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Question of the day: Does the world need another brand?
Coach, the empire representing affordable luxury seems to think so. In what appears as a tall order, the man himself behind the brand, Creative Director, Reed Krakoff, is making things personal. From the full concept development, down to the brand’s name, his own, Reed Krakoff is pushing full force to make the fashion world embrace the new line. Treated as a separate entity yet fully funded by Coach, (deeming it essentially as its own competitor) the plans for the Reed Krakoff brand includes product offerings in women’s ready-to-wear, jeweler, handbags, and shoes.
The strategy? Sell Americana! The line, as Mr. Krakoff describes it will feature price points for its r-t-w from $495 to $1,195, and has emphasized the esthetic as an eclectic mix of “softness with American utilitarianism.” Handbags will retail from $ 695 to $ 1, 295. There is also mention that the stand alone brand projects 10 initial free standing stores (US, Japan, Hong Kong) and more long term goals include markets in men, home, and fragrance.
And despite Krakoff's wizardry touch (since joining the company in 1996, sales have, according to WWD increased 6-fold) the real doubt lies both in the volatility of the market, and the oversaturation of luxury brands.
If fashion and consumer spending can become more of a patriotic symbol: a strategy Mr. Krakoff seems to want to utilize – than he could have a chance after all. However, right now that could seem like a far stretch. His price points represent an upper middle class demographic (the ones deemed far worse hit by the financial/mortgage storm) but the upswing of things could lie in the product differentiation (point of view) and investment in global expansion.
It will be interesting to see if America will support the new American brand, (like the Clair McCardell days!) or if Reed Krakoff will do better at selling “America” to our long lost neighbors.
Nevertheless, despite all the reasons not to, Coach is using the recession as an opportunity to think long term, and capitalize on a dream that could be a powerful voice for fashion, in the years to come.
St. John, like a lot of other luxury apparel brands is trying to combat the less than stellar performance of the economy, by going back to the drawing board, and reminiscing about better days.
St. John's is just one of the many who are embracing “heritage” as an opportunity to cash in, relate to customers, and create a more significant tie between brand values and the end consumer.
But this has not been the first step in St. John’s effort, to revive the brand. First, it was Angelina Jolie as its campaign muse, (which posed as a huge disconnect between the brand and her image), than came the fall launch of the “SoCa” concept, a spin off line of casual wear, that had a free standing store in Costa Mesa, Calf.
Today however, is a new day.
It seems as though St. John's. Is putting a side all the typical “hip tricks” and is going back to basics. The company describes in WWD, about the newly gained customer insight- its customers are buying more conservatively, and as a result, want “classic inestment pieces, with a modern flare.”
The modern part, can be categorized under the St. John Yellow Label, priced at 30 percent lower than its ready-to-wear, and featuring a sporty and cool vibe complementing the traditional St. John collection.
And it appears that for the 47 year old retailer , the customer is always on the mind. Other opportunities for St. John will include a basics program of all black pieces in a new fabric offering, as well as more special offerings.
Bravo to St. John who is an example of a luxury brand focusing on the consumer instead of relying on global expansion as a means to be profitable. St. John’s is forcefully implementing their approach by focusing on quality product and value, celebrating the customer, and her love affair for the brand’s clothes.
Mac Cosmetics, owned by Estee Lauder Cos. Inc., confirmed in WWD today that it has joined forces with Milk Studios to create a sponsored show venue for New York Fashion Week (scheduled September 10-17). The space, known formally as Milk Studios’ Photography is located at 450 West 15th street in downtown New York City.
In this bold move made by MAC, it’s clear that the competition for gathering and hosting the shows for the nations hottest designers just got tougher, thanks to the new alternative location, other than the tents at Bryant Park.
MAC, with its MILK Studio collaboration, has truly capitalized on the economic climate, frugality of fashion houses, and a shift in presentation styles, that many designers are taking. With this new venture, the most noted benefits are financial; MAC and MILK gives out the space for free, apposing to the traditional Bryant Park venue that runs from $26,000 to $50,000. And it seems like all the cool kids are doing it! Alexander Wang, Adam Lippes, Vena Cava, Band of Outsiders and Peter Som, are just a few feeling the downtown vibes, and gearing up to show their Spring/Summer 2010 collections at MILK.
For Demsey, the President of Estee Lauder (the parent company to Mac) the goal is to create an environment that will foster more creative capabilities. The strategic approach for MAC has taken a 360 turn from its 5 year sponsorship stint with IMG at the Bryant Park Tents, into a new direction that the company describes as “ an integrated support of fashion and makeup artistry” providing MAC with a more active role with the designers and their presentations.
All in all, this move will provide more brand control and exposure for the multimillion-dollar make up company and on its own terms. This news comes at a time, when fashion week at Bryant Park has come under siege as being “tired.” As a result of designers looking to add a lot more jolt to their business (go big or go home!), MAC's collaborative effort will be refreshing for the fashion community and for commerce in general. At a time, where fashion has taken a rough hit, MAC and MILK studios are representing the new American spirit-that creativity and ingenuity are essential in achieving economic prosperity.
Now only 48 days until New York Fashion Week…
Date: Wed, 22 Jul 2009
From: Tony Hsieh (CEO - Zappos.com)
To: All Zappos Employees
Subject: Zappos and Amazon
Please set aside 20 minutes to carefully read this entire email. (My apologies for the occasional use of formal-sounding language, as parts of it are written in a particular way for legal reasons.)
Today is a big day in Zappos history.
This morning, our board approved and we signed what’s known as a “definitive agreement”, in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock. Once the exchange is done, Amazon will become the only shareholder of Zappos stock.
Over the next few days, you will probably read headlines that say "Amazon acquires Zappos" or "Zappos sells to Amazon". While those headlines are technically correct, they don't really properly convey the spirit of the transaction. (I personally would prefer the headline “Zappos and Amazon sitting in a tree…”)
We plan to continue to run Zappos the way we have always run Zappos -- continuing to do what we believe is best for our brand, our culture, and our business. From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.
We think that now is the right time to join forces with Amazon because there is a huge opportunity to leverage each other's strengths and move even faster towards our long term vision. For Zappos, our vision remains the same: delivering happiness to customers, employees, and vendors. We just want to get there faster.
We are excited about doing this for 3 main reasons:
1) We think that there is a huge opportunity for us to really accelerate the growth of the Zappos brand and culture, and we believe that Amazon is the best partner to help us get there faster.
2) Amazon supports us in continuing to grow our vision as an independent entity, under the Zappos brand and with our unique culture.
3) We want to align ourselves with a shareholder and partner that thinks really long term (like we do at Zappos), as well as do what’s in the best interest of our existing shareholders and investors.
I will go through each of the above points in more detail below, but first, let me get to the top 3 burning questions that I'm guessing many of you will have.
TOP 3 BURNING QUESTIONS
Q: Will I still have a job?
As mentioned above, we plan to continue to run Zappos as an independent entity. In legal terminology, Zappos will be a "wholly-owned subsidiary" of Amazon. Your job is just as secure as it was a month ago.
Q: Will the Zappos culture change?
Our culture at Zappos is unique and always evolving and changing, because one of our core values is to Embrace and Drive Change. What happens to our culture is up to us, which has always been true. Just like before, we are in control of our destiny and how our culture evolves.
A big part of the reason why Amazon is interested in us is because they recognize the value of our culture, our people, and our brand. Their desire is for us to continue to grow and develop our culture (and perhaps even a little bit of our culture may rub off on them).
They are not looking to have their folks come in and run Zappos unless we ask them to. That being said, they have a lot of experience and expertise in a lot of areas, so we're very excited about the opportunities to tap into their knowledge, expertise, and resources, especially on the technology side. This is about making the Zappos brand, culture, and business even stronger than it is today.
Q: Are Tony, Alfred, or Fred leaving?
No, we have no plans to leave. We believe that we are at the very beginning of what's possible for Zappos and are very excited about the future and what we can accomplish for Zappos with Amazon as our new partner. Part of the reason for doing this is so that we can get a lot more done more quickly.
There is an additional Q&A section at the end of this email, but I wanted to make sure we got the top 3 burning questions out of the way first. Now that we've covered those questions, I wanted to share in more detail our thinking behind the scenes that led us to this decision.
First, I want to apologize for the suddenness of this announcement. As you know, one of our core values is to Build Open and Honest Relationships With Communication, and if I could have it my way, I would have shared much earlier that we were in discussions with Amazon so that all employees could be involved in the decision process that we went through along the way. Unfortunately, because Amazon is a public company, there are securities laws that prevented us from talking about this to most of our employees until today.
We've been on friendly terms with Amazon for many years, as they have always been interested in Zappos and have always had a great respect for our brand.
Several months ago, they reached out to us and said they wanted to join forces with us so that we could accelerate the growth of our business, our brand, and our culture. When they said they wanted us to continue to build the Zappos brand (as opposed to folding us into Amazon), we decided it was worth exploring what a partnership would look like.
We learned that they truly wanted us to continue to build the Zappos brand and continue to build the Zappos culture in our own unique way. I think "unique" was their way of saying "fun and a little weird." :)
Over the past several months, as we got to know each other better, both sides became more and more excited about the possibilities for leveraging each other's strengths. We realized that we are both very customer-focused companies -- we just focus on different ways of making our customers happy.
Amazon focuses on low prices, vast selection and convenience to make their customers happy, while Zappos does it through developing relationships, creating personal emotional connections, and delivering high touch ("WOW") customer service.
We realized that Amazon's resources, technology, and operational experience had the potential to greatly accelerate our growth so that we could grow the Zappos brand and culture even faster. On the flip side, through the process Amazon realized that it really was the case that our culture is the platform that enables us to deliver the Zappos experience to our customers. Jeff Bezos (CEO of Amazon) made it clear that he had a great deal of respect for our culture and that Amazon would look to protect it.
We asked our board members what they thought of the opportunity. Michael Moritz, who represents Sequoia Capital (one of our investors and board members), wrote the following: "You now have the opportunity to accelerate Zappos' progress and to make the name and the brand and everything associated with it an enduring, permanent part of peoples' lives... You
are now free to let your imagination roam - and to contemplate initiatives and undertakings that today, in our more constrained setting, we could not take on."
One of the great things about Amazon is that they are very long term thinkers, just like we are at Zappos. Alignment in very long term thinking is hard to find in a partner or investor, and we felt very lucky and excited to learn that both Amazon and Zappos shared this same philosophy.
All this being said, this was not an easy decision. Over the past several months, we had to weigh all the pros and cons along with all the potential benefits and risks. At the end of the day, we realized that, once it was determined that this was in the best interests of our shareholders, it basically all boiled down to asking ourselves 2 questions:
1) Do we believe that this will accelerate the growth of the Zappos brand and help us fulfill our mission of delivering happiness faster?
2) Do we believe that we will continue to be in control of our own destiny so that we can continue to grow our unique culture?
After spending a lot of time with Amazon and getting to know them and understanding their intentions better, we reached the conclusion that the answers to these 2 questions are YES and YES.
The Zappos brand will continue to be separate from the Amazon brand. Although we'll have access to many of Amazon’s resources, we need to continue to build our brand and our culture just as we always have. Our mission remains the same: delivering happiness to all of our stakeholders, including our employees, our customers, and our vendors. (As a side note, we plan to continue to maintain the relationships that we have with our vendors ourselves, and Amazon will continue to maintain the relationships that they have with their vendors.)
We will be holding an all hands meeting soon to go over all of this in more detail. Please email me any questions that you may have so that we can cover as many as possible during the all hands meeting and/or a follow-up email.
We signed what's known as the "definitive agreement" today, but we still need to go through the process of getting government approval, so we are anticipating that this transaction actually won't officially close for at least a few months. We are legally required by the SEC to be in what's known as a "quiet period", so if you get any questions related to the transaction from anyone including customers, vendors, or the media, please let them know that we are in a quiet period mandated by law and have them emailtree@zappos.com, which is a special email account that Alfred and I will be monitoring.
Alfred and I would like to say thanks to the small group of folks on our finance and legal teams and from our advisors at Morgan Stanley, Fenwick & West, and PricewaterhouseCoopers who have been working really hard, around the clock, and behind the scenes over the last several months to help make all this possible.
Before getting to the Q&A section, I'd also like to thank everyone for taking the time to read this long email and for helping us get to where we are today.
It’s definitely an emotional day for me. The feelings I’m experiencing are similar to what I felt in college on graduation day: excitement about the future mixed with fond memories of the past. The last 10 years were an incredible ride, and I'm excited about what we will accomplish together over the next 10 years as we continue to grow Zappos!
-Tony Hsieh
CEO - Zappos.com
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