Luxury Industry News Roundup: 01/08/10

1.) Hell Freezes Over - Hermes Launches Diffusion Line in China:
"The new brand will be called Shang Xia (meaning "topsy-turvy" in Mandarin), will be based in Shanghai and is scheduled to launch in Spring 2010. Shang Xia's creative director is Qiong-Er Jiang, daughter of a noted Chinese architect. Shang Xia will include ready-to-wear and decorative arts inspired by Chinese culture and traditions of craftsmanship. According to Thomas, the new brand will be tailored for the Chinese market where Hermes lags behind its competitors."

Okay, so it's not "officially" a diffusion line, but if it quacks like a diffusion duck and sort of walks like a diffusion duck . . . ?

*Note: A diffusion line is the name for an accessible, mainstream affordable, mass-market collection produced by a global luxury player that's ordinarily prohibitively expensive and exclusive. For example, Giorgio Armani has Emporio Armani + Armani Exchange; Versace has Versace Jeans + Versace Versus; Chloe has See by Chloe; Marc Jacobs has Marc by Marc Jacobs + Jacobs by Marc by Marc Jacobs; Alexander McQueen has McQ; Valentino has Valentino Roma + Valentino Red; Dolce & Gabbana has D&G; Michael Kors has Michael by Michael Kors + Kors by Michael Kors; and so on.

I'm sure the argument will be that this is regional positioning, but why not instead make Hermes items that directly appeal to Chinese consumers and sell them exclusively in their China boutiques (if not worldwide)? I think the answer is that the Shang Xia brand really will be a type of Hermes diffusion brand, claiming superior craftsmanship yet made entirely in China so that the products are more immediately accessible and affordable for the average Chinese customer.

You know, just like all the other Italian, French and American luxury brands do with their own diffusion lines.

It's a smart business move but certainly not one that I saw coming, and I think it speaks volumes about the kind of future that Hermes sees for itself in the new retail order (while speaking volumes about the new retail order in general) -- especially as Hermes has been consistently touted as one of the few luxury brands able to survive the global economic contraction whole and intact.

I'm thinking we may have just seen Hermes blink.

US Fashion Mag states: "The objective of this move is to offer cheaper products in China, as well as capitalising on the growth of the luxury market in the country in 2010" -- so yeah. Diffusion line.

Other points of interest: as with all Western ventures in China, there must be a Chinese contact (with sufficient government/party ties) as a partner, and Shang Xia is partnered with Qiong-Er Jiang, the daughter of a noted Chinese architect. Jiang's job is to steer business to local and regional manufacturers, suppliers and distributors (i.e. friends and family). Hermes cleverly defines this type of nepotism as "ensuring that only local raw materials are used to create items under the brand."

2.) Argentina Gets Its Day in the Lagerfeld Sun:
After drinking from the creative wells of Russia and China, Lagerfeld headed to Argentina for the Chanel Spring 2010 campaign: "Tango, elegance, antiques, and good sunlight. They're amazed about the size of Buenos Aires, the beauty, the cuisine, the great cultural offer and especially the buildings and architecture."

The campaign was shot back in October of last year, and all I can say is, it must be a drag to have to chase down those dollars in every exotic location imaginable (as if!). Since Brazil is supposed to be the next China as far as economic growth and consumer spending (or so say the analysts), shooting an ad campaign in South America, while incorporating distinctly latin flourishes in the collection, is a gorgeous way to play it safe while looking like you're taking very stylish chances.

A brief video clip below of the set used for the ad campaign:

*Note 2: Chanel is one of the few major luxury brands that does not offer a diffusion line.

But as long as we're nattering on about Chanel -- 1.) Hell freezes over (again!) as Chanel offers temporary tattoos for Spring; 2.) Chanel workers demonstrate over raises that weren't as high as they might have liked; and 3.) Chanel plays hardball by hiring a former Louis Vuitton executive for help in developing new market and branding strategies -- if you can't outsell them, then outmanoeuvre them, right?

Oh, hey, on the subject of angry unions, remember when we mentioned a few weeks ago that Saks Fifth Avenue was cutting 116 beauty and cosmetics jobs at its flagship location in NYC? Well, that news (unsurprisingly) didn't set too well with the people whose jobs were getting cut: Saks' Midtown firing draws labor lawsuit -- "The National Labor Relations Board, Local 1102 of the Retail, Wholesale and Department Store Union charged that Saks fired the employees in retaliation for voting two weeks earlier to unionize . . . Saks has denied that the firings were related to union activity, noting that it began restructuring its cosmetics and fragrance departments elsewhere in the chain last summer. Saks has cited a new strategy to let vendors like Chanel, Lancome and Clinique fully staff the counters themselves."

At least the union activity here involves people who are losing their jobs as opposed to workers who just didn't get as large a raise as they wanted. But still, Saks has been steadily losing business and cash by the quarter (after quarter) -- it would be unreasonable to believe that they *aren't* restructuring deals with major brands in an effort to clamp down on labor costs.

Julia Bentley, a spokeswoman for Saks, stated that "vendors already employ nearly 70% of the personnel in the New York store's cosmetics and fragrance department, (while) other New York City department stores use a fully vendor-staffed model" already.

3.) Prada May (Not?) Be So Deep in Debt That It Needs Investor Cash:
"Prada SpA, the luxury company which has called off four attempts at an initial public offering in the last 10 years, denied a New York Post report that it is in talks to sell a (minority) stake to Cie. Financiere Richemont SA . . . Prada, which has cited adverse market conditions for its unsuccessful IPO attempts, said last year it had been approached more than once by potential investors about selling a stake, adding that any interest was unsolicited."

The article goes on to note that Prada is presently operating under a debt of nearly $1.5 billion dollars, and Richemont, the third largest luxury conglomerate in the world, with brands like Chloé, Cartier, Montblanc and Van Cleef & Arpel under its umbrella, could certainly be a friendly source of rescue. Richemont could possibly absorb seasonal losses of the Prada brand while using Prada's design reputation to seriously reposition itself as competition to both LVMH and PPR/Gucci Group.

Grazia Daily reports that "with new financial backing, the luxury label could be unstoppable", though it's difficult to see how $1.5 billion in debt could possibly be an attractive feature should Richemont go shopping for a major luxury brand to add to its roster.

A look at Prada's upcoming Spring 2010 collection, which Miuccia Prada admitted that she designed with the recession fully in mind:

Rgarding Ms. Prada designing with a more commercial outlook, there's an excellent article in the Washington Post about the tension between runway shows and what actually ends up in retail stores: Ready for the Runway, but Not for Retail? -- "There are times when women look at runway images and turn away convinced that designers hate them or are out to make a mockery of their busy, complicated lives . . . but the truth is that if you walk into a designer's own shop, particularly in Europe where working the sales floor is a career rather than a sideline until the big acting break or the B-school acceptance letter arrives, you would find that most designers are willing to sublimate their desires for the customers."

In other Prada news, "Vita Prada", an unauthorized biography of Miuccia Prada written by Italian journalist Gian Luigi Paracchini and released in Italy just before Christmas, is a popular bestseller and the talk of the Italian fashion scene.

Collezioni Online writes: "The Prada phenomenon is recounted with skill by Gianluca Paracchini. The term 'phenomenon' is used because Prada, given its turnover that runs into several figures, can no longer be regarded as a mere group or fashion brand; it has become something of a symbol of a conceptual style that has overturned aesthetic canons to create trends and establish fashions."

Oh, so maybe Richemont might be wise to overlook all that debt, after all.

4.) Your Stylish Black Wardrobe Has Turned Against You:
"Black clothing can highlight dark lines under the chin, shadows around the eyes and wrinkles on the face, colour consultants say . . . Dark scarves, hats, polo neck jumpers and high-collared coats are apparently particularly likely to emphasise ageing features of the face . . . Just one in five of us apparently have the correct skin tone to wear black well . . . The one in five ... who suit black close to their faces have 'winter' complexions consisting of pale, cool and dramatic colouring."

And here I've been assuming that I'm ever so jet-setting and sophisticated as I step out into the day in my black on black ensemble, but now they tell me that what I'm really looking like is tired, drained and old . . . as if I needed the confirmation.

But you know, the spring collections are due soon, so these "color consultants" could just be, you know, shills for the fashion industry (you think?) telling us we look all old and tired-out in an attempt to get us off our duffs and into Nordstrom (or Neiman Marcus, or Macy's, or Target, or Bloomingdales, or you name it) to buy some more stuff -- albeit very brightly colored, Cortez and the fountain of youth stuff.

Because that's just what we all need right now, I guess -- a bright scarf that instantly makes us look ten years younger. A video clip below of the Diane Von Furstenberg 2010 Spring/Summer collection that's a veritable tour through the entire color wheel:

Nicole Fischelis, Fashion Director for Macy's, stated in a piece for Pantone: "While (consumers) may be more selective in their purchases right now, people still want to be excited and inspired by fashion. Color is arguably one of the most essential elements each season as it triggers the emotional 'buy me' reaction!"

5.) Maybe Fashion Isn't the Most Fabulous Game in Town Anymore:
"Despite the collective sigh of relief that the holiday season wasn't as bad as last year, recent sales trends are still a sobering reminder for retailers. The hottest items this holiday weren't apparel related but instead were iPhones and other smart phones, BluRay DVD players -- even toy hamsters."

Designers, models and luxury brands enjoy a rarified type of notoriety within the pages of fashion magazines and among the rounds of fashion and beauty blogs, but in the wider sector, "style" is losing out to lifestyle. While technology like the iPhone is continuously tweaked and adjusted to meet the daily needs of its user, luxury fashion brands are too often aloof from their buyers, prefering to *decide* for the consumer what he/she should want rather than reaching out to design and manufacture specifically for the consumer's lifestyle needs.

This results in nervous retailers stuck with racks of unsold merchandise and the inevitable flurry of 50%-70% off sales when the designer misgauges shifts in public mood.

Brands such as Prada, Armani and Dolce & Gabbana collaborate with cell phone companies on designer phones, but these are just cosmetically enhanced devices that operate no differently than the same cheaper, unbranded model. As long as the luxury brand concept of "lifestyle" remains stuck in a surface-looks only mindset, they'll continue to lag behind technology companies like Apple that have learned to produce products that are aesthetically pleasing while genuinely (and positively) impacting the lifestyle of the consumer.

I mean, I love a great overcoat or terrific pair of shoes as much as the next person, but neither increases connectivity, brings information to my fingertips or radically alters the way I interact with a fast-paced world.

If luxury brands wish to stay relevant, it would certainly help if we could stop having this same discussion over and over: "Go to the sites of the most innovative labels -- Prada and Balenciaga, to name two -- and you find almost no appreciation for the potential of digital technology. No special films that might illuminate the creative process, no animation, no design gestures that are consistent with the contemporary spirit of these brands. Instead, what you chiefly get is a video of the last collection, some still images from an advertising campaign and, in Prada's case, an update about its art-world projects."

Case in point, the L.A. Times ran an article forecasting fashion trends for 2010. Two of them dealt with the marriage of style and up-to-the-minute media, with #1) styles driven by popular culture more than the proclaimed vision of any name brand designer, and #2) the increasing influence of home shopping networks as more and more people abandon the idea of going to a mall or boutique and instead shop from the convenience of their own homes, using their computers and televisions.

The best recent example of lifestyle choices proceeding apart from the dictates of the luxury brands is the wild popularity of the Twilight movies and the significant impact they've had on the fashion industry. Major brands scrambled to play catch-up, and are attempting to steer the game back in their direction by hyping connections to Tim Burton's upcoming Alice in Wonderland film.

The big difference between Twilight and Alice in Wonderland is, of course, genuine consumer interest. The influence of Twilight spontaneously exploded once the films were released, a result of a best-selling fiction series from a no-name author turned into low-budget movie hit that any smart executive worth his/her trend-awareness salt should have ridden into a golden sunset. But it just wasn't glamorous enough -- hence, Burton's Alice in Wonderland: huge budget, big name director and oodles of breathless, marketing hype regarding the fashion world's designs based on characters from the film.

But this is, again, luxury brands telling the consumers what they think they *should* want ("thigh-length, Alice-appropriate dresses in mad, mad plaids" says Zac Posen, a designer whose brand appears to be in financial trouble), the equivalent of brands signing on to Facebook and Twitter as yet another means of manufacturing excitement for their products rather than bothering to actually follow the continuous discussions of what their customers might genuinely like and want (never mind directly soliciting feedback).

6.) INDUSTRY QUICK HITS:

A.) Another one bites the dust as edgy luxury label Phi closes up shop: "The collection developed a cult following in the New York fashion scene. But the pre-spring delivery, which was shipped to stores this month, will be Phi's last. The Phi boutique at 71 Greene Street in Manhattan's SoHo neighborhood is to close at the end of next month."

Phi was founded by Susan Dell, wife of billionaire Dell computer magnate, Michael Dell. It's indeed tough times for the fashion industry when the wife of a billionaire senses that funding a luxury brand is no longer a worthwhile investment. Video clip below of the Phi Spring/Summer 2010 runway show -- their last gasp:

In similar news, Hugo Boss announced that it's closing a Cleveland plant and laying off 300 workers; Prada has been quietly laying off workers while insisting the action is "temporary"; last year, Versace was adamant that they would not participate in the dramatic discount wars, but this year is a whole different story; and a stretch of New York's Fifth Avenue has been quietly shifting from high-end shops to store fronts that peddle used (i.e. "vintage") clothing and accessories.

Japanese fast-fashion retailer Uniqlo is doing all right, though: "Excluding new store openings, sales across Uniqlo's 770 outlets in Japan grew by 21%." I guess that Jil Sander partnership is really paying off: "Hit products such as the +J line overseen by German designer Jil Sander led to a 40 percent surge in first-quarter sales, defying a slump in Japanese household spending amid job losses and falling wages."

Other quick retail news: overall holiday sales were up 1.8% from last year, though the 2008 holiday season was one of the worst ever, so a slight uptick, while encouraging, isn't the great news it could have been: "Americans are still constrained by economic factors that prevented Christmas spending from reaching pre-recession levels. And the gains were helped by a miserable December 2008 that was easy to beat."

Abercrombie & Fitch is still doing badly, however, despite the New York Post reporting that Giorgio Armani was caught gazing in bafflement out his New York flagship store windows at the crowd lining up to get into A&F. A&F reports a continued 19% plunge in sales, and the overall job situation in the U.S. is looking grim, which led to a corresponding drop in stock prices for retail companies once the U.S. December jobs report was announced.

B.) The global fashion glut has an upside: "Don't hate décor and fashion magazines for presenting what's in, what's out and buy-keep-toss trend pages. It's their job to sell us stuff. They sold us green eyeshadow last month so this month, it's gotta be purple so that their advertisers - the good folks who underwrite the magazine - can move some units and pay for those retouched ads . . . There's so much to choose from that pretty much anything goes. Really. No trend can rule. Wide tie or Cusack skinny, slim flat-front trousers or pleated harem pants . . . Pause for a minute to think about what you buy and why. Then wear whatever the h*ll you want."

By erasing the boundaries between seasons, cultures and genders in order to produce collections that can sell simultaneously in Moscow, Chicago, Singapore and Brasilia, brands have tossed previously established style rules into the shredder. Fashion has reached such a stage of democratization that we're now even encouraged to design our own (see: DIY for the New Year).

With global luxury brands continuing to shed their original identities in the attempt to be all things to all people (or, all things to all currencies, as the announced Hermes diffusion line proves), then really, as the above author stated, anything goes.

C.) The lawsuits just keep on a coming: Sigourney Weaver caught in a $5-million lawsuit between Vincent Longo cosmetic executives; trendy retailer Chick Downtown is in a heap of financial trouble; Balenciaga sues Steve Madden for allegedly ripping off its shoe design.

D.) Elizabeth Taylor's White Diamonds is still the best-selling celebrity fragrance in the U.S.: "Elizabeth Taylor's White Diamonds fragrance is the best-selling celebrity perfume of all time, according to a research company . . . The fragrance recorded US sales of $67 million in 2008, followed by Unforgivable, a scent endorsed by Sean Diddy Combs, which racked up $48.5 million."

White Diamonds was first released in 1991, which means that a nearly twenty year old mainstream celebrity fragrance is knocking the socks off of even splashy new releases. What makes the story even more extraordinary, however, is that nine celebrity fragrances pulled in over $245 million in the U.S. alone . . . in one year! Imagine how large that makes the overall global market for all fragrances and fragrance related products (scented body creams, soaps, shampoos and home diffusers).

The ad that launched an empire:

As long as we're talking celebrities, the worlds of presidential politics and celebrity endorsements have (un)officially merged: "While reading the Wall Street Journal, Weatherproof President Freddie Stollmack spotted a photograph of the president in (one of their) coat(s). He bought the rights to use the original Associated Press image, in which the president looks a bit like a gentleman lumberjack awaiting his Land Rover, and enlarged it into a mammoth billboard with the tagline: 'A Leader in Style.'"

Photo of the Times Square billboard below:

visit the site Randomly Noted for more info

The White House has objected to the use of the president as a seeming spokesmodel for the Weatherproof brand, and the billboard is scheduled to be removed . . . in 2 weeks.

On the topic of celebrities and the fashion industry, in particular, the idea of celebrities as artistic consultants a la Lindsay Lohan and Ungaro, the L.A. Times weighs in with their opinion: Celebs as artistic advisors? We think not. Yet Lady Gaga might just prove everybody wrong. I mean, she even has her own unofficial Barbie doll -- can Victoria Beckham rival that?

E.) Luxury Brand Logos resonate with Asian consumers: "Given that many wealthy Chinese only earned their riches in the previous decade or so, consumers there are eager to show their peers that they've ascended to a higher class, Ms. Telford said. A widely recognized logo serves as the clearest symbol of the wearer's success. 'If they don't recognize the brand, they don't walk through the door,' agreed Linda Switzer, head of retail at Wynn Macau, a gambling resort on the island city-state."

The article notes a Hong Kong study that showed that 68% of the Asian respondents stated that a brand name logo on an item was an important means of communicating that they were wearing/carrying the real deal and not a knock-off. Residents in the U.S. and the U.K. were only 36% and 33% (respectively) more likely to choose merchandise branded with a luxury logo.

To illustrate the popularity of established luxury brands with the Asian consumer, the author states that while Armani has 25 free-standing boutiques in the United States (its largest Western market), covering all its brands from Aramni Exchange to Giorgio Armani, they already have 45 free-standing stores in China. Undoubtedly, more are in the planning stage.

F.) Luxury brand Versace participated in a charity event by auctioning off an unpaid intern position to the highest bidder.

But the gothmaist notes that it's difficult to consider it a particularly charitable move on Versace's part when they're getting free labor in return for their "donation".