When Dolce & Gabbana said recently that it is folding its younger, less expensive D&G brand into its high-end line, many retailers were bewildered. D&G's success has at times overshadowed the more deluxe Dolce & Gabbana. And the prevailing wisdom is that a luxury brand loses cachet when it offers cheaper wares.
The danger, this theory goes, is that $300 Dolce & Gabbana dresses hanging beside $3,000 dresses with the same label will leave shoppers confused about what the brand stands for. "The Dolce super-label has sublime value," which could be diminished in consumers' minds, says luxury-consumption consultant Jim Taylor.
But there's another way to look at this wager: Consumers—savvier and more confident than ever about fashion—no longer pay as much attention to narrow tiers of brands. They've been mixing and matching expensive and cheap clothes for years. Meanwhile, luxury brands can seem cluttered with different lines when what consumers really care about is the designers who stand behind them.
Indeed, Mr. Taylor this week advised a roomful of luxury-company executives that they are annoying high-end customers by creating tiers of brands. "Nothing upsets affluent consumers more than finding there are multibrand models for multiple levels of quality," he said at the American Express Luxury Summit in Park City, Utah. In other words, maybe Dolce & Gabbana has already been devalued simply by the existence of D&G.
Mr. Taylor argues that companies must choose between two strategies. Either they must go the way of Michael Kors and Ralph Lauren and "paint the earth" with multiple brand levels or they must "simply be sublime" and cater to the roughly 20% of luxury consumers who shop without regard to price.
In fact, another luxury magnate recently narrowed his focus to one luxury brand. Brunello Cucinelli, chairman and chief executive of Brunello Cucinelli SpA, last year folded his two lower-level fashion lines—Gunex and Rivamonti—so quietly that almost no one noticed.
Brunello Cucinelli's Move
Then he put his assets to work producing more products for his top-drawer Brunello Cucinelli line, which sells products from mink jackets to chino shorts.
His showroom in Milan in February overflowed with his expanded fall 2011 collection of shoes, belts, bags and clothes. When I asked what his Gunex and Rivamonti customers should do, he grabbed a pair of chinos, pointed at the pleats, and said some basic pieces like pleated pants are being incorporated into the more luxurious Brunello Cucinelli line.
"My customers understand what I am doing," Mr. Cucinelli said. What's more, he noted that he can now focus entirely on developing the main brand.
This is essentially a wager that the business to be gained by a broader brand will exceed what is lost. Mr. Cucinelli is a highly successful fashion gambler, whose company's profits rose 83% to €15 million (about $22 million) last year, on revenue that grew 27% to €201 million. Mr. Cucinelli, a factory worker's son who received an award from the Italian government last year that is equivalent to being knighted, is predicting that his growth rates will continue in 2011.
Still, these sorts of decisions run against the grain of traditional luxury management. "We're just going to have to absorb [the end of D&G] before we figure out how we're going to handle it," said Neiman Marcus fashion director Ken Downing when asked how his luxury department-store chain would handle the change. Neiman carries both Dolce & Gabbana and D&G.
The 'Bridge' Line
Ever since Yves St. Laurent launched Rive Gauche in 1966, so-called secondary brands (once called "bridge" lines because they served as a bridge for consumers to cross to designer lines) have been part of designer fashion. Donna Karan's DKNY, Marc Jacobs's Marc by Marc, and Prada's Miu Miu offer consumers a less expensive and often younger-looking or more casual entrée to the designers' style.
Newer designers often establish their credentials with high-end lines while nursing plans to launch more profitable secondary lines. The latter can sell more of their products because they're lower-priced, and they generally have higher profit margins because they can cut corners on quality and complexity. The linings may be polyester and the seams less rigorously anchored. The manufacturing sometimes takes place in low-cost countries like China.
Jason Wu toyed with the idea of launching a secondary line a year ago, and Panichgul Thakoon launched Addition as a secondary line. For Akris, the Akris Punto secondary line has been a substantial profit producer. Versace last year brought back its secondary Versus line after having shut it down several years earlier, hiring hot British designer Christopher Kane to design it. The line often gets better reviews than Versace itself.
Dolce & Gabbana representatives have repeatedly declined to discuss the logic behind their move, though it has been discussed and approved by the company's board. The company notified retailers by letters sent in March, saying the plan would be implemented in 2012. People familiar with the strategy this week confirmed that is the case.
Wearing the Designer
Despite retailers' confusion, one might ask whether many consumers will even notice that D&G is gone, because they consider most everything designed by Stefano Gabbana and Domenico Dolce to be Dolce & Gabbana, regardless of what the label says.
Ask my husband about his CK underwear and he'll tell you they're Calvin Klein. Most people think of DKNY as an abbreviation for Donna Karan, when it's actually a more casual contemporary line. Quick—is that Ralph Lauren sweater you're wearing green, purple, or black label—or is it RLX or Polo? Chances are that to you, it's just Ralph Lauren. And Mr. Lauren mixes up his various lines in his stores.
So perhaps it's really the brands and retailers who depend most on having separate secondary labels, which make it easy to situate product lines according to stores' traditional layouts: Donna Karan goes on the "designer" floor, and DKNY is merchandised with the "contemporary" collections.
But to most consumers, says Stephanie Solomon, fashion director for Bloomingdale's, a secondary line is "just a way to have access to the brand."
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