Michael Kors

It’s said that image is everything in fashion, and for luxury brand Michael Kors, that image has begun to tarnish.

For more than a year, fashion insiders, from style bloggers to financial analysts have been warning of “the coming crash” of Kors’ lifestyle company, Michael Kors Holdings.

They’re worried that in the three years since the company went public, it’s been opening so many stores that it’s at risk of oversaturating its own market -- a prospect that could doom the brand.

There were just 231 Michael Kors stores around the world in late 2011; today, there are 509 stand-alone stores and nearly 200 licensed locations worldwide. That huge expansion has translated into big increases in sales over the last few years, particularly at the brand’s highly popular outlet stores. In any other industry, more sales and more customers would be a good thing. But in high-end fashion, too much popularity can be fatal.

Annamma Joy, a professor in the faculty of management at the University of British Columbia who has researched what drives luxury brand buyers, says while most fashion lovers seek out the latest styles so they can feel they fit in with the latest trends, the luxury shopper is looking for the opposite: they want to stand out. High end shoppers are more concerned with using luxury brands to curate looks that no one else has.

“Luxury is exclusive because luxury is rare,” she says.

Most of Michael Kors’ high-end designs remain decidedly exclusive -- if for no other reason than their high price tags. And the 56-year-old Kors is still “American fashion's golden boy,” as Vogue declared him last month when he unveiled his fall collection at New York Fashion Week. That collection won Kors plenty of praise from fashion scribes who admired his approach to “opulent restraint.”

The problem appears to be the handbags.

For too many fashion lovers, Michael Kors’ bags have become annoyingly ubiquitous. And when a luxury item is everywhere, it begins to feels ordinary, Joy says.

The problem for so many high-end fashion brands is that they rely heavily on their handbag and accessories market. Even for the highest of the high-end brands, it’s the smaller goods such as perfumes and handbags, that make up the bulk of their sales, Joy says.

Fashion companies love these items because they are one-size-fits-all, easy to produce, and carry huge profit margins. Customers love smaller items too because they are the ideal way to “buy into” a brand and own a piece of luxury without spending the tens of thousands of dollars needed to take home a full outfit.

Michael Kors decided to go after these “aspirational luxury” shoppers by selling his handbags in easily-accessed suburban outlet stores. While the bags could hardly be called cheap, at $200 and up, they are affordable by luxury brand standards.

But by successfully bringing his bags to the masses, the Michael Kors’ brand may have lost its air of exclusive luxury, becoming in a sense, a victim of its own success. BUY Handbag Here

Of course, Kors isn’t the first to threaten its brand’s cachet by becoming too popular.

Only a few years ago, Coach headed down the same path -- and into the same predicament --that Michael Kors finds itself in today.

It began aggressively opening new stores a decade ago, placing much of its focus on outlet stores to attract new customers in suburban centres. The strategy worked and women looking to grab a small piece of high-end fashion rushed in to snap up leather goods festooned with Coach’s now well-known ‘C’ logo. By 2013, factory outlet sales made up 70 per cent of Coach’s overall retail sales.

But as the Coach logo began showing up on everyone’s arm from soccer moms to babysitters, Coach’s image began to tarnish. Not only was Coach no longer seen as upscale and exclusive, it soon found itself struggling against upstart competitors Kate Spade and Michael Kors who were following its expansion model.

In the last two years, Coach has been attempting to turn back time, closing 70 stores, most of them outlets and doing away with deep discounts. It’s also courting the European market more by opening a flagship store in Paris for the first time, as the company attempts to grow beyond handbags into a “premium lifestyle brand.”

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