Sung-Joo Kim: Changing the Face of Luxury
MCM AG's Chairperson and Chief Visionary Officer Sung-Joo Kim says she has been on a mission since her college days ‒ to empower herself and other women. Her success to date with MCM demonstrates what can be achieved.
For global fashionistas, and those admittedly less chic, "luxury fashion goods" evoke images of monogrammed logos designed by European fashion houses, most of which have been, and still are, headed by European men. Thus, Sung-Joo Kim's acquisition of German luxury brand Modern Creation Munich was both a surprise and a break from the norm for the fashion world.
The company recorded sales of slightly less than $70 million in 2005, the year it was acquired by Kim. It is now active in 35 countries with 365 stores, and generated sales of over $500 million in 2014. With thirty years of entrepreneurship and business savvy under her belt, Kim was recently invited to join a select group of leaders at this year's World Economic Forum in Davos at Credit Suisse's "Women of Impact Dinner." She shared the story of her success with us.
Starting from Scratch
Kim's appeal stems not only from her business sense, but also her personal narrative. Though she was born into one of the richest families in South Korea, she inherited none of her father's wealth. Her father, a gas and energy tycoon, wished his daughters to marry prosperous men, not enter the realm of business. After her father's death, her brothers inherited billions; she inherited nothing monetarily, but was gifted with his mind for business.
It seems Kim was going to follow a different path from the start. She took a non-traditional route by leaving South Korea as a teen to study at Amherst College, the London School of Economics, and Harvard University. Then, contrary to her family's traditional, Confucian-prescribed way of life, she married her college sweetheart without her parents' consent, which led to her immediate disinheritance. With no money for her tuition, she was forced to drop out of Harvard after one year and obtain a job.
Stepping out of School and into Fashion
She secured a position as a project manager at the iconic Bloomingdales Department Store in New York City, working under the mentorship of the company's "Godfather of Fashion", Chairman Marvin Traub. Three years later, Kim's drive and "cut-throat training" propelled her back to Korea, taking with her all the knowledge of the fashion industry she had garnered at her time working in the luxury sector with Bloomingdales.
Back in South Korea, Kim started her own business licensing luxury designer brands for the Korean market, including Sonia Rykiel, Yves Saint Laurent, Gucci, and MCM, as well as British retailer Marks & Spencer. She credits the 1988 Seoul Olympics for stirring the interest of Western luxury brand retailers in Asian markets. Though interest and demand were present, she recalls the difficulty of setting up a business in Seoul in the eighties. "I had only a telephone and a desk. Financing micro-businesses in Korea, especially toward women, was nonexistent at that time. No bank wanted to lend me money," she explains. However, through a negotiated joint venture between American businessmen and her father, and a family reconciliation, she secured a loan from her father. When asked what could be done to aid her, she replied, "Lend me money, because no banks want to lend me money."
Creating Her Own Empire
In 2005, Kim, already successful with licensing contracts, acquired the German company MCM, a luxury designer brand known for its monogrammed luggage and handbags. MCM, at the height of its popularity in the eighties and early nineties, could be seen on the arms and in the hands of top entertainers and models, such as Diana Ross and Cindy Crawford. By the late nineties, due partly to tax evasion charges levied against the founder, the brand lost its momentum in the market. In 1998, the business was bought by a Swiss investment group with a lack of fashion retail experience. The brand began to lose its appeal as counterfeit MCM goods crowded the market. What had once been a globally renowned fashion label, and "more popular than Louis Vuitton in Germany," had declined in brand visibility. It was at this crucial point in MCM's history that Kim jumped from brand licensee to brand owner, acquiring the entire business for an undisclosed sum.
In the late nineties, Kim states that she learned from the fashion house Gucci how "a chaotic brand can turn around within three to five years." Invited to be a member of the strategy team responsible for re-launching Gucci as a more fashion-forward brand, Kim recognized the importance of branding. "I learned how a brand can turn around in a very dynamic way. I learned restructuring, and rebuilding brand power from Gucci. I had also learned, early enough through the licensing business with MCM, how to manufacture. Combining the two, I applied what I learned to rebuilding MCM," Kim asserts.
Rebuilding a Diluted Brand
To observers, Kim's mission to rebrand a globally recognized luxury name seemed very challenging. She admits that acquiring MCM was courageous. "When I bought the brand in 2005, it was a brave move. I was a medium-sized company owner, without much money or resources, not even much human resources, but what I learned from Gucci is that when something's messy, try not to add, try to clean up first."
Thus Kim, nicknamed by her employees "Genghis Kim," for her hands-on approach and relentless drive, began to clean up MCM by shutting down the company's global operations, closing down wholesale accounts, consolidating production, and concentrating marketing efforts into Korea. In Berlin, Paris, London, New York, Dusseldorf, Frankfurt and Munich, the company repositioned itself by establishing "really beautiful boutiques, next to top luxury brands." The European marketing strategy was to reclaim its place in the luxury market in major European markets, but Kim knew the consumer base that would help propel MCM towards the top of the luxury goods retail chain was in Asia. "We always recognized that the future market for MCM was Asia, so we began securing prime locations in top cities. We opened our first flagship boutique in mainland China – Shanghai – in 2010," she notes. She further explains that the company focused its efforts on China, because it was poised to be "the biggest luxury market in the world."
New Luxury vs. Old Luxury
Kim concedes that the notion of luxury goods is affiliated with Europe. "European companies are dominating the luxury business, because they have a long history, several hundred years of art, music and architecture. In the fashion industry we cannot ignore that they are definitely still the dominant power." Kim realized that MCM's strength lay in its brand name that had been built and solidified over decades. Armed with the knowledge of branding power, she forged ahead into the fashion arena to reinvigorate it."MCM is about a dynamic, functional, innovative and empowered lifestyle," Kim stresses.
She attests that the Asian market today includes large numbers of young professionals who have "different needs and a new perception of luxury." Kim defines new school luxury as multi-dimensional: economic power moving from the West to the East, unisex, family money, and the dynamic, growing markets of China, Japan, Korea, and Southeast Asia. New luxury represents the "dynamism of the vital and youthful mindset" Kim explains.
Shaking up the Fashion Business
She elaborates, "MCM customers are the movers and shakers, because they are so well informed by digital media They are very trend conscious, brand conscious, and they are high income earning professionals or have affordable free income from wealthy parents. The way this young generation relates to luxury is different from what we experienced before." She believes that MCM knows "exactly what Asian customers want," and strong sales in the Asian market suggest she is right.
MCM plans to open forty new stores in China in the 2014-2015 fiscal year, and it has also seen strong gains in Europe and the United States. New stores have been opened in France and Germany, and, in America, the brand is being distributed in luxury department stores Saks Fifth Avenue, Bergdorf Goodman, and Neiman Marcus. An MCM boutique opened in Soho, New York City in January this year, and the company plans to launch its global e-commerce effort out of New York.
More than the Bottom Line
MCM's rapid growth in the Asian market thrills Kim, but she emphasizes that she wishes to keep the growth moving at a manageable pace. Qualitative, not quantitative growth remains her mission. "I told my team, 'Slow down a little bit, it's a bit too fast, because a small company running on a global scale, competing with the global giants is not an easy job. Now, it's time to grow more sustainably. It's a dynamic brand, we have mileage to expand."
Despite more than half a billion dollars in sales and a workforce that is 75 percent women, Kim refuses to sit on her laurels. "As a brand owner I have always wanted to make social responsibility one of our core values. It's not just about growing, but serving every market and society that we go into. I hope the spirit of the brand also carries a message of sharing in society. It's all about balancing exclusivity, high quality design and craftsmanship, while still creating jobs and opportunities through inclusiveness."