EU Court rules that luxury bands can block Amazon sales: A landmark ruling has come down in the European Union Court of Justice, which said that luxury product makers can block their wares from being sold by third parties on marketplace sites such as Amazon and eBay.
"The quality of luxury goods is not simply the result of their material characteristics, but also of the allure and prestigious image which be stows on them an aura of luxury," the court said. "That aura is an essential aspect of those goods in that it thus enables consumers to distinguish them from other similar goods. Therefore, any impairment to that aura of luxury is likely to affect the actual quality of those goods."
German cosmetics and fashion manufacturer Coty, which owns brands such as Calvin Klein and Covergirl, brought the action to the ECJ after an authorized distributor began selling its wares on Amazon. Coty and other luxury brands, such as LMVH, are loath to be associated with the likes of Amazon, with its emphasis on low prices and mass availability. To that end, LVMH has created 24 Sevres, a glossy e-commerce site where shoppers can select products from more than 150 high-end designers and get them via 2-day shipping.
POV: "This is all about brand protection and a part of preventing counterfeit goods," says Constellation VP and principal analyst Cindy Zhou. Luxury brands have taken similar issues to court in the United States as well, such as when Tiffany sued warehouse club Costco over rings labeled "Tiffany" in stores. Costco argued that it was not selling counterfeit rings but rather using the word as a general description of the type of setting used in the rings. A court ruled against Costco, ordering it to pay Tiffany more than $19 million.
"Luxury brands are all about differentiation and curating their upscale image," Zhou says. "As Amazon and other sites have a third-party seller network, it is difficult for the brands to control their distribution."
The ECJ's ruling offers protection to the LVMH's of the world from brand dilution in the EU's 28 countries, but won't have any effect on the massive consumer goods market in the U.S. Nor is it any guarantee across the EU, as the notion of a luxury good can be a bit fluid. For example, Coty brands such as Cover Girl and Clairol products are widely available for a reasonable cost in drug and department stores everywhere, hardly confined to tony retail boutiques. But overall, the ruling provides interesting fodder in a time of rapid change for cross-border trade, e-commerce, marketing and customer engagement.
Dell Technologies Q3 results—the highlights: This week Dell Technologies reported its third-quarter results, posting revenue of $19.6 billion but a net loss of $941 million. The full numbers are available here, but in this post we'll mostly focus on comments executives made during a conference call, and how they reflect on the broader market.
One major aspect of the historic Dell-EMC merger that created Dell Technologies was the potential for supply chain synergies, which would not only lower the vendor's cost but also improve product availability and service. Here's how Jeff Clarke, VP of products and operations, described the state of the state:
We've seen tremendous efficiency in the supply chain particularly through cycle time improvement, lead time improvement to our customer base and managing our working capital initiatives through our facilities most notably in the form of inventory. So I think we are well along the path of managing our other cost outside the commodity and the supply chain on the product side.
Memory prices, which affect so many tech products, companies and end-users, have been rising and with little end in sight, but Dell's supply chain footprint is helping it compete:
You've seen what we've gone through which is the longest inflationary period that I can recall in memory in a decade plus. And that's a byproduct of two things; one, there hasn’t been any new DRAM capacity been brought online and then the consumption of DRAM is at the highest rates we've seen.
We have DRAM, so as much as I have said DRAM is going up in cost we have it. And we're getting a value for having it. And whether that's in our PC business, on our server business I think that is something customers are coming to us for knowing we have supply and they're obviously paying for it.
Dell introduced flexible consumption models across its product line earlier this year. They allow companies to scale usage up or down as needed while avoiding major up-front costs. The number of flexible consumption deals in Q3 dropped compared to Q2, suggesting initial customer enthusiasm for the model is waning. That's not necessarily the case, Dell CFO Tom Sweet said:
I think that things are going to vary. They are complex, they're multi-year, they take time to negotiate with and typically the larger customers, the global customers that are negotiating these types of arrangements and so I think we are going to see some variability. I think all things being equal it's entirely conceivable that we'll see an uptick in a flexible consumption models in Q4 just given natural end of year sort of activity both from a customer and from a Dell Technologies perspective.
Dell has a massive array of products, some of which will likely be consolidated over time. Clarke acknowledged a need to lower complexity for customers:
[Y]ou know, complexity doesn't mean less products, complexity can mean the number of offers per product, how many countries we offer our product in. Interestingly we treat the 180th country the same way we treat the largest country in the world. It's not clear to me the 180th country in the world needs all of the entire storage breadth of our portfolio and we can make that less complex.
The next big news out of Dell will come in about a month at the Consumer Electronics Show in Las Vegas.
