Should brands try to stamp out competition—or welcome it?
In late December, we ran a story based on reporting from Jeweller magazine, that said Pandora was warning its Australian retailers not to carry Alex and Ani. “Under the terms of your Pandora authorized retailer agreement,” said a letter to Down Under retailers signed by Pandora Australia president Brien Winther, “you must not sell any products that could reasonably be regarded as competing products.”
The note came after Karin Adcock, the former head of Pandora Australia, announced she was introducing the positive-energy line in Australia and New Zealand. (It is seemingly not unusual for executives to work for rival charm brands: Two of Alex and Ani’s leading U.S. sales executives, Scott Key and Dan Sills, are Pandora vets.) The controversy even made the local consumer press, where Winther claimed that Adcock made similar decisions when she held his spot.
Shortly after that story ran, we heard that Alex and Ani had also sent a warning to U.S. retailers in September. Using strikingly similar wording to Winther’s, the letter, signed by Key and another executive, quotes Alex and Ani’s authorized service agreement:
In order to protect Company’s brand integrity, Authorized Retailer shall not carry products that have the same feel, look and message of the Alex and Ani brand. Such determination remains at Company’s sole discretion.
For clarification, companies that have the same look, feel and message as Alex and Ani would likely confuse a consumer to believe the competitive product is associated with Alex and Ani. These brands include, but are not limited to: Chrysalis, Wind & Fire, Angelica Collection, and Luca + Danni.
Chrysalis (now part of Richline), Wind & Fire (C.G. Creations), and Angelica Collection (Royal Chain) did not return requests for comment. But Luca + Danni—which just appointed a former Alex and Ani exec as president—filed a complaint with the Federal Trade Commission. Last week, founder and CEO Fred Magnanimi sent a cease-and-desist letter to Alex and Ani executives, which reads in part:
The Luca + Danni product line is nothing like Alex and Ani nor any of the other three expandable bangle brands that are listed in your letter. Luca + Danni bracelets are made using a radically different design, the aspects of which share little overlap with any of the key design and branding features of Alex and Ani products.… This viewpoint detailed above has been corroborated with our retail partners that carry both lines as well as individual consumers that have purchased products from both brands.
It concludes that it is “karmic” that Alex and Ani is now facing the same treatment in Australia—where, we should note, Adcock plans to complain to the local competition authorities.
In response, Alex and Ani sent JCK a statement that says, “just as other leaders and innovators in many industries, [it] is protected by intellectual property laws.” This issue has also made to the general press, in this case The Boston Globe.
In the case of Alex and Ani, obviously brands need to target knock-offs. But if the company considers these rivals copycats—and its letter doesn’t come close to charging that—that should be settled legally, the traditional way big brands protect their intellectual property. Otherwise, it shouldn’t be a big deal that lines have, for example, a similar “message.” Many brands today stress eco-consciousness and positivity.
The Australian episode, meanwhile, makes clear that Pandora views Alex and Ani as a competitor and possibly a threat. (So does one analyst.) It may not be a coincidence that one month after Jared announced it would stock Alex and Ani, the chain announced it was converting to Pandora shop-in-shops.
Yet, there is one group that doesn’t see the two brands as competitors: jewelers. While both lines attract a wide range of customers, Alex and Ani is generally aimed at a younger buyer, while Pandora appeals to older ones. A recent Alex and Ani commercial, for instance, features young models, while a popular Pandora spot targets moms. They also have widely different approaches: It is hard to imagine “affordable luxury” Pandora introducing an app based on the zodiac, as Alex and Ani did.
In fact, you could argue, the brands complement each other: Alex and Ani gets customers hooked on charms. As they age, those shoppers move on to Pandora. Pandora-loving moms may also buy Alex and Ani for their kids.
As a Harvard Business Review article put it, companies have two options for growth: They can boost their market share (pie-splitting) or increase the overall category (pie-growing). The latter is smarter, argue the authors:
[P]ie-splitting strategies often just drive short-term, unsustainable results where companies are merely “renting share.” And in the long run, too much share stealing without category growth destroys long-term industry profitability for everyone involved.
Category growth is tougher with a mature market, but that isn’t what we have here.
The proof is in the numbers. In October, Alex and Ani, which is primarily a U.S. brand, said it’s on track to do $350 million in business in 2015—more than 15 times its 2011 sales. It is not easy to get an exact number of Pandora’s U.S. revenues, as they are given in Danish kroner, but they totaled approximately $527 million in 2014 and will likely show substantial growth in 2015. (It says sales rose double digits over the holiday.) So not only are these brands not hurting each other, they may even be helping.
All of which makes these sharp-elbowed tactics, from every company, seem pointless and possibly self-defeating. Just as it’s common for jewelers to carry various brands of watches, they should be free to stock different brands of charms.