Tory Burch entered the Japanese market through Look in 2009 and has seen sales rise rapidly in the five years since. It will now take over Japanese distribution, giving it the margins needed to invest in building the brand further. For Look, the loss of such a powerful brand means a drop of 15% in turnover, but the associated glow from its tenure of the US brand, and its solid track record, has given it access to some strong brands with the potential to replace it.
Tory Burch has cancelled its exclusive distribution agreement with Look and Mitsubishi Shoji. Tory Burch Far East, based in Hong Kong, first signed a deal with the two companies in 2009, and the subsequent launch in Japan was one of the most successful for an overseas fashion brand in the last decade. Sales have risen nicely, reaching some ¥6.7 billion for the year ending December 2014. The distribution agreement covered womenswear, bags, shoes and other accessories, with Look managing both department store concessions and stand alone stores. As of the end of 2014 there were 45 retail locations, mostly within department stores.
The agreement will end in July, and from 1 August a new directly owned subsidiary will take over wholesale and retail operations, although Look will assist in the handover in terms of stock control, logistics and IT systems. This is expected to be formalised in a contractual relationship between Look and Tory Burch‘s Japanese subsidiary, with Look continuing to handle stock control and transport longer term.
For Tory Burch, the switch to direct operations will give it the level of brand control it needs to move to the next stage of expansion. The ownership of wholesale and retail margins will also give it the financial room to invest in more stand alone stores, and go beyond the current focus on department stores, a shift that is essential to deepen brand awareness and communication in such a competitive market. The greater investment in stores, online and brand marketing is likely to quickly propel the US brand into the ¥10 billion plus grouping of overseas fashion brands.
The deal is a blow for Look. Tory Burch‘s Japanese sales of nearly ¥7 billion account for close to 15% of Look‘s turnover – Look itself saw sales of ¥45 billion for FY2014. The good news is that Look now has a strong portfolio of brands and continues to sign more, partly because the deal with Tory Burch in 2009 helped transform the fortunes of the Mitsubishi-backed distributor. The US brand‘s immediate success helped Look shuffle off its image as a decaying wholesaler formerly owned by the even more beleaguered Renown, into a modern distribution business with a dynamic portfolio and a willingness to invest in retail – store investment being a key differentiator from more traditional distributors like Misaki Shoji and Aoi. As a result sales have grown by ¥10 billion from ¥36 billion three years ago and matching its sales in 2000, the year before it lost the contract to distribute Marc Jacobs.
In the last three years, Look has signed brands such as Alice + Olivia, Repetto, Deux Leux, La Perla and Vince Camuto to add to existing brands, Il Bison, A.P.C., Paul & Joe and Marimekko. While the lost turnover from Tory Burch will take time to recover, this solid portfolio, the backing of Mitsubishi Shoji, and new brands, all should provide strong foundations for a recovery.
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