Dear Mr. Kowalski:
On Super Bowl Sunday as the Tiffany brand was about to be served up to a massive international audience via Lady Gaga we also got the news that Fred Cumenal had been booted out. Financial performance the culprit:
“The board is committed to our current core business strategies, but has been disappointed by recent financial results,” you told us. “The board believes that accelerating execution of those strategies is necessary to compete more effectively in today’s global luxury market and improve performance.” Basically: We’ve got the recipe, we just need a speedier chef.
Since Cumenal was fired, I’ve had six – count them six – calls from various media, and even more from friends in retail. I can only imagine how your phone is buzzing. I’ve shared my assessment with everyone who asks, so I thought it only fair to include ye-who-have-not-called in the distribution. Here’s the headline:
You’re basting in a more toxic stew than you realize – and the heat is being turned up. Indeed, we can now sample all the ingredients required in a recipe for brand damage and potential ruin. Several flavors imbue the marinade for your entire category; one is reserved for Tiffany alone.
Ingredient #1: The obvious conundrum of 21st century retail.
This is the retail category contraction facing malls and main streets, alike. We’d just rather shop online. We’d far rather buy online. Right now, eight percent of luxury goods are purchased online: the third largest global market in the world for luxury goods. That’s only going to grow and eat away at the conventional footprint and business model.
Ingredient #2: Personal luxury goods as a segment is not thriving.
We have only to peruse Bain’s most recent report: one percent contraction year over year, with America and Asia (non-Japan) sales declining by three percent.
Ingredient #3: Stir in declining tourism and spending on luxury goods to take home as souvenirs.
Bain terms this the “re-localization of luxury goods,” as in local luxe purchases exceeding tourist purchases by five percent, which hasn’t happened since 2001. We’ll come back to this.
Stir in a dollop of three lifestyle zests:
- We’d rather spend on experiences. Ask any 17 year-old about Tiffany and you’ll confront a blank stare. They may have received something in a blue box at their bar mitzvah or confirmation, but in terms of powerful memento moments? They’d rather have tickets to Jingle Ball.
- We’d rather spend on casual goods than formal. The luxe loving, to the manor born elite, are not magnetized by the Tiffany brand. These tradition-fueled, formal fine crystal, china and silverware customers are on the wane. Let’s just say it out loud: Bridal registries now trend towards the Crate & Barrelesque.
- We’d rather buy in off-price channels. Engagement rings for second marriage or third marriages? Look no further than CostCo. Where else are we turning, if not to a conventional jeweler? Why to eBay, of course. Is there a difference once you put it on between a David Yurman ring sold in a David Yurman store and a previously owned one, purchased via online auction or Amazon? Nope. How about a Tiffany bracelet? Nada.
Now then, how does this nasty concoction facing all jewelers become your own?
The retail destination, itself, runs the risk of becoming a Disney World ride at Epcot: Tourists may want to enter the museum-quality environs of the hushed prestige of Tiffany, but a vacation destination on 57th Street does not a growing global business make. You know all that. You probably scoffed at the justification of the flagship store’s holiday sales decline being attributed to nasty traffic at the nearby Trump Tower, but there’s a powerful association that needs to be acknowledged. The Tiffany/Trump connection is more than the aroma evoked by the name of the “second daughter.”
Here’s that one more spice to add your unique flavor: imagine for a moment, your stores in Beijing or Tokyo or, dare we say it, Mexico. Is there another jewelry brand in the world as closely associated with American luxury? And with Trump? Do you believe customers in those cities will want to “badge themselves” with the Tiffany brand, as they walk down the streets of their own cities? Your designers have done a great job of re-imagining and re-invigorating Tiffany design. Paloma Picasso. The Atlas Collection. Elsa Peretti. The new Hardware pieces showcased by the Lady Gaga ads. The brand is obvious – but not globally innocuous. We’re not talking an explicit # boycott moment. Nothing that apparent. No, just the specter of the twinge that comes from bitter distaste. The wrinkled nose of an acrid brand.
The stench of tariff wars required to make America great again may well be the secret ingredient that renders genuinely lethal the potion of brand revenge you must now swallow cold. You’re going to need an antidote and fast.
My Rx for a course correction, if not a full-on cure: Beg, borrow, and steal ideas from other industries. Don’t look to competitors. They’ve got a nasty cough all their own.
- Beg some insight from Donna Karen. Herself. She’s been able to create relevant, accessible youthful brands. Initially tethered to the über mark with DKNY, but now with Urban Zen. Notice how Urban Zen is a shared worldview, less about her or the parent brand and more universal, e.g. global.
- Borrow some wisdom from the luxury car folks. As in “previously owned.” Look how Lexus, BMW, Mercedes, Jaguar and others have been able to monetize the second and third lives of their products. Why leave your brand to the whim and caprice of eBay, the Fabrikants and Circa?
- Steal from yourself. You own the great emotional wallop of the engagement/bridal market. What else can you sell him and her (stop thinking china!)? A joint-venture with Kleinfeld? The Four Seasons hotel chain? Who can you buy that would help you vertically integrate the relatively price impervious first marriage market?
That’s all I’ve got, looking at it from the outside, in. Mr. Kowalski, you’ve put yourself in the kitchen. It’s getting hotter. We all hope you can stand the heat.