Thursday, April 9, 2009
I have said all along that this economy is actually doing retail, especially luxury retail a huge favor and flushing the system of sub-par performers and performance. Circuit City, formerly one of America's largest electronics superstores, was never quite as good as its closest competitor Best Buy. It didn't have the expertise, the inventory selection, the convenient locations, or the national buying power as its superior competitor. Ultimately the chain went out of business.
On the other end of the spectrum, the fabulous Sound Advice also closed over the past few months. It's niche market of higher end electronics, sound systems, and accessories was definitely feeling the effects of the economy. While their staff performed well, their customers just weren't in the market for US$ 10,000 plasma televisions and the latest, trendy phone systems.
I've noticed over the past year or so that parents companies are demonstrating some unusual marketing techniques. Previously, I felt many umbrella companies (broad companies with many similar companies under one ownership or director) would always keep their respective companies separate. For example, it was fairly public knowledge that Express, Bath and Body Works, Victoria Secret, and the Limited were all owned by the same company. But the stores were run separately, had different marketing plans, etc. Until the last year or so - when suddenly you could buy Victoria's Secret body care and skincare in Bath and Body Works. And of course you can use your Limited Card at Express, or any of the other parent companies.
Similarly, I always said that Hollister & Co was marketing for high school students, Abercrombie & Fitch was for college students, and Ruehl was for the after college crowd. Ruehl, a concept from Abercrombie was test marketed in a dozen or so cities across the country. But it held a separate identity from Abercrombie. Until just a few months ago, when the Ruehl logo suddenly incorporated the A&F influence for all to see.
Even Publix Supermarkets, with their Crispers restaurant chain, even is cross marketing, selling the eatery's salads in their markets, and making sure all of the restaurant patrons know that the ice creams and produce come from the supermarket's house ranges.
To some point, the cross marketing makes sense. It saves the company money, assists in building brand awareness, and broadens their reach to potentially new consumer groups. However, I think companies really need to consider the negative effects on their business.
Cross marketing can cheapen a brand. For example, The Gap, who also owns Old Navy and Banana Republic, now allows customers to use their Gap Card, Old Navy Card, or Banana Republic Card throughout all three chains. I'm sorry, but the quality of both the clothes and the clients at Old Navy is not quite on par as the clients and products of Banana Republic. Not that Banana Republic is fabulous by any means, but their stands and image is a little more elevated than the Gap, and definitely more than Old Navy. Mixing the marketing and brand recognition of Old Navy and Banana Republic might tarnish the image of Banana Republic.
Imagine that luxe powerhouse LVMH, who owns more than their share of luxury brands including Dior, Louis Vuitton, Zenith Watches, Moet & Chandon, etc, having one LVMH credit card that could be used at all of its locations. This, unlike The Gap's credit system, would be a good representation of cross marketing - as the LVMH umbrella encompasses brands that all are luxury, exclusive, and similar in design and production.
Retail companies, especially luxury fashion brands, must be very cautious when cross marketing. Mixed signals are never en vogue.