbag specialist Gucci Group
Single-brand companies benefit from focused customer research and centralized headquarters, while larger companies can suffer from "brand bloat," with too many name brands diluting attention and marketing dollars away from a company's most profitable segments, Bain said.
"Can big be better?" Bain asked in its report. "It can be, but clearly success for multibrand groups requires a new approach."
Bain recommended companies focus on training and keeping their most talented employees in-house, do a better job of collecting and sharing consumer data and allocate resources wisely, depending on how each brand adds to the company's competitive performance.
At the same time, "successful monobrands need to stay true to their core businesses and avoid forays into far-flung adjacencies, if they are to continue to outperform multibrands," Bain said.
Posted by Constance Wherrity on June 6, 2006 1:12 AM
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