Luxury & Fashion Biz News: Mulberry, Burberry, China, Beauty, Perfume and The End of the World

I was wondering when we’d reach this point — where the contracting global economy would result in luxury brands cannibalising each other out of market share (and eventually out of existence):

Mulberry loses out to Prada in luxury market“Profit and margins have been damaged by British handbag-maker Mulberry’s bid to go even more up-market. The leather goods brand reported a 36% drop in half-year profit, in contrast to the Italian designer Prada’s forecast-beating 30% profit jump for its third quarter . . . ‘We are investing in quality –- from design, to product, to talent and stores. We need to catch the new luxury customers,’ (said Bruno Guillon, Mulberry’s chief executive). Mr Guillon pledged the brand would not alienate its existing customer by pricing them out.”

Yet that’s exactly what’s happening — the “alienation” of the existing customer, that is; or, really, the spending fatigue of the existing customer, as the existing customer dined-out on credit card debt that’s now not so readily available or appealing (see: Credit Card Debt Is Top Worry, Survey Finds) — which is much the same story with Burberry, another brand that rapidly expanded in order to hoover-up the excess cash swamping the consumer markets in both developing and first world economies.

But once the aspirational shopper dropped off the radar and factory orders started drying up in China (and elsewhere), brands like Mulberry and Burberry are left with huge holes in their quarterly reports. They’re now scrambling to reach the big money consumer, but big spenders aren’t so keen on merchandise from a brand that’s bulldozed through the past ten years avidly courting the mainstream.

Mulberry Fall 2012 — the collection that consumers ignored

There’s no caché or status in publicly flaunting an easily obtainable mainstream brand, and when you’re an image dependent luxury corporation, caché and status are all you’ve got. Once you’ve blown that, you’re left with little other choice but celebrity driven ad campaigns and collaborations with the likes of Target and H&M.

*Speaking of Desperate Collaborations: The last high-low H&M collaboration with quirky high-concept brand Martin Margiela was a resounding flop in comparison to previous, highly hyped and frenzied collections. NYMag writes that “two weeks after the clothes were released, some New York locations were advertising markdowns” while the Business Insider states that “H&M finds itself chasing a diminishing consumer base that seems to have found a consistent retail home elsewhere.”

The Business Insider’s on the nose verdict: by leap-frogging from one designer collaboration to another as a means of attracting publicity, H&M has muddled its core message so completely that the average consumer is no longer certain of what the H&M brand stands for, so takes her/his business elsewhere.

*Did Someone Mention Celebrities?: Fashion by Madonna, Kim Kardashian and other stars expected to be hot this shopping season“Major department stores, facing growing competition from trendy fashion chains such as H&M, Mango and Zara, have jumped on the trend. They’re hoping to reap benefits from the lines during the holiday shopping season, a time when stores can make up to 40% of their annual revenue. Big stores now get as much as a quarter of their sales from celebrity brands, which is up from under just 10% five years ago, according to market research firm NPD Group.”

Which must just *gall* professional designers to no end. Oh wait, I see it actually does! See: Oscar de la Renta slams celebrity designers who have no formal training

Oscar de la Renta Spring 2013 — how the pros do it

I’d be pissed, too, if I were a career fashion designer losing market share to Madonna, Nicole Richie and the Kardashians. But then, the fashion designers kind of deserve it for relying so heavily on celebrities to help sell their goods in the first place.

A friend alerted me to this article in Slate Magazine about American Giant and the creation of what the author calls the greatest hoodie ever made: “In the 1970s, when the fashion industry morphed into a mass-market business dominated by mall stores, its marketing and distribution costs began to skyrocket. To keep retail prices down, companies began to shrink the price of producing clothes. Today, when you buy a hooded sweatshirt, most of your money is going to the retailer, the brand, and the various buyers that shuttle the garment between the two. The item itself costs very little to make—a $50 hoodie at the Gap likely costs about $6 or $7 to produce at an Asian manufacturing facility.”

So it’s nice to see a growing awareness of the pros and cons of global manufacturing — what we gained by outsourcing, but also what we lost.

And by supporting supply chains that are transparent and easily traceable, consumers will no longer risk giving their money to companies that source from factories with egregious labour records and lethal workplace environments. See: China clothing factory fire kills 14 and 112 workers die in Bangladesh garment factory fire.

From the article, Bangladesh Factory Fire Highlights Brands’ Supply Chain of Ethics: “As the global market for cheap labor and manufacturing moves from China to Bangladesh, “the next sourcing hotspot,” where minimum wage for garment workers is under $37 monthly and 3.6 million people (four times that number including families) are dependent on this industry for their livelihoods, building collapses and fires have claimed more than 700 lives since 2007, in a country with more than 4,000 garment factories that produce about $20 billion annually with sales primarily to the US and Europe.”

*As long as we’re talking about China: China’s slowing economy is a problem for global industries, such as the cosmetics industry, that were banking on the continuous development of a Chinese middle class happy to spend.

What this means for Estée Lauder, who recently announced the launch of a special product line developed specifically for China, is anybody’s guess.

*NOTE: L’Oreal is also reporting a concern about the slowdown in China, though their market share in Asia is still increasing.

*Perfume Sales Factoid: Estee Lauder sees luxury key to re-igniting fragrance sales“Designer fragrances account for two-thirds of industry sales and sell more reliably than those tied to celebrities. And while the very high end fragrances make up only about 7% of industry sales, Gabai-Pinsky (a global brand president at Estee Lauder who oversees designer fragrances) called them ‘a pocket of high growth.'”

From the rapid proliferation and ceaseless marketing onslaught, I would have thought that celebrity perfumes were the biggest moneymaker at the moment. But they aren’t. Not by a long shot.

And between Estee Lauder, L’Oreal and LVMH, they control only 36.4% of the prestige fragrance market (prestige = designer brand and specialty beauty brand fragrances). That leaves a lot of wiggle room for the competition.

*And just in case you were wondering: Don’t be silly . . . lipstick won’t affect your IQ

Great, now what are we going to blame?

*LAST WORDS: An interview with designer Jil Sander in the Wall Street Journal sent ripples through the fashion press when it was revealed the former Jil Sander head-designer Raf Simons was let go because he was unable to turn a profit for the company — that sales were averaging only $140 million a year under Raf Simons when they were at $250 million or more under Jil Sander herself.

Is it any wonder then that the brand’s executives entered into negotiations to get Jil back? It was established very clearly under Bill Gaytten’s direction that a huge brand like Dior could easily increase sales no matter who was in charge, so the appointment of Raf Simons would only work to the brand’s favour by drawing worldwide press attention.

The Jil Sander brand, on the other hand, is much smaller than Dior and doesn’t have a huge perfume, cosmetics and accessories business to compensate for losses due to poor clothing sales. As much of a darling as Simons was in the eyes of the fashion press, it wasn’t enough to sell clothes. And selling clothes is what the Sander brand has to do to survive.

But hey, you know what? It’s the end of the world! Who cares about selling clothes and shoes and bags. See: Mayan apocalypse: panic spreads as December 21 nears

*big head-shaking sigh*

If it’s not Unicorns in North Korea, then it’s Vampires in Serbia. Seriously, we are *so* doomed as a species, and it has nothing to do with the Mayan calendar or Raf Simons’ inability to design clothes that will sell.


  • FiveoaksBouquet

    I like Oscar de la Renta’s style–feminine with obviously quality fabrics and lots of self-assurance there. Very appealing to me, if unobtainable. Makes me want to turn in my jeans for something more alluring! However, walking around my neighbourhood in a de la Renta would be likely to engender more ridicule than admiration.

    As far as I can see, Estée Lauder has dipped its toe into the higher-end perfume market with Aerin Lauder’s three imho excellent Private Collection scents and wasn’t there some expensive oud perfume only for the Middle-Eastern market? I wrote to them about making it available more widely but received no reply. I for one would like to see this tendency developed by Lauder with more perfumes coming out.

    • Five — I love the idea of you cruising through your ‘hood in head to toe Oscar de la Renta, with the neighbours whispering to each other, “Look at Miss Hoity-Toity. Who does she think she is!”

      While likely also admiring the colours and fabrics in spite of themselves.

      The Estée Lauder article mentioned how they recently snagged the Zegna contract and are excited about pushing into the high-end men’s fragrance market, which could certainly use some shaking up. Zegna has an extensive yet utterly forgettable collection of men’s fragrance, and I’d like to see Lauder turn that around. There’s no reason for such a successful global brand to lag so far behind its competition in the fragrance category.

      Both Tom Ford and Chanel have shown that a high-end designer fragrance category can work. I don’t see any reason why Zegna can’t use its already extensive global presence to establish the same, especially now that Stefano Pilati has been hired on as head-designer. Bringing on a new head designer gives them a great opportunity to retool their whole approach.

      • FiveoaksBouquet

        Zegna could definitely use some promotion around here. I haven’t seen it. Maybe Lauder will create some Zegna women’s perfumes too, with a tailored leathery vibe. Yum yum!

        • From what I’m reading, the idea behind bringing Pilati onboard the Zegna brand was not just because he’s a very experienced menswear designer, but also because he’s fantastic at womenswear, too — and Zegna wants to revitalise and expand its little-known womenswear label, Agnona.

          So yes, I can totally see an Agnona perfume in the somewhat near future, especially as they used to have one, but it hasn’t been available on the market for years.

          Speaking of womens’ perfumes with a leathery vibe, have you tried the Bottega Veneta perfume? I’ve heard lots of good things.

          • FiveoaksBouquet

            Most of the comments I’ve seen are favorable too. I did test it and it sort of left me flat.

            • That’s what I was afraid of, too. All the positive press I heard never motivated me to seek it out; it just didn’t seem like it was going to be worth the effort. I’m sure it’s nice, but I’m (and you’re) looking for more than “nice”.

              If they do a new Agnona perfume, let’s hope it’s a lot more than nice.