Samsonite Is The McDonald’s Of Luggage Brands

It was recently announced that Samsonite, the world’s biggest luggage maker, will acquire luxury luggage rival Tumi for $1.8 billion.

Analysts are suggesting the move is a no brainer, and while we tend to agree, we’d also like to point out that Samsonite’s survival over the past three years has been dependent upon acquisitions of other upscale brands like Tumi — a brand whose suitcases start at around $500. Previous Samsonite takeovers have included Lipault and Hartmann.

“We always wanted to have a play in this segment, but we have never been able to do it in a very credible way,” says Samsonite CEO Ramesh Tainwala of the deal.

The reality is when you are the McDonald’s of luggage brands becoming more upscale might be exactly what saves you.

Related: Stonemill screws up big time with gender specific bread

China’s growing demand for luxury goods shows no signs of slowing down, as the richest one percent are only getting richer. Catering to the uber wealthy in Asia and Europe — where Hong Kong-based Samsonite is most well known — is indeed a no brainer. Furthermore, the Tumi deal will help Samsonite grow in the North American market, as two-thirds of Tumi’s revenues are from the region.

So what can other companies learn from the Samsonite-Tumi merger?

Don’t be afraid to change your identity when the tough gets going, regardless of whether you are an upscale or everyday brand. Historically, smaller luxury brands have been acquired by mega brands with great success. During the evolution of their luxury status, these elite brands came to realize that being part of a bigger name was necessary to increase scale and efficiency.

Related: Key lessons learned from Yahoo’s failure

Here are a couple examples of luxury brands that reaped huge financial rewards after a takeover.

In 2011, Luxury shoe brand Jimmy Choo was purchased by Labelux for $811 million.

In 2015, Europe’s biggest hotel operator Accor bought luxury Fairmont hotel brands for $2.9 billion in cash and shares.

Despite the benefits of a merger for upscale brands, there is one word of caution for mass brands like Samsonite. Reaching a wealthy market is considerably more challenging, with lower rates of success.

“It can be incredibly profitable for upscale brands to slum it by releasing a line of mass-market merchandise… However, it is much, much harder for a downscale brand to suddenly act posh and reach out to wealthier clientele,” explains Jordan Weissmann from Slate.

Harder doesn’t mean impossible though. We encourage calculated business risks, especially when they are back up by Big Data. Good luck Samsonite.