Luxury & Fashion Biz News: July 20th, 2012 (Using Hermes as link bait, Burberry has Interparfums right where they want them, and Lady Gaga revs up the perfume-hype campaign)

1.)
A deliberate traffic-grabbing tactic is to create a headline for a story that’s far more sensational than the article’s content can reasonably support. For instance, here we have an article at one of the Forbes blogs titled, “Has The Hermes Birkin Bag Lost Its Appeal?”

And at first, I was thinking, “Whoa, has Hermes finally overdone it? Have they overproduced and overhyped themselves to the point where they’ve turned into Gucci or Louis Vuitton and wealthy consumers have tired of seeing their products everywhere?” but then I read the article and the author makes the point that, far from what the headline suggests, Hermes is still one of the most desired and coveted luxury brands in Asia.

As the author writes of his experience in a second-hand luxury store in Hong Kong, “Picking out a hibiscus colored Birkin, I was told that it was brand new, straight from the box and never been used. I asked where their Birkins come from and a sales associate responded, ‘Our clients buy Birkins at Hermes stores and sell them to us. We have more stock of Birkin bags than the Hermes store,’ she said. They sell the Birkins for 50-100% more than the retail price at the Hermes store and they would not bargain down because they said there will be people who will buy them at asking price.”

Now, I’m not sure about you, but when someone tells me that second-hand shop customers are willing to cough up well over the retail price on product that’s still in production and available from the brand itself, that leads me to believe that said brand’s appeal is doing anything but waning.

Hermes womenswear Fall 2012 — “Equestrian, but in a wild way”

There’s also a statement from a Singaporean fashion blogger who states that in Southeast Asia, owning an Hermes bag is the ultimate status symbol: “It represents success, achievement and status. It shows that the wearer is a card-carrying member of the $10,000 handbag club . . . ‘For first-timers who save for months on end to buy their first very Birkin to those seasoned collectors who must have every new color or size in their wardrobe … the Birkin is more than just a bag, it’s a lifestyle.’”

And with Bloomberg news reporting that sales for Hermes continue to surge even as fellow fashion/luxury brands like Burberry and Mulberry are starting to stall, it’s obvious that inferences regarding The Fall of the House of Hermes are more link bait than anything else.

*NOTE 1: And yes, I know — by linking the article myself, I’m only encouraging them. Link-bait is a double-edged sword.

From Bloomberg: Hermes Sales Beat Estimates On Surging Luxury Demand In Asia — “Second-quarter sales surged 27% in the Asia region at constant exchange rates, accelerating from the first quarter, the company said . . . Sales climbed 6.8% in France and 16% in the rest of Europe . . . In the Americas region, sales gained 8.2% at constant exchange rates.”

But while China and Southeast Asia are great regions for Hermes, sales for the brand did see a slowdown in Japan, down 1.1% from a year earlier, and their revenues from Europe came in at nearly half their 2011 mark.

Surprisingly, ready to wear and fashion accessories (excluding leather goods) were the biggest growth-drivers for Hermes, with a sales increase of 22% over last year (leather goods revenue witnessed a more modest 7.4% bump).

But it’s not as if the likes of Louis Vuitton are rolling over and giving up. Despite recent articles that have portrayed the Louis Vuitton brand as over-exposed and losing favour with the Chinese consumer (see: Louis Vuitton so last season for China’s super chic), Vuitton is continuing to push ahead with aggressive marketing and expansion, opening an impressively large four-story shop in Shanghai on July 21st that will include a private floor where made-to-measure and custom services for invite-only clientele will be offered.

*As long as we’re mentioning consumer fatigue: Cool It, Target: Frank Calls Collaboration Fatigue — “This week Target and Neiman Marcus announced their holiday partnership—an array of more than 50 items ranging from fast fashion scrubs to Chinese-made knickknacks as imagined by 24 CFDA-certified designers . . . When will it end? Is anyone else experiencing major Collaboration Fatigue? Does anyone else not want to be anywhere near either of these stores (or the Internet, for that matter) when this stuff goes live on December 1st?”

But back to Louis Vuitton: To make sure that everyone in Shanghai is aware of their intentions, LVMH managed to purchase the entire front page of the China Daily to trumpet the news (China Daily is China’s top English-language publication).

They also shipped over the entire custom-made steam train that featured in their last womenswear show in Paris, just for the occasion (and just because they could).

Louis Vuitton Fall 2012 — next stop, Shanghai!

So, yeah, no expense is being spared to make an impression, yada yada (though it might help matters for Louis Vuitton if Marc Jacobs would stop talking about Tibet).

*NOTE 2: You’d think a smart designer would have learned that very specific lesson after the Sharon Stone + Dior fiasco (see: Dior `Deeply Sorry’ for Sharon Stone’s Tibet Comments).

*SORT OF RELATED: You know who else is reporting enviable profits? Brunello Cucinelli, that’s who — Brunello Cucinelli First-Half Revenue up Globally, Down in Italy: “The Italian luxury apparel maker’s revenue increased in most geographical areas, apart from Italy where it posted a 3% decline. In the whole of Europe, Cucinelli’s revenue went up 17%, particularly driven by sales in Russia and former Soviet Union countries. Sales in China were up 52%, led by the opening of new stores which sell only its brand, while revenue in North America was up 23%, Cucinelli said in a statement.”

“Standing apart from the crowd, but not in an obvious way”

The Cucinelli company made a “sparkling” debut on the Milan stock exchange earlier this year and has been chugging right along ever since.

But while Cucinelli is toasting itself with glasses of champagne, Market Watch is reporting that “A slowdown in US high-end spending that has hurt retailers from Tiffany & Co. to Macy’s Inc. could be hitting luxury retailer Saks Inc. in the second half as well.”

But it’s not just high-end spending that’s been curtailed — retails sales fell overall for the third straight month in the United States, a retail slowdown is being reported in the UK despite the hoped-for boost of the Queen’s Jubilee celebrations (see: UK retail sales let down by weather and lack of jubilee bounce), and China’s domestic retail growth is showing signs of sputtering, no matter the Chinese government’s best efforts to stimulate growth through artificially boosting domestic consumption.

*Related Reading: China’s Economy Slows, Hits Worst Level Since Crash

*BUT BACK TO HERMES: Vanessa Friedman at the Financial Times wonders aloud why everyone’s talking about Ralph Lauren, Giorgio Armani and Stella McCartney designing for the Olympics but not mentioning anything about Hermes and Prada providing outfits for the French equestrian team and the Italian sailing team, respectively (see: Who knew about Hermès?)

*As long as we’re on the topic of the Olympics: Chinese Feel Burned by Olympic Uniform Controversy — “Naming Chinese-made products that Americans might next burn, after the uniforms, has become a bit of a low-grade parlor game among Chinese microbloggers (iPhones are, by far, the favored candidate). A few commentators have also suggested turning the tables and burning American products.”

And due to the surprising number of designer brands and brand names attached to sports gear and uniforms, some news outlets are dubbing the London 2012 Olympics “The Most Fashionable Olympics Ever” — including names like Armani, Ralph Lauren, Prada, Hermes, Stella McCartney, Cadella Marley, Sportscraft, Nike, Adidas, the Olsen twins and Coach.

That’s a lot of fees generated (with concern voiced that the Olympic committees might be going a bit overboard in their zeal for licensing dollars — see: Non-McDonald’s fries banned from Olympics).

2.)
It’s never particularly healthy when the majority of your company’s revenue is derived from one source. For example, take the Interparfums company, a developer, manufacturer and distributor of perfumes and cosmetics for a variety of brands, including Jimmy Choo, Boucheron and The GAP. Their biggest client, however, is Burberry, and now Burberry is threatening to leave them in the lurch when its current license deal expires.

From Reuters: Burberry plays hard ball over perfume deal — “Burberry said on Tuesday the discussions were continuing, with their outcome ‘uncertain’ and also said it had served notice of its intention to terminate the license agreement with Interparfums with effect from December 31, 2012 . . . Analysts estimate Burberry’s fragrance business accounts for only about 2% of the British group’s revenue but for about half of Interparfum’s net sales.”

Analyst Linda Weiser stated that losing the Burberry license could potentially reduce Interparfum’s overall earning by as much as 75%, which puts Interparfums in an egregiously difficult position, especially as it seems like the issue isn’t just a matter of Burberry wanting a bigger cut of the revenue stream — the scuttlebutt is that Burberry wants to step up its fragrance and cosmetics lines to rival the likes of Dior, Armani and Chanel, and so might be needing bigger and better global development and distribution than Interparfums can actually provide.

Should Burberry exercise its right to terminate its agreement with Interparfums, they would pay a fee of €181 million for the privilege. News of Burberry’s possible defection has sent Interparfums’ stock price plunging.

*IN OTHER PERFUME NEWS: Lady Gaga released the first advertising blitz for her upcoming celebrity scent, “Fame” — and I’m sure you’ve all been just dying to see it. So here it is:

With subtitles, because she’s, you know, French . . . or something

*NOTE 3: Coty, which owns the Gaga fragrance license, has filed plans to raise $700 million via an initial public offering on the stock market. This news comes hot on the heels of Coty’s unsuccessful efforts to purchase the Avon company for over $10 billion.

*Related: My favourite sensory psychologist (Avery Gilbert) asks, “Is Lady Gaga 2.56 Times More Popular Than Justin Bieber?”

And Wired Science published an article that looks at how the fragrance industry is exploring the use of engineered microbes to produce new fragrance materials: Your Perfume May Soon Be Produced by Bacteria — “Fragrance companies are now looking to lab-engineered bacteria and yeast to produce fragrances normally derived from plants, reports Chemical & Engineering News . . . Some of the first products being outsourced to microbes are the citrus molecules valencene (found in the peel of Valencia oranges) and nootkatone (found in grapefruit peel), commonly used in fruit-flavored drinks and perfumes. And there’s no need to go to Tahiti for vanilla: Vanillin scent, which is already produced synthetically, can also be made by microbial fermentation. Soon, we could be living in a world of microbe-made smells.”

Do you think this might have a confusing impact on what can be termed an all-natural perfume — I mean, the raw materials are produced via living microbes . . . ? Though I expect the “lab engineered” aspect to the equation would put the kibosh on that consideration.

And here I was thinking we could get all sci-fi on the natural perfume market.