Luxury & Fashion Biz News: March 30th, 2012 (Kors vs. Coach, online shopping is kicking retail’s a**, and H&M goes upscale)
1.) Michael Kors and Coach Battle It Out for Accessories Customers:
“Since the (Michael Kors) company went public three months ago, his ambitions have become clear. Michael Kors aims to more than double its North American store fleet to 400 and more than quadruple to 1,000-plus its department-store boutiques. Michael Kors will operate in malls and street locations, like Coach, sell accessories-heavy collections, like Coach, and focus on “accessible” luxury, yes, like Coach. While both companies can thrive in the fastest-growing part of the U.S. luxury-goods sector, Kors may steal Coach customers.”
Coach reported a 15% increase in both sales and revenue in its last quarterly report in January of 2012, with strong sales and new store openings in Japan, North American and China, but other companies see the typical Coach customer as ripe for the taking — that the customers are more loyal to Coach’s “affordable luxury” price points than they are to the brand itself.
Bright colors, soft leather, chunky hardware and prices below $400 have made Coach a success
The Bloomberg article notes that Michael Kors company revenue is driven by sales of its accessories — 62% of its sales, to be exact — and that its handbags, like Coach, typically stay under the $400 price barrier in its lower-priced Michael by Michael Kors diffusion line, which is a much more profitable and better selling line than his upscale Michael Kors brand.
In an article for Forbes magazine, Michael Kors CEO John Idol states that, “The pure luxury accessories market was a crowded field with Prada, Louis Vuitton and others, but in the accessible luxury market there was Coach and not a lot of other competitors.” And now the Michael by Michael Kors line offers shoes, handbags, sunglasses and watches . . . just like Coach.
But it’s not like Coach is caving in under the pressure of competition. They’ve launched their own perfumes (to challenge the likes of Michael Kors and Ralph Lauren, for instance), they’ve reopened their menswear division and have dug deep into their archives to launch a retro-inspired collection that caters to a new consumer interested in color and style but without a bunch of flashy logos involved.
And all at prices that remain within that splurgy but still affordable $200-$400 sweet-spot.
It’s a tough retail world out there, and the competition for the mid-level consumer is getting nothing but more intense. The already established luxury brands (Prada, Louis Vuitton, Hermes, Chanel) have pretty much nailed down their customer base, with very little room for up and coming labels to crack the ranks, but the lower-priced market is about value for the dollar — the best quality that can be purchased at a mid-level price. In that kind of environment, anyone can make a splash.
For example, the small Rebecca Minkoff company has teamed up with private equity fund TSG Consumer Partners in order to grab its own chunk of that exact same mid-level accessories market. And while Minkoff is presently a $35 million dollar company, they’ve recently expanded from womenswear & accessories into men’s accessories, too, so I don’t think they intend to be taken lightly.
Rebecca Minkoff Spring 2012 – bright, bold and full of accessories
*Speaking of menswear: Menswear fuels global luxury boom, executives say — “Whether it’s a desire to be as dapper as Don Draper on television’s ‘Mad Men,’ a need to look good for a job interview or just a hankering for new duds, men have increased their spending on fancy clothes, and executives expect the boom to continue . . . The global luxury menswear market is growing at about 14% a year, or nearly double the pace of luxury women’s wear, according to consulting firm Bain & Co.”
Also: WWD reports that Tom Ford has opened a three story menswear boutique in Paris, selling “eyewear, fragrance, footwear, accessories, sportswear and tailoring collections”; executives for French global luxury conglomerate PPR said that “one of the largest factors driving growth in the global luxury sector is the desire of more men to ‘take better care of themselves’”; and TVNZ reports that while men don’t shop as often as women, they’re more loyal to the stores and brands where they do shop — so if a brand can hook a male customer, they might possibly have them for life.
2.) Up to 40% of UK High Street Stores Could Close Over the Next Five Years:
“Four out of 10 shops will have to shut in the next five years as consumers turn their backs on traditional stores in favor of online shopping, according to a report which casts more doubt on the future of the beleaguered British high street . . . consumers shop more on the internet, with online sales forecast to reach £43bn by 2015, accounting for 14% of all retail sales. Some 22% of people did not buy their last item of clothing or accessories in store, and only 9% of customers want to see the full product range in shops.”
Other articles in the news have mentioned that the days of big box warehouse type stores may be over, now that online shopping has become more common and frequent. That when a store’s main selling point is convenience and low prices instead of customer service and a knowledgeable sales staff, there’s nothing to keep consumers from preferring to shop online rather than making a special trip to the actual shop.
Businessweek reports that the Best Buy retail chain is closing 50 of its largest stores and opening 100 smaller retail locations instead, and that chains like Wal-Mart and Target are following suit, emphasizing smaller locations and shops within shops.
Amazon — which sells everything from electronics and household goods to food and fashion — is reportedly benefiting from the migration to online shopping.
Even luxury brands — some famously reticent to establish online shopping — are having to adapt to the desire to shop online, with large consumer groups in India and China turning to online resources to find the goods they perhaps can’t access locally.
“Earlier, only youngsters were experimenting with buying stuff on the Net. Now, even the mature customer is getting accustomed to e-commerce, opening up an avenue for premium and luxury labels,” said Abhay Gupta, CEO of the newly launched Luxury Connect in India, while China Daily reports that “For the first time, the turnover of China’s online luxury goods shopping market has exceeded 10 billion yuan ($1.59 billion) and the market is likely to continue expanding at a year-on-year increase of 30 percent over the next several years.”
And as I noted in last week’s biz post, international online shopping has become so prevalent in countries like Australia and New Zealand that retailers are lobbying their government representatives to slap duties and taxes on all imported goods, no matter how low the value.
*NOTE: In a 2009 article, Karl Lagerfeld said that “the Internet does not convey ‘the unique feel and sophistication of luxury materials, refined tailoring and extraordinary attention to detail found in luxury fashion’ — He added that shopping for high fashion required a ‘multi-sensory environment’” — but fast forward to 2012 and we now have Karl.com
It’s amazing how fast you can be forced to eat your own words in the digital age.
*RELATED: Milan lags behind in fashion’s Internet revolution — “With social network sites and smartphone apps making rapid inroads into the fashion world, observers say Italy risks falling behind even as its luxury brands feel the pain from the economic crisis.”
Though, to be frank, Prada is one of the Milan fashion houses that’s not feeling much pain at all: “Italian fashion house Prada beat forecasts with a 72% rise in annual profit, joining the ranks of luxury companies to benefit from a growing class of wealthy shoppers in China and other Asian countries.”
Over 42% of Prada’s growth was due to sales in the Asia-Pacific region, with the United States and Europe clocking in at distant 20% and 16% growth rates, respectively.
Prada’s flaming hot girl-on-girl Spring 2012 ad campaign
By contrast, struggling luxury-brand Versace — which reported losses for 2008, 2009 and 2010 — just returned to profitability in 2011 but expressed only “cautious optimism” for its prospects in 2012.
A good reason for Versace’s return to profitability in 2011 could be traced directly back to the money it received for its collaboration with global fast-fashion chain retailer H&M, yet many H&M stores reported “a more than small amount” of returned Versace merchandise from dissatisfied consumers, so it’s unclear as to whether the arrangement was as good for H&M as it was for Versace.
*NOTE 2: Another sign of the potential weakness of the Versace brand — construction of the Palazzo Versace hotel and residences in Dubai is four years behind schedule amidst a weak marketing budget and a lack of demand from real-estate buyers. Adding insult to injury, competing Italian lifestyle label Armani has had its Dubai Hotel & Residences up and running since 2010.
*And as long as we’re talking about H&M: “Those H&M rumors have been confirmed: Hennes & Mauritz will be launching a new, upscale(ish) retail chain. As a rep from the company told WWD the concept would be similar to Hennes & Mauritz’s COS clothing line, which is trend-driven, but less so than H&M and priced slightly higher with more emphasis on fit and fabric.”
After all, why pay Versace a barrel load of cash for higher-priced merchandise that’s just going to sit in the return bins when H&M can do that perfectly fine all on their own?
INDUSTRY QUICK HITS:
A.) I don’t normally go gaga over an ad campaign, but Cartier just recently unveiled a gorgeous video ad that was allegedly two years in the making. It’s certainly worth checking out, not least because it so effectively manages to portray an air of high-end opulence while still being a video hosted on YouTube:
We’re pricier than your average panther
From “Is the Cartier ad the start of something new?” — “The ad embodies what television really should be: pure, driven and inspired creativity. It’s immediately clear the Cartier Odyssey ad is produced somewhere outside of the U.S. And it’s clear because U.S. luxury ads tend to drown viewers in excess.”
*Tragically relevant: If you’re a brand like Alexander Wang, attempting to portray your goods as hip, high-end and fashion forward, it’s best not to get caught up in sweatshop allegations and lawsuits, because then your shop windows get egged and no one looks good. You don’t see anyone egging Cartier windows, am I right?
*Even more tragically, and unsurprisingly, related: Kim Kardashian gets flour-bombed at her latest perfume launch, ostensibly as an anti-fur protest, but more likely because the whole phony-wedding fiasco turned the public against the Kardashians.
Eggs, flour . . . all we need now is sugar and a little baking powder to make ourselves a big “disappointment in crap brands” cake.
*Speaking of crap brands: Fashion industry initiative cracks down on labels that don’t pay models (and that includes you, Marc Jacobs) — “Marc Jacobs made headlines after one of his 17-year-old models blogged about being paid with just one outfit, rather than money, for 30 hours of work on his fall 2012 show . . . He Tweeted: ‘Models are paid in trade, if they don’t want to work with us, they don’t have to.’”
And for more perfume related hijinks, visit author and smell scientist Avery Gilbert‘s blog for a smackdown of cheap celebrities and the cheaper perfume companies they cozy on up to: What Do Adam Levine and Selena Gomez Have in Common?
B.) The legal claws are out as Dolce & Gabbana sue small South African jewelry store Dolce & Banana, and Gucci and Guess slug it out over the letter “G”: Gucci Accuses Guess of Massive Design ‘Knock Off’ Scheme
C.) Dior is reportedly planning to announce a head-designer by the time the July haute couture shows commence in Paris. Haider Ackermann is now rumored to be a serious contender for the job.
Haider Ackermann Fall 2012 — a good fit for Dior?