1.) The House of Lacroix’s Near Death Experience:
The Abu Dhabi press is reporting that “The ruling family of Ajman is likely to enter the world of haute couture after making a €70 million (approx. $100 million U.S.) takeover bid for the ailing French fashion house Christian Lacroix, which filed for bankruptcy protection in June. Regis Valliot, the company’s court-appointed administrator, told AFP that the offer – by Sheikh Hassan bin Ali, a nephew of Humaid bin Rashid, the Ruler of Ajman – would be “formalised” within 48 hours . . . ‘It is the fantastic solution we dared not hope for,’ Mr Valliot said.”
Lacroix has had a rough go of it — the designer holds a sentimental place in the hearts of the French and the fashion press, but the clothing does not sell as well as it needs to in order to support the brand, its accessories line receives lukewarm consumer response and several attempts at fragrance launches have been failures.
Just to illustrate the gap between clothing and accessories/fragrance sales for a brand, NY Mag reports that the Nina Ricci brand’s “fragrance division pulls in $150 million in wholesale volume a year, (while) the fashion division is estimated to pull in just $25 million in retail sales” — a 5x greater difference in revenue generation. Fashion houses rise and fall on sales of their accessories, even though the seasonal catwalk shows create the illusion that the dresses, coats, blouses, skirts and jackets are the stars of the show . . . and Lacroix suffered from a lack of star power.
Speaking of stars of the show:
2.) It’s the Quality, Stupid:
“Luxury retailers are scrambling … to hold the attention of well-heeled shoppers who aren’t as immune to recessions as once thought, but the changes they’re making are … marking a return to the roots of luxe with an emphasis on both quality and scarcity . . . ‘If the dress is $5,000, it should look like $5,000,’ said Joseph M. Boitano, group senior vice president and general merchandise manager at Saks Fifth Avenue. ‘If the garment doesn’t look great and it doesn’t look like value, I don’t care what the price is,’ he said. ‘It can be as cheap as cheap and it’s still not going to work’ . . . Boitano said the customer is looking for options, such as shoes or handbags at lower prices, but that quality remains paramount.”
Again, I kind of have to laugh that the topic of quality is one that retailers and luxury producers are finding the need to now debate and discuss with such intensity — and I’m half of the opinion that if they see the need to debate the advantages of producing quality items for the consumer, then it’s already too late for the industry to redeem itself. At least, for the already established players.
New brand and designer names might be able to arrive and thrive on the scene, unencumbered by the industry’s recent spate of over-expansion, over-production and over-exposure (see: LVMH courts Rodarte), but for a lot of brands that sold mass-market goods at luxury prices (you know who you are!) — their days might very well be numbered.
For example, Gucci — their CEO came out with a recent statement that the brand is rethinking its entire accessories line, having realized that it was all just a bit too cheap and ostentatious for its own good: “Under (former brand chief Mark) Lee, Frida Giannini introduced canvas Joy bags with the interlocking-G logo costing as little as 400 euros ($568). They earned the wrath of fashion writers such as the Washington Post’s Robin Givhan . . . ‘One of the mistakes Mark Lee made was to insist on the logomania,’ said Armando Branchini, a consultant with Intercorporate in Milan. ‘The Gucci brand became a little schizophrenic.’”
But once you’ve started down the ostentatious path, is it possible to pull things back and start again? The latest skin-tight, blinged-out Gucci collection for Spring/Summer 2010 doesn’t inspire much confidence in that respect:
And despite Gucci’s ambitious Asian expansion plans (“‘For a long, long time to come, Asia will be the primary focus of Gucci Group investments,’ CEO Polet said … He added that 22 of the 27 stores the company opened in the first half were in Asia.”), the brand is earning the anger of the average Chinese citizen who can’t help but notice that corrupt government officials are the main purchasers of the brand’s products:
Gucci Snake Bag Draws Ire in China as Wage Gaps Widen — “Official graft cost China as much as $86 billion a year and the chances of a corrupt official going to jail were less than 3 percent . . . China’s wealth boom is creating a surge in spending on luxury goods. Gucci Group … says sales in China, including Hong Kong and Macau, accounted for 17 percent of global revenue in the first three months of this year. Gucci has six stores in Beijing, the same number as in metropolitan New York.”
***Note: Cartier has announced expansion plans in China, as well: “China could become Cartier’s largest market within four years as it aims to double the number of stores on the mainland. Bernard Fornas, president and chief executive of Cartier, said … strong demand in China and the Middle East is compensating for weakness in traditional strongholds Japan and the United States.”
And because so many eyes in the fashion industry are presently fixed on Asia (the China luxury market revenue is expected to break $5 billion in 2009, up from $3 billion in 2008), would it be unwise to expect to see a surge in popularity of previously unknown, and even already established but perhaps lesser known, Asian design houses?
Two examples that come to mind are #1) designer Issey Miyake returning to producing a men’s fashion line after a two year absence, which doesn’t make a lot of sense in this climate unless he’s experiencing a rising demand for his work (men’s collections are notorious for generating even less revenue than women’s fashion), and #2) Limi Feu, Yohji Yamamoto’s daughter, is producing collections that she herself states are meant to complement her father’s sportier, more casual designs for the Adidas Y3 label:
It could be just a matter of time before Asia turns to its own homegrown talent to sate its taste for designer luxury.
But that’s not necessarily going to stop the traditional Western brands from trying: “(Burberry) Chief Executive Angela Ahrendts said Japan is a ‘strategically important’ market for the company, adding that the firm continues to review all opportunities in the region. ‘Together with the luxury non-apparel joint venture announced last November, the (product licensing) amendment also better positions Burberry in the next few years to optimise its presence in Japan and the high growth Asian region,’ she said.”
Though I’m having a difficult time understanding how Japan is a strategically important market for anyone right now when its unemployment rate is rising to record highs and the increasing value of its currency is crushing the export production that drives its economy: “With rising unemployment weighing on consumer spending, the new government may need to take fresh pump-priming measures to ensure the world’s number two economy stays on a recovery path, analysts said . . . Economists expect data … to show Japan’s jobless rate hit a record high 5.8 percent in August, up from 5.7 percent in July, as companies struggle to cope with the fallout from the economic slump.
But maybe “strategically important” means something entirely different from “financially profitable” . . . ?
And while we’re on the subject of emerging markets and strategic importance:
3.) Salvatore Ferragamo CEO Says Mexico Is Its Strongest Luxury Market:
“Salvatore Ferragamo Chief Executive Officer Michele Norsa said the Italian fashion brand’s strongest sales growth among major economies this year has been in Mexico, where the wealthy spent more at home as the peso fell . . . Mexico is ‘probably the strongest market of the big countries in the world,’ Norsa said, and growth there was ‘quite surprising. Mexicans are traveling less to the U.S., so they bought locally.’ He said Ferragamo’s control of its retailing space in Mexican department-store chains like Grupo Palacio de Hierro SA meant the outlets stayed well-stocked.”
So instead of traveling abroad and buying from Ferragamo boutiques in New York where the peso is doing even worse than the U.S. dollar, the wealthy consumers of Mexico are spending their cash at home, which I suppose is good news for Ferragamo, but only in a “We just robbed (New York) Peter to pay (Mexico) Paul” kind of way.
Vido clip below of Ferragamo’s Spring/Summer 2010 collection for men that was shown in Milan this past June. But will it be big in Mexico City?
Speaking of big in Mexico City (or New York City, or any other major metropolitan area flush with spendy citizens and tourists), French shoe genius Christian Louboutin has climbed aboard the Viral Video bandwagon and released his company’s first promotional art film — a low budget homage to Alfred Hitchcock’s Psycho, replete with more product placement than a Hollywood summer blockbuster:
Psycho-dorky!
5.) Armani Prepares for a Future Without Armani:
“Giorgio Armani, after recovering from a months-long bout of hepatitis, slightly loosened his grip on his fashion empire Wednesday, naming one of his most-loyal executives as deputy chairman, as part of a management reorganization. The reorganization — which includes expanding the board of directors and delegating more power to non-family members — comes as the self-described “dictatorial” designer grapples with the future of his business.”
Mr. Armani owns 100% of the Giorgio Armani company, which is stunning in and of itself. Most family run fashion companies have sold out stakes to investors long ago, but Armani kept full control of the company, so any and all success that the Armani company has achieved over the last several decades is a testament to the man’s ambition, will and talent.
But he’s now 75, and it’s time for the company to prepare for a future without him, especially as the brand is continuing to expand across the globe, most notably into India and China. Armani appears to have no direct heirs, though nieces and nephews are installed in key postions: “His nephew, Andrea Camerara, recently took on a more visible role as non-executive director in the president’s office. One niece, Silvana Armani, designs some of the collections, and Roberta Armani handles public relations.
Video clip of the Armani 2010 Spring/Summer collection below. Robin Givhan at the Washington Post writes of the collection: “His clothes look as though they are straining, yearning to be something more exciting and daring than what they are” — oh Robin, aren’t we all:
6.) Industry Quick Hits:
A.) Louise Vuitton heads to Lebanon: “‘The next market where there are opportunities is clearly Lebanon, which has been resilient to the crisis and has already shown to be a strong market for luxury,’ Damien Vernet, general manager for the fashion house’s Middle East and India operations, told reporters. ‘We are working on the final stages … if we could not miss another summer that would be wonderful.’”
There’s a boutique scheduled for opening in Dubai this month, plus the c
ompany is also eyeing expansion into Egypt, Jordan and in Syria.
B.) Joop! fails in its bid to trademark the exclamation mark: “An exclamation mark cannot be registered as a trademark, the European Court of First Instance has ruled.
The German clothing and perfume company Joop! applied to register the punctuation mark both on its own and inside a rectangle.”
And a good thing, too, or we’d all be ponying up legal fees just to continue to write enthusiastic sentences!(!!!!)
C.) Sonia Rykiel is next up for H&M: “Swedish fashion retailer H&M has signed up French designer Sonia Rykiel for its next two collections . . . Rykiel will design lingerie and knit-wear collections to be launched at some Hennes & Mauritz stores in the winter of 2009 and spring 2010, respectively, joining other exclusive guest designers such as Jimmy Choo and Karl Lagerfeld . . . From the designers’ perspective, joining forces with a retail giant can bring substantial income but also the chance at unparalleled visibility before a wider audience.”
But then there’s also the risk of over-exposure, not to mention turning off the wealthier clients who supported the designer before the she decided it might be profitable to sell out to the mass-market. *harumph*
Sonia’s Fall/Winter 2009/2010 collection below:
“I stole my boyfriend’s jacket and gave it to H&M.”
D.) Hypermarket Chain Carrefour pressured by shareholders to pull out of emerging markets: “Shares in Carrefour rose … after a report claimed that the group’s biggest investors, Colony Capital and Bernard Arnault (CEO of LVMH), are pressing for an exit from emerging markets such as China and Brazil. The report by French daily Le Monde said the two shareholders have been pressuring CEO Lars Olofsson to sell the group’s outlets in such countries, hoping to recover some of their investments.”
Carrefour is the largest hypermarket chain in the world, with operations in Europe, China, Colombia, Brazil, Argentina, the Dominican Republic, North Africa and other parts of Asia. Analysts are saying that leaving emerging markets would be a step backward for the retail giant, as revenues from Asia and Latin America are gaining while stores in areas like France have seen declines.
But hey, Bernard Arnault wants his money back! Maybe he needs it to keep LVMH afloat?
E.) That whacky Karl Lagerfeld!: “Lagerfeld photographed a story for the October issue of Italian Elle, that transformed a male model into a Ken-like doll … and added interesting accessories atop model Ikeliene Strange’s head. You thought Lady Gaga’s hair bow was wild? That was nothing compared to a colander, a heel, and a telephone.”
“Just wait until I TRIPLE my dose of Celexa — world, watch out!”
F.) Luxury retailers need to return to a full-service mindset if they want to survive: “Michel Phan of the Paris-based ESSEC Business School, which runs the world’s only luxury brand management MBA program, says service — online, in-store and after-sale — is vital for luxury retailers in Asia . . . ‘I often tell retailers — you have a beautiful product, a wonderful store, but when it comes to service, it’s not on par, or its not even there,’ she said.”
Wow, could we see a return to both quality AND service? Excuse me, my head is spinning.
G.) Holiday Inn wants you to know that they’re smelling better, thank you: “Despite the recession and an unprecedented slump in the travel industry, scent and sound still matter to the world’s biggest hotel company . . . InterContinental Hotels Group … is in the midst of a major overhaul of its Holiday Inn locations around the world, which will see systems installed in every hotel that pump a customized scent into corridors and lobbies . . . the weak market hasn’t dissuaded its owner from an ambitious, billion-dollar plan to revamp its 3,200 Holiday Inns around the world, aiming to attract younger travellers and their families.”
If they can get the place to smell like chocolate chip cookies fresh from the oven, I am so there.
7.) And Now That Milan Fashion Week is Over, Long Live Paris Fashion Week:
“Gladiatrixes in minidresses … made from the skins of freshly vanquished crocodiles, and models that scintillated like human disco balls had the run of Paris’ catwalks on Thursday as the City of Light’s spring-summer 2010 collections moved into day two on Thursday . . . Paris’ nine-day-long ready-to-wear displays move into day three on Friday with shows by Japanese designers Issey Miyake and Yohji Yamamoto, Paris-based critical favorite Lanvin, Britain’s wacky Vivienne Westwood and luxury giant Christian Dior.”
Video clip below of super skinny, excessively shiny, uber trendy Balmain for Spring/Summer 2010:
Looks twice as good now as it did in 1987!
Where were you when the luxury world stopped burning?
