Luxury & Fashion Biz News: Exclusive vs. Everywhere – the dilemma of the modern luxury market
There’s generally a lull as the intense, frenetic activity of the major fashion weeks subside and CEOs, designers and journalists nurse their hangovers, jet lag and sore feet (and maybe even a bruised ego or two). But there’s a little bit of news that still trickles out the faucet, like, for instance, that cutting-edge luxury retailer Barneys is reassessing its market performance and pulling out of Dallas.
Barneys New York to close NorthPark store: “After careful consideration, Barneys New York has exercised its contractual right to terminate the lease for its Dallas location prior to its expiration,” a company spokesperson said. “Barneys’ operational and financial performance is strong and we remain focused on investing in our flagship stores across the country as well as Barneys.com.”
Barneys has been on thin-ice since the recession first rattled the windows of big spenders back in 2008. The company nearly declared bankruptcy (for the second time) in 2009 as its investment backer, Istithmar World Capital, pumped cash into the retail chain in a desperate effort to keep their sizeable investment afloat.
*NOTE: Istithmar, which bought Barneys for almost a billion dollars back in 2007 when the luxury-bling market was still white hot and considered selling it off for half that price in 2009, finally gave up on trying to make a silk purse out of the $590 million dollar debt load of Barneys and passed the company on to hedge fund firm Perry Capital in May of 2012 (narrowly avoiding another staring contest with bankruptcy court).
Perry Capital has since taken a hard look at the what, where and why of Barneys, and under-performing markets (like Dallas) are getting the axe. WWD reports that “There has long been speculation that the Dallas store, along with units in Scottsdale, Ariz., San Francisco and Las Vegas, don’t perform as well as Barneys’ flagship on New York’s Madison Avenue, and units in Beverly Hills, Seattle and Chicago.”
Funny, though, that it’s the warmer-weather locations that seem to under-perform. But maybe that’s not so surprising — a lot of the seriously trendy, edgy lines that Barneys is known for tend to favour dark colours, heavy knits and lots of leather.
Screenshot from Barneys website — black & white & winter all over
*IN OTHER FINANCIAL-RELATED NEWS: Marni owners Gianni and Consuelo Castiglioni are trolling the open waters for financial backing for a hoped-for expansion into China: “The Italian fashion label has big plans for the coming years. To help boost its retail business, the house’s chief creative officer Gianni Castiglioni has confirmed a financial backer will be needed . . . ‘I would be open to considering a partner, only if he would share my vision in managing the company. We are looking at industrial partners that can provide competence and long-term vision,’ (said Castiglioni) . . . The label is hoping to expand into China, which has been a popular move with many of the big fashion houses over the last few years.”
It’s notable that the Costigliani couple is hitting the press for backers, as that possibly means that #1) banks are getting cranky/skittish again about lending, and Marni as a brand doesn’t have the sales numbers or cash flow necessary to calm frazzled nerves; and/or #2) Marni isn’t a property with pop-culture cache, so there’s less of the sizzle on hand that’s required to get hedge funds/investment groups circling and sniffing the way they did around the likes of Jimmy Choo.
Marni Spring 2013 — more cool than hot
*NOTE: Though Marni’s recent collaboration with fast-fashion retailer H&M was heavily hyped, it didn’t create the kind of crazed consumer hysteria that accompanied previous H&M collaborations with Roberto Cavalli, Jimmy Choo and Versace. There were also said to be a lot of merchandise returns after the initial excitement wore off (of course, the same was said about Versace).
Also, it’s about seven months later and people are still flogging about five pages worth of Marni for H&M wares on eBay. So as much as I admire the creative minds behind Marni, I can’t see it being a hot-ticket brand that’s begging for expansion into China.
*What’s so bad about staying small, anyway?: Does every fashion brand have to turn into a scenery-chewing empire like Michael Kors or Armani? From the article, ‘Hipster redemption? How local, made-in-USA, artisan-focused entrepreneurs are reviving American manufacturing‘: “Businesses from artisan sausage makers to small coffee shops (which in turn buy locally-made baked goods) to furniture makers to made-in-USA fashion creators to app-designers and technology start-ups, each of these ‘hipster’ careers has the potential to create jobs, both for the people who start them, and the employees they hire if they succeed.”
Small clothing and accessories businesses are keeping people employed and making a profit while meeting a demand for better than average quality, craftsmanship and creative design. Going massively into debt in order to expand into China doesn’t have to be the default end-game, especially if you acquire a loyal, dedicated customer base that loves what you do and who you are.
Besides which, I constantly see headlines like these: Trade Slows Around World and IMF Sees ‘Alarmingly High’ Risk of Deeper Global Slump — which don’t particularly encourage the notion of expansion, am I right?
*RELATED: Trendy fashion retailer Intermix is also dragging a net through the waters, looking for someone (anyone? anyone?) to take a bite: “Fashion retailer Intermix is up for sale as the company looks for strategic partners that could help it expand . . . ‘We are looking for strategic partners or even another private-equity firm that has invested in retailers so we can get the synergies,’ Intermix Chief Executive Khajak Keledjian said in an interview. The company hasn’t ruled out a complete sale, though he said the Keledjians would want to remain with the new company.”
They presently have stores in 30 cities in the US and Canada, yet somehow feel the need to expand right when sales growth in the high-end sector of aspirational fashion looks like it’s ready to fall off a cliff.
From the article, Fiscal cliff could curb US clothing sales — “‘We’ve got expiring tax cuts, increased taxes due to the health care law, the debt ceiling is going to expire,’ and there are ‘a number’ of other costs relating to President Obama’s new health care laws … all of which are going to happen at, or about, the same time,’ (said Matthew Shay, president and CEO of the National Retail Federation). If steps are not taken to avoid the situation, he warned of a contraction in the US economy, and estimates as much as 4-5% could be lost from the country’s GDP.”
But what seems to be the winning move for the moment is to pull an Hermes (See: Hermes to protect exclusive image with fewer new stores) — to be smaller and more exclusive, shifting away from a reliance on flash and logos and head toward what’s considered “absolute” luxury, instead; even in what used to be considered the very logo-centric Chinese market.
From the Wall Street Journal article, China’s Luxury Market Shifts Upscale: “HSBC’s recent report found that while the Chinese appetite for luxury remains strong, shoppers are becoming more sophisticated and more discriminating. Gone are the days of “bling,” where the more overtly branded a product, the better. In its place is a respect for high quality and a less-is-more attitude.”
*RELATED: Hermes defies the trend of slipping sales — “‘There are basically two kinds of luxury consumers in China, the ultimately wealthy and the aspiring middle class,’ (said Ben Cavender, associate principal from the Shanghai-based China Market Research Group). ‘What we are seeing right now is that affluent consumers are moving upmarket in their purchasing decisions and are favouring more exclusive ultra-luxury brands such as Hermes over the mass luxury brands such as Louis Vuitton or Gucci that have done well in China in the past.’”
*Speaking of Hermes: CEO Patrick Thomas states that Hermes is investing tens of millions of dollars into its Chinese-artisan Shang Xia brand, and that he expects it to eventually overtake sales of Hermes in China: “Forget the word ‘luxury’ entirely. Use only the word ‘quality,’” said Mr. Thomas. “This is what Chinese want, and it will be a justification of price.”
I think this is going to be true everywhere, and not just in China, which may be why we’re seeing the rise of the previously mentioned Hipster-influenced small brands — companies that share a passion for quality, craftsmanship and design over marketing and logos.
Take Nigel Cabourn, for instance, an extremely niche menswear designer who bases his collections on vintage clothing and outerwear worn by explorers, climbers and outdoorsmen.
“What you put in, you definitely get out”
I love what Mr. Cabourn had to say at the very end of that video clip: “I know that there’s a depression out there, but I think that depression doesn’t affect people that are doing something really exciting, really different and cult. And that’s what our brand’s all about.”
*Bonus Reading: Portrait of the Artist as a Postman, The strange and secret world of Kermit Oliver — the tale of a strikingly talented Texas artist who’s designed more than fifteen scarves for Hermes.