Luxury & Fashion Biz News: June 17th, 2011 (Of Louboutin, Social Unrest and Fake Street Cred)

1.) Christian Louboutin Sues Over Red-Soled Copycats — YSL Hits Back:
“Last month, Christian Louboutin hit Yves Saint Laurent with a $1 million-plus trademark-infringement lawsuit for the use of red soled shoes in the Spring 2011 YSL collection. Now, Saint Laurent has filed court papers, alleging that Louboutin fraudulently claimed ‘exclusive’ use of red soles in his trademark application and is illegally trying to monopolize a style that he didn’t invent.”

And YSL has a point — it’s unlikely that Louboutin was the very first shoemaker to ever put a red sole on a pump, but that’s just YSL arguing the technical letter of the law without acknowledging what’s really going on, which is that Louboutin so popularized the use of the red sole on his shoes that he pretty much owns the style anymore, because any shoe with a red sole is simply assumed to be a Christian Louboutin, for good or bad.

All of Louboutin’s competitors know this, and most have refrained from using the red sole on their own shoes out of respect for the designer’s creative success (it’s not easy building up a global shoe business, much less singlehandedly). Versace tried the same thing back in 2008 and was promptly slapped with a lawsuit, with the LA Times commenting that: “The shoes I have seen so far are beautiful, but that red under sole is a direct rip-off of Christian Louboutin . . . With all these designers speaking out on counterfeits and copycats, it seems déclassé for Versace to nab a competitor’s signature.”

But times are tougher for fashion labels now than they were in the heyday of easy credit bolstering the bottom-line of department stores and boutiques, and competing designer labels are more willing to make bold grabs for a smaller slice of the pie. Sensing a weakness in Louboutin’s trademark argument — that while he may be the most famous designer to have painted a sole red, he’s not the first — even Brazilian shoe label Carmen Steffens has been painting their soles red, and getting a face full of lawsuit for the trouble.

But they’re holding firm: “Gabriel Spaniol, the brand’s international development director, said: ‘We are ready to provide unassailable evidence that we have been using colored soles, especially red, before Mr. Christian Louboutin popularized his.'”

UPDATE 08/12/11: This blog-post originally published with the claim that the Louboutin company was owned by the Gucci Group, which also owns the YSL brand. I’ve been attempting to locate the article/site where I read this information, yet cannot seem to find it anywhere (if, indeed, it existed at all). So my apologies — it looks like I may have hallucinated that bit of info.

*NOTE: In a country like China, it’ll be the well-known color of the sole, not the name of the brand, that will drive sales. And the Louboutin label is likely too small, and without the benefit of heritage, to properly exploit such a valuable stylistic flourish. Advantage YSL?

But speaking of China: Zero Hedge, a no-holds barred site that cuts neatly and cleanly through all the BS chatter about the state of the global economy, posted a recent article titled, Why The Wheels Are Falling Off China’s Boom: “Much of the ‘growth’ and profits have come from ruthless exploitation and predation. The civil unrest that is igniting all over China is partly a result of continual, grinding oppression and predation by the local Elites. Thugs push around poor vendors–is this your idea of ‘rule of law’? How about pushing peasants off their land for luxury condo developments? This sort of exploitation by local authorities and their cronies draws a ho-hum response from the Western media; corruption and predation has been normalized–unless you’re the one being pushed off your land and given a pittance in compensation.”

The full article is worth reading if you’re at all buying into the idea that China’s economy will be the unequivocal savior of troubled luxury brands.

Another warning sign on the road ahead for China: China’s ‘Wealth Drain’: New Signs That Rich Chinese Are Set on Emigrating“Nearly 60% of people interviewed claim they are either considering emigration through investment overseas, or have already completed the process, according to the 2011 Private Wealth Report on China published by China Merchants Bank and a business consulting firm Bain & Company. The richer you are, the study suggests, the likelier it is that you resort to emigration. And among those who possess more than 100 million yuan, 27 % have already emigrated while 47% are considering leaving.”

Reasons for emigrating from China to other countries include lack of food safety, poor water and air quality, and a growing “hate the rich” mentality that some wealthy Chinese are afraid could turn into a repeat of the brutal redistributionist policies of Mao Tse-tung.

So they’re fleeing preemptively . . . and taking their money with them this time.

And that fear of social discontent turning into mob violence isn’t entirely exaggerated: China Social Unrest Getting Out of Control“China’s security services have managed for now to curb social unrest in the southern manufacturing city of Zengcheng after migrant workers set fire to government buildings over the weekend . . . ‘I think that any amount of cracking down is going to be a little bit like in Syria,’ Enzio Von Pfeil, CEO of the Economic Time Bond Fund told CNBC on Thursday. ‘You’ve put out the flame in one section of the kitchen but then another flame erupts in another section of the kitchen.'”

*NOTE 3: More social unrest in China documented here: Chinese Street Vendor Dispute Expands into Violent Melee, and here: China unrest as hundreds protest against Taizhou land grabs, and here: Claims of injustice spur wave of unrest in China, and here: Lead poison protest adds to Chinese unrest, and here: Inner Mongolia protests prompt crackdown

“A very difficult balancing act for the Chinese”

*$20,000 Question: If the wealthy Chinese see the writing on the wall and hit the exits before the general population erupts in angry protests (that spur equally angry government crackdowns), then what happens to all the Western brands that rushed to build build build expand expand expand inside the country so that they could peddle their expensive goods to the wealthy Chinese?

2.) Michael Jackson Perfume Saga is Less Thriller, More Bad:
“That loud thudding sound you heard … was a 15-page legal complaint landing in the lap of Julian ‘Franck’ Rouas, the colorful character from the Côte d’Azur who, along with the late singer’s father, Joe Jackson, was planning to market his-and-hers perfumes that celebrated MJ, without quite using his name or likeness on the products. Turns out there may be a little problem with that. The Michael Jackson estate’s corporate entity granted Bravado International Group exclusive rights to market merchandise—including fragrances—using MJ’s name and image. Yesterday afternoon in Federal District Court in Los Angeles, Bravado filed suit against Julian Rouas a/k/a Franck Rouas and his company Julian Rouas Paris, Inc. They claim trademark infringement, dilution, and misappropriation, along with copyright infringement and a bunch of other fun stuff.”

Our favorite fragrance crank, Dr. Avery Gilbert, has been on top of this shady, unsavory deal ever since it first surfaced in January, and kept following as it got fishier, and fishier.

The UK’s Guardian is reporting that Michael Jackson’s father believes he has the right to exploit his son’s name and likeness, whether there’s a contract or not: “‘They can say whatever they want,’ Joe said. ‘I am the father, [Michael] was my son and I can decide what to do on his behalf and in his honour.'”

So, he birthed him, he owns him? Yeah, good luck with that argument.

Other smelly news:

A.) Wine Disguised As Perfume Can Only End Badly: A wine company in Europe has decided that the way to reduce consumer confusion and get more women to buy their wine is to shape their wine bottles like perfume bottles (heaven forbid they should just make better wine). The company won Innovation of the Week praise for their concept, but so far, in all the comment sections I’ve read, none of the female consumers seem impressed by the idea.

Sample comments: “This is just like some of the horrendous, completely misjudged new products that they dream up on the Apprentice. I would love to see the market research on this and what sales turn out to be like. Highly offensive.” and “If someone is so far gone that they are prepared to drink out of a perfume bottle I think confusion over which wine to buy is the least of their problems.”

And an on-target critique from Dr. Vino: “Argh, those crowded product assortments confusing women wine shoppers! Apparently the wines come in three different flavors/aromas/varieties: No. 4 Ruche – jasmine scent, No. 6 Malvasia – rose scent, and No. 8 Moscato – violet scent. What that exactly means is not clear — are they for drinking or dousing?”

Some photographic illustrations of the (clever?) bottling below:

Pack of the day: Mazzetti d’Altavilla wine-perfume hybrid

B.) LVMH moves to consolidate perfume production in-house: “I found a very interesting article in yesterday’s Le Monde, a leading french daily newspaper. It says that LVMH is insourcing back the manufacturing of their perfumes, starting with 4 recent Dior creations that are now entirely manufactured in-house and no longer by IFF, Givaudan and the like.”

While the big Flavor & Fragrance labs manage to control the formulae to designer fragrances due to the use of patented raw fragrance materials, a perfume formula itself cannot be patented (thanks to a court ruling that declares perfume formulae “non-creative”). And since the designer brands own the names and packaging, then corporations like LVMH can put whatever they want in the bottles, really — they’ve simply been using the global F&F companies out of habit, and because it’s a system that’s worked for a long time.

But brands like Chanel and Hermes broke away from the single-lab created perfume system a while back and started creating their own perfumes in-house, hiring specialized master perfumers to concoct the formulae (Jacques Polge for Chanel, and Jean-Claude Ellena for Hermes) and purchasing raw materials from whichever source they found worked best for them rather than chain themselves to the materials one specific F&F laboratory might wish to push at any given time.

Paris based fragrance journalist Denyse Beaulieu at Grain de Musc describes LVMH’s move in-house as a betrayal of the laboratory system and the (mostly French) perfumers who work for those laboratories, but I can’t find any criticism on her site of Chanel or Hermes for doing the same, so I’m a little lost as to where her sense of alarm comes from.

Beyond, of course, that she’s a fragrance writer in Paris and a lot of her new friends at the F&F labs are understandably up in arms about the whole thing (job security, etc.). In every other instance in the luxury industry, bringing design and manufacturing back home and in-house is considered a good thing: the company gains greater control over the finished product and can negotiate more successfully for better pricing and a consistent quality of raw materials without being captive to any one supplier.

*NOTE 4: Gucci established a hi-tech manufacturing plant in Italy to keep the production of its high-end leather goods in-house and under one roof, for example. I’ve yet to read anyone criticizing that as a betrayal of factory workers in Sri Lanka.

LVMH is a powerhouse within the fragrance industry, owning brands like Dior, Guerlain, Kenzo, Fresh and Fendi (and there’s that little skirmish at present over the House of Hermes), so any new move on their part is bound to shake things up. And like any other industry that’s established a comfortable groove in which it operates, yanking the needle off this particular co-dependent record is going to result in some unpleasant noise.

But let’s be honest about it — Flavor & Fragrance labs are outsourced labor, pure and simple. They may not be outsourced labor in Cambodia or Guanzhong, but why in the world should any company continue to outsource production from anyone, anywhere if they don’t especially have to? Besides, global labs like Givaudan, IFF, Symrise and Firmenich have been churning out increasingly interchangeable product for the last two decades, so they don’t really have a lot of wiggle room to carp about the loss of artistic integrity.

Even Ms. Beaulieu wrote of the latest French Fragrance Foundation awards, “That Belle d’Opium by Yves Saint Laurent won best feminine … nearly put me off my food.”

Belle d’Opium was created and produced by Firmenich.

“An over-used and abused accord” — Octavian Coifan, 1000 Fragrances

Is it possible that LVMH could do any worse?

C.) Spanish group Puig buys majority stake in Gaultier label: “Last month, it bought Hermès’s 45% stake in the house of Jean-Paul Gaultier, plus another 10% of the stock from the designer himself. In February, it officially took over the Valentino fragrance license from Procter & Gamble and this June will launch its first perfume with the House.”

The Financial Times article states the 55% ownership in Gaultier that Puig purchased doesn’t yet include the rights to the Gaultier fragrance line, which is presently held by Beauté Prestige International. But that license expires in 2016, and with Puig now holding the majority controlling interest in Gaultier, I would suspect that Beauté Prestige International’s days of creating and producing the highly profitable Gaultier perfumes are numbered.

Puig is unusual in that it’s a fragrance conglomerate that has moved into owning and producing fashion, rather than the other way around. For example, Puig has been producing Paco Rabanne fragrances for years, but is scheduled to resurrect the Paco Rabanne clothing label this coming Autumn in Paris with Indian designer Manish Arora at the helm.

Out of the fire, into the Rabanne — Manish Arora’s Fall 2011 collection

D.) Actress Helena Bonham Carter wears specially created fragrances to get into character: “My son, one of his friends’ mothers is a perfumer and for a few characters now, we discuss the character and she makes up a perfume. It really does help. Obviously, you can’t smell it offscreen — it’s not a scratch-and-sniff performance. But for me it helps because it brings a whole atmosphere.”

Which brings up a whole new interesting topic for discussion — what might your favorite fictional characters smell like? Mine’s easy: Nick and Nora Charles = booze, cigarettes and coffee.

3.) Saks Fifth Avenue Decides It Needs to Appeal to More Asian Customers:
“Saks Fifth Avenue, which currently carries Asian brands such as Junya Watanabe, Issey Miyake and Comme des Garcons, may be looking to carry more Asian labels at its stores . . . Jennings said that more Asian designers are seeking to expand into the American and European luxury fashion markets, as Asian-inspired designs and brands gain in popularity in the West.”

Might this have something to do with the emigration of wealthy Chinese mentioned previously? You can take the wealth out of Asia, but you can’t take the Asian out of the wealth — or something like that.

Other department store news:

A.) Nordstrom buys online flash sale retailer Haute Look: “Nordstrom created what could be an epic fashion merger … when it announced that it would acquire the online sales site HauteLook for $180 million in stock.”

What better way to promote new designers and merchandise than to snap up a website all primed and ready to deliver limited time exclusive sales to a wide internet audience? It’s a very smart move for Nordstrom, while also giving Haute Look access to the chain retailer’s vast purchasing network, not to mention its considerably deep pockets.

But beyond expanding into online flash-sale site territory, Nordstrom recently announced their intention to push into Canada, as well: Nordstrom Says It May Expand to Canada in First Foreign Foray.

But while Nordstrom is contemplating an invasion of Canada, they just recently announced the closing of a downtown Indianapolis location that was faring poorly: “A top Nordstrom Inc. executive said Thursday morning that the company chose to close the downtown Indianapolis store after sales plummeted when it opened a (second) north-side location in 2008. Nordstrom President Erik Nordstrom flew in from the Seattle-based company’s headquarters to notify the downtown store’s 176 employees that the store would close on July 31.”

B.) Neiman Marcus launches new discount site and concept store: “Neiman Marcus launched an e-commerce site for Last Call and new concept stores called Last Call Studio by Neiman Marcus … So far, the Studio stores are located in Dallas, TX, Rockville, MD, and Paramus, NJ . . . Average price points in the Last Call Studio stores are less than half of what is offered in full line Neiman Marcus stores so expect to find mostly contemporary brands . . . the e-commerce off-shoot for Last Call, … is comprised primarily of products purchased directly from vendors and consists (again) mostly of contemporary brands.”

Neiman Marcus already has a discount store model called Last Call Clearance, but these are located mainly near large metropolitan areas and stock a lot more high-end and luxury brands than the Last Call Studio models. The site was launched in October of 2010.

So who needs Haute Look when you can just do it yourself, right?

In related Neiman Marcus news, the retail chain reports that profits and sales are up: “Neiman Marcus Inc. said Friday that its fiscal third-quarter profit more than doubled, reflecting strong sales gains. The Dallas-based retailer also said that the 200,000-square-foot expansion of its warehouse on Pinnacle Point Drive will be finished in August to handle its growing online business.”

Chief Executive Karen Katz states that Neiman Marcus is doing everything it can to engage customers in social media formats, reaching out via Facebook and Twitter, and that “email and texting has replaced the telephone as the primary ways we engage and communicate with our customers.”

No word yet one what their plans are for “reaching out” should those savvy social media followers continue to abandon established platforms like Facebook, with over six million U.S. users and over 100,000 UK users disabling their Facebook accounts last month: Facebook traffic plummets in the US

That’s the danger of chasing after the latest tech trends — they’re outmoded and outdated by the time large companies and corporations get a plan for engagement pushed through committee. Karl Lagerfeld is sounding downright prescient when he mentioned years ago that the internet and luxury companies are not a match made in heaven.

Though Lagerfeld does love creating those WTF mini-movies for Chanel fans to puzzle over on YouTube:

Was it his intention to make a life of luxury look so sour and unappealing?

Seriously, Mr. Lagerfeld, you can stop proving your point. Please.

Hey! You know who would make a great promo film for a luxury brand? Erik Brunetti, that’s who.

Where the style is street and the artist is real

Nearly every mid to high-end brand is desperate to establish street and youth cred, yet they hire directors like Martin Scorsese to direct their promo movies. Why not bring on a genuine street artist instead, right? Seriously, if there are any marketing/PR agencies out there reading this, do us all a favor, ditch those deals with the played-out Hollywood establishment and give us the real deal.

I mean, really, if you’re trying to update your image to appeal to an edgy, younger and internationally savvy consumer, you don’t hire David Lynch:

Where played-out establishment lowers the bucket into creative bankruptcy

Whoever green-lit that project deserves a permanent vacation. In Siberia.

C.) Macy’s pairs up with . . . Giambattista Valli? Styleite is as shocked over the rumor as I am: “Valli’s clothing is beautiful, but it’s not for everyone. A lot of his clothing is very edgy and very forward thinking — they’re the kind of dresses that get noticed before the person wearing them gets noticed. Even his most basic sheath dresses call to mind a kind of sleek attitude that not everyone can pull off. Accordingly, his more complicated-looking frocks can be so beautiful they’re actually intimidating.”

Look, I know, low-high collaborations are all the rage, but they only work when they make at least some small amount of sense. Macy’s + a designer of haute couture level ready to wear whose name most customers won’t even know how to pronounce doesn’t really = hitting it out of the ballpark.

Giambattista Valli, Fall/Winter 2011/2012

I’ve never figured out why high-end designers want to drag their reputations through the high-street gutter with subsistence level labor collections anyway. No matter how simplified the concept, the execution always comes up sorely lacking. Is cheap polyester and sweatshop wages what Valli wants to sign his name to?

Well, that and the back of the paycheck Macy’s will hand him, of course.

But as I mentioned back in September of 2010: “Such thinking (and collaborating) completely explodes the myth of any participating brand’s exclusivity.”

Good night, Mr. Valli. It was so terribly nice to know you.


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