If you’re into brands like Kate Spade, Coach, or Stuart Weitzman, you might not know they’re all part of a company called Tapestry. Now, Tapestry is making a move to acquire Capri Holdings, which owns equally well-known names like Versace, Jimmy Choo, and Michael Kors. The deal is valued at an impressive $8.5 billion. While the merger received approval from regulators in the EU and Japan, the U.S. Federal Trade Commission (FTC) isn’t on board just yet—they filed a lawsuit in April to block it. The FTC is concerned that this merger could lead to higher prices for “accessible luxury” handbags and might negatively impact workers’ wages.
What Defines Luxury?
When we talk about luxury, it’s not always easy to define. Is it about price? For some, bags priced between $100 to $500 fall under “affordable luxury,” while anything above that is considered “high-end luxury.” But really, is there a significant difference between a bag priced at $499 and one at $501?
Another way to define luxury might be by the materials used. However, considering that leather bags can be found in both high-street shops and luxury boutiques—and with many luxury brands now turning to sustainable or recycled materials—this isn’t a straightforward indicator either.
In the context of this merger, Tapestry and Capri would prefer to define the market as broadly as possible, framing themselves as small players within the vast luxury market. If the market is simply “luxury,” then they’re competing against some of the biggest conglomerates in Europe, like LVMH, which owns brands such as Louis Vuitton and Dior, and Kering, which houses names like Gucci and YSL.
The Market for Accessible Luxury
Tapestry is a leader in what’s known as the “accessible luxury” market, a concept initially popularized by Coach. For example, a Michael Kors handbag is still high-quality but far more affordable than a YSL bag, making it accessible to a broader range of consumers. Unlike high-end luxury items, which are rarely discounted, accessible luxury products often go on sale, especially during events like Black Friday.
The FTC likely views the market as accessible luxury, and some reports suggest that Michael Kors and Coach alone made up 53% of the affordable luxury handbag sales in 2022. However, Tapestry argues that the market should be defined as luxury overall—a $200 billion industry—in which case Tapestry-Capri would hold less than 10%.
Impact on Handbag Prices
Post-merger, consumers might notice fewer choices even though the number of brands stays the same. With so many brands under the Tapestry-Capri umbrella, competition on pricing, promotions, and strategy could decrease, leading to higher prices.
Interestingly, higher prices could actually increase demand. If, say, Michael Kors bags become more expensive, they might also become more exclusive—a key selling point for many luxury goods.
The Bigger Picture for the Luxury Market
Other players in the market, like Rebecca Minkoff, are concerned about competing in a post-merger landscape. The FTC even suggests that Tapestry has plans to acquire more brands, which could further enhance its market power—and drive prices up—not only in the handbag sector but across the broader luxury market.
While luxury handbags are discretionary purchases, meaning you don’t need to buy them, the merger could have wider implications. For instance, if most of the stores in an upscale shopping center end up being owned by the same company, it could affect the workers employed there, who would all report to the same corporate entity.
The FTC’s complaint also highlights how Michael Kors quickly matched Tapestry’s $15 hourly wage back in 2021. A merger would eliminate the need for such competitive wage adjustments, potentially reducing workers’ bargaining power.
Should This Merger Be Blocked?
In 2023, Capri and Tapestry’s combined revenue was $12 billion, a far cry from LVMH’s $80 billion. Tapestry’s sales also dipped by 1.8% in May, its worst performance according to GlobalData.
With around 33,000 employees, Tapestry is still relatively small. Even if it acquires Capri and more brands, it will take time to reach the scale of LVMH.
However, since luxury handbags are non-essential items, consumers have the choice to resist price hikes by not purchasing them. Tapestry claims that the merger will lead to better quality, not just higher prices—though mergers often have the opposite effect, with less innovation and higher costs. If Tapestry does deliver on its promise, perhaps the higher price could be justified by better quality. The FTC recently lost cases against Meta and Microsoft, but this is a different, smaller market. It will be interesting to watch how this case unfolds, especially since the deal must be finalized by August 10th.