Why Did the Logo Get Cheap — Licensing, the Sweet Poison

In the previous episode, we watched Dior’s New Look revive postwar Paris and saw the golden age in which haute couture reached the summit of craft. Designers shaped the times, and brands gained the power to move the very mood of an age.

But a summit is shadowed. A one-off piece of handwork is, from the start, for a small wealthy few. To keep growing as a company, a brand had to deliver its name to more people, more widely. The answer that emerged was the mechanism of licensing.

You make nothing yourself; you merely lend the name. And first-rate names begin to dance across goods made by factories all over the world. At first it looked like a clever strategy. But it was also a sweet poison, eating away at a brand’s value from within.

Money Rains Down for Merely Lending a Name

Licensing is a mechanism by which a brand lends its name and logo to other companies and, in return, receives a share of the sales (a royalty). Perfumes, sunglasses, umbrellas, stationery — without owning a single factory, a brand could collect money while leaving both the making and the selling to others, so long as it lent its name.

In the 1970s, as designers’ ready-to-wear spread explosively, demand for goods bearing a fashionable name grew too large to ignore. To brands, licensing looked almost like a magic mallet that spat out gold. Carry none of the burden of manufacturing or distribution; simply collect the royalties — such was the logic.

The one who pushed furthest down this road was the designer Pierre Cardin. His name was, before long, lent out to an unbelievable number of products. By reports, by the end of the 1970s his name was attached to more than two thousand kinds of goods, spreading to bicycle accessories, wine, cookware, even hair dryers. By one account, his name was said to appear even on a toilet-seat cover.

The irony is that Cardin himself was an extremely gifted couturier. Known for avant-garde design, his bold, space-age forms ought, by rights, to have earned the highest acclaim. But by lending his name to so many products, his name became, instead, ‘commonplace’ to the customers of high fashion, it is said. To lose scarcity in exchange for talent — it may have been the cruelest bargain a creator could make. His name would be handed down to later ages as the cautionary tale of ‘a brand ruined by licensing.’

Logos Overflow, Value Thins

The problem lay precisely here. The value of a luxury brand is supported not only by quality and craft, but by the scarcity of ‘not everyone can have it.’ Yet licensing denies that scarcity head-on. Once a logo dances across every kind of product, that name is no longer special.

In the industry this is called ‘brand dilution.’ When cheap sundries bearing a first-rate name overflow the streets, the original wealthy customers, on the contrary, drift away. The name that was supposed to be theirs alone now lies scattered even in a station kiosk — that disillusionment drives off the most precious clients.

The textbook case was Italy’s distinguished house of Gucci. Compounded by family infighting, control of the brand grew loose. Licensing and easy product expansion spread without restraint, and by the mid-1990s, products bearing the Gucci name — from keychains to cheap canvas bags — were reported to top twenty-two thousand kinds. The distinguished house that had set out from the pride of saddlery was, before it knew it, on the verge of becoming ‘a logo found anywhere.’

Gucci’s turmoil was not caused by the licensing trap alone. Within the founding family, conflict over shares deepened, and relatives fought bitterly over inheritance and management direction. Uncles and cousins sold off their holdings one after another to investment firms, and Maurizio Gucci, who had been the head, also let go of his shares in stages from the late 1980s. Then in 1993 he sold his remaining stake as well, and the family is reported to have completely lost control of the company bearing its own name. The story of a clan begun from the pride of a saddle-maker here slipped from the founding family’s hands.

What came at the end of glory and feud was a grievous conclusion. In 1995, Maurizio Gucci was shot in front of his office in Milan and lost his life. The incident was later reported to have been tried as a killing commissioned by his estranged wife. The family name remained in the world, and the brand revived. But the very bloodline that had built that name was, in the very midst of glory, deeply wounded.

The Wisdom of Subtraction, Taught by Crisis

Ironically, it was this rock-bottom experience that rewrote the textbook of modern luxury management.

The first thing the people who set out to rebuild Gucci did was not to add, but to subtract. They bought back the recklessly issued licenses, cut away the cheap goods, and boldly pared down the very number of products on the shelves. Under Tom Ford, who took charge of creative in 1994, the range is said to have been trimmed from a scale of twenty thousand kinds to a few thousand. And as scarcity returned, so did the brand’s luster, and sales — far from falling — are said to have grown.

Subtraction, not addition. To pare down, not to overflow. This lesson left behind by the age of licensing would come to form the very foundation of later luxury strategy.

And so, from the end of the 1980s into the 90s, house after distinguished house faced the difficult question of how to confront its own diluted value. Brands that had slipped from the founding families’ hands and lost their way. It was also a vacancy that heralded the arrival of a new era.

One businessman was watching that vacancy intently. He would bind the wandering brands one after another, and conceive a grand empire that no one had ever drawn. The next episode will turn its gaze on the strategy of that man — the one who remade luxury into a modern business.