Luxury stretching: a practice that has changed the sector
Stretching has allowed luxury companies to grow more quickly, without being limited to growth in their luxury lines, or being restricted to growth in demand for the products of their original trade. Though many have departed from luxury, some have retained that status to their primary products.
The practice of stretching is driven by financial need. While there is a high margin on luxury items, there is a low volume, and maintaining the firm's profitability can be a difficult proposition. Extending or stretching to lower markets provides a steady stream of income to sustain the brand.
It's also worth noting that, on the supply side, the financial cost of stretching or extending the brand is far lower: it does not require the brand to have the financial strength to set up additional manufacturing operations, only to have the brand strength to make products appealing while licensing others to manufacture the items.
The licensees typically have manufacturing capabilities and competencies, but no brand recognition in the market nor the competence to build a brand. They benefit from borrowing on the cachet of a brand that others have worked to build.
Aside of finances, the benefit to the brand of stretching is that it builds mass-market awareness of the brand, by means of advertising the stretch products; it creates visibility by placing its marks in the hands of more people; and through products such as cosmetics, it brings a sense of intimacy through physical contact or proximity.
All of this feeds the envy of the primary line: a woman who purchases a perfume that carries a luxury brand develops an appreciation for the brand that may carry her into purchasing clothing or other merchandise. It may also serve to bring foot-traffic into the boutique where those who seek the perfume may see the clothing and interact with the staff and other customers.
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