The Luxury and Fashion Biz: 07/23/10 (of Lacroix, price hikes, world trade and why Preppy still sells)

1,) New Lacroix Designer Wants to Do Couture *and* Target:
“Christian Lacroix’s new designer, Sacha Walckhoff, who now helms the label without Lacroix, is trying to pull the company out of debt and modernize it a bit. Lacroix’s passion may have been couture, but that won’t sustain a label nowadays. Many high-end designers looking to stay current and get a bunch of free marketing collaborate with mass retailers like Target. Walckhoff isn’t opposed to the idea . . . (said designer Sacha Walckhoff), ‘Lacroix is luxury, but the brand’s DNA, as the Spring 2011 collection shows, is about mixing the luxurious and the rough. This creates a large territory to play and craft something everyone could love.’”

First, it’s interesting that designers are freely admitting that working at the couture level isn’t profitable if they’re operating at hedge-funded, global distribution levels. Investors require a payday, and it isn’t haute couture and Ready to Wear that will supply that.

Second, Mr. Walckhoff is debuting a Lacroix men’s collection before getting back into the more fiercely competitive world of women’s Ready to Wear and couture, as the company is still focusing on paying off debts and (see above) a womenswear line is expensive to relaunch and market while struggling to satisfy creditors.

Focusing on menswear allows the brand to re-enter the market at a price point that’s affordable, getting them back into the fashion press, back on the retail shelves and back on the consumer radar. Fashionista writes that: “Price points are not wild for the Lacroix menswear collection-they’re comparable to other ready-to-wear labels, not couture. Pants range from $260 to $310; jackets are $1,100 to $1,400; suits are $1,600 to $2,300.”

Christian Lacroix Chief Executive Nicolas Topiol stated earlier this year that the brand needed to “rebuild itself” before getting back into womens Ready to Wear, and that he doesn’t expect a womenswear line to happen before 2012 (update: I mistakenly typed 2010 previously – sorry for the confusion); however, the brand has already signed licensing deals for eyewear, stationary and furniture. Now if they could just launch a successful Lacroix perfume, they might have some extra cash to play around with.

Meanwhile, Christian Lacroix himself is designing coins for the French mint: “Lacroix will be taking on the role of designing at the (French) Mint – which plays home to a museum, photography shows and, of course, coins aplenty (as well as a legendary designer now to boot) – but though he’ll get around to coins eventually, his first task is tackling special medals. According to WWD (Womens Wear Daily), Lacroix will design medals for marriages and PACS (that’s French civil unions) to begin with, but has future plans to create new commemorative coins using precious metals.”

The designer has also kept himself busy designing French railway uniforms and hotels.

As if to illustrate the difficult conditions for the womenswear market at present, Japanese fast fashion company Fast Retailing (owner of the successful Uniqlo chain where Jil Sander is creative head) is consolidating brands and phasing out underperformers: “‘The current business climate in the women’s wear retail industry continues to be unfavourable, due to the changing lifestyles and tastes of the young female consumers that Cabin (a Fast Retailing brand) targets as its main customers,’ a statement said.”

2.) And Here Come the Protectionist Trade Moves:
“The American Apparel & Footwear Association (AAFA) applauded the U.S. Senate for voting to renew the total ban on imports from Burma under the Burmese Freedom and Democracy Act of 2003. The affirmative vote followed an AAFA key vote letter sent to every member of the Senate urging for swift passage of the measure.”

On its surface, the ban is meant to address issues of human rights (jailed dissidents) and democracy (voting irregularities, military coup) in Myanmar/Burma, but if that’s the case, we’d have a ban on imports from more than just Burma, so is this latest move simply a round of new protectionist measures designed to filter out foreign competition, especially as the ban is so enthusiastically supported by the Apparel & Footwear Association (which has been steadily fighting the onslaught of cheap foreign goods)? It’s not like they don’t have a dog in the fight.

*Note: Not that I’m against a resistance to cheap apparel imports, but I’d like it to be driven by consumer awareness and consumer choice rather than industry lobbying, government sanctions and protectionist methods. Tell consumers what they’re potentially supporting — i.e. human trafficking, civil oppression, military dictatorships — when they purchase items from particular countries and give them the choice to put their money elsewhere; though another argument is that without the general prosperity that developing nations can achieve through trade with richer nations, problems like civil oppression, military coups and human trafficking will never end.

India also finds itself staring at the undesirable stick-end of industry protectionism, with garments from India placed on a potential blacklist, and gold chains from India removed from tarrif exemptions.

From the NYTimes: “The trade program, known as the Generalized System of Preferences (GSP), was created in 1974 to help poor countries grow economically by allowing certain goods to be imported to the United States duty-free. The protections apply to about 5,000 types of products from 131 countries, including 43 of the very poorest nations, like Afghanistan and Cambodia. Exports to the United States under the program represent a big share of exports for nations like Tunisia, Fiji and Armenia.”

On the subject of gold and India, the volatile price of gold is causing India’s consumers to think about recycling their jewelry. India is the world’s biggest gold importer, and 2010 imports are estimated to be even greater than the previous year, despite gold’s increasing prices (though some reports are noting dramatic drop-offs in gold buying).

In a recen
t interview, Suresh Hundia, President of India’s largest bullion traders’ association, Bombay Bullion Association (BBA), stated that demand in India for gold jewelry has fallen off a cliff due to the skyrocketing price of the precious metal: “There is no demand in India or for that matter in the world for gold jewellery or coins. Reports have suggested that physical demand has been on a slide. We see demand only from ETFs, which are also treading at higher levels. Prices had hit the recent highs, hence jewellery buying is almost nil at this level.”

3.) Chanel Follows the Luxury Brand Playbook and Raises Prices:
“Following the recent 20-percent price hike on classic Chanel bags throughout Europe, Madison Avenue Spy reports that now a similar increase will occur here in the states. As early as August 1, department stores and Chanel boutiques across the country may start selling the iconic Reissue, for example — currently retailing for $3600 — for as much as $4100.”

This is standard luxury brand strategy as outlined in luxury branding handbooks, such as The Luxury Strategy by JN Kapferer and V. Bastien. A brand that wishes to retain the image of exclusivity and luxury, despite the fact that it operates on a mass-production scale in some respects (such as Chanel with its cosmetics, temporary tattoos, perfumes, shoes and Ready to Wear clothing), will steadily raise prices on its most iconic goods (the classic quilted handbag, for instance) as a method of communicating to consumers a continued level of status and desirability.

Since this behavior actively contradicts what most people think of as normal retailing behavior — in a recession, lower prices because demand has decreased — continuously raising prices gives the impression that demand for the company’s goods has done nothing but increase.

Lisa Tant, editor-in-chief of Flare Magazine, noted the Chanel price increase report and posted the following to her Twitter account:

Tant_twit_report.jpg

Which is ridiculous, of course, as Chanel raising its prices has nothing to do with sticking it to a recession or how “luxe” the brand is, and it certainly isn’t “smart” except on a purely Marketing 101 scale (High Price = Luxury is a lazy concept in reality). As a fashion magazine editor, she knows this, but it’s her job to excitedly go along with the game in order to keep a major (or potential) advertiser happy.

But come to think of it, regularly hiking prices on a classic handbag isn’t much different from continuing to produce a haute couture collection that doesn’t make any money — it’s all about maintaining the “coveted” image necessary for moving millions of $30 bottles of nail polish and $50 bottles of perfume off the shelves.

In summary: it’s not the act of raising prices itself that’s “smart”, but the extent to which (or whether) the ploy succeeds.

*Note: I did pick up a bottle of the latest Chanel “it” nail polish for Louise, and she squealed with delight, so . . . maybe the color is just really cool?

Speaking of prices and luxury, Luxe Spending Rises, but Apparel Lags“Apparel spending by (the country’s richest) consumers has recovered somewhat, but continues to slide, falling 5% in the first quarter and 4% in the second quarter. By comparison, apparel spending by this group slid 8% during the fourth quarter of 2008 and 9% in the first quarter of last year.”

4.) Fashion Brands Stampede to the Internet:
“In 2009, as the worldwide luxury-goods industry fell 8%, to under $230 billion, luxury sales online were forecast to grow 20%, according to Bain & Company. Suddenly, the brands that had sniffed at e-commerce looked rather foolish . . . The difficulty of making a flat screen feel luxurious is one reason some brands refrained from selling products online, but for the final holdouts, battles with department stores pushed them over the edge. Department stores ordered too much inventory for 2009 and were left with piles of unsold clothes when consumer spending declined. The stores slashed prices — meaning less revenue for the clothing makers, along with a potential image problem when a $500 shirt sold for $200.”

Luxury-fashion brands have been struggling to regain their lustre ever since the department stores stabbed them in the back, and while the brands themselves were wary of the internet, that didn’t prevent department stores from selling those same high-end labels on the net (and sometimes at drastically discounted prices, to boot).

So now the brands are taking control over their internet image and setting up virtual shops left and right, but differentiating themselves from the department stores by offering items and color selections that aren’t available anywhere else. Rag & Bone is the latest trendy fashion brand to set up a webshop, but etailing sites from Roberto Cavalli, Gucci, Oscar de la Renta, Alexander McQueen, DSquared2, Prada, Armani and more have been popping up over the past year.

Asked if he was afraid that department stores would get angry that Marc Jacobs was opening up its own e-shop, president Robert Duffy responded: “How can they? That’s ridiculous . . . I’m the one that should get huffy that they have it on their Web site.”

In related news, Fashion Sites Try To Attract Male Shoppers — but why, when women overwhelmingly shop more at fashion sites than men? For example, shoppers at Gilt are 75% female, 70% female at Rue La La, and 80% female at Haute Look. Well, here’s the reason to bother with the guy shopper: “Men may buy less than women, but they spend more. Affluent men, those with income levels in the top 20% of U.S. households, spent an average of $3,970 on Internet purchases during the fourth quarter of 2009 compared with $1,958 for women, according to Unity Marketing.”

So bump up the male shopping population and bump up the amount spent on that respective site as a result, goes the thinking. It’s a nice theory, but that pesky sluggish economy might just put a damper on that nice theory: “Blake Hallinan, a director in the consumer and retail investment banking group at Bank of America Merrill Lynch, noted that Merrill recently cut its forecasts for GDP growth for the year to 3% and, for 2011, 2.5%. Many economists last month began shaving growth projections as the rebound has been tamped down by persistently high unemployment, low consumer confidence and fears about Europe’s sovereign debt crisis, among other factors
. “

Internet retailers are fairly confident of their ability to continue growing, nonetheless, citing evidence of rapidly expanding net shopping even through the present recession’s worst months. Federico Marchetti, CEO of YOOX, stated that “we are just at the beginning of the [e-commerce] story, not in the middle and not at the end.”

To underscore that point, online fashion e-tailer FarFetch.com reports that “Visitor numbers have increased over 70% every six months since launch (in October of 2008) . . . and went up 105% in comparison to the last six-month period.”

The internet is on fire (don’t put it out!).

5.) Huge Counterfeiting Ring Nabbed:
“Federal prosecutors in Maryland announced the indictments Friday of nine people on charges of smuggling 120,000 pairs of counterfeit Nike shoes and half a million counterfeit Coach handbags through the Port of Baltimore . . . The merchandise also included thousands of counterfeit Coach and Gucci shoes, 500 counterfeit Cartier wrist watches and counterfeit Viagra pills . . . The investigation also led to the arrests Thursday of six men in London, in what authorities called one of the biggest counterfeit goods seizures in the United Kingdom’s history.”

It’s estimated that counterfeit goods account for up to 7% of all worldwide trade, though that number could be higher as authorities are unable to accurately assess the actual size of the counterfeit problem. Tim Phillips writes in ‘Knockoff: The Deadly Trade in Counterfeit Goods‘ that if this number is accurate, and China is responsible for two-thirds of these counterfeit goods (as is thought to be the case), then it’s against their own best interests for the Chinese government to put a stop to counterfeiting as their country’s very economic survivial depends on the continued, if not growing, manufacture and exportation of counterfeit goods.

This is why you see the very luxury companies that have been impacted the worst by counterfeiting setting up shop in China nonetheless. The belief is that if they can encourage the legitimate manufacture and sales of their goods in China, it will then encourage the legitimate Chinese producers and retailers to petition the government to crack down on the counterfeiters.

Video clip below of a segment from the CNBC news report, “Crime Inc.: Counterfeit Goods”:

As long as we’re talking about luxury brands in China, Hermes Raises 2010 Sales Growth Forecast, Expects Higher Operating Profit“Demand for luxury goods is accelerating as Chinese shoppers buy more high-end clothing and accessories, and U.S. and European retailers replenish inventories after the recession. Hermes sales gained 23% in the first half and the company said operating profit rose at a faster pace, helped by growth in high-margin products such as textiles, leather wear and watches.”

Hermes is also forging ahead with their exclusively Chinese manufactured and retailed subsidiary, Shang Xia. The brand will be marketed and sold completely separate from the Hermes name, and is expected to launch this September: “Luca Solca, luxury analyst at Sanford Bernstein, said the company’s move was ‘a demonstration that their high-end price focus is not as effective in capturing aspirational demand when you compare that with mega-brands such as Louis Vuitton and Gucci. ‘Besides, Herm├Ęs was late in getting to China, and now stands behind, in consumer recognition, not only Louis Vuitton and Gucci, but Burberry and Prada as well.’”

INDUSTRY QUICK HITS:

1.) The Las Vegas strip succumbs to discount fever: “While some businesses struggle to survive in this economy, one store is taking its chances on the Las Vegas Strip. And so far, tourists are welcoming the clothing store with open arms . . . Ross Dress for Less has opened up its second shop on the Las Vegas Strip. ‘I wouldn’t even walk into a store like Tiffany just because I know that I couldn’t afford it,” said Kris Huber, tourist . . . The store is geared to tourists. It provides two levels full of clothing. For Rishelle Vega, a store like this on the Strip is long overdue. She says high-end stores don’t fit her budget. ‘I go there, but I go there thinking it is a museum. I can look and some I can touch but I can’t buy that. I can’t afford that,’ said Vega.”

Oh, ouch! These have to be painful words for any luxury retailer to read, but it also hints that the days of high flying, bling shopping, haute cuisine, ever exclusive Vegas may be over. Welcome back to the family friendly days of discount air faires, discount hotel rooms, all you can eat casino buffets and budget shopping.

2.) Roberto Cavalli teams up with Coty to revitalize his sluggish perfume line: “Roberto Cavalli Group, an Italian fashion brand, and Coty Inc., a leading global beauty company, have announced that they have signed a license agreement for the creation, development, and distribution of ‘Roberto Cavalli’ and ‘Just Cavalli’ fragrances. The new agreement with Coty will start in July 2011, when the existing fragrance license agreement for ‘Roberto Cavalli’ and ‘Just Cavalli’ expires.”

I’ve always thought the Cavalli brand was ill-served by ICR-ITF, the Italian company that presently holds their fragrance license. The bottles are bland (when not downright awful — Abigail at I Smell Therefore I Am sent me a Cavalli bottle recently just to show me how they ruined a potentially interesting design concept by covering it in cheap plastic) and the scents themselves are unmemorable. A partnership with a much bigger global fragrance player like Coty should be a very good thing for Cavalli.

In other fragrance news, Jennifer Aniston launched her first celebrity fragrance this past week but changed the name from “Lolavie” to “Jennifer Aniston” at the last minute to avoid confusion with (or maybe a lawsuit from?) Marc Jacobs Lola.

3.) Say Hello (again) to American Preppy: “Just like European currency, European men’s wear has been in the dumps lately. Suddenly all that rigorous, over-designed and unwearable stuff cranked out by Raf Simons and his ilk seems as inadvertently retro as a Eurail Pass . . . Signs of this are visible not only in the brisk business Ralph Lauren’s new restaurant in Paris is doing selling le hamburger to the French (whose not-so-secret secret for staying slender, if you will forgive the digression, is cigarettes: in Paris even dogs and infants smoke) (but also) in the flurry of prepublication attention generated by ‘True Prep: It’s a Whole New World,’ the follow-up to the best seller ‘The Official Preppy Handbook,’ published in 1980.”

Video clip below of Raf Simons:

Vs. American sportswear brand Michael Kors (Kors often shows his mens and womenswear together):

So it’s not just me — the clean, casual lines of an American designer like Kors appear to hold a globally unfussy appeal during a time when culture, politics and economics seem burdensome and complicated. At least our eyes can relax, even if our brains can’t seem to catch a break.

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