From Wall Street Journal 24/09/13: Bugatti Hopes Handbags Will Turbocharge Brand
Luxury Car Maker Enters Fashion World to Entice New Customers
The Bugatti Veyron supercar can accelerate from zero to 60 miles an hour in just 2.5 seconds. It is with a similar rush that Bugatti Automobile SAS has entered the world of car-related fashion. The auto maker, owned by Germany's Volkswagen AG VOW3.XE +0.09% since 1998, plans an international chain of retail stores to sell its just-launched, limited-edition Bugatti clothing and accessories to add to a small range of merchandise already on sale. Bugatti showed off its new haute couture at Milan's annual fashion fair last week.
Bugatti is joining a growing band of premium auto makers determined to enhance the appeal of their brands and entice new customers, particularly women, by selling branded clothing, handbags, watches and other accessories. It is a strategy Italy's Ferrari SpA and Germany's Porsche, another Volkswagen brand, have long adopted. Critics say that auto makers' fashion ambition is just a form of expensive advertising with little evidence that it helps sell cars. Any extra revenue is marginal compared with car sales themselves.
But brand experience is important when it comes to selling expensive, luxury cars that represent multibillion-dollar investments by the manufacturers. The Bugatti Veyron Sport Vitesse has a €1.7 million ($2.3 million) sticker price so buyers aren't likely to buy on impulse, say brand experts. Once the decision is made, these buyers tend to stay loyal. "First you need to get in the potential customer's face with good strong advertising and then follow this up down the road with an impressive dealership experience," said David Haigh, chief executive of London-based Brand Finance. "It is definitely worth heavy investment to ensure the brand is in the customer's mind at the time the decision is made."
"We want to create a world around Bugatti," said Wolfgang Schreiber, president of Bugatti as well as chief executive of Volkswagen's U.K.-based luxury car maker Bentley Motors. Bugatti wants to attract customers who aspire to the car but perhaps can't afford one, without sacrificing the qualities the brand is associated with. "The products must be at the same level as the cars—high-quality, high-priced, exclusive," Mr. Schreiber said during an interview at the Bugatti fashion show last week.
Ferrari, owned by Italy's Fiat SpA, F.MI +0.65% is in other auto makers' headlights. Ferrari was rated as the world's most powerful brand across all product categories by Brand Finance this year based on brand affection, loyalty and the company's profitability. The Italian maker of luxury sports cars and Formula One racers plans to sell fewer cars and is reducing production this year to maintain its exclusiveness. Ferrari will limit output to 7,000 cars this year and next after selling a record 7,318 cars in 2012."The brand is the biggest asset and we want to preserve the value of the brand," Ferrari Chairman Luca Cordero di Montezemolo said in an interview at the Frankfurt auto show earlier this month.
Ferrari recently expanded its merchandising, licensing and services to include a tailor-made service so that customers can choose the color and leather of the interior of their cars, a restoration service for old Ferraris, and a driving school. Auto makers are using accessories to attract women buyers, who are an increasingly important market in their own right.
Porsche created its own design label, which features a high-end accessory line, more than 40 years ago. In 2009 it introduced a women's fashion line, and earlier this year its first women's handbag. The company has signed up tennis star Maria Sharapova on a three-year deal to be its "brand ambassador" in a new global communications campaign.
Porsche says 30% of its customers are women. That compares with just 10% for Aston Martin, the U.K.-based sports-car maker best known for its link with fictional British spy James Bond.
Bentley is going down the handbag route to attract women buyers as part of efforts to double unit sales by 2018.
"Only 12% of our customers are women, which isn't good enough. We want to double this percentage within the next five years. [It is] brand extension but in a careful way," said Ariane Reinhart, Bentley's personnel director.
The first Bentley handbags went on sale last month, starting at $5,500 each.
Sabrina Tamburino Thorne was one of the first customers to purchase a Bentley bag when the British sports-car maker launched its range of accessories for women at a classic-car event in Pebble Beach last month.
"I really loved the shape and the Neptune Blue color—the size is perfect and of course it's exclusive," said the Philadelphia socialite, who is finance and budget coordinator at the Greater Philadelphia Tourism and Marketing Corp.
However, even Brand Finance's Mr. Haigh recognizes that while anything that reinforces the brand has a chance of helping car sales, the flow is usually the other way. It is the car that sells the branded goods, whether it is a Ferrari key ring or a Porsche suitcase, he said.
There is also risk that building out an automotive brand repels some customers, as well as attracting new ones.
"Bentley's [accessories] strategy is condescending and could backfire. Women are attracted to Bentleys for the same reason as men—their quality, performance, precision and heritage," said Tony Quinn, a London-based chief strategy officer at advertising agency at Publicis.
By MARIETTA CAUCHI and GILLES CASTONGUAY; Wall Street Journal, September 24th 2013