Luxury Industry News: 06/04/10

1.) Why Luxury Brands and Celebrities Don’t Always Mix:
“What I wonder is if Lady Gaga sits in her spacious first class seat as she flies from location to location with a glue gun and a bag of studs working on her handbag-art-project. You know, with anyone else I would be shocked, but this is Lady Gaga. What else can you expect? Her outfits and her entire persona is there for shock value, so at least she is staying true to herself and making sure each and every item she wears gets the attention she is seeking.”

Hey lady, do you have a license to carry that . . . handbag?

Poor Hermes, they spend generations carefully defining their company and product line as the zenith of luxury only to have some pop-tart take a biker-chic bedazzler of a shine to one of their most coveted products. It might be even worse an image association than the circa 2007 photographs of Britney Spears giving a near crotch-flash in an L.A. parking lot while clutching a crocodile skin Hermes Kelly (plus scraggly toy dog) in one arm.

But I find the above story more interesting for how Lady Gaga was fully aware that biker-studding an Hermes would get her way more attention than if she’d done the same to, say, a Chanel or Louise Vuitton — exemplifying the difference between the brands and their respective status among consumers.

The Hermes “dream” is one of hand-made refinement and classic style elevated high above mere fashion trends (as well as mere working-class mortals), which is why Gaga’s rock-n-roll attack on her Birkin comes across as almost shockingly transgressive (in a fashion sense) and so earns her plenty of inches in the gossip columns and style blogs.

But Chanel is fronted by social-transgressive extraordinaire, Karl Lagerfeld (against whom the likes of Gaga just can’t compete), and Louis Vuitton has already admitted to machine-making the majority of their products in factories while utilizing the tabloid-grizzled likes of Madonna and Keith Richards as advertising props, so the resulting quakes wouldn’t have registered even a mild blip on the cultural Richter scale if she’d stun-gunned a 2.55 or a Suhali.

*Note: You can’t transgress a luxury brand that’s already transgressed itself.

Lady Gaga and Louis Vuitton/Chanel are birds of a mainstream, pop-culture feather, icons that surf trends and incorporate previous ideas into new works, holding splashy attention getting events (concert stunts and late night interviews) and regularly issuing PR alerts over their latest moves (shop openings and advertising campaigns). So it was only by “defacing” something of an alleged cultural value placed higher than her own (one brand to another) that Gaga could provoke the shock, outrage and surprise she was hoping for.

In somewhat related, though Karl Lagerfeld focused, news, our favorite fashion curmudgeon has been awarded France’s Legion of Honor medal, presented by President Sarkozy, who had this to say about the indefatigable Karl: “‘I really enjoy your company because next to you, I feel calm, quiet and a bit of a drudge.’ Note this statement came from a man known alternatively as ‘Speedy Sarko’ or ‘the hyper-President’ by the press, disparaged among his elder peers for a habit of shortening state visits in order to get back to work.”

And on the Louis Vuitton news front, parent company LVMH has sold its Chateau d’Avize holding, a French champage maker, to an oil tycoon who reportedly wishes to diversify his own portfolio beyond credit crunched Russia. Champagne sales have fallen in Russia for two straight years, a 6.9% drop in 2009 following a 3.7% slide in 2008. An LVMH spokesperson stated that their own champagne sales have increased by over 30% for the first quarter of 2010 in comparison to 2009 — which seems like an odd reason to sell one of your champagne makers, oui?

Perhaps the future is a little less bright, which leads us to:

2.) MasterCard Advisors SpendingPulse for May ’10 (U.S. Industries Report):

The MasterCard SpendingPulse report is issued monthly, compiling recorded sales data for a comprehensive look at the state of the economy. The report for May 2010 was not good, with retail sales in May dropping 3.7% below May of last year, the second month of declines after sales looked like they were on an uptick for the first quarter of the year.

The report notes that spending on luxury goods was up nearly 10%, but that stock market volatility is predicted to be a drag on luxury spending for the remainder of the year as spending for luxury goods rises and falls with gains or losses in the stock market.

iStock Analyst states that “Higher unemployment claims, regulation reforms and euro troubles contribute to the Dow’s slide”, with a blog at Forbes magazine writing that the Labor Department’s latest U.S. jobs report was very bad news: “Only 431,000 new jobs were created in May versus the consensus forecast of 515,000, and most of the new jobs, 411,000, were temporary census-taker jobs. Minus those, there were only 20,000 new jobs created in the combined private and government sector. A dismal report.”

It takes an increase of around 150,000 new jobs created every month just to keep the U.S. economy at maintenance level (never mind growth), which makes an increase of only 20,000 private sector jobs a horror movie of a report for retailers.

And now it looks like another European country is on the brink of economic collapse — Hungary: “‘Today you got a postcard from Hungary – all is not well, send money. It’s a reminder that the debt issues are still there and they’re serious and significant,’ said Karl Mills, manager at Counterpoint Select Fund.”

And there’s more: Global rebound anemic: “A sovereign debt crisis in the euro zone has rattled financial markets in recent weeks as investors worry that fiscal austerity measures dictated by a $1 trillion European Union-International Monetary Fund rescue plan could stifle already hobbled global growth. In contrast, some emerging markets risk overheating and are showing symptoms of a potential asset bubble.”

And even more: Mideast luxury sales seen stagnant in 2010“Dubai, the luxury capital of the Middle East as well as its tourism and trade hub, was hit hard by the global financial crisis and a real estate crash. Expensive tastes for designer clothes, luxury watches, fancy cars and gold-plated mobile telephones accompanied the boom, but the global economic downturn led to a drop in the number of tourists visiting the cosmopolitan emirate, damping demand for luxury goods.”

This piling on of bad news is giving financiers/investors the jitters, and financiers/investors don’t buy Swiss watches, French scarves, African diamonds or Italian handbags for themselves or their significant others when they’ve got a bad case of the jitters (see: October 2008).

In other news, Louis Vuitton just opened a glitzy megastore in London:

Calling all worshipers to the temple

A brand that positions itself as “luxury” has to put a smile on its face and throw a party, no matter the economic outlook, as true luxury is supposed to be immune to the jitters. And while a certain, small segment of the world’s population certainly is immune to economic vagaries, global high-end brands have increasingly come to rely on “entry level” products (keychains, pens, lighters, sunglasses, diffusion brand t-shirts and jeans, etc.) to finance their expansions: “It used to be, if it’s not unique and exclusive, it’s not luxury, right? Now what we find is that Louis Vuitton has entry-level products, Tiffany … All these brands that have the halo of luxury, but that also sell entry-level products and are fairly ubiquitous, have done the best.”

But there’s continued debate over the long-term effect (damage?) of entry-level items and diffusion brands on a brand’s reputation. The Schmoozy Fox blog writes that, “Diffusion brands are a good way to target consumers who are usually much younger than the main target market of parent brands. They can tap well into the trend of status consumption … by which individuals strive to improve their status through the conspicuous consumption of consumer products that confer and symbolize status”, while the authors of the book, The Luxury Strategy, warn that the creation of entry-level products and second or third tier diffusion lines, while not bad in and of themselves, are “death by dilution, dispersion or evaporation of the brand content” — they cheapen the true luxury brand and pull its reputation down to premium or masstige levels.

A June 4th Reuters article reports that, “Many European luxury groups have widened their entry-level offering to lure more shoppers, but if the strategy brings short-term gains, it risks causing the brand long-term pain.”

The example of Valentino is used for the article, noting that the brand, famous for its couture evening and cocktail gowns, is now offering t-shirts and other casual wear to boost its bottom line: “But some luxury experts say Valentino’s ‘Couture T-shirt,’ even with a price tag of ‘only’ 300 euros is an oxymoron”, yet Valentino Chief Executive Stefano Sassi says, “We are not stretching down the brand. We are trying to say that you can be both couture and contemporary.”

Speaking of “luxury” t-shirts, you can now buy that Balmain t-shirt you always wanted, and for an entry-level price of $1,025.00 — $600.00 off the suggested retail price.

Yes, I know.

Balmain Spring 2010 — we’re worth only what you’re willing to pay

How convenient, then, that Balmain has just opened its e-commerce site. Go forth and pay a lot, I guess.

Regarding t-shirts, luxury brands and seasonal discounts, another point the authors of The Luxury Strategy make? Luxury never goes on sale: “There is a total divergence between luxury and fashion, and we can even say that this (discounting prices to move unsold merchandise) is the concrete aspect that most differentiates a luxury brand from a fashion brand . . . the value of a luxury product should increase over time and not suddenly crumble, showing that ordinary clients have been robbed.”

3.) Hard Hit Saks Fifth Avenue Returns to Profit, But Closes More Stores:
“‘The planned closing of our Charleston (South Carolina) store is consistent with our focus of utilizing our resources in our most productive stores,’ said Steve Sadove, chairman and chief executive of Saks . . . About 60 employees affected by the closure will be offered transfer opportunities or receive severance packages.”

The Charleston store will be closed by July 17th, 2010. Their Portland, Oregon and San Diego, California locations are also set to close in July, but Sadove stated that further closings are not on the schedule at the moment (though he didn’t rule it out): “Chairman and CEO Stephen Sadove said on the conference call that the Portland store’s lease expired, the San Diego store’s lease was close to expiring, and the company didn’t see growth potential in the small Charleston store . . . ‘The number of stores we would consider closing (in the future) is very small,’ he said.”

Saks has cut inventory levels, worked with designers to create lower priced merchandise, eliminated staff and closed underperforming locations in a bid to stay competitive, efforts which resulted in a return to profitability for the first quarter of 2010, after bleeding cash through the end of 2008 and all of 2009. Sandove said that there were no plans to open new Saks Fifth Avenue locations either domestically or in other countries, but that they are moving ahead with the expansion of their Saks outlet stores: “A major prong of Saks’ approach will be to open Off 5th outlets stores at a rate of about three or four per year. Sadove said the outlets, of which there are now about 55, are profitable and do not offer discounts as deep as those at Nordstrom’s Rack chain.”

Sandove also said that their internet sales have increased by 32%, an overall retail trend that was noted in the MasterCard SpendingPulse report while also reported by Internet Retailer: “Traffic to designer and luxury retail sites increased 28% for the week ending April 10 compared with the same week a year earlier, says Experian Hitwise, which measures Internet traffic. That’s a significant change from April 2009 when traffic to such sites fell 18% for the week ending April 11 compared with the previous year.”

I know I do the majority of my discretionary spending online. I find it much easier to suss out the best style and price for a pair of jeans when I can comparison shop around the country from my comfy living room chair. I’ve had enough of hauling my a** to a brick and mortar store only to discover they don’t have my size in pretty much everything I want. Besides, shopping at an actual store is so last century!

Also Saks related: Weak Euro May Not Boost Saks Appeal“A weak euro could even work against luxury retailers. When the euro was strong, European shoppers flocked to New York, where Saks, for example, generates a large portion of its revenue. A weaker euro could hit such spending.”

4.) Liz Claiborne Isn’t Feeling Quite So Lucky Today:
“A federal judge has ordered Liz Claiborne Inc to pay $300,000 in damages after ruling that its Lucky Brand Dungarees infringed the trademark of Marcel Fashion Group’s “Get Lucky” apparel line . . . a jury cleared the Get Lucky line of trademark infringement because Marcel Fashion had used it continuously since 1985, years before Lucky Brand was even formed.”

The Liz Claiborne company originally reached a 2003 agreement with Marcel Fashion not to use the phrase “Get Lucky” in any of their promotions for Lucky Brand merchandise, but filed the lawsuit against Marcel in 2005 when the fashion group started using a clover symbol (similar to the Lucky Brand clover trademark) on their “Get Lucky” brand.

That this case went all the way to a jury trial is unusual, as companies are generally motivated to settle trademark issues before they hit the costly and completely unpredictable courtroom trial phase. But the $300,000 punitive award was considerably less than the $30 million the Marcel Fashion Group allegedly countersued for.

But now Lucky Brand jeans has lost its protected trademark, which is serious punishment in itself.

In other brand news, Jones Apparel has completed the first stage of its acquisition of the Stuart Weitzman company. Jones paid $180 million for a 55% controlling ownership stake in Weitzman, though Stuart Weitzman will continue on as CEO.

Jones is presently in growth mode, looking for new “accessible luxury” brands to acquire, plus expanding into China, rolling out Nine West and Anne Klein sportswear specifically created for the Chinese market. The Jones Apparel Group includes brands such as Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Robert Rodriguez, Easy Spirit and Energie.

Lebury Research called the “accessible luxury” trend back in 2004, and explained it this way: “At the heart of ‘accessible luxury’ is the positioning of a given brand as having nearly all of the attributes of a luxury brand – high production quality, design-led, premium materials, a strong emotional engagement with the customer etc. – but with a price point that is slightly lower, and an acceptance that its target market is now perhaps the top 20% of consumers rather than the top 2%, hence re-defining ‘exclusivity’.”

The Stuart Weitzman brand is very much in the “accessible luxury” category that’s attractive to the Jones Group, available in major upscale department stores (Neiman Marcus, Nordstrom, Saks Fifth Avenue) and with a lineup of accessory products that are similar to higher-end designer names (like Christian Louboutin and Jimmy Choo) but openly utilizing outsourced labor and materials, costing hundreds (if not sometimes thousands) of dollars less as a result.

5.) Oscar De La Renta Sees A Future In India:
“Oscar de la Renta sees more promise in the Indian market for high fashion than in neighboring China . . . Top luxury industry executives told Reuters this week that China represented their biggest opportunity as a new market for everything from jewels to cosmetics. But Oscar de la Renta Chief Executive Alexander Bolen said the tradition of fine dressing by women in India was more suited to the company’s own aesthetic.”

A separate Reuters article reported that de la Renta was also eyeing expansion in London rather than Paris, as CEO Alex Bolen stated that the proper retail location for a de la Renta boutique is prohibitively expensive in Paris at this point. He noted that the recent depreciation of the British pound has made opening a flagship in London more affordable than it has been in the past.

*Note 2: One thing I noticed while walking through the different shopping districts in Paris this past May was the distinct lack of available space for lease. This was in marked contrast to, say, when I went walking down Madison Avenue in New York City in April, where it was distressing, but not unusual, to see an empty storefront with a “For Lease” sign in the window.

International sales presently account for only about 30% of de la Renta sales overall, with Bolen saying he’d like to up that number to about 50%. Bolen also noted that increasing their inv
entory efficiency has resulted in better product movement, with most of their shop merchandise selling at full price this year as opposed to the glut of sale merchandise in the past couple of years: “‘It’s OK to be out of stock on some things . . . I’d much rather be there than where we were in ’08.'”

Video clip below of de la Renta’s briskly selling Spring 2010 collection:


A.) The Clash of the NYT Fashion Critics: Suzy Menkez sees the recent hiring of non-star designers to creatively helm big fashion houses as a sign that brands are shunning the outsized personalities in favor of talent that will work more closely with executive teams rather than driving collections solely on wattage and force of will; Cathy Horyn, however, says that brands aren’t hiring Tom Ford, Karl Lagerfeld, Jean Paul Gaultier type names because there are none of these types of big names and personalities available for hire.

Suzy Menkez: “Today’s role model is not Karl Lagerfeld, appointed designer at Chanel in 1983. Nor is it John Galliano, who has been shaking up Dior since 1996. It is rather the multitasking Christopher Bailey at Burberry, who last year was given the title of “chief creative officer” to encompass his overall role as merchandiser, brand manager, information technology innovator, advertising inspiration and e-commerce controller — all alongside his main day job as design director.”

Video clip below of hard working Christopher Bailey’s Spring 2010 collection for Burberry:

Cathy Horyn: “The problem is there are just not enough of such hard-working, all-seeing individuals in the industry. With a number of companies now being run by equity-market managers, you can bet your bottom dollar that they would love to get their hands on an experienced design maestro — if more were available.”

They both have a point.

Speaking of outsized personality designers, Roberto Cavalli has insisted that without him, there’s no Cavalli: “perhaps the most shocking thing he had to say was that if he got hit by a bus tomorrow, that Cavalli would cease to exist. There would be no new designer, ‘nobody’ he fiercely said when asked about the future of the brand.”

B.) World Cup Trophy Gets Louis Vuitton Case, Becomes Clichéd Teenage Girl: “The World Cup trophy case was unveiled today with various people who had a hand in designing the case and Naomi Campbell, who aside from being regular party to court hearings is also close with Nelson Mandela. The case was made by Louis Vuitton, which is why you can see (their) logo all over the side of the case, rather than anything World Cup related . . . It’s also a shame they didn’t complete the cliché trifecta with a Burberry scarf and the trophy sitting comfortably in an Ugg boot.”

I just thought that was hilarious, so wanted to share.

C.) Watchmaker Movado to close 26 of its 27 retail stores: “Movado announced that they are closing 26 of their 27 regular price boutiques in an effort to streamline their business and focus on wholesale and retail outlets. They are keeping their Flagship store in Rockefeller Center in New York as the only shop selling regular priced product, while they have 31 outlet stores.”

Movado markets their own watch brands under the Movado, Concord, Ebel and ESQ names. They also hold licenses for Coach, Hugo Boss, Juicy Couture, Lacoste and Tommy Hilfiger.

Hey, speaking of Coach, there are two pieces of news: #1) Coach has re-entered the Mens business — with an expanded men’s selection online and a stand-alone boutique on Madison Avenue — after abandoning their male clients in the 90’s when women’s accessories emerged as the big moneymaking scheme of the century (do I sound bitter? I hope so, because I am!); and #2) They’re releasing a new perfume called Poppy, named after their best-selling line of bright, affordable bags aimed at young female consumers.

The Poppy fragrance also appears to target the young female consumer, including (but not limited to) snack-friendly notes like cucumber, mandarin, candied rose petals, crème brûlée, vanilla and whipped marshmallow. Sticky!

D.) Japan’s high-end Ginza shopping district changes along with the Japanese economy: “The current transformation is rooted in the deflationary pressures depressing the economy, which has made consumers more cost-conscious and less likely to splurge on an expensive handbag or clothing from a high-end Western brand. This has created an opening for fast-fashion shops like Fast Retailing Co’s Uniqlo, Inditex’s Zara, Forever 21 and Abercrombie & Fitch Co, all of which have established outlets on Chuo Avenue, Ginza’s main thoroughfare.”

Yet one more piece of evidence that the marriage of high and low is more than just a passing fad.


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