1.) U.S. Recession Is Worse Than Previous Estimates Stated:
“The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed. The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books . . . the third quarter of 2008 underwent one of the biggest changes, going from a 0.5 percent decrease in gross domestic product to a 2.7 percent drop. The new reading better illustrates the effect the September collapse of Lehman Brothers Holdings Inc. had on the economy and credit markets.”
Anyone in retail has got to be whimpering in pain at the news, though they’ve likely experienced it first hand all this time while wondering what kind of crazy glue the economic cheerleaders have been sniffing in the back room.
As proof in point, LVMH, the world’s biggest luxury conglomerate, reported a 23% drop in profits for the first half of 2008, and is now announcing that it’s cutting back on advertising and marketing for the underperforming labels in its roster: “In the wake of the 23% decline in first-half profits it announced Monday, LVMH plans to postpone or suspend marketing and promotions for its brands that failed to be top performers . . . This new withholding strategy is part of LVMH’s cost containment plan for the remainder of 2009.”
As the article notes, Louis Vuitton and Fendi saw increases in profit and market share — with Dior and Guerlain perfumes not doing too badly, either — but LVMH’s wine, jewelry and watch brands saw huge drops in revenue (an over 70% plunge in some cases). The LVMH designer brands that are rumored to be affected by the cuts in marketing dollars are Loewe, Celine, Kenzo, Givenchy, Marc Jacobs, Donna Karan and Emilio Pucci.
Pucci’s sluggish selling Spring/Summer 2009 collection below. Nicole Phelps wrote in her review for Vogue: “An eighties-by-way-of-a-Miami-club vibe that just doesn’t seem to jibe with the house’s more blue-blooded soul” — this was head designer Matthew Williamson’s last hurrah for the Pucci label before he went on to . . . uhm . . . create a collection for down-market chain H&M:
But cleary, the ‘How Low Do You Want to Go?’ syndrome, while great for customers, is killing the labels: “Manolo Blahnik went on sale last Monday at its flagship store on West 58th (near Paul McCartney’s loft) with 50% and more off the entire spring/summer collection . . . Century 21 … is having an 85 per cent off clearance sale . . . Saks Fifth Avenue is countering with a “take-an-additional-50-per-cent-off-for-a-total-of-up-to-70-per-cent-off-original-prices” promotion. Bloomingdale’s is offering 50 per cent off almost all reduced women’s designer spring/summer collections for a total savings of 65 to 80 per cent.”
The entirety of New York retail, apparently, is for the haggling.
And while Jacob’s designs for Louis Vuitton appear to be holding steady, his namesake labels (Marc Jacobs and Marc by Marc Jacobs) are becoming a regular feature on the discount racks, but that doesn’t stop him from winning any awards: “Having just bagged himself the CFDA International Award for his work at Louis Vuitton last month, Marc Jacobs now finds himself a recipient of one of the Pratt Institute’s Legends 2009 awards. The designer will be honoured along with architect and designer David Rockwell and poet, musician and visual artist Patti Smith at a gala benefit on October 29 at 7 World Trade Center.”
***Note: Oscar de la Renta, however, is not to be outdone in the blue ribbon race: “Margaret Hayes, president of The Fashion Group International, told WWD: Oscar personifies the word ‘superstar’. While this award honours his lifetime achievements, it is also in recognition of the vitality and creativity clearly apparent in his current collections.’”
Another fashion label that’s singing the blues is Hugo Boss: “German fashion group Hugo Boss said on Thursday that its net loss had more than doubled in the second quarter . . . For the first half of 2009, the company posted a 5% drop in sales . . . German press reports say Hugo Boss is under pressure from its parent company, the Italian fashion house Valentino, to cut costs across the board to cope with the global downturn.”
A video clip below of the Hugo Boss Spring/Summer 2009 collection that consumers ignored — the collection is their Orange designation, which is a lower-priced, more casual line than the spendier Hugo Black:
Speaking of jewelry sales (and we were, you know, just a couple of paragraphs back):
2.) Overstock.Com Cries Uncle in Jewelry Makers Lawsuit:
“A judge has issued an injunction that prohibits OverstockJeweler.com from using the trademarks or selling jewelry that infringes on the copyrights of a group of high-profile jewelry designers who sued the online retailer . . . The judge’s ruling stated that the defendants had “infringed plaintiffs’ intellectual property rights,” and that going forward, OverstockJewelry.com and its subsidiaries/related companies, including BlingJewelry.com, are restrained from utilizing the designers’ trademarks.”
Overstock.Com was accused of manufacturing their own jewelry lines and then marketing them using other designers’ names and trademarks as part of their promotion (i.e. “Inspired by David Yurman” or “Copies of Bulgari”, etc.). David Yurman, Cartier, Van Cleef and Arpels, Gucci and Bulgari all joined forces and slapped Overstock with trademark infringement lawsuits, and once the legal scenario started looking dismal, Overstock caved in.
But in the ‘Fools Rush in Where Angels Fear
to Tread’ category, pop singer Lily Allen, fresh off her photoshoot with Lagerfeld as the new face for Chanel handbags, has decided to strike while the iron is ever so lukewarm and launch her own jewelry line: “Lily Allen” is comprised of nine ranges that targets women between 14 to 40 years old. The line features whimsical theme such as colorful flamingoes, fruits, flowers, traffic signs, and smiling faces in silver or gold, with each piece reflecting her style.”
Video clip below of Lily Allen in all her pop culture glory (side note: Chanel is resorting to a 24 year old pop singer to front for their expensive handbag line — that particular move has me curious; are they attempting to revamp the more mature Chanel image to bring in the teenagers and twenty somethings?):
I predict a ’50% Off All Lily Allen Jewelry’ sale in the near future.
3.) Retailers Get Real:
“Neiman is stocking top-tier designer brands like trendy Manolo Blahnik shoes at a starting price of $395, roughly $150 less than a year ago. Cashmere sweaters that started at $295 this fall start at $195. It’s all part of some big changes sweeping through a retail world that’s starting to adjust to the reality of a frugal post-recession . . . mass retailers, supermarkets and the consumer packaged goods industry have embarked on a storewide re-evaluation of what they sell . . . ‘It’s going to be a decade before we see the kind of consumer spending we saw in 2007 again,’ said Deborah Weinswig, retailing securities analyst at Citi Investment Research.”
Analysts are predicting less of the over-abundance of choices in styles, fashions, flavors and scents and more of a focus on what sells, with retailers weeding out the 45 different varieties of shampoos or popcorn brands, for example, and sticking with the choices that are most popular with consumers. Department stores will also carry fewer items in any given size, reducing, say, a backstock of 20 particular dresses in a size small to only 10-15.
One thing I’ve already started to notice is that online luxury retailer Net-A-Porter is selling out of higher-priced items far more quickly than they used to, which means they’re prudently stocking way less to begin with. Which is smart. Once the recession first started gaining traction in late 2007, sites like Net-A-Porter took a hit to their sales numbers, eventually getting stuck with so much unsold product that they had to establish an entirely new website (featuring dramatically reduced prices) just to get rid of it all.
In related news, Discounting Can Be Dangerous for Luxury Sector: “Late last year, Tiffany quietly nudged down prices for engagement rings–one of its biggest sellers–by about 10%. Salespeople tell customers about the reductions, but otherwise there’s no publicity . . . But retail experts argue that price cuts could prove to be perilous for luxury retailers. ‘The losers [in this recession] will be the ones who destroyed their brand through the discount model,’ says Janet Hoffman, global managing director of consultancy Accenture’s retail practice. ‘We won’t see the damage from that necessarily today, but we’ll come back in a year and be able to [notice].’”
Even Chanel is lowering prices, and Chanel never lowers prices: “A Chanel spokesperson says price reductions are simply the result of a stronger U.S. dollar” — but just last week, I took a pass through the Chanel boutique in Nordstrom where I saw a tray of discounted logo jewelry and trinkets sitting forlornly on a neglected counter.
4.) Cosmetics Companies Still Chasing After Pheremones:
“As the science — or, as some believe, pseudo-science — of pheromones advances toward commercial applications, more manufacturers of personal-care products are dropping tinctures of synthesized pheromones into their formulas, with claims that they will boost sex appeal and confidence . . . ‘We don’t claim using our product you’re going to hit a home run,’ said Ryan Gaspar, a brand manager. ‘We say, ‘We’ll get you to first base.’”
The article is most interesting for what it tells us about social interactions in general — that the issue of pheremones aside, people are attracted to someone who smells good: “While Dr. Fisher believes pheromones may not initially be an aphrodisiac, someone’s scent can certainly be a turnoff, or a turn-on, once courtship has been established, she said.”
Speaking of scent turn-offs, Marian Bendeth is interviewed for the Toronto Star about how the city worker’s garbage pick-up strike can have an adverse psychological effect on the city’s residents: “‘The sense of smell is connected to the limbic system, which also governs emotions,’ she says. Emotionally speaking, decay is synonymous with disease, fear and death. But while some people become sad in reaction to rotting food, says Bendeth, others may turn hostile.”
Check out the comments below the article for an example of the hostility the anti-fragrance crowd hurls at anything fragrance related. Christopher Laudamiel, one of the top perfumers in the world, takes time to respond to the anti-fragrance misinformation.
And as long as we’re on the subject of anti-fragrance craziness, Perfume sets off events in Fort Worth that put 34 in hospitals: “A rush of hysteria over what was initially reported as a gas leak likely resulted in 34 people being sent to area hospitals Wednesday afternoon. But the actual culprit was perfume … Medical experts often refer to such episodes as ‘contagious fear’ . . . Thinking about something can make someone feel a certain way, said Mary Lynn Crow, Fort Worth clinical psychologist who teaches at the University of Texas at Arlington . . . ‘Fear is one of the most contagious emotions there is. When you say to people, ‘Hey, there is a contaminant in the building and it is making people sick,’ then it easy for them to feel accordingly.’”
5.) Gucci CEO Admits to Logomania, Says Gucci Handbags Will Change:
“Gucci’s new Pelham and Jackie handbags are “more subdued” than boom-year models, because consumers don’t like to flaunt their money at a time of an economic crisis, (Gucci CEO) Polet told journalists today . . . ‘The bags don’t scream Gucci, they don’t flaunt the logos,’ Polet said of the new design for the $3,100 Jackie handbag. ‘Yet the shape is instantly recognizable as Gucci.’ He also said the brand’s sales staff had been instructed to be “less pushy” during the economic crisis.”
Zoinks! I had to read that art
icle twice, I found it so incredible. Especially the use of the adjectives “pushy” about their sales people and “schizophrenic” about their previous collections. Of course, the Gucci Group is getting squeezed by its parent company, PPR, to maintain sales and profits after PPR reported a jaw-dropping 76% drop in net earnings for the first half of 2009.
Gucci’s more “subdued” Fall/Winter 2009/2010 collection below:
6.) It’s Do or Die Time for the House of Lacroix:
“Italy’s Borletti Group, an investment company that owns stakes in Europe’s La Rinascente and Le Printemps department stores, is one of four firms to have submitted bids for Christian Lacroix fashion house, raising hopes that the struggling French brand won’t be closed down . . . At the end of July, Christian Lacroix’s 125 workers will be asked to go on holiday until the end of August, a spokeswoman for Christian Lacroix said. If a buyer isn’t found, 112 staffers are expected to lose their jobs . . . The winner of the bid will be announced by the administrator in September.”
And yet another troubled fashion group, Italy’s Ittierre (manufacturer and distributor for the Just Cavalli, VJC Versace, Versace Sport and C’N'C Costume National labels) has just announced its own reprieve of sorts: “Italy’s Ittierre SpA, which went into administration in February, has secured a deal to manufacture and distribute John Galliano SA’s women’s wear, men’s wear and leather goods collections. The five-year deal … — which analysts say could bring yearly revenues of around 40 million euros, or $56.3 million at current exchange rates — is part of Ittierre managing director Massimo Suppancig’s priorities to turn the company around.”
Roberto Cavalli famously dissed Ittierre for what he considered a less than appealing Just Cavalli collection for Fall 2009: “‘I have made this decision in order to protect the Just Cavalli image and its clients,’ Roberto Cavalli told WWD regarding the show cancellation. ‘The difficult Ittierre situation leaves me with no guarantee and no certainty that my young line will be as avant-garde as always.’” So the five year extension for the John Galliano line must be a relief for Ittiere as it struggles to return to profitability.
But Dan and Dean Caten, the designers behind the DSquared2 label, are doing their own PR and pushing their own brand into hopefully higher visibility by hosting a new fashion show, “Launch My Line”, with the Bravo network: “The latest fashion competition will feature 10 established fashion designers paired with 10 successful industry professionals (ranging from stylists to music producers to CEOs and beyond), who want their own clothing line. The duos will work together to “bring their vision to life,” and the winning team’s clothing line will be launched.”
I can’t always wear the DSquared2 line (the cuts have at times been uncomfortably slim), but I love their jeans, and the energy and enthusiasm behind their runway shows is undeniably infectious. Below is a video clip for their 1930′s inspired (which means roomier cuts!) Men’s Fall/Winter 2009/2010 collection:
But maybe, in order to succeed, you just have to be big enough to throw your weight around: “Luxury goods makers LVMH Moet Hennessy Louis Vuitton SA and Chanel SA may win more control over how Web-based retailers sell their products after a last- minute lobbying campaign over a draft European Union regulation . . . Brand owners such as Chanel, known for $2,000 quilted handbags and No. 5 perfume, and Cie. Financiere Richemont SA, the world’s largest jewelry maker, argue that removing restrictions on Internet sales will damage an industry with annual sales of 65 billion euros ($92 billion). Cosmetics and perfume makers contend consumers need to touch, smell and experience products at stores and claim that online retailers degrade product image.”
I can understand the point about online retailers (especially the discounters) sometimes not doing a lot of good for a brand’s image, but I certainly don’t need to touch, smell and experience items in a physical store in order to make a purchase. I order all my clothing and fragrances online and much prefer it that way — I can try things on (and test things out) in the comfort of my own home (away from pushy, often uninformed sales people) and make decisions that suit my own needs and schedule.
This latest move by LVMH and Chanel is really more about maintaining their iron grip on distribution than it is about caring for the needs of the consumer, because once the floodgates open and consumers get a glimpse at just how much LVMH and Chanel merchandise there is out there, the image of exclusive, hard to procure luxury just flies right out the window.
UPDATE:
7.) Inter Parfums’ Report a Drop in Sales in 2009:
“‘In light of the worldwide decline in consumer spending and the corresponding destocking of fragrance inventories by distributors and retailers, our 10.6% decline in net sales is rather modest and considerably less than many of our peers,’ said Jean Madar, chairman and CEO, Inter Parfums.”
Which I guess is a somewhat roundabout way of saying that everybody else’s sales numbers suck, too, so what’s the big deal? The company reported a 13% decline in net sales for the entire first half of 2009, but stated that Lanvin perfumes are a bright spot for them at the moment: “‘Lanvin, our second largest prestige brand, has proven somewhat resilient … with year-to-date sales running 25% ahead of last year in local currency due to the continued strength of Eclat d’Arpège, reorders of Jeanne Lanvin, which debuted in the fall of 2008, and the good response to Lanvin L’Homme Sport this spring.’”
I didn’t realize that Lanvin perfumes were quite so popular, though it makes sense, as Lanvin was crowing about their increasing market share only a few months ago.
