Michael Kors Holdings (NYSE:KORS) agreed to buy high-end designer Versace in a deal that values the fashion house at $2.1 billion, an acquisition that seems to please no one. Because Kors is viewed as an aspirational luxury brand, whereas the Italian designer has long been the epitome of high-end couture, the deal is viewed as one that will not build up Kors but rather will tear down Versace.

Michael Kors is a more-than-capable designer in his own right, but having positioned his company as a "masstige" brand, or a luxury designer accessible to the mass market, he risks alienating the haute couture crowd that paid up for the mystique and reputation associated with Gianni Versace's creations, even after he died.

Versace models on a runway

Image source: Versace.

Designers willing to go down-market

There have been similar instances of tsk-tsking in the past whenever a designer has decided to go lowbrow. Target arguably started the trend when it launched a clothing line by Mossimo in the late 1990s and early 2000s, which was soon followed by clothing from Isaac Mizrahi. Thereafter, retailers of all stripes were partnering with designers who, only a few years prior, wouldn't have stepped foot inside a department store, let alone had their fashions appear in one.

Soon we saw J.C. Penney partnering with Nichole Miller, Kohl's rolling out collections of lingerie and bedding from Vera Wang, and fashion designer Laura Poretzky designing shoes for Payless. Tapestry (NYSE:TPR) was also able to purchase high-end shoe designer Stuart Weitzman without any ill effects.

Nevertheless, we've seen how a couture brand can lose its cachet by exposing itself to the masses. Tiffany nearly broke its brand when it made silver bracelets cheap enough that any mall rat could purchase them, and Burberry was damaged after it licensed its signature check pattern to almost any company willing to sign a contract. Both had to dramatically rein in their accessibility to regain credibility as exclusive brands.

Kors will be walking a very thin line. It wants to allow its core customers to feel that they're cable of owning a Versace piece and obtaining the heights of fashion while also ensuring that Versace's dedicated and loyal followers don't feel like they're losing the prestige of belonging to a rarified club that few can enter.

A familiar refrain

Michael Kors was hot from the get-go following its IPO in 2011, and it grew sharply by following the playbook Tapestry had written previously. Kors embarked on a major expansion that saw its goods find homes in more than 4,500 retail locations, including department stores, specialty shops, and its own retail stores, both full price and outlet. It also copied Tapestry by buying high-end shoe designer Jimmy Choo for $1.2 billion.

Yet, as Tapestry discovered, familiarity breeds contempt. Sales of Tapestry's Coach handbags plunged as consumers discovered that they could get the same cachet from buying cheap handbags at the outlet stores as they received when paying full price. The brand's ubiquity led to it falling out of favor. And now Kors is suffering the same fate.

Earlier this year, Kors announced it was closing between 100 and 125 full-price retail stores over the next two years while also cutting back on the amount of discounting it would do. Kors' current situation is what makes its acquisition of Versace worrisome. Kors is not buying the Italian designer from a position of strength but is using it as a crutch to help prop up its reputation from a weakened status.

Because the Michael Kors brand does not travel in the same circles as Versace does, it's possible the $2 billion deal will end up being wasted money, as it damages the high-end designer without generating enough sales for Kors. 

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tapestry. The Motley Fool owns shares of Michael Kors Holdings. The Motley Fool has a disclosure policy.