ES_by_Petter_Larsen (Grade HP:A+)

Petter Larsen MIB1 – Beacon International Marketing
1
ELIE SAAB (ES)
Executive summary
Even though luxury fashion consumers are changing behaviours, and we have fewer
haute couture houses in the marketspace, Elie Saab is more profitable than ever.
However, a new affluent middle class in emerging markets has a huge need for affordable
luxury goods. This rapport identifies and discuss issues in this matter, and at the end
concludes how Elie Saab can achieve long-term sustainable growth.
Presented to:
Tessa Misiaszek, PhD., MPH
November 4th, 2016
Authored by: Petter Larsen

2
NEXT STEP FOR A GLOBAL HAUTE COUTURE BRAND
ELIE SAAB, hereafter ES, is a luxury fashion house with four primary product lines, Haute
Couture(HC), Ready-To-Wear(RTW), wedding dresses, and accessories –- and anchored by
couture. ES is one out of eleven couture design houses left in the world. The firm is witnessing
an impressive growth over the past years and much of it is because of its cash cow RTW
(appendix 1), however, ES is also earning big bucks on its anchor product line. In addition, ES’
star product (appendix 1) is a differentiator from its competitors.
Even though the world’s high-net-worth individuals (HNWI) grew last year, the consumers are
shifting to a more causal style of clothing. Moreover, much of the ES’ success the past five years
is the rapid growth in the ready-to-wear(RTW) product line which provide a higher return on
investment than ES’ couture line.
In addition, a new and emerging affordable luxury market with an affluent middle class are
arisen, nonetheless ES has insisted to stay true to its core of exclusivity by targeting its products
to the world’s most affluent. Thus, the main issue for ES is:
“Should ES go against its own core values and value proportion and focus on the
growing affluent middle class and its needs or continue with ES’s unique value
proportion(UVP) for a long-term sustainable growth?”

3
To lead or be leaded?
ES is not just one of the few established haute couture (HC) houses left in the industry but also
one of the leaders in its field. ES’ design is beloved among A-celebrities, royalties and the globe
most affluent people.
According to Bain & Company the global luxury market is divided in three layers super-wealthy,
aspirational, and accessible luxury. ES targeting themselves to the super wealthy and
aspirational, but intentionally avoiding the affordable segment (appendix 2). Despite a huge
market for affordable luxury, Mr. Saab and his firm’s goal has been to maintain the brand’s
exclusivity and position as one of the remaining HC houses.
Luxury brands are one of the most profitable and fast-growing brand segments (Shukla, 2010;
Wiedmann et al, 2009; Tynan et al, 2010), and an increased exposure to global media seems to
have increased the desired for high-quality goods among emerging markets (Belk, 1999). Bain
and Company predicts that 85 per cent of all luxury stores the next decade will be opening in
emerging markets. Moreover, the luxury consumption will grow by 10 per cent in emerging
markets, and, overall luxury sales will be down 18 per cent in America, 10 per cent in Japan and
8 per cent in Europe (Krauss, 2009). So, to expand ES’ business in emerging markets may be a
good idea.
The luxury fashion industry is facing a new trend of its consumers. The consumers are shifting to
a more casual style of clothing, even among the wealthiest segment of the world’s population.
The HC customers in the nineteen-hundred and 2010 is the same (royalties and celebrities). That
being said, it is clearly a change in consumer’s behavior. Earlier, this clientele just purchased
cloths from the top tier layer, but nowadays, this clientele purchasing clothes and accessories in
all three layers. An example on this matter is that they are purchasing a made-to-measure haute
couture gala dress from ES (super wealthy), RTW jacket from Prada(aspirational), and a bag
from Burberry (accessible).

4
SWOT analysis
As seen in the SWOT analysis for ES in appendix 4, one of ES main strengths is that the firm is
one out of eleven haute couture houses in the world and is in good company with Jean Gautier
and Chanel to name a few. Also, celebrities and royalties have taken ES to their hearts. Mr. Saab
is the brand. He is taking care of the relationship with ES’ clients to ensure that each and every
client will be attached to the brand. Thus, the HC clients will be brand ambassadors and the
positive word-of-mouth (W.O.M) will be spread within their respective networks (appendix 6).
This may be a reason why ES just uses 1 per cent of its sales on advertising (Elie Saab case,
2010). Traditional push advertising does not suit ES high-end profile nor targeting the right
group of people.
On the contrary, one of the biggest weaknesses is that ES is losing money on its core product line
compare to RTW. In addition, as a fashion brand, ES need to be very trend centric, and has,
chosen or not, a limited customer base. Not everyone has the money to spend over $100,000 on
an HC dress or thousands on an RTW entire. Nonetheless, ES do not target people who cannot
afford it. Over to opportunities, the RTW and accessories product lines has increased by 19 per
cent compare to the sales of HC. Even though the sale of both HC and RTW has increased the
past years, RTW has clearly a higher ROI on its RTW product line than the made-to-measure
line. Also, another opportunity is to expand to Asia where only 1 per cent of the revenue came
from in 2008(Elie Saab Case, 2010). The HNWI grew 25.8 per cent to 3 million high-net-worth
individuals (HNWI) in Asia in 2009 (Merrill Lynch, 2010) 35 per cent of luxury goods were
purchased in Asia and 24 per cent in Europe. Lastly, the main threat, but also key differentiator,
Mr. Saab himself, he is extremely committed in everyday-decisions, everything from HC
activities to image and brand management. What will happen if he is not here tomorrow? On the
other hand, if the C-suit do not have Mr. Saab on his team, the brand will dilute.
Product life cycle
ES’ HC product line is in the mature stage. The world’s HC market is shrinking but its product
line is very profitable. RTW product line is the cash cow (Appendix 1), and is taking market
share against HC, and are now the most important for ES in terms of sales. The wedding dresses
and accessories lines is in the growth stage, and in terms of the BCG matrix the dog -- with both

5
low market share and growth market rate. Lastly, the question marks are the investment in hotels,
yachts, and golf. The market share is low, however, it may pay off. This product line is in
introduction stage.
Distribution strategy
ES distribution model ranged from licensing, partnerships, and third-party distribution, to direct-
owned stores. The firm can license some of its RTW collections and accessories, and offer
partnerships with companies which is better at what ES is not great at. For example, ES
comparative advantage is night-dresses, so they can ask a jewelry company to make accessories
which match ES’s HC dresses. If ES produce itself, it would be very expensive but also not
necessarily on a high enough level to put the brand Elie Saab on it (alternative cost). Moreover,
ES can offer its products at world-class retailers (third parties) which increase the exposure the
brand, and consequently get a higher brand awareness among the target segment(s). A good
example of that is showing its night-dresses on the first floor at the luxury retailer Harrods in
London. Finally, in the anchor cities company-owned flagship are preferred.
Porter’s five forces
Now as we know ES strengths, weaknesses, opportunities and threats, let’s go into details on
external factors that can affect ES’ business. Porter’s five forces is perfect in this matter.
The buyer has low power; the price is extremely high for targeting the world’s most affluent.
This is not affordable luxury goods (appendix 1). The prices start on $1200 for RTW, and ends
on $100,000 for HC (appendix 3). The power of suppliers is also low. If they do not produce in
the right manner, ES can change to a better candidate. On the other side, threats from substitutes
are huge. The behavior of the super-wealthy consumers has changed. Now, these individuals are
wearing clothes from all three luxury layers. It has gone from 100+ HC houses in 1946 to 10 plus
in 2010 (Elie Saab Case, 2010). It is not only few established HC houses, but also few new ones
due to low ROI on time, resources and money.

6
Recommendation
You can lead a market by producing less but maintain the exclusivity and brand image or play in
three luxury layers with three different clienteles, which would lead to lower margins higher ROI
per unit – and aiming to penetrate the market like Marc Jacobs and Michael Kors did. However,
these brands diluted and I believe it will happen with ES too, if targeting the new affluent middle
class. The founder himself Mr. Saab has always wanted to target the brand to the people who
appreciate high-end, one-of-a-kind design from the finest fabrics and materials (Elie Saab Case,
2010). The materials and fabrics in the affordable segment (appendix 1) are not the finest. More
importantly, if the C-suit does not follow the founder himself, the brand will dilute because he is
the brand. In the luxury industry is not only to generate as much revenue as possible but create a
brand with value to its tribe (brand ambassadors). In other words, the brand ambassadors (tribe)
are effective media channels but they are not for sale or for rent (Godin, 2008).
In conclusion, integrated with the marketing mix, the recommendation is to focusing on its cash
cow and star (appendix 1). The price should maintain extremely high to target the same customer
base (appendix 3). Moreover, based on the information from Kraus (2009), Merrill Lynch
(2010), Bain and Company, and information provided in the case, ES should focus less in the
North-American market but focusing more on targeting the most affluent people in emerging
markets such as Hong Kong, Shanghai, Singapore, and India – with an emphasis on targeting the
super-wealthy and aspirational market.

7
Appendix
Appendix 1: The BCG-matrix (Henderson, 1970)
Appendix 2: The FashionIndustry focusing on the luxury goods (Fredriksen
2010, RetailManagement)
High
Price
Low
Physiological NEED Status
Exclusivity
Low High
Super
wealthy
STARS
Haute Couture
QUESTION MARKS
Yachts, Hotels, Fragrance
CASH COWS
RTW
DOGS
Wedding dresses and
accessories
HIGH
RELATIVE MARKET SHARE
LOWM
A
R
K
E
T
G
R
O
W
T
H
H
I
G
H
L
O
W
Accessible
Aspirational

8
Appendix 3: Perceptualmapping: Luxury FashionBrands focusing on the
“affordable”,“aspirational”and“super-wealthy” segment
Elie Saab
Valentino
Dior
Chanel
Louis Vuitton
Gucci
Tiffany Burberry
ExclusivityMass market
Affordability
Prestige price

9
Appendix 4: SWOT analysis of Elie Saab (MichaelPorter, 2008)
Strengths
1 of 11 HC houses
1 of 7 showing its HC
line at the HC Week in
2009
Mr. Elie Saab is the brand
Weaknesses
Sells more RTW than HC
Trend centric industry
Limited customer base
Opportunities
Rapid growth in RTW
3 million HNWI in Asia
Threats
Dependency on Mr. Saab
The HC is in change

10
Appendix 5: Porter’s Five Forces (Porter, 2008)forElie Saaband its external
factors
Few new HC houses
Low buyer power
The price is the price
Low supplier power because
producing goods for one
of the luxury leaders
in the world
Many substitutes
Consumer are mixing HC with RTW
Consumer can choose a cheaper alternative
Few occasions during a year with HC
Competitive
Rivalry
Supplier Power
Threat
Of
Substitution
Buyer Power
Threat
of New
Entry

11
Appendix 6: Mass-marketstrategyvs. Tribe (Godin, 2008)integratedin the
innovation adaptation life curve
Mass-market strategy (push marketing) Tribe (brand ambassadors)
ES= Elie Saab
C= Celebrities => brand ambassador (Innovators)
C1= The friend of the tribe leader/brand
ambassador (Early adapters)
C2: The friend of the early adapters (Early
Majority) etc.
ES
C
C1
C1
C
C1 C1
Company
x

12
Work sited
Belk, R.W. (1999), “Leaping luxuries and transitional consumers”, in Batra, R. (Ed.), Marketing
Issues in Transitional Economies, Michigan University Press, Michigan, pp. 39-54.
Fredriksen, J (2012) “Varehandelsledelse (Retail Management)” Kunskapsforlaget, Bergen,
Norway
Godin, S (2008) “Tribes: We Need You to Lead Us ” Penguin Group
Henderson, B (1970) “BCG matrix”, Boston Consulting Group.
Krauss, C. (2009), Strength by Luxury Goods Shoppers in Asia and Online Bring Glimmers of
Hope to Beleaguered Industry, Says Bain & Company in Release of Annual Worldwide Market
Study, Bain & Company, New York, NY.
Porter, M (2008) “On Competition”, Harvard Business Review Book
Merrill Lynch and Capgemini (2010) “World wealth report 2010” p. 4
Shuayto and Kayaal (2012) “Elie Saab: Growth of a global luxury brand”, Richard ivey School of
Business Foundation, version: 2013-05-17
Shukla, P. (2010), “Status consumption in cross-national context: socio-psychological, brand and
situational antecedents”, International Marketing Review, Vol. 27 No. 1, pp. 108-29.
Tynan, C., McKechnie, S. and Chhuon, C. (2010), “Co-creating value for luxury brands”, Journal
of Business Research, Vol. 63 No. 11, pp. 1156-63.
Wiedmann, K.P., Hennigs, N. and Siebels, A. (2009), “Value-based segmentation of luxury
consumption behavior”, Psychology and Marketing, Vol. 26 No. 7, pp. 625-51.

ES_by_Petter_Larsen (Grade HP:A+)

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (8)

Similar to ES_by_Petter_Larsen (Grade HP:A+)

Similar to ES_by_Petter_Larsen (Grade HP:A+) (16)

ES_by_Petter_Larsen (Grade HP:A+)