BrandWatch by Michel Gutsatz

Abercrombie & Fitch in Europe: Fast Forward, No Looking Back?

New York, January 2006, a friend, a great connoisseur of luxury and fashion, dragged me off to 5th Avenue. "Have you seen the latest retail craze? I bet you have never seen something like this!" That's when I discovered the new concept store of Abercrombie & Fitch. Right away, I remarked that one of the major retail codes was broken: The street-side windows were obscured. A refusal to reveal - tempting customers to enter. Today, everyone knows the main principles of the concept: a night club ambiance, with "sexy" overtones, salesmen and saleswomen with futuristic looks (and shirtless men), music, a maze of a shop with huge photos, loud music... At the time something else caught my attention as well: the inaccessibility of the products. Folded, stacked, they seemed like they were just elements of the decor. Impossible to touch. As inaccessible as the sales staff. Abercrombie & Fitch: a world of frustration ... and therefore of unrequited desire. I came out of there astounded, albeit with some questions.
Four years later, what has become of the brand? For the last 2 years its results have been bad. Sales fell by 16% in 2009, net income is at 8.7% of turnover. Everyone talks about the impact of the crisis. But the truth lies elsewhere: Since 1999 the brand has seen its turnover, with the same sales surface, grow only once, in 2006! This means that there have been two tendencies: Growth in overall sales and a fall in sales at existing stores. Abercrombie & Fitch thus grows, but by persistently opening new stores. The opening of the store in Tokyo in 2009, followed by Copenhagen in 2010 and the eagerly awaited store in France in 2011 are part of this strategy. As their folders say: "The Company's Growth Strategy relies on the Addition of New Stores” (10K form March 2009). One may also note that some press releases from the brand "drown" these results in the overall results that are overwhelmingly positive due to the opening of new stores.

This confirms my analysis of the brand: a brand that has been built on a marketing concept (combination Sex / frustration / desire), extremely well exploited and implemented ... but with a dearth of interesting products (casual classics that Gap has built on over the years ..). Customers enter, attracted by the place, the atmosphere, the desire to own one of the brand’s products, to be part of this rather unique "experience" ... then do not return. We are far removed from the power of a brand developed 30 years ago with the same concept: Calvin Klein. The future of the brand, it seems, has been compromised.

Why Dove Men Will be a Success ...

Last month, Dove launched a new range of products for men under the name Dove Men+Care. Analysts and Web denizens penned hundreds of articles speculating on whether this extension of the brand would be a success. Many opinions were negative (see Brandchannel or 'From Line Extension to Line Extinction"!). All these criticisms are based on a common point of view: Dove is a brand for women and it is extremely difficult to make men adhere to it, since men are very reluctant to use cosmetic products. I intend to devote myself to this difficult and delicate task: I will try to show why Dove Men will most likely be a success.

Let me take you back to 2003: Before this period, "Dove wasn’t a beauty brand, it was a bar of soap," said Mark Wakefield, Marketing Director, Unilever skin care and deodorants for Canada. Studies made, for example, by Millward Brown at that time, clearly showed that Dove was then a family product that highlighted its moisturizing properties: marketing campaigns at the time evoked moisture and skin hydration... Thus (only!!) 7 years ago Dove was a family soap / shower gel brand highlighting a unique feature: hydration.
A strong brand, but it was slowing down, and saw itself overtaken (depending on the markets) by brands such as Olay or Nivea. It was in 2004 that it built a strategy that has transformed the brand, a two-fold strategy: communication and products.

2003: Launch of its hand & face care products
October 2004: Launch of the "Dove Campaign for Real Beauty"
2005: Launch of body lotions and "hairstyling" collections AND the Dove Self-Esteem Fund for education.
September 2005: Launch of the new body and hand lotion collections with the slogan "Loving Every Inch of Your Skin".
2006: Launch of the "hand-wash" ranges and "Dove Firming Campaign" and a new body lotion with the slogan, "Tested on real curves”.

The film "Evolution" is posted on YouTube and has become a phenomenon spreading like wildfire.

Thus, within 2 years, the Dove has grown in 3 important directions:

1. A strong identity - going far beyond the functional, i.e., hydration - by placing the woman at the heart of the brand
2. An emotional relationship with its consumers - by persuading them to be less self-conscious about their bodies - at a time when the social canons of beauty "thin and young" are omnipresent.
3. A complete offer of body, face and hair products – well ahead of the simple moisturizing soap and shower gel.

We must therefore consider the launch of Dove Men in the light of this strategy and this history. I propose to bear out my analysis on three central points:

Bare Escentuals: A New Approach to Distribution

Last January, Shiseido announced that it had acquired the American natural cosmetic brand, Bare Escentuals, for 1.7 billion dollars - roughly 3 times its annual turnover ($ 556 million in 2008). The success of the brand is based on a number of factors - some of which are analysed in the NBSE Report 2009:

• The identification of the brand with its current CEO, Leslie Blodgett.
• The brand's positioning - that of a pioneer in natural makeup - with the launch of bareMinerals in 1995
• Close attention paid to consumers - the brand engages its clients in a real dialogue using various points of contact.
• The choice of a distribution strategy that breaks away from all the codes of the profession:

1. When she took over the brand (which at that time had a range of bath and body products) in 1994, its turnover was significant only during the holiday season. The first break away was to use television as a means of distribution. By appearing on QVC in person, Leslie Blodgett made a twofold impact: She carved a niche for herself on a fast-growing channel (the second time she appeared, her turnover attained $180,000 in 10 minutes, the third time, she sold $400,000 in 20 minutes, and the "one hour" appearances helped her to sell $1.4 million) AND she personalized the brand around her own image. This strategy took shape when QVC offered Bare Escentuals the opportunity for live broadcasts - and thereby made possible a direct contact between the brand, its CEO and its clients. 
2. That was the origin of the second break away: The choice of a "community based" distribution.  Leslie Blodgett set up direct distribution channels (such as itinerant stalls in shopping malls / cruise ships / buses ...) allowing direct contact between consumers, the brand ... and its charismatic CEO.  
3. Bare Escentuals was one of the first beauty brands to use the Internet to market refills... and its products - and thereby expand its network of consumers. Other than its own website, the brand is one of the bestsellers on Amazon.com. 
4. In 2001 she developed an Infomercial strategy - with a frequency of 250 per week (which now accounts for 1 / 3 of turnover) 
5. After having bypassed the usual distribution channels in this way, and once success was guaranteed, Bare Escentuals started selling at Sephora, Ulta, Macy's, Nordstrom ... and also opened boutiques in its own name (121) where it offers the complete collection.

Today Bare Escentuals realizes its turnover from retail (shops + spas + Sephora, Ulta, Macy's etc. ... 60%), through infomercials, internet and television (28%) and the rest from overseas sales (12%). It generates an operating margin of 31.5% - which is from 2 to 3 times more than its competitors. I cannot help but admire this business model: you have to know how to break the codes in order to create, from scratch, the 46th most important cosmetic company in the world (source WWD). As Michael Porter says: "The only way to [achieve] a sustainable competitive advantage [is] by operating at lower cost, by commanding a premium price, or by doing both. Cost and price advantages can be achieved in two ways. One is operational effectiveness – doing the same things your competitors do but doing them better. ….. The other way to achieve advantage is strategic positioning – doing things differently from competitors, in a way that delivers a unique type of value to customers."

Walmart: The Secret Life of a Pizza Box

Walmart continues taking initiatives in sustainable development - by placing videos concerning the efforts it makes in recycling at the disposal of the press as well as its customers. 
The latest is interesting from several points of view:

• In 2006 Walmart announced that it had asked its suppliers to reduce the volume of their packaging by 5% before 2013. Here Walmart shows that it applies this restraint to itself ... by using recycled cardboard for its pizzas.
• The video shows the client all the advantages of buying a Walmart private brand pizza ... the box is recycled (the same approach was highlighted in a previous video 'The secret life of sour cream')
• The private brand fresh pizza in question is "Marketside", the new private brand conceived as an extension of the Marketside by Walmart stores I referred to last week. The retailer here confirms its strategy for launching this new private brand by showing that, in addition, some of its packaging is recycled...

You can watch the video here:

Mauboussin and Accessible Luxury

I would not have decided to write this note on Mauboussin if its CEO, Alain Némarq, had not picked up his pen to write an article in Le Monde of 8th February entitled: "Modern Luxury is Sharing". This article astounded me. The CEO of a jewellery brand from the Place Vendôme spoke of "stupid ... rich", "client drugged by luxury", of brands that take the "customer for a sucker and a neurotic"! He pits the "rich" against "normal people" and refers to "social justice". He speaks of a world where luxury by dint of exclusivity, high prices and distinction, is disconnected from reality. He puts forward "affordable" and "reasonable luxury" offering "high quality products", and "consumer-friendly luxury".

This analysis really deserves our attention because, on several points, it corresponds to the analysis that I develop on BrandWatch since its inception: Luxury brands have lost the notion of price - by charging prices that are far too high, the meaning of quality - by providing products unworthy of their image, of rarity - multiplying sales points, and of emotion - by vulgarizing their offer and their relationships to clients.
So I decided to cast a prudent eye on Mauboussin, to answer (in my own way) the question that agitates the world of luxury "Mauboussin, is it still luxury?". I propose to do so by making a list of radical decisions taken by the brand … and drawing some conclusions:

Distribution: the Challenge of Integrating Channels

I regularly defend on BrandWatch the idea of integrating the different channels of distribution for a brand (for example in beauty: The transmission of beauty gestures, After Mary Kay & Stila, Dior). A recent McKinsey study "The Promise of Multi-channel Retailing" reinforces this idea by recalling some essential facts and offers some ideas:

• Fact: In the U.S. only 25% of drugstores, 40% of distributors and 60% of dealers specializing in fashion have retrieved their pre-crisis growth rates in the 5 years after the last recession (2001). No brand can now afford to wait that long.
• Information too often neglected: Consumers who buy and use multiple distribution channels spend much more than those who are satisfied with a single channel. The example of fashion is instructive: the ratios range from 1 to over 5!
  
  
   
• Why do so many brands not make the grade? Because they believe that integrating distribution channels means a replication of the “boutique/magazine” on the Internet, or the creation of a sales representative who only reproduces what one finds in the store, hoping that by multiplying the availability of products the customer will buy more. This is a big error: Each channel is unique, it must correspond to a specific offer and complement the other channels – through services offered, information available, a knowledge of consumer expectations.
• Example: JC Penney - "JCPenney has leveraged its legacy as a successful catalog merchant into a tightly integrated cross-channel commerce offering. Stores are outfitted with Web kiosks, and all point-of-sale terminals have Web access so customers can easily purchase product categories, styles, and sizes not available in stores. JCPenney is even testing a system that allows customers to scan coupons in the store that have been sent directly to their mobile telephones. What’s important is that each of these channels builds upon JCPenney’s overall “fashion at a value” brand equity by highlighting exclusive brands and deep promotional pricing."

• The future: a strategy driven by the CEO (the question of the accountability for such a strategy is clearly posed), a reasoning where distribution and communications are closely interlinked, multiple channels including the mobile phone....

"Natural" Beauty Invokes Science… and Repositions Itself

At the recent Natural Beauty Summit Europe organized by Beyond Beauty, one of its most remarkable speakers was Sharon Greene of Risc International: she pointed out, among other things, that a growing number of consumers are looking for products that are derived from both nature and science.
We have today in the streets of Paris two advertising campaigns that demonstrate that some brands have understood this significant trend. Two emblematic European brands positioned "natural", Caudalie and Nuxe, call attention to the patents they have filed:

• Nuxe - whose signature is “Belle par Nature” ("Beautiful by Nature") - advertises "Merveillance, the Anti-wrinkle cream with 4 Patents".
  
  
  
  
  
• Caudalie refers to a patent as though it was crucial to the effectiveness of its products ... "there is no miracle ... there is a patent".
  
  
  
  I would draw a parallel between this notion of "science" and Caudalie’s change of packaging in 2006: the brand had changed from a “lifelike” depiction of grapes to a more “technical” illustration (flat colour / use of silver).
  
  
  
  

These two standpoints follow on the heels of Yves Rocher – which registered the term “Cosmétique Végétale” ("Botanical Cosmetics") (to avoid the term "natural") - and opened its first “Atelier Cosmétique Végétale” (“Botanical Cosmetics Workshop”) in Paris: the terms used are a throwback to the savoir-faire of the artisan, the professional, the nobility of a job well done. The brand thus invests itself with a sphere of legitimacy that is different from that of Nuxe or Caudalie: we are at the artisan-producer.
Thus the strategies of the European "natural" brands are increasing in finesse and becoming more sophisticated - each of them working on their values and re-establishing the foundations of their legitimacy. It is interesting to note that none of the three has chosen to acquire a global label (Cosmebio or Natrue) for all of their products.  Two of them have created Organic ranges (Nuxe and Yves Rocher have rounded out their offers with certified organic lines: BioBeauté by Nuxe and Culture Bio): To me it simply proves that the “natural” market is now structuring and differentiating itself.

Extending a Brand: The Marketside Case

Last July, I spoke about (in "Even Walmart Can Falter") the new concept launched by Walmart at the end of 2008: Marketside. These are small food supermarkets dedicated to "ready to eat" and "ready to heat", where the chain offers a large fresh-food section, ready-to-serve dishes, delis, etc. There are currently 4 of these stores in Arizona (thank you, mypbrand.com, for the photos!). It does not seem like any new shops are being launched. The rest of the story is fascinating and offers us a remarkable example of brand extension.

1. In July 2009, Walmart announced they were launching a private brand, "Marketside", with an offer of pre-prepared meals - available in selected stores. Some of the items found under the name of "Sam's Choice", their generic private label, are now found under "Marketside."
   
   
   
2. In September 2009 the brand began to rename the "delis" in some of its stores in Arizona and Texas ... "Marketside Delis”. Here one finds fresh food, wholesale, and pre-prepared, under the brand name "Marketside."
   
   
   
   

We thus find here a very consistent strategy of brand extension in 3 phases:

• Up against Tesco (the arrival of Fresh & Easy), the creation of a concept store to "learn" the fresh and "deli" business - This concept is not meant to spread itself (at least short term).
• Setting up Marketside “corners” in neighbourhood WalMart stores - which can only strengthen the real Marketsides.
• Creation of a private brand that will be found in all Walmarts - and thus investing the brand with a "fresh" image it did not have hitherto.