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More consolidation? Richemont apparently rebuffs Kering

The LVMH - Tiffany drama has ended but it looks like more consolidation amongst major players is in the cards. How does this affect the jewelry consumer? We take a deeper dive.

Per JCKonline...

“Combining the two mega brands of the soft and hard luxury industry, Gucci and Cartier, could address the perceived higher fashion risk of Kering and the perception of mismanagement of Richemont’s smaller brands in its portfolio,” said UBS, in a note quoted by Reuters.

However, the news service added that “while combining the two would make sense strategically, the family ownership structure at both companies is a big hurdle.” It noted that Rupert’s family investment vehicle controls 51% of Richemont’s voting rights, while the Pinault family’s holding company, Artemis, owns 41% of Kering."

You can read the full JCKOnline article here

Let's first start with Tiffany and LVMH. Tiffany, the iconic US brand, failed to transform into the digital age. Their failure to understand younger generations and failure to realize their brand was slipping led to their ultimate demise as an independent company., the owner of Jewelry.News, experienced the Tiffany decline first hand when we reached out to them a few years ago. We received a nasty, intimidating letter from their lawyers instead of a "thank you for the opportunity but we'll pass". Needless to say, we knew at the time that Tiffany failed to have any stype of strategic vision for the future. Their over-dependence upon brick and mortar was a glaring mistake that could not be overcome. Jewelry consumers will have to take a watch and see attitude with the new Tiffany. Consumers have always paid a large premium for Tiffany product in the past. Can LVMH keep the Tiffany brand going strong? We'll see.

That brings us to Kering-Richemont. Interestingly it appears that Kering reached out to Richemont and not vice versa. Clearly brick and mortar jewelry sales are not rebounding as expected and those jewelry corporations without a clear digital vision of the future are destined to get "Tiffany'd". Kering lacks a strong brand name in the US in particular and is too dependent upon 3rd party retailers. Tiffany at least had their own, iconic brand. Richemont appears to be playing hard ball knowing that Kering's options are limited this late in the ecommerce ballgame.

The failure of jewelry retailers to adapt to ecommerce was excacerbated by the pandemic. As noted in our post "Online jewelry sales are exploding", online sales at Signet were up a whopping 70% last quarter on a year over year basis. Jewelry retail is no different than any other retail business, those who did not adapt to ecommerce quick enough are being left out in the cold.

Overall this mass consolidation of the jewelry industry is probably not in the best interest of the jewelry consumer. Innovation, research and development, and customer focus is often lost when biggest fish start gobbling up the smaller fish.

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