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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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Colonna agreed luxury groups are becoming more flexible. For example, when LVMH first bought Donna Karan International, it initially ran it like a European luxury brand, with an Italian manager, Italian manufacturing and an emphasis on directly operated stores. Now, LVMH has adopted a vastly different model skewed to the U.S. market and the wholesale channel.

Likewise, Gucci Group has sought to create more differentiation between its brands, particularly Gucci and Yves Saint Laurent, which then-Gucci Group creative director Tom Ford once distinguished by saying one store's format was vertical while the other was horizontal, Colonna recalled. Today, YSL is charting a more distinctive brand image, "which will be more visible in the years to come," Colonna added.

"One-size-fits-all does not exist," said Michael Burke, chief executive officer of Fendi and a 20-year-plus veteran of LVMH and Christian Dior. "There are things I learned at Dior that are useful for Fendi, but it's not cut and paste. You have elements, but you have to adapt them to each brand."

To be sure, Fendi's fortunes have improved under sole LVMH ownership. It had faltered when jointly owned by Prada Group, along with members of the Fendi family.

"The concept of arm's length between sister companies is crucial," Burke stressed, describing LVMH as a "federation" of brands, rather than one where corporate powers-that-be dictate global positioning for all brands. "It was always very decentralized and brand-centric," he said of the French conglomerate.

But he acknowledged LVMH's prowess lies mainly with brands that have global potential across different channels of distribution.

Lagerfeld agreed: "I think the big groups should concentrate on big, global names. They are good at that. Developing smaller businesses with 'difficult' designers not so well known by the general public is difficult because of the shareholders and the investment needed."
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