Big things are happening in the shoe world, as Michael Kors gets ready to buy Jimmy Choo in a $1.2 billion deal. This recent buyout marks a new trend in companies who label themselves as “accessible luxury.”
Brand like Michael Kors price their items in an effort to stay affordable and remain in a middle zone between bargain priced and high end products. The trouble with their pricing is consumers are either spending less money or splurging on expensive items for triple the price.
The decline in sales can also possibly be linked to less people shopping in stores, as online shopping has become the new normal. Adding items to your cart with a few clicks of your mouse pad is much easier than spending hours in a shopping mall looking through merchandise.
While brands like Zara, who sell items of good quality for bargain prices, are surging in sales, Michael Kors is struggling to stay afloat. Even luxury designer brands such as Louis Vuitton and Gucci are remaining profitable because it seems people would rather save up for the real thing than settle for something else.
Michael Kors has been struggling for a while as they closed 125 of their retail stores in May and its share prices lost a fifth of its value.
Last year, Jimmy Choo reported a 15% increase in revenue and credited 75% of their sales to shoes. Although Jimmy Choo also sells purses, perfumes, and sunglasses, shoes have always been their largest means of profit. Choo’s pricing ranges from about $425 to $3,000 depending on the type of shoe. However, Michael Kors’ items begin at $70-$90.
Michael Kors hopes this buyout will give them the increased profit they need and not only save their brand but make them money. This marks the first time Jimmy Choo will be owned by another company, and we are curious to see the changes this buyout will result in. Perhaps Michael Kors will try to design and sell more expensive handbags, or Jimmy Choo might take a swing at lower priced shoes and handbags. Either way, this is sure to create some excitement for the fashion industry.