What Do Rolex's Bucherer Acquisition and Shein's Forever 21 Deal Reveal About Retail and Brand Opportunities?

Anyone who follows retail knows that the industry is rapidly changing

‍The pressure to be agile and ready to adapt is constant. Luxury brands are consolidating while technology is opening new avenues for generating revenue beyond trade, thereby fueling further M&A activity. Economic uncertainty and fickle consumers require responsive brands. It is in this environment that the Rolex/Bucherer and Shein/Forever 21 deals broke last week.

The interesting part is what the deals will mean for the brands.Both Rolex and Shein are what we call strong core brand dominant businesses, meaning their equity is primarily tied to one single brand, which means that the brand manager’s main objective is to protect it. Both brands are now entering unchartered territory by associating their brand with a different entity.  

As Rolex expands their sphere of influence, will they be able to preserve the essence of the brand or is this acquisition the first step into redefining the brand’s permissions?

It is not that Rolex, owned by the Hans Wildorf foundation, hasn’t acquired businesses before. In fact, it completed several acquisitions in the mid-1990s to integrate most of its suppliers. Rolex is the essence of quality and the ultimate watchmaker. An image they have carefully cultivated over time. As Ben Clymer, founder of HODINKEE, and an expert on luxury watches says on the Podcast “Invest like the best with Patrick O’Shaughnessy”: “Rolex makes watches. They don’t sell watches.”  
Bucherer, however, as a major distributor of Rolex and its subsidiary Tudor watches, changes this truth. It is the first customer facing acquisition with a direct association with the Rolex brand. The market is expecting change as evidenced in the plunging stock price of Watches of Switzerland another major Rolex distributor. According to theWSJ, the Bucherer brand and business will continue to be managed separately from Rolex which makes sense given the target and DNA of both brands. However, one can’t help to wonder if Rolex might not explore a closer collaboration through “ingredient” or “endorsing” brand. Already Bucherer is the first to offer a “certified by Rolex” certificate of authenticity brand.

It will for sure be an interesting evolution to follow.

Shein and Forever 21: Is there value beyond distribution?

Shein and Forever 21 are at the other end of the spectrum, as the flag carriers for fast fashion. Shein is the new kid who has upset the competition including H&M and Inditex with its intuitive online experience and innovative production methods. Forever 21 is the first mover who got lost in expansion and lost its relevance.

The deal will giveForever 21 an unmatched online platform from which to market its products which it desperately needs while Shein gets the expansion it needs as it attempts to emulate Amazon and create an online platform beyond its own brand. Shein will also be able to sell its clothes in Forever 21 retail stores, giving the brand a retail presence and an outlet for its customers to try on and return styles.A trend that has been successfully proven by other initially pure online brands such as Warby Parker, Gopuff and Deliveroo.

However, the big question remains, will Shein’s core customers find Forever 21’s slightly more expensive styles attractive and will the brand have power to draw more shoppers to the platform or will they find it irrelevant to pay extra for a brand that had essentially lost its edge. Similarly, will Forever 21 get the renewal that it needs on Shein’s platform, and will the brand be able to grow its base from here?

In other words, will either brand be able to expand its sphere of influence through association with the other brand or are the two too similar?

One unanswered question is if the partnership represents an opportunity to do more e.g., to address another hot topic in fast fashion and use the leverage of both brands to set drive a positive sustainability agenda and truly redefine what that means in the context of fast fashion? That would be interesting (and good for the world!)

An agile retail environment requires agile brands.

Both Rolex and Shein are running a risk but surely it is a calculated risk. Most likely both companies have diligent processes in place to manage their brand portfolios, which is critical.

The current environment calls for change and the brands with resources will pursue it. The winners will be the ones who understand how to manage risk while expanding their sphere of influence, grow their brand portfolio smartly and integrate new technologies such as Remarkly’s intelligent brand portfolio strategy solution to create better and more responsive customer experiences.

Whether you are high or low on the retail spectrum, the companies who master these practices will emerge successfully.

To learn more about Remarkly’s smart do-it-yourself brand portfolio strategy solution with built-in industry- validated, decision-making processes, powered by AI, go to www.remarkly.io

_{Sources:
https://www.wsj.com/business/retail/rolex-to-buy-watch-retailer-bucherer-cbbeaccd
https://www.wsj.com/business/retail/shein-strikes-deal-with-forever-21-71ec58a3?mod=business_feat1_retail_pos5
https://podcasts.apple.com/se/podcast/invest-like-the-best-with-patrick-oshaughnessy/id1154105909?i=1000615832640 I https://www.watchesandculture.org/forum/en/rolex-one-of-a-kind/
https://knowledge.wharton.upenn.edu/podcast/knowledge-at-wharton-podcast/where-did-forever-21-go-wrong/
https://www.businessinsider.com/forever-21-bankruptcy-rise-fall-retail-apocalypse-fast-fashion-2019-9
https://www.bain.com/insights/retail-m-and-a-report-2023/}