Michael Kors Meets Versace: Lessons for Retailers on Managing Multiple Brands (and Meeting the Needs of a Diverse Set of Customers)

In a bold, buzzed-about move at the end of September, American accessories giant Michael Kors acquired Italian luxury brand Versace for a whopping $2.1 billion. This acquisition represents one of the first attempts by a U.S. fashion company to run an elite luxury brand, and not everyone is convinced that the merger was a good deal or a good idea — including, unfortunately, many fans of the Versace and Michael Kors brands.

Michael kors buying versace has ruined my life

— SpecialK (@K8Renney) September 25, 2018

donatella after selling versace to michael kors pic.twitter.com/cv23vR67Tj

— ` (@melanchloelia) September 24, 2018

Large, costly mergers like this aren’t unheard of in high-end retail. In 2015 and 2017, Coach, Inc. acquired Stuart Weitzman and Kate Spade & Company, respectively, renaming the three-brand conglomerate Tapestry, Inc. On the luxury end, retail conglomerates LVMH and Kering Group have long dominated. LVMH controls Dior, Louis Vuitton, and Veuve Clicquot, among other big names, while Kering Group runs 14 apparel brands, including Gucci, Alexander McQueen, and Balenciaga.

However, these established conglomerates differ from Michael Kors — now renamed Capri Holdings — in one major respect: all or most of their brands market to similar audiences searching for products at a similar price point. The wide disparity in price and style of Michael Kors and Versace products represents a potential stumbling block. However, if Capri Holdings can make the merger work, it’s poised to become the first major American luxury conglomerate.

The Challenge of Customer-Centricity for Multiple Brands

With this expensive deal, Michael Kors isn’t just acquiring Versace, it’s acquiring all of the cultural implications, heritage values, and institutional challenges that come with it. In public statements about the deal, Kors himself has emphasized the strength of the Versace brand as a primary selling point.

This is the challenge for any retailer managing multiple brands: how to reconcile differing customer expectations and fine-tune a marketing strategy that reaches them all. In this case, much of Versace’s value rides on its brand reputation, while Michael Kors keeps its price point accessible by manufacturing in countries where labor and goods are less expensive. If Capri Holdings succumbs to the temptation to cut costs by reducing Versace’s quality and moving its operations out of Italy, it risks alienating Versace’s customer base entirely.

Clearly, maintaining Versace’s existing customer base is a priority. However, for the merger to prove a true success, both brands must grow. Luxury companies have long been known for innovative, beautiful products, but those products alone are no longer enough to outpace the competition. Brands must pivot to become customer-centric rather than product-centric, offering uberpersonalized experiences to each and every customer.

How Customer Analytics Can Help Conglomerates Thrive

Of course, a high level of personalization requires an advanced customer analytics platform. Now that it’s under the larger Capri Holdings umbrella, Versace can leverage this technology to offer a more compelling customer experience.

Mergers of this type are tricky: both brands need to maintain their distinct identities, but they also need to facilitate enough communication across their marketing teams to take advantage of potential cross-marketing opportunities. Like two heads are better than one, two brands’ customer data leads to more precise insights for the entire conglomerate.

Primarily, access to more data means a greater capacity for customer segmentation. Perhaps a conglomerate’s customer analytics platform reveals that one group of shared customers buys purses exclusively from one brand and costume jewelry from another, or that another segment of customers stocks up on cosmetics from both.

These insights inform how both brands will communicate with customers moving forward. Stand-alone brands use these types of customer insights to cross-sell or upsell specific products or product categories. Conglomerates like Capri Holdings are in a unique position to cross-sell products across a number of brands, providing even more precise recommendations to customers thanks to its diverse product offerings.

At the end of the day, the success of Capri Holdings hinges not only on its ability to keep existing customers happy, but to provide them with an even better experience than before. Large retailers have access to all of the data that they need to do so — it’s just a matter of taking advantage of it.

Corey Pierson is co-founder and CEO of Custora, a provider of advanced customer analytics for retail.