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Finding the Right Fit: Smaller Brands Thrive Under New Ownership

Having the right parent or owner has become a hot-button issue in the luxury goods industry, with plenty of failures and successes to talk about.

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At Starwood, Bliss has received more attention, including new investments in technology, a dedicated business development team and leader and also what Klein called the "the ultimate fuel for the brand" —the real estate required to increase the spa footprint.

Lagerfeld said chemistry and mutual respect are essential between a designer and the owner of his or her brand.

"Things can only work if everybody works well with everybody. The management has to make an effort — and the designers, too — if it is not coming naturally as it does at Chanel, where people work perfectly well together," he said. "Designers think they are geniuses — and managers often think they know better. That can make a bad mix.

"Groups should only keep companies fitting with their 'culture,'" added Lagerfeld, who acknowledged he's ended up with the wrong owners in the past. "But you cannot know before," he said. "You have to work with the people they give you to manage the business."

So far, Lagerfeld seems confident with Hilfiger Corp. and seems to be enthusiastic about the setting up of his Lagerfeld Gallery label in New York.

But some observers downplayed the ownership question, saying brand potential and scale are the most vital factors of success.

"If you are Helmut Lang and you are trying to fight against Chanel, whether you are owned by a group or an individual investor, the game is going to be difficult," said Antoine Colonna, luxury analyst at Merrill Lynch in Paris. "It's not enough to change the owner to have a different formula. We're talking generally about smaller brands and they will in any case find it difficult to deal with the big ones."

The fact that Emilio Pucci is thriving under LVMH, whereas Christian Lacroix did not, suggests the former had "an incredible differentiation factor," whereas Lacroix could never surpass the status of a niche brand, he said.

Still, Colonna allowed that having a bunch of small, under-performing brands represents "a management distraction" for the groups who "don't have infinite management reserves."

Floriane de Saint Pierre, who runs an eponymous executive search and consulting firm in Paris, agreed that failed or stalled brand rejuvenations are not always the fault of bad parents. "I don't think there are ideal owners," she said.
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