Business

How new luxury specialists like Cuyana, AYR, and Cienne are killing off designer diffusion brands.

Over the last six years, as modern luxury standards have become more widespread, they’ve begun to take root in the marketplace, and several bad carryovers from the bling era of luxury have begun to meet grisly ends. Modern luxury’s aversion to deep discounting is one of the more prevalent examples at the moment, and in a similar vein, the diffusion line — a watered down discount offshoot from a designer brand — also looks to soon become a relic of a bygone era.

That’s according to Glossy senior reporter Hilary Milnes, who in writing at big sister publication Digiday, recently published a piece whose headline echoed, quite nicely, our own thoughts on diffusion lines: “As luxury goes digital, ‘diffusion’ lines become obsolete”.

“A quick look at some of the designers that have discontinued their diffusion brands demonstrates that the model has lost its luster,” she wrote. “Marc by Marc Jacobs was absorbed back into the main Marc Jacobs line in 2015. D&G by Dolce & Gabbana dissipated in 2011. Prada’s Miu Miu was repositioned into a sister brand. DKNY is still hanging on, but things aren’t looking good: Namesake Donna Karan recently stepped down as the brand’s creative director, and Aliza Licht, the brand’s popular social media persona @DKNYPRGirl, has departed.”

The central flaw with the diffusion line idea, is that at its core, it was never truly created with the consumer in mind.

What’s becoming clear, given the shuttering of these discount designer offshoots, is that shoppers are beginning to vote with their dollars quite emphatically — and based on results, they’re close to pronouncing the diffusion line idea dead. Frankly, it was a typical example of mass-market thinking from the outset. And its appeal is finally starting to fizzle out as consumers become hip to the hustle — and as new independent brands offering better products at similar price points begin to pinch the hose.

According to Ms. Milnes, diffusion lines reached their height in the 1990s and early 2000s, before running head first into the modern luxury era: where the competition is stronger, and where the shopper is, on average, smarter and wiser. Rony Zeidan, the editorial curator at Luxury Society, a publication, explained it to Ms. Milnes this way: “In the 1990s, diffusion brands had much less competition than they do today. There’s no sexiness or luxuriousness around them anymore; the market is too diversified, and shoppers have too many options.”

The diffusion line model, in other words, is a poor fit for the modern luxury economy — and consumer choice plays a huge part in all of this.

Diffusion brands’ fatal flaw.

The central flaw with the diffusion line idea is that at its core it was never truly created with the consumer in mind. In today’s consumer-first marketplace, then, the fact that DKNY’s, Dolce & Gabbana’s, and Prada’s versions either no longer exist or are in trouble, is simply a marketplace correction.

In citing digital shopping as a factor, Ms. Milnes touches on a big reason why diffusion lines are becoming obsolete, and she’s certainly on the right track. But stopping there leaves out the most essential part of the story. It’s become clear now that diffusion lines only work in a centralized, brand-centric market environment where consumer choice is limited, where e-commerce doesn’t exist (or is not yet widespread), where shoppers lack access to open knowledge about products and brands, and in a market where luxury is primarily defined by logos and price.

Diffusion lines were ultimately created for the benefit of brands, not consumers. They served chiefly as avenues to extend a brand’s reach to as many people as possible, and were nothing more than quests for larger profit margins and ubiquity. They were never meant to give shoppers the real thing, the genuine article — just watered down replicas of main brands. The short term boosts in revenues were surely substantial, but over time, this tactic simply backfires, cheapening the potency of the main line. And, crucially, this only works when brands rule the roost, and when consumers have few choices to pick from.

But in today’s consumer-centric economy, shoppers are finding excellent luxury goods from specialist, digital-first upstarts. That these same brands are selling comparable (or better) items at similar price — and without the marketing overheads — makes the decision an easy one for the diffusion line’s core audience (the younger, aspirational shopper) to make. If you’re searching for a stylish pair of jeans, why would you shop at D&G when you know you can find something better at specialists like Industry Standard, DSTLD, or AYR? And what would make you choose a leather bag from Miu Miu over a simple, tasteful, high-quality one from a company like Cuyana, Mansur Gavriel, or Mon Purse?

These are the exact scenarios that are playing out today, and consumers are opting for the AYRs and Cuyanas now more than ever. Ten years ago, these same shoppers, who might have looked to D&G or Miu Miu first, now seek out modern luxury companies first before checking out DKNY’s diffusion line second — if at all.

So now that the market has righted itself — now consumers have more choice and better choice — these very same diffusion lines that once raked in cash are one by one being put out to pasture. For existing brands that are still playing by the old rules, the modern luxury marketplace is a ruthless killer.

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