Sunday, February 26, 2012

Martha Stewart Continues to Prosper Based on the Martha Stewart Brand

A Comeback Story That Says – Well We Don’t Know What it Says

Martha Stewart is an American story.  Ms. Stewart moved from being a baby sitter for Mickey Mantle's kids and a model to being a household guru.  She had her own TV show, her own product line and her own public company.  She also got involved in an insider trading scheme, and she was ultimately tried and convicted of lying to the government. 

Why Is This Former Convict Smiling?

Ms. Stewart served her time in a not particularly pleasant women’s prison in West Virginia.  Her public complaints were relatively mild and few, and when released she resumed her career of marketing “Martha Stewart”.  This has been a tremendous financial success.  Ms. Stewart and Macy’s teamed up, with great results for both parties.

In 2005, Martha Stewart’s company approached Macy’s (M) with an intriguing proposition. It offered the nation’s second-largest department store chain the chance to sell a wide range of home goods bearing the name of the style doyenne. Stewart was already a household name, with a successful TV show and magazine and a line of housewares sold by discounter Kmart (SHLD). There was one possible downside: Stewart had just been released from a federal prison after serving five months for obstruction of justice. Nonetheless, Macy’s bit, and what followed was a partnership that made the Martha Stewart Collection one of the chain’s most visible brands.

Now Ms. Stewart is moving up to J.C. Penney

The chain agreed to buy a 17 percent stake in MSLO for $38.5 million and, starting next February, will open hundreds of mini-stores devoted to all things Martha. According to the companies, the partnership will generate more than $200 million in revenue over 10 years for MSLO. “Penney offered to buy a chunk of stock and infuse a bunch of money, and gave a great opportunity to grow,” says Margaret Gilliam, founder of an eponymous retail consulting firm.

Naturally all of this has Macy’s upset, and naturally all of it will end up on court, and naturally all of the rest of do not really care what the outcome of that court battle will be.  Of greater interest though is how a former convict has been able to do so well with her personal brand.  Here’s one explanation.

That Stewart can flex her muscles against a major licensee so responsible for much of her past exposure is due in part to a big shift in U.S. retailing. Since the Great Recession, stores have been luring balky consumers with merchandise they can’t find elsewhere, often hooked to a famous name—Kim Kardashian at Sears stores, for example. Retail consultant Robin Lewis says exclusive merchandise inoculates retailers against an increasingly common consumer practice: comparing prices on smartphones. That’s one reason it’s hard to go shopping these days without encountering Stewart’s towels (Macy’s), doggie raincoats (PetSmart) (PETM), build-it-yourself furniture (Home Depot) (HD), craft kits (Michaels Stores), and desktop organizers (Staples) (SPLS). Her brand even transcends retail, with signature houses in subdivisions built by KB Home (KBH) and destination weddings at Sandals Resorts.

And as for the socio-economic meaning of all this, well it’s hard to say.  On one hand one has to admire Ms. Stewart for fighting back from a prison sentence and being an even stronger brand name.  There is no question Ms. Stewart was made an example by the government, that’s what the government does with celebrity defendants.  Their rationale is that high profile cases help deter crimes, and they may be right and no its not fair to the Martha Stewarts of the world, but that is part of the price of fame.

On the other hand it is hard to see why consumers will purchase a brand just because a celebrity’s name is attached to it.  Are American consumers that shallow?  Apparently they are.  And so Martha Stewart has probably eclipsed an American icon like Betty Crocker as a marketing persona.  And even that was hard for Ms. Stewart, because Betty Crocker is a fictional person whose life is infinite.  Of course, one suspects people will buy Martha Stewart products long after she has passed away, and when they do few if any will even know she was once a real person.

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