Luxury & Fashion Biz News: August 17th, 2012 (Designers and the law; plus, Is mass-produced luxury losing its lustre?)

LEGAL WOES:

A.) Alexander Wang settles its lawsuit with former employees who accused the company of running a harsh, sweatshop type operation in New York: “The suit was initially brought against Wang in March (of 2012) by two former employees — Wenyu Lu, who claimed he was fired after applying for worker’s compensation for injuries sustained on the job, and Flo Durante, who claimed she was fired after complaining about long hours and poor working conditions.”

Articles mention that the case was “dismissed” by the judge, but the dismissal only occurred after a private settlement was reached between the opposing camps, which usually means a cash payment under the stipulation that the matter is dropped and nobody talks about it again.

Did the sweatshop allegations have merit, or was this just an attempt to smear a good company in order to get them to cough up some cash to make the case (and all its resulting bad PR) go away? We’ll never hear how it really went down behind closed doors. Which is kind of a shame.

B.) Bulgari cries foul over design copying from Kenneth Jay Lane: “Bulgari sued Kenneth Jay Lane, saying the New York jewellery designer copies and imitates its rings and bracelets without permission. Rome-based Bulgari accused Kenneth Jay Lane … of copyright infringement, design patent infringement and unfair competition.”

“Don’t blame me for dressing Lady Gaga”

I can’t help but notice that Bulgari didn’t seem particularly lawsuit happy until the company was acquired by LVMH in 2011, a corporation that’s astonishingly lawsuit happy.

*NOTE: A trademark lawsuit filed by Bulgari in Russia earlier this year seems (in retrospect) to be about protecting Bulgari’s latest perfume launch, as well as partially revealing why Bulgari is presently going after the likes of Kenneth Jay Lane.

C.) Law.com explores the good and the bad about fashion trademark battles, and why sometimes they’re a necessary part of the landscape: The Butt Face vs. The North Face

D.) Former employees sue Bond No. 9 owner Laurice Rahme for a pattern of racism in the workplace: “A pair of former ‘perfumistas’ at the high-end Bond No. 9 perfume shop …claim in a federal lawsuit that owner Laurice Rahme is a racist who called African-Americans ‘thieves’ — and used a code phrase to alert security when dark-skinned customers came into the store. ‘We need the light bulbs changed,’ was the signal for an unwelcome customer, according to the lawsuit. Veronica Robledo and Karin Widmann are seeking $3 million in damages in the suit that accuses Rahme of violating their civil rights and firing them for objecting to her “pattern of racism against customers and employees.”

My one and only thought in response to the Bond No. 9 lawsuit is that it couldn’t happen to a more deserving perfume company. What goes around, comes around.

IS LUXURY LOSING ITS LUSTRE?:

Luxury goods show signs of losing lustre: “Look behind the headline figures, and the picture is considerably less rosy. Richemont’s latest numbers may have been impressive, but sales growth has slowed since the beginning of the year, and much of the boost to revenue at all the luxury goods companies is because of the effect of currency movements . . . If demand in Asia falls significantly, luxury goods companies will really start hurting. Europe, mired in its never-ending financial crisis, will not bail them out. Nor will the US, where demand is only stable.”

Unity Marketing published a report that draws a bold line underneath this kind of news, stating that their research shows ultra-affluent households in the US (the Top 2%) have reined in their spending to the lowest levels in three years, while WWD reports that luxury apparel purchases in the US for the second quarter of 2012 are down by 54.9% from the same period last year.

I mean, 54.9% . . . ! And the other numbers are just about as scary for a poor luxury CEO to handle: accessories and footwear spending is down 51.9%; fragrance and beauty spending down 41.2%; jewellery down 24.9%; and watches down 34.8%.

*Relevant: The Business Insider links to a Wall Street Journal blog entry where the author talks about avoiding designer logo merchandise, and how to shop for accessories in classic silhouettes while not spending the big bucks: Bags That Take No Names

So how do you think a luxury CEO responds to such news? Pulling back on the rapid expansion train to focus on strength of design, quality materials and an increased emphasis on craftsmanship? Oh, don’t be silly. They’re raising prices, of course!

Faster, higher, stronger: luxury pricing goes for gold: “Analysts say prices in the luxury industry have surged from 2001 to 2011 and will keep rising faster than broader prices. Thomas Mesmin at Cheuvreux estimates that prices for fashion and leather goods rose 62% in that period, while watches and jewellery have risen 78%. Euro zone inflation has totalled just 26% over the 11 years . . . LVMH, the world’s largest luxury brand, has been especially assertive, raising prices in its Louis Vuitton and high-prestige champagne lines by up to 15% in 2011. Chauvet says systematic price increases at LVMH account for a third of its revenue growth.”

Higher glamorous prices, same champagne

But for the shoppers who are more budget conscious, it’s the little things that are starting to count — like indulging in tiny expensive chocolates instead of splurging on a new designer dress. As Nicole Brady writes in her article, Little luxuries shine amid the gloom: “With consumer sentiment set to ‘worried’, people are still looking for luxury but not wanting to spend a lot on it . . . as the consumption of big-ticket items such as houses and cars has slowed, people have switched to treating themselves with artisan breads, coffees, chocolates and sweets.”

The article includes quotes from retail analyst Naren Sivasailam, who equates this kind of movement away from big ticket logo spending with the tried and true lipstick index — that when economic conditions turn for the worse, people don’t stop spending entirely on luxuries, they just start focusing on smaller, more intimate pleasures:

“While the early 2000s were all about ‘mass customisation’, which Mr Sivasailam says dominated the marketing jargon of that era, consumers these days are seeking specialist, niche outlets. ‘I’m not just talking individual chocolatiers or bakeries, this includes boutique retail clothes, handbags, shoes,’ he says. ‘There is a clear trend to specialty stores, be it online or in bricks and mortar.’”

Which helps to explain the new kind of Madison Avenue that NYTimes writer Eric Wilson wrote about this past week. Where Madison Avenue was once the prominent display of old money tastes and shopping habits, the post-recession shakeup has ushered in a high-low mix of established designer and contemporary niche brands, dotted with little cafes and specialty bakeries.

Downtown Comes Uptown: “‘Customers today are buying from high to low,’ said Andrew Rosen, the fashion executive who is a founder of Theory and is involved in the businesses of Helmut Lang, Proenza Schouler, Alice + Olivia and Rag & Bone, all of which have joined the (uptown) landscape. He was talking of both the high and low ends of fashion, but he could as well have been speaking about the stores all along the length of Madison Avenue. ‘It’s got a great mix,’ he said, ‘and that just creates a more dynamic shopping experience.’”

*Related and relevant: Artisan bread makers buck the trend — “Higher costs and lower prices are hurting big bread manufacturers. But the makers of expensive, artisan loaves are bucking the bread ­recession . . . The owner of popular Sydney bakery Sonoma, Andrew Connole, said he was baking up to 30,000 loaves a week and selling them for up to $7 each. ‘Shows like MasterChef have ­captured people’s awareness and even during tougher economic times people are cooking at home and happy to invest in good bread and wine,’ he said.”

It seems apparent that, even as spending on designer clothing and accessories takes a hit as consumers face an uncertain economic future, there will always be room in the budget for good food and wine . . . and chocolate . . . and cheese . . . and cupcakes . . . and I’m sure the list goes on.

Growing a niche cheese business in tough times

Maybe Lady Gaga was on to something with that meat dress, after all.