Luxury & Fashion Biz News: The appeal of accessories in a down market
*The Accessories Business is Healthier than the Apparel Business: When the Trimmings Are the Main Course — “In a stubbornly stagnant economy, the stylish woman who typically preorders the latest frock for a fete-filled summer in the Hamptons might instead stretch her budget by adding a purse, shoes, hat or iPad case to her existing wardrobe. At parties, perhaps she’s hoping no one has noticed that she’s shopped her closet. But the fashion industry has . . . Indeed, accessories and related merchandise at Michael Kors accounted for about 75% of total revenue in 2012, a company spokeswoman said.”
The article notes that the accessories category has several advantages over apparel in the eyes of both customers and retailers in that sizing isn’t as big an issue, the items (shoes, bags, sunglasses and jewellery) are mostly smaller and easier to ship, and that while consumers are cutting back on apparel purchases, they still want something that will help add a fresh spin on the wardrobes they’ve already accumulated.
Sonia Evers asks in an article for Fashion Etc.: “So what does this mean for the future of fashion? Essentially it means we can expect to see an influx of shoes, sunglasses, handbags and more from designers who may have never even thought to expand into accessories. Loeffler Randall just launched its first line of handbags, Victoria Beckham recently announced her expansion into eyewear, who’s next?”
*NOTE: Don’t forget the shoelaces! From an article at WWD: “‘At $8 to $9, laces are good add-ons to appease customers’ need to buy something for themselves,’ said Michael Jaworowski, director of purchasing and planning at Haberdash, who added that red is the most popular. ‘Guys are just starting to add that bit of colour to make themselves stand out.’”
But even as world economies grind ever slower, 1.) Saks Fifth Avenue increased the size of its shoe department by a whopping 10,000 square feet (or 929 square meters, for my metric friends); 2.) Macy’s announced it would create the world’s largest shoe department as part of its proposed Macy’s Herald Square renovation, “a total of 39,000 square feet of continuous space peddling as many as 300,000 pairs of shoes on any given day –- with a built-in coffee/wine/chocolate bar” (see: Macy’s $400 Million Makeover); and 3.) accessories brands like Brian Atwood, Skagen, Alexis Bittar, Rebecca Minkoff and Anya Hindmarch have either been fully acquired by investment groups in 2012 or have taken on significant investment cash to fund aggressive expansion plans.
The former accessories-only brand fuels expansion into apparel with investment cash
WWD reports that the beauty industry is just as abuzz with mergers and acquisitions, as consumers have proven more willing to splurge on lower-ticket beauty items rather than high-priced clothing. For example, nail polish sales are up by 70% and sales of dry shampoo products have increased by almost 40%, but the NPD Group is reporting that it’s the more budget type brands that are doing the best in sales — “Premium skincare brands (in the UK) with an average selling price of about £100 are currently experiencing the strongest decline.”
*Speaking of charging less and selling more: Nordstrom to speed up Rack store openings — “In the midst of a tough economy, upscale retailer Nordstrom appealed to cost-conscious consumers by doubling the number of discount Rack stores over the past four years . . . Nordstrom posted an 11% drop in its second-quarter profit Thursday . . . (but) sales at Rack stores open at least a year rose 7.7%, compared with a 1.1% gain at Nordstrom’s full-line clothing stores.”
Nordstrom is opening 15 discount Nordstrom Rack stores in 2012, with plans to open another 24 Rack stores in 2013. Overall, Nordstrom wants to more than double its Rack presence in the next four years, and while they’ve announced a major Manhattan location for its full-priced Nordstrom brand, that’s the only expansion of their full-line Nordstrom brand that’s in the works, and even that store won’t be completed until 2018.
So is it up to the discount subsidiaries to keep retailers like Nordstrom alive and kicking? When I read that a huge global brand like Coach relies on its factory outlet stores for half its revenue, it makes me realise that diffusion branding isn’t just for the big luxury names anymore.
*NOTE: Marketing consultancy firm Digital Luxury Group (DLG) has determined that the most globally sought after handbag brand on the internet is Coach, with the most searched iconic bag model being the Hermes Birkin. They also found that Gucci is the most popular handbag brand on Facebook, and that Louis Vuitton is now so played-out in Japan that the brand has fallen out of the country’s Top 5 in popularity.
The most popular handbag brand in the world?
*Related and relevant: Investment firm Bronte Capital explains why it’s shorting the stocks of big luxury brands and turning away from investments in China — “We know what a completely collapsed luxury good market looks like. Brazilians like a bit of bling, but in the late 1980s and into the 1990s, the kidnapping rate in Brazil went skyward (there is an horrific documentary about that called Manda Bala which translates ‘send a bullet’). After kidnapping became a major industry (particularly in São Paulo), carrying a $3000 handbag no longer said ‘look at me’, it said ‘kidnap me’.”
But the latest quarterly reports for Prada show a luxury market in Asia that isn’t ready to throw in the towel quite yet: “Sales have been helped by tourists, who accounted for 50% or more of what it sold in Europe and the US, Huang said. Asia, excluding Japan, is estimated to have contributed as much as 60% of the total sales, mostly from Greater China . . . Prada’s revenue increased 31% in the Americas, 37% in Europe and 45% in Asia Pacific (excluding Japan) during the period.”
Selling like Prada-cakes in China
Notice the heavy emphasis on accessories — bags, jewellery, hats, sunglasses, belts and shoes — in the above ad campaign. Prada aint no fool.
*One last (weird and related) Prada note: Miuccia Prada engaged in a bit of “Do as I say, not as I do” when she criticised Italian designers for selling out to foreign investors while conveniently glossing over the fact that Prada took its company public in Hong Kong rather than on the Milan stock exchange. See: Miuccia Prada Speaks Out Against Selling Luxury Labels to Foreigners, Says Italian Fashion Is Becoming ‘Second League’
Because who’s to say that Prada’s Hong Kong IPO and intense expansion efforts in China haven’t changed the look and feel of the company to more closely reflect its growing Asian customer base rather than its Italian origins?
Glass house. Stones.
*As long as we’re on the topic of markets going bust rather than boom: US luxury consumers spent 27% less this quarter than the same period last year, revealing the increasing case of economic jitters among a formerly reliable and free-spending group.
Wealthy US Consumers cut spending by 27%: “Thomas Bodenberg, Unity Marketing’s chief consumer economist, explained, ‘Several months back, market pundits told us that the 2007-2009 recession had run its course . . . However, this is not the case, borne out by consumer sentiment. Two factors are dominant: first is the interconnectedness of our global economy, as economic turmoil in Europe readily translates into uncertainty here. The second looming factor is the upcoming election, whose results will either drive or inhibit consumer sentiment and willingness to purchase.’”
*NOTE: In light of the above, Chanel executives might consider putting a leash (or a muzzle) on their head designer (see: Chanel designer is a “bully” for Pippa comment) — because if Kate Middleton is one of today’s most influential style drivers, then publicly insulting her family members isn’t likely the most intelligent way of wooing her into your brand in the future.
But you know what? Who needs little miss Duchess of Cambridge when you’ve got all of China eating from the palm of your hand. In an article for China Daily (see: “Chinese prefer foreign brands“), it’s reported that the most recognised brands in China are all foreign, and that Chanel is number 3 on the list, beating out Gucci, Armani, Hermes and Louis Vuitton, none of which even appear in the Top 10.
In fact, Chanel is the only fashion brand to land in the Top 10, finding itself flanked by huge technology and food brands, including Apple, Nestle, Sony, Samsung, Uni-President Enterprises, Panasonic, Nike, Canon and Starbucks.
How Chanel managed to score such high recognition among China’s consumers is a marketing success story I’d love to hear more about.