Impact of Tapestry and Capri Monopoly on Mid-Luxury Consumers
The pending merger of Tapestry and Capri Holdings and the ongoing legal issues to consolidate mid-market leather prices could result in an unfair monopoly that limits consumer choice.
Conglomerates Battle For Dominance
In August 2023, Tapestry, the New York-based parent company of Coach, announced plans for a USD 8.5 billion merger with Capri, the owner of founder-led labels including Jimmy Choo, Michael Kors, and Versace. The FTC (Federal Trade Commission) has since sued to block the deal in April 2024 — which would put six brands including Michael Kors and Coach under a single company — arguing that the combined companies would monopolise the leather bags and accessories market, inevitably reducing competition and leaving consumers with fewer affordable options. The lawsuit raises concerns that such consolidation could stifle innovation and drive up prices, as a lack of competition often leads to complacency amongst market leaders. According to Reuters, the FTC notes that the deal would also give Tapestry a dominant share of the “accessible luxury” handbag market, controlling over 50 percent of it once the deal was completed.
Additionally, the FTC highlighted potential repercussions for employees, warning that a monopoly could negatively impact pay and benefits due to decreased bargaining power. This reflects a growing trend of mergers and acquisitions amongst luxury conglomerates that (at times) prioritises dominance in market dynamics over consumer choices. Perhaps this scrutiny by regulatory bodies such as the FTC should be welcomed as the outcome of this legal battle may not only reshape the future of these brands but also set a precedent for how accessible luxury markets may operate in the years to come.
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What Is “Accessible Luxury”?
Accessible luxury, in part, applies to mid-luxury goods that are set at a price point between luxury goods and mass-market brands. According to the FTC, “accessible luxury” is defined in the market as handbags sold between USD 100 and below USD 1,000, which is a bracket where brands such as Capri’s Michael Kors and Tapestry’s Coach and Kate Spade fall between.
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In an article from 2015, Forbes defined the Michael Kors consumer as the 25 to 54-year-old age group with annual incomes of over USD 50,000. “These consumers will represent the newly affluent or established upper middle class in the market. These are people who have disposable income and a desire to have some of life’s amenities,” reads an analysis from the article. However, 2015 was nearly a decade ago and the once 25 to 54-year-old age group is now moving toward the “older millennial demographic” while existing competition from Coach and Kate Spade is only compounded by the rising second-hand and counterfeit industry as Gen Zs are opting to purchase superfakes and luxury counterfeits as both a commentary on capitalism and the democratisation of luxury fashion.
This inevitably sees Michael Kors slowly losing its niche in a market it had once successfully carved out a space. An acquisition would mark a significant shift in the competitive landscape, allowing the combined entity to leverage shared resources and enhance brand visibility, ultimately positioning itself as a formidable player in the accessible luxury segment. Michael Kors himself has spoken out on the increasing challenge of staying relevant “in a world where brands can rise and fall based on viral TikTok videos and photos of handbags on the arms of celebrities such as Taylor Swift and Beyoncé.” Aside from a possible merger, perhaps a rebrand could be in store similar to that of 2018 when Michael Kors Holdings acquired Gianni Versace for EUR 1.83 billion or approximately USD 2.12 billion which led to the amalgamation of Capri Holdings Limited.
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While one would like to assume the move could lead to expanded distribution channels and an enriched product offering that caters to a broader audience while maintaining the allure of luxury — a more likely eventuality would be a consolidation of brand identities that could dilute individual brand equity, potentially leading to a loss of distinctiveness in a market that thrives on unique offerings. This could result in a more homogeneous product range that might not resonate as strongly with discerning consumers who seek the exclusive appeal that defines accessible luxury.
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Think of it this way, when the average non-brand-loyal consumer who wants a mid-market luxury bag enters a department store (or goes online shopping at MyTheresa or FarFetch) and sees three monogrammed tote bags that each have roughly the same shape and size but are equally as expensive, they may struggle to distinguish between the brands leading consumers to perceive all options as equally desirable. This is arguably more insidious than controlling prices, it is also potentially tricking consumers into believing they are making an informed choice when, in reality, they are merely responding to superficial branding and marketing tactics that mask the lack of substantial differences in quality or design. Of course, some may argue that there are signature pieces to each brand like the Coach Tabby Shoulder bag or the Kate Spade Flower Duffle Crossbody. However, when one thinks about it, the silhouettes are easily exchangeable (and replicable) and the only real point of differentiation is an emblem or monogram print.
Status of Pending Lawsuit
As it stands, the legal battle is at something of a stalemate with designer Michael Kors testifying earlier this month about competition in the handbag industry stating: “Sometimes you’ll be the hottest thing on the block. Sometimes you’ll be lukewarm. Sometimes you’ll be cold,” acknowledging that his namesake label has fallen from favour and needs a refresh, according to reports from CNBC news.
The FTC has contended that the merger of Tapestry and Capri — especially with Coach and Michael Kors under a single ownership — would result in a dominant handbag conglomerate capable of raising prices while providing customers with the same or inferior products. Conversely, attorneys for Tapestry and Capri have challenged the FTC’s portrayal of a consolidated handbag market. They argue that competition has increased as consumers now consider both high-end luxury brands and lower-priced fast-fashion options, along with the availability of online-only platforms and secondhand marketplaces according to a recent article from CNBC News.
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As Glossy.Co reports, mergers among major fashion companies frequently attract regulatory attention. Notable examples include LVMH’s USD 16.2 billion acquisition of Tiffany & Co. in 2020, Essilor’s USD 49 billion merger with Luxottica in 2018, Michael Kors’s USD 2.1 billion purchase of Versace the same year, Kering’s acquisition of Gucci in 1999, and Prada’s takeover of Jil Sander in 1999. These mergers and acquisitions were scrutinised by regulators due to worries regarding diminished competition and increased market consolidation in the luxury fashion sector.
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The outcome of the lawsuit against the merger of Tapestry and Capri remains uncertain, but it carries significant implications for consumers and the accessible luxury market. Should the FTC succeed in blocking the deal, it could prevent the emergence of a dominant player that might limit choices and drive up prices. This would help maintain a competitive landscape where innovation and diverse offerings thrive. Conversely, if the merger goes through, consumers may face reduced variety, as the combined entity could focus more on a uniform product range, potentially sacrificing uniqueness in favour of brand consolidation. However, heightened competition from fast-fashion alternatives and the burgeoning secondhand market could still encourage brands to innovate and differentiate themselves, ensuring that consumers have access to a wider array of options. Ultimately, this legal battle will not only influence the future of these iconic brands but also shape the landscape of accessible luxury.
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