1.) Just When You Started to Believe in All That “Recovery” Talk:
“Retail sales drop 0.3% in December as sales for all of 2009 plunge by a record amount . . . The December drop in sales was a surprise given that the nation’s big retailers had reported better-than-expected results last week, reflecting a surge of last-minute holiday shopping. But even with the rebound reported by the nation’s biggest chains, these retailers suffered their worst annual performance in more than four decades in 2008, according to data from the International Council of Shopping Centers.”
The fall in retail sales is, of course, unexpected. Again.
The 0.3% decline in December sales alone is a bitter pill for everyone in the retail industry to swallow, but sales for the entire year of 2009 dropped 6.2% in comparison to 2008′s drop of 0.5%. Sales for every single sector were either flat or declining: specialty clothing, general merchandise, autos, electronics, department stores. There wasn’t a ray of sunshine in the lot, especially as economists are predicting a worsening employment situtation for 2010.
Re. the initial flurry of excitement over the holiday season’s supposedly exciting sales numbers, Stephen Robertson, director general of the British Retail Consortium, called it a ‘false dawn’ and stated that 2010 will be a tough slog for retailers: “Robertson … predicted no growth in consumer spending over 2010 and indicated the recent glut of positive updates from the festive season may represent a “false dawn” . . . Robertson said consumers’ concerns over higher taxes and the end of many fixed-rate mortgage deals would squeeze spending.”
UPDATE: WWD is reporting that a wave of retail store closures is expected to hit this year. Macy’s announced that it’s shuttering 5 underperforming stores, and Foot Locker just announced that it will be closing 117 locations. Now that retailers have downsized staff and slimmed down inventory throughout 2009, the only thing left to do is start shedding shops that can’t hold their own in this much less buoyant environment.
And while all the breathless anticipation among the luxury industry insiders is now focused on the Chinese economy’s spectacular growth, it might be a good idea to get a closer look at just where some of this exciting GDP growth that all the fashion groups are fighting to service comes from.
Example #1 is the ghost city, an entire city built with stimulus money that sits empty, a project whose massive spending scale registers as part of that 8% GDP growth, but offers hints that such economic growth is unsustainable:
The city that stimulus money built
Example #2 is the South China Mall, the (once and former) biggest mall in the world, located outside the factory city of Dongguan. Opened in 2003, it remains 99% empty, a monument to government graft, corruption and ego over the reality of the situation on the ground. After the mall opened, the NYTimes proclaimed that China was catching up to the consumer habits of the West, but the large middle class population that’s necessary to support such a wonderland of retail is simply not there, and the mall is falling into decay and disrepair:
UPDATE: Original linked vid was disabled, so I’ve substituted this one
More and more financial analysts are murmuring questions about China’s “bubble” economy, speculating that the majority of (if not all of) the growth is government stimulus, with nothing substantial to hold it together should that money pump run out of printed Yuan to chug.
Add to the above the bizarre piece of information that China’s pig farmers and other rural business owners are borrowing from the banks and using the low-to-no interest rate funds to stockpile metals in their backyards as a hedge against inflation (rather than, you know, spend the money on home improvements or expanding their businesses) and you have a picture that should frighten the bejeebus out of any luxury CEO that’s planning on the Chinese consumer to rescue their failing fortunes.
Yeah, business for designer brand merchandise is bang-up in Beijing, but the further you travel from the major city centers, the less need there is to buy Louis Vuitton luggage, Zegna suits and Tag Hauer watches as bribes for govenment officals: “Executives of luxury goods companies say that lavishing government officials with such products is a year-round practice that reflects China’s culture of gift-giving and tradition of basing business decisions on personal relationships. They admit to having special accounts for government officials, their relatives and even their mistresses, often with code names like Dr. No and Miss K.”
A culture of “gift-giving” plus a tradition of basing business decisions on “personal relationships”. I like that. It rolls off the tongue with the loveliest of fake platinum lilts. Here in the U.S., we just purchase boring old dinner plates for our elected officials, but somehow, that makes the patronage and cronyism easier to swallow (pun intended).
Note: the luxury companies are trying to get whatever they can out of China before the whole thing pops like an overstretched balloon, but is this really the way to run a “luxury” brand? If luxury is about exceptional materials and superior craftsmanship rather than the scur
rying, bottom-line chasing of the mass market companies, then wouldn’t it be a better idea for luxury brands to relax, take a breather and perfect their product line before all rushing out onto that one particular (though admittedly quite large and attractive) patch of thin ice?
But everyone is consumed with the need to “establish a presence” — they want to be there at that exact moment when the alleged Chinese middle class rises up to start spending, because who wants to be the last one to the party, right? Yet China might very well turn out to be like Brazil in this respect, great in economic theory but less reliable in economic reality: “Brazil is the land of the future, and always will be.”
Force to be reckoned with NYTimes fashion critic/analyst Cathy Horyn writes: “the industry has been pulled sideways–and will continue to be–by two enormous forces, China and digital technology . . . The absolute authority that luxury brands–and fashion magazines–enjoyed for the past decade or so has eroded. As a consequence, we’re probably going to see some stupid decisions made in the coming year, because panicky executives can’t get their minds around what’s going on and feel they must join the nearest pack.”
Horyn is one of the smartest writers in the luxury biz, and if she sees the slapdash race to beat China at its own game (and the even more slapdash race into WTF digital media projects) as a potential reputation killer, then people should start paying attention. As she later states: “there will only be so many companies with the capability to produce high-quality (and let’s hope exciting) products. Why start going astray now?”
Related: Dubai, a former Next Big Scene, isn’t doing a whole lot better than next great hope China: “The Palazzo Versace Dubai, only the second such hotel after the first was opened on the Gold Coast, was so luxurious it would even have the world’s only refrigerated beach, the investors were told. Now, following one of history’s greatest property collapses, Sunland is battling scores of investors attempting to flee the desert city. Analysts are no longer asking how much money the listed Sunland can make from Dubai, or even how much invested money the group stands to lose, but how much extra the group will have to pay to get out of the Middle East.”
An Armani hotel & residences project is scheduled to open in Dubai in mid-March of this year. It’s likely to meet the same fate.
2.) Technology Shrunk Your Handbag:
“The rise of smartphones such as the iPhone and miniature MP3 players has taken a huge weight off the shoulders of the nation’s ladies . . . smartphones have rendered (bulky mobile phones, electronic organisers, device chargers, MP3 players and laptops) largely obsolete as they can access email, surf the internet, play music and be used as an address book and organiser . . . high street stores believe the trend will herald a return to smaller clutch bags rather than the huge, bottomless creations from the likes of Chanel and Louis Vuitton. The average bag now weighs 3lb 5oz … that’s 57 per cent less than the average just two years ago.”
Angelina Jolie early 2008 bag vs. Angelina Jolie late 2009 bag
I remember reading stories back in late 2006 and early 2007 about the rising incidence of shoulder, neck and back injuries from women carrying huge totes stuffed completely full: laptops, water bottle, extra pair of shoes, paperback novel, datebook, organizer, sunglasses, mobile phone, etc. Now that Blackberries and iPhones have become increasingly easier to use and available to the average consumer, lugging all those extra pounds is thankfully no longer necessary.
I still lug my laptop around in my shoulder bag, but that’s because they still haven’t created a smartphone that can take the place of performing extensive research and writing on a laptop computer, but if all I needed was access to email, instant messaging an organizing calendar program and iTunes, I’d gladly ditch the laptop. My shoulder and neck would thank me for it.
i guess I’m still waiting for that mythical, lightweight, fully-functional, mobile folding keyboard” . . . that’ll come before the flying car, right?
3.) Yohji Yamamoto Brand Shuts Its Doors in NYC:
“After filing for protection from its creditors last October, it seemed that Yohji Yamamoto had found a saviour in private equity fund Integral Corp – which had agreed to finance the company’s restructuring – but it seems the jubilation may have been short-lived as the brand has closed both its New York stores.”
The Yamamoto-Adidas partnership of Y-3 will still plug along, as Adidas appears to own the trademark and rights rather than the Yamamoto company (which has filed for bankruptcy in Japan), but will the Yohji Yamamoto brand become another Christian Lacroix, surviving only as a licensing operation? The rumor is that Yamamoto still plans on a runway show in Paris this Spring, yet shutting both the Yamamoto New York locations isn’t a confidence builder in that regard (Yamamoto boutiques have also shut their doors in Antwerp and Paris).
Yamamoto’s Spring/Summer 2010 collection below. Sometimes I think the man is brilliant, then other times I watch his runway shows and completely, thoroughly understand why his company went belly up:
And then, of course, there’s the lack of a hot selling fragrance line. It seems like the only brands that have filed for bankruptcy (or closed up shop) so far are brands that either don’t offer a fragrance line (Luella, Phi) or brands that don’t have a hot selling, blockbuster fragrance line (Christian Lacroix, Yohji Yamamoto, Escada).
As if to underscore my point, the Washington Times reports that fragrances priced over $100.00 were one of the few movers and shakers in the retail scene during 2009: “Beauty-industry watchers noticed large growth in sales of expensive perfumes — those priced above $100 — this year. Meanwhile, lipstick sales were down 11 percent, perhaps disproving the lipstick-ind
icator theory . . . The perfume industry accounts for about $25 billion to $30 billion in annual sales.”
Yikes! $25-30 billion is a lot of coin. No wonder every D-List celebrity is scrambling to climb aboard that particular gravy train:
When everyone’s doing it, it’s not special anymore
In other struggling luxury brand news, the Karl Lagerfeld brand is running into trouble, cutting staff and axing its K Karl Lagerfeld diffusion line: “The Tommy Hilfiger-owned Karl Lagerfeld business … has eliminated four positions in its Amsterdam office and two marketing-p.r. positions in New York, according to an e-mail from the company. In addition, the more casual K Karl Lagerfeld line of denim and sportswear will be discontinued with this spring’s men’s and women’s collections.”
While newly revived yet critically and commercially buffeted Halston is rumored to be courting “Sex and the City” star Sarah Jessica Parker as a creative advisor — arguably, a much better publicity move than Ungaro’s hiring of drugs-and-rehab star Lindsay Lohan. It would certainly get Halston some much needed spark with the fashion press, and Parker’s mainstream influence could potentially help liven-up the perhaps too retro collections that have emerged under the Halston name since the Weinsteins and Jimmy Choo’s Tamara Mellon got involved.
Hot young designer Marios Schwab is presently at the helm as Halston’s head designer, and his first collection for Halston will debut at the Fall/Winter 2010 shows. Video clip below of a very artsy, stylish promo film for the Fall/Winter 2009 Halston collection. There was no such fanfare for Spring 2010, as the brand produced only a minimal Spring collection during much dramatic name exiting and designer swapping:
Note: and the Sarah Jessica Parker rumor is now a confirmed fact — Parker has been signed by Halston as a creative advisor/director, quite possibly as head designer for a newly formed Heritage Halston line. But you just knew that Lady Gaga was somehow going to get mentioned in the same breath as Halston and Sarah Jessica Parker . . . right? I mean, she’s everywhere!: “One source close to the situation likened the deal between Parker and Halston to the one unveiled last week between Polaroid and Lady Gaga, who was named creative director for a special line of Polaroid Imaging products. Hilco Consumer Capital LLC, which owns a stake in Halston, also owns Polaroid in a joint venture with Gordon Brothers Brands LLC. “
And there you have it. The Gaga-ification of Halston. I’m intrigued!
4.) Former UK PM Tony Blair Takes a Consulting Position with LVMH:
“A source close to Mr Blair has confirmed that he in the final stages of negotiating a deal with LVMH, which he is expected to begin working for later this year . . . ‘There is an agreement in principle but nothing has been signed yet,’ said the source. ‘Mr Blair won’t be joining the board but he will be acting in an advisory role … his job is likely to involve attracting new clients’ . . . Mr Blair is expected to be paid a six-figure sum by the firm for his part-time role . . . In total, he is estimated to have earned at least £15 million since leaving office two and a half years ago.”
There’s a ruckus presently being raised in the UK over their former Prime Minister (for the labor party) taking a lucrative position with a major luxury corporation. Past ties to Bernard Arnault, CEO of LVMH, during the time that Blair was in office are receiving renewed scrutiny, and parliament officials are decrying the impropriety that such a move appears to entail, questioning how much influence Arnault (and therefore LVMH) may have had with Mr. Blair while Blair was still Prime Minister.
On the other hand, it only seems logical that a powerfully connected former political figure would agree to do advisory and consulting work with an intensely high-profile luxury conglomerate. I mean, who else is Tony Blair going to work for? I would guess it’s the dichotomy of his professed politics (socialistic, for the people) with the reality of his money-hustling and influence-peddling life after politics (almost $25 million U.S. accrued in just two and a half years) that’s causing the uproar — but Arnault must be gleeful at such a coup, and having such a globally recognized figure as an advisor can only help LVMH in the long-run, especially when negotiating the tricky waters of new international markets such as China and India.
After all, Blair is already accustomed to navigating the political power structures around the world, and likely still knows all the right people by name and rank. If I were PPR or Richemont, I’d be nervous.
5.) The Question on Every Luxury Retailer’s Mind:
“Chinese millionaires favor Cartier, Patek Philippe watches, holidays in the U.S. and Bentleys according to a survey by Hurun magazine. (Yet) when it comes to first-class flights and cigarettes, they prefer local brands.”
Well, that ought to make a few people at Cartier happy. Other brand preferences stated were: Fashion Label – Giorgio Armani; Sports watch – Rolex; Fashion watch – Louis Vuitton; Fashion accessory – Hermes; and Skincare – Chanel. Pretty much a Who’s-Who of the major luxury brands, which has been the report all along from China — that established luxury brand names are deeply valued for their history and reputation as much as for the actual products themselves.
Of course, it doesn’t hurt that Hermes actually makes great accessories, or that Chanel skincare, while highly expensive, is genuinely good stuff. I am a little surprised about the Giorgio Armani placement as favorite fashion label, however (I thought his star had dimmed since the 80′s) — but because of the high purchase to government bribery rate, the majority of luxury purchases in China today are by and for men, and a nice Armani suit is an impression that’s hard to beat.
Besides, when someone asks you what suit you’re wearing and you say, “Burberry Prorsum” or “Paul Smith”, it lacks that fine Italian sizzle. Video clip below of the menswear line that bureaucrats adore:
Last month, I ordered a Giorgio Armani shirt in an extra large, but it was so tight I had to send it back (and I’m ordinarily a Large/XLarge tweener), but just maybe if I stopped eating (entirely) for the next six months, I could fit into one of those coveted suits!
6.) INDUSTRY QUICK HITS:
A.) Proctor & Gamble to bid adieu to Valentino:“Procter & Gamble plans to end its fragrance licensing agreement with Valentino Fashion Group, according to a person familiar with the matter. Puig Beauty & Fashion Group SL, the Spanish fashion and fragrance company, is expected to take over the license from P&G in February 2011.”
The brief article later mentions that P&G is whittling down the “underperformers” in its brand lineup, which is so obviously a slap in the face to the Valentino group that I wonder just how testy those high-level meetings became when attempting to hammer out a new agreement. But Puig is an excellent fine fragrance company, and quite possibly a much better fit for the ruffles and glamor of Valentino than Proctor & Gamble ever could be.
Related: The Oscar de la Renta company recently wrested back control of its fragrance line from L’Oreal after an 18 month legal struggle. A de la Renta spokesperson stated that they would keep their present fragrances in development, but with the lack of a current popular seller, I can only imagine that their focus is going to be on the production of something new and more suited to the luxury brand’s image and clientele.
With the mass-market fragrance industry in a current slump, it’s way past time for luxury houses to take a more interested, if not active, role in the development of fragrances that bear their famous names.
Tangential point: the celebrity scents industry had a near-death experience last year (with sales plunging by a reported 20%), but Beyonce’s upcoming “Heat” perfume is expected to rake in $100 million in its first year.
One hundred million dollar hit? They hope so!
One of the central players in the celebrity fragrance scene is Parlux, which reported a 3% increase in sales for the latest quarter. Parlux holds licenses for Paris Hilton, Jessica Simpson, Nicole Miller, Josie Natori, Queen Latifah, Marc Ecko, Rihanna, Kanye West and more.
B.) Haiti’s garment exports crushed by the earthquake: “The impact the earthquake has had on the region means it is likely to have lasting economic impact – not least for the clothing industry which is the single largest sector in the Haitian economy . . . Before the disaster, Haiti was the seventeenth largest supplier by volume of apparel products sold in the United States, with imports valued at $412m in 2008.”
C.) Martin Scorcese is filming a new Chanel ad in Brooklyn: “Chanel has a tradition of pairing directors with their muses for ad campaigns; Nicole Kidman and Baz Luhrmann (Moulin Rouge) worked together for Chanel No. 5, as did Jean-Pierre Jeunet (Amélie) with Audrey Tautou for the latest Chanel No. 5 ads.”
With David Lynch signed on to film a campaign for Dior, and now news of Scorcese for Chanel, the high-concept imagery wars are heating up.
Giorgio Armani has responded to the battle for consumer attention by hiring global (and much younger) soccer star Cristiano Ronaldo to replace David Beckham as the Emporio Armani billboard model. The photo images are already flooding fashion, celebrity and sports sites, so the choice to strip the man down to his skivvies was obviously a smart one.
D.) A marriage between beauty and the beast: “We’ve made no secret of the deep existential nausea caused by looking at the mysteriously long line in front of the Ugg store in Soho. But the latest news related to the Australian-born trend that would not die has sent a shiver that runs from our eyes to our very soul — Jimmy Choo is collaborating with Ugg.”
What’s going on over at Jimmy Choo, anyway? First H&M and now Ugg. Are they completely determined to run their own good name into the ground? Or do they know something we don’t, and so are scrambling to grab any bits of cash they can from whatever consumer market possible before the entire thing comes crashing down?
You know, now that I think about it, Christian Louboutin *has* replaced Jimmy Choo in the pop-culture lexicon as the “it” shoe to have and wear (the “Sex and the City” sequel is reportedly stuffed full of Louboutins, where the original series was once all about the Manolos and the Choos), so, knocked off their lofty perch, what does Choo have left, then, but the less glamorous worlds of fast fashion and Ugg?
When life gives you designer lemons . . .
E.) 11 clear signs that the U.S. Economy is headed into the toilet: “A massive “second wave” of mortgage defaults is getting ready to hit the U.S. economy starting in 2010. In fact, this “second wave” is so frightening that even 60 Minutes is reporting on it.”
Retailers will be reading analysis like the above and weeping, because if the first mortgage meltdown wave sent the country’s consumers rocking back on their heels, the second wave could potentially knock us all down. People can’t spend money they don’t have.
F.) Luxury brands turn to DNA to fight back against counterfeiting: “A New York state-based company has announced it will be adding genetic material to some high-end products . . . ‘Proof of authenticity is a central tenet of brand integrity, and there is no better proof than DNA,’ Applied DNA president and chief executive James Hayward said in a release. Applied DNA uses botanic DNA, which cannot be copied. The processed DNA solution can be incorporated into fabrics, dyes or glues to create a unique genetic identity for the product.”
This particular solution is so wonderfully 21st century geeky-tech that I’m in awe. Now all I need is my Cartier branded portable DNA reader and I’m good to go!
