Many consumers fear just that, but retail analysts differ.<\/b>
\nThe $2.1 billion acquisition of Versace by Michael Kors Holdings Limited announced this morning generated an immediate response from consumers\u2014much of it negative. Any change concerning a beloved brand is bound to rouse some rabble on Twitter, of course, but in this case many of those consumers have struck on the critical question that Capri Holdings Limited\u2014the new corporate name that the combined brands will take\u2014will have to confront: Will the acquisition benefit Kors at the expense of Versace?
A goodly number appear to think so. \u201cWe know Gianni didn\u2019t die for this,\u201d tweeted Scott Timlin, a former MTV star, referring to the designer\u2019s 1997 murder by a mentally disturbed fan. The essential objection stems from the fact that, while both brands are technically in the luxury category, Michael Kors is what some in the trade calls \u201cmasstige\u201d (prestige for the mass market), while Versace is a storied Italian couture house with the reputation and prices to match. \u201cTime to get Versace at your local TJ MAXX and Marshall\u2019s,\u201d tweeted freelance writer Danielle Ayoka.
\u201cThat\u2019s super disgusting and sad even,\u201d complained Walter Miller, who co-stars on VH1\u2019s Black Ink Crew.
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A post shared by Michael Kors (@michaelkors) on Sep 22,2018 at 7:05am PDT
Criticism hurts\u2014but this criticism has some historical grounding.
A decade ago, Michael Kors was a red-hot brand. Its sophisticated yet accessible sportswear and accessories were flying off department store racks. \u201cMichael is firing on all cylinders,\u201d Macy\u2019s CEO Terry Lundgren told The New York Times in 2008. \u201cThis is his moment.\u201d
Unfortunately, Kors made too much of his moment, going on an expansion tear that landed his apparel in discount stores and quickly diluted his brand. Nowhere was that dilution more visible than with Kors\u2019 handbags, which in their ubiquity acquired the reputation of luxury for the suburban Subaru-mom set. \u201cMichael Kors handbags are everywhere,\u201d said The Washington Post in 2015, \u201c\u2014and that\u2019s a problem.\u201d
By May of last year, Michael Kors was slamming on the brakes, closing 125 stores and curtailing the promotions that had sullied its luxury image in the minds of so many consumers.
So now comes the Versace acquisition and, with it, the many who are fearing that Kors will notch the Italian brand down to the level Kors currently occupies. Buying an esteemed house like Versace\u2014started in 1978 when the late designer Gianni Versace debuted his first clothing in Milan\u2014has obvious benefits for Kors, which plans to build the brand\u2019s marketing, increase its store count from 200 to 300 and bump its revenues up to $2 billion. But will Versace lose its luster under Kors\u2019 ownership?
Bob Phibbs, CEO of New York-based consultancy the Retail Doctor, doesn\u2019t think so. Kors\u2014which has already been on a turnaround track\u2014\u201cknows its customers and is strategically collecting brands like Versace instead of fragmenting itself,\u201d he said. \u201cThey know luxury brands are about creating a feeling and making shoppers feel like they matter. When the company became fed up with discounting at department stores a couple of years ago, they started to cut them out of their strategy. Michael Kors made it clear that you can\u2019t discount luxury. They\u2019re an upscale brand investing wisely.\u201d
It\u2019s worth pointing out that mass-market companies owning rarified luxury brand is nothing new. While many consumers are unaware of the fact, Volkswagen owns Bentley, for example. Budget-friendly cruise behemoth Carnival happens to own the legendary Cunard line. Grey Goose vodka is a property of Bacardi Limited, and so on.
The difference here is that Kors\u2019 purchase of Versace is very public and very visible, and many consumers are very upset. Fashion is fickle, and Versace might come out worse for the wear from this deal.
\u201cThe acquisition of Versace by Micheal Kors is a pretty large departure for this company and, depending on how the Versace brand is managed, could pose risk to Versace\u2019s loyal customers,\u201d said Bruce Winder, co-founder and partner of the Retail Advisors Network. \u201cMichael Kors has been on a bit of a buying spree, picking up Jimmy Choo [for $1.2 billion in July of 2017.] But what makes a company successful at the middle ground of the market (MK) may not be what makes a company successful at the high end of the market. The industry has been going through a consolidation of late but sometimes that spells trouble for brands as their DNA gets morphed, whether intentional or not into something too different.\u201d
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Robert Klara
@UpperEastRob
Robert Klara is a senior editor for Adweek, where he specializes in covering the evolution and impact of brands.<\/p>\n

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