Has Michael Kors lost Its Edge?
Michael Kors is a world-renowned, award-winning designer of luxury accessories and ready-to-wear, known for his distinctive designs and craftsmanship with a jet-setter aesthetic that combines stylish elegance and a sporty attitude. His namesake company, Michael Kors, offers women’s and men’s apparel and accessories that are considered high-quality, but at attainable price points.
In 2011, Michael Kors went public and became one of the largest fashion IPOs in history. In the past few years, Michael Kors has become one of the fastest growing companies in the retail industry's so-called "affordable luxury" segment. The company has been aggressively opening new stores domestically and internationally to feed its strong customer demand while simultaneously expanding into multiple product categories and sub-brands to compete at all price points.
This rapid expansion leaves people wondering if the popularity will hurt Kors’ “cool factor”, making the brand less exclusive and, therefore desirable to some.
In order to perform an assessment of Michael Kors’ Brand Equity, we utilized BAV syndicated data, which tracks perception of Michael Kors through different time periods.
Figure: 1.1 Perceptual Map of designer brands, USA all adult population, annual household income of over $75,000, 2014
The Perceptual Map (Figure 1.1) shows that people perceive Michael Kors to be in the “sweet spot” between exclusivity and accessibility. The brand is not being perceived as unapproachable or prestigious like Gucci or Versace and, at the same time, it is not as accessible as Calvin Klein. The brand is perceived to be trendy, visionary, and good value compared to other brands within the fashion designer category. This is not surprising since Michael Kors is known to be one of fastest growing brands within the accessible luxury category. Nevertheless, there are foreseeable problems that the brand must consider.
First, given the accelerated growth, Michael Kors’ future will rely on its ability to leverage sales revenue through market segments and product expansion, while at the same time maintaining its position within the luxury space. Second, luxury consumers in mature markets such as Europe are adopting more “contemporary” fashion due to the recent economic crisis, while the growing middle class in emerging markets namely China are seeking alternative labels offering quality at an attainable price. This soaring consumer demand for accessible luxury products generates more competition from both newcomers and traditional ultra-premium brands alike, making it more challenging for Michael Kors to maintain its leadership within the category.
Under those circumstances, it is unclear whether Michael Kors will be able to avoid brand dilution and continue to compete effectively against increasing competition in the accessible luxury category.
Figure: 1.2 Michael Kors’ PowerGrid, USA all adults, annual household income of over $75,000, 2008-2014
The PowerGrid (Figure 1.2) shows that from 2012 to 2014, the brand has transitioned from the niche quadrant to the leadership quadrant. However, its brand strength, a leading indicator of a brand’s momentum, is trending downward in 2014. This shows that the brand has lost its momentum, suggesting a potential decline in brand stature going forward.
Figure: 1.3 Michael Kors’ Pillars, USA all adults, annual household income of over $75,000, 2008-2014
Looking deeper into the cause of this shift in brand strength through Michael Kors’ Pillars (Figure 1.3), we see a drop in energized differentiation, suggesting that people perceive the brand to be less unique. Energized differentiation has an impact on the brand’s pricing power, consumer loyalty and engagement. Moreover, we see a decline in relevance, indicating a potential drop in brand penetration. Lastly, the increasing knowledge score suggests an increase in brand awareness, which is likely an outgrowth of rapid expansion.
Figure: 1.4 Michael Kors’ Leveragability chart against Kate Spade, Coach and Ralph Lauren, USA all adults, annual household income of over $75,000, 2014
Pursuing this further, the Leveragability chart (Figure 1.4) illustrates Michael Kors’ strengths, weaknesses and opportunities against its main competitors such as Kate Spade, Coach, and Ralph Lauren.
The top right quadrant shows that Michael Kors is being perceived as a visionary and stylish brand against key competitors. This serves as a reflection of the brand’s clear vision to provide global consumer with luxury jet-set lifestyle that transcends across everything Michael Kors creates from products to stores and to marketing initiatives.
In addition, the attributes highlighted in green, such as innovation and social responsibility, represent the window of opportunity for Michael Kors to leverage in order to gain a competitive advantage. Finally, the attributes highlighted in red, for instance distinctive and upper class, show potential weaknesses for the brand, and should be a point of focus for Michael Kors in order for it to effectively compete with Kate Spade, Coach and Ralph Lauren.
All in all, Figure 1.2, 1.3, and 1.4 conclude that the brand has started to become diluted due to the increasing accessibility and the lack of authenticity compared to key competitors. In order for Michael Kors to avoid brand dilution and gain competitive edge, it should focus on building energized differentiation and relevance by, for example, boosting its brand authenticity through the creation of brand stories that are appealing and relatable to global consumers. Despite its ubiquitous presence, the brand must continue to maintain a certain degree of exclusivity by prioritizing distinctive design, pushing forward innovation, and creating a unique brand experience. Lastly, customer engagement and loyalty strategies should be elevated in order to gain and maintain market share.