How Tiffany could be the string to LVMH’s luxury bow

The luxury industry, which once evolved at a befittingly elegant pace, is changing at breakneck speed. It’s become a hunting ground for investors, with Deloitte research showing that there were a record number of mergers and acquisitions in the luxury sector in 2018, 22% up on the previous year.

The giants of the industry have been acquiring luxury brands that are themselves vast. Michael Kors buying Versace last year was momentous. Yet LVMH think they can go one better by acquiring Tiffany, in the battle to own brands in a sector that is set to thrive in coming years. Tiffany rejected a $14.5 billion bid, claiming that was undervaluing its place in the market. It’s not a huge surprise, and Tiffany are in a strong position, as LVMH need more jewellery in their ‘hard luxe’ stable if they’re to take on rival luxury group Richemont. LVMH’s TAG Heuer and Fred jewellery simply can’t compete with Richemont’s Cartier, Montblanc, Piaget and others in a fight. They need reinforcements. Enter Tiffany.

It’s not all roses though. Despite Tiffany’s recent share price surge, they have had challenges in recent years, such as standing out as true luxury when they’re perhaps best known for their lower end products. Yet with US sales so strong and market share in good health, Tiffany can still command a high premium, befitting its status.

The battle to own brands all comes down to the expected growth of the luxe sector. And a big part of that is down to luxury brands becoming increasingly aware that digital – once a word utterly immiscible with the concept of luxury – can be a huge driver of growth.

When Richemont acquired Net-A-Porter last year, it was the logical next step in its pursuit of keeping up with the evolution of consumer buying behaviour. Its chairman, Johann Rupert, spoke in 2016 of the ‘massive change in the way business is being done by going digital, a massive change in eCommerce’. And in acquiring Net-A-Porter, it instantly found itself in possession of a leading eCommerce player.

LVMH’s Tiffany bid wouldn’t at first glance seem a counterpunch to this, yet it shows that they see where the future is headed. LVMH knows omnichannel. Luxury brands aren’t always the best at investing effectively in digital, but LVMH understands that whilst having a beautiful retail experience may be the cornerstone of a strong luxury experience, for the modern luxury consumer, having strong digital touchpoints that fit what customers need from a particular channel is paramount.

Their investment in the latter has been visible from the outside, and Bulgari’s recent improved performance is evidence of this. LVMH also knows the Chinese consumer and the buying behaviour of Chinese HNWIs. 80% of Chinese luxury consumers are on social media, and they expect to buy quickly and seamlessly from luxury brands with the same quality of experience they’d get by going into a boutique. Burberry is a real leader in harnessing this behaviour, with its B-series line, where on the 17th of every month they release an exclusive range for just 24 hours. And it’s only available on its Instagram, WeChat, LINE and Kakao accounts. It maintains the exclusivity synonymous with luxe, but in a way that meets the modern consumer’s expectations of retail.

For Tiffany this can be a huge growth area, if LVMH acquires it and can apply eComm thinking to an already successful brand. The same way you wouldn’t have backed David to beat Goliath, Tiffany and the bigger groups aren’t easily comparable. Budgets are very different, which may have led to a lack of investment in certain marketing channels for Tiffany. Yet you can’t knock their investment in a strong digital strategy, including their work with key influencers like Kendall Jenner, and as luxury brands go they’re not in bad shape. Acquiring Tiffany is a unique proposition befitting its historic strapline – there really is only one…