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  • laika
    moderator
    • Sep 2006
    • 3787

    NYT: Luxury Prices are Falling; the Sky,Too

    December 4, 2008
    by Guy Trebay


    “THE world is a strange place right now,” a salesman on the main floor at Bergdorf Goodman said as shoppers pawed through handbags piled on counters like discount merchandise at Century 21. “It’s off its axis.”
    The handbags, like a lot else at the Fifth Avenue retailer, had been marked down 40 percent and are likely to go lower as seasonal sale days wear on. “Sixty percent off is the new black,” as Patricia Marx wryly noted in the Dec. 8 issue of The New Yorker. Yet the discounts at Bergdorf are far from the deepest among luxury retailers around the city.
    In a move that caused consternation among its high-toned competitors along Fifth Avenue, Saks slashed the bulk of its fall fashion and accessories up to 70 percent over Thanksgiving weekend — to what some termed limbo lows.
    There is nothing new about retailers cutting prices at holiday time, and the discounts have been especially deep in this recessionary year. But few in the luxury goods trade can recall a time when the price-slashing started so soon or was so severe. By cutting prices radically, Saks’s chief merchant, Ron Frasch, turned his chain’s flagship emporium into a swank Fifth Avenue version of a discount outlet, moving merchandise in volume and spooking the competition as it struggled to hold on to a traditional mark-down sequence, and even to continue selling certain brands at full price. Mr. Frasch declined to comment on his corporate game plan. “It’s not a conversation I want to get into,” he said.
    Even seasoned bargain hunters were startled to see Saks’s wood-paneled main sales floor mobbed with consumers nosing like truffle hounds through shelves of marked-down cashmere sweaters and racks of designer clothes with prices seemingly too good to be true.
    Could those columnar Valentino evening dresses in signature red really be 70 percent below the original price of $2,950?
    Was one reading the $329 tag right on a cashmere men’s blazer from the elite Italian woolen house Loro Piana, a jacket that typically costs $2,000 or more? What about the $129 price for a black satin skirt from Comme des Garçons? Was the tagged price a misprint? It was not.
    “What I hear at every level of retail is that no one has ever experienced anything like this in their careers,” said Ken Downing, the fashion director of Neiman Marcus. And, while Mr. Downing suggested that the 40 Neiman stores would not soon tumble to discount fever, much of their merchandise had already been marked down by 40 percent, a sure sign that the line on price reduction cannot be held by any single player in luxury goods.
    Privately, most retailers admit to being frightened by the severity of the economic downturn and are looking not merely to save the current season but their commercial lives.
    While it is true that early numbers suggest retailers across the country got a boost from Black Friday’s bargain-hunting frenzy, the margins on optimism remain slim. A report released on Tuesday by MasterCard Advisors showed that sales of luxury goods fell 24.4 percent in November compared with the same month a year ago. When individual stores disclose their own figures for November sales on Thursday, they are expected to show the deep declines of early fall continuing.
    On Wednesday, customers of Barneys New York received an e-mail message promoting a “designer freak-out sale.” The savings of up to 50 percent encompassed goods like Christian Louboutin suede booties (marked down to $720 from $1,195) and coveted Marc Jacobs totes (reduced to $629 from $1,250). It should probably be noted that handbags and shoes are where luxury retailers turn to hear the music of cash registers going ka-ching, and so the event was a clear indication that somebody at Barneys must be freaking out.
    “It’s painful,” Linda Fargo, the women’s fashion director at Bergdorf Goodman, said referring to a landscape in which carriage-trade stores are struggling not only to hold on to their profits but also their ineffable luster.
    What seems inevitable is that the pain will worsen as the price reductions provoke questions among consumers of how stratospheric profits must have been when the economy was riding high. How great, really, was the surcharge to consumers for participating in fashion fantasy?
    “I was in Saks last week, and there were these staggering discounts and it’s not even Jan. 1,” Tim Gunn, the “Project Runway” host and chief creative officer of Liz Claiborne, said Tuesday, before a discussion on “Redefining the Rules of Fashion in Today’s Economy,” sponsored by the textile manufacturer Dow XLA. “I was told by easily half a dozen sales associates that if I opened a Saks credit card, I’d get another 15 percent off. What I wonder is, “What are the real margins?’ ”
    That question gives rise to another: once consumers become acquainted with slash-and-burn prices, how can designer fashion regain its mystique? Will shoppers ever again want to buy luxury goods at full price? The depth of the challenge was suggested by the incongruity this week of seeing Prada wallets, usually kept under glass at Saks, dumped into display stands that at Wal-Mart are known as “end-caps”; lizard handbags at Bergdorf Goodman jumbled on counters as if that Fifth Avenue landmark were an outlet of Loehmann’s; and Ralph Lauren dress shirts at Lord & Taylor thrown together and offered at prices roughly equivalent to the cost of two McDonald’s Happy Meals.
    The Saks strategy may be the first sign of a radical reconfiguration of the luxury goods landscape, said Beth Buccini, an owner of Kirna Zabête, the SoHo specialty store. “The intense and early discounting will negate the power of runway shows to drive fashion in both creative and commercial terms,” Ms. Buccini said. “All anyone can afford to do anymore is to sell pre-collections,” she added, referring to the commercial collections designers offer during transitional periods between their statement-making, twice yearly runway shows.
    “Runway clothes next year will arrive in the store in April, and we will have three weeks to sell them at full price before the department stores have put them on sale,” she said. “What I’m worried about is the creativity. Everybody is paralyzed wondering what people want, what they’re willing to spend, what’s going to dazzle us into not being able to live without certain items.” It could be, as Zac Posen remarked on Tuesday, that we are headed into a period when designers and retailers are “either stimulated and excited and challenged,” or else follow thousands of other failed American businesses into oblivion.
    “It’s all going to be very Darwinian,” Ms. Buccini said.

    ...I mean the ephemeral, the fugitive, the contingent, the half of art whose other half is the eternal and the immutable.
  • rach2jlc
    Senior Member
    • Sep 2006
    • 265

    #2
    Interesting article and, at the end of the day, I think we'll all be better off if we can get rid of some of these superfluous brands that don't really contribute much.

    When economic times were great and everybody had money, all these lame brands pop up (I mean, how many "premium denim" companies exist now??? It used to be Helmut Lang and Diesel. Period ((haha)) When things get tight, the ones with real talent and foresight stay... and the others... don't.

    Shitty ones go, smart ones stay, greedy ones get in trouble (cough: Prada, cough).

    Also, I'm glad to see a little normalcy brought into the market... prices for Euro goods, especially, have gotten a little nuts. I know they blame the "high Euro," but nevertheless prices are nuts.

    I bought a small, entry-level Cartier watch four or five years ago or thereabouts that was around $1400 or so at the time. I was at the Cartier store near me a week or two ago, just looking around, and the same watch is now $2595. As well, the sales staff told me that Cartier has been raising its prices twice a year REGARDLESS of whether the Euro goes up or down.

    Those days, too, are over (I think). People CAN'T pay whacky prices for so-so stuff and won't.

    In the end, this is good for customers and requires businesses to become savvy and lean again.

    Comment

    • Faust
      kitsch killer
      • Sep 2006
      • 37852

      #3
      Exactly, John. Prices went through the roof, FAR outpacing inflation rates, and Guy Trebay is absolutely right when he demands to know (and which noone will tell him) how much designers and retailers were making when the times were good (don't forget, the % markup on a $2000 bag in REAL terms translates to a lot of $$$, so the retailers were only too happy when designers raised their wholesale prices). It was nothing but greed. We were in a retail bubble, similar to other bubbles, so here is to hoping it's over...
      Last edited by Faust; 12-06-2008, 09:50 AM.
      Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

      StyleZeitgeist Magazine

      Comment

      • rach2jlc
        Senior Member
        • Sep 2006
        • 265

        #4
        This is somewhat off-topic, but the other day when reading articles like this about the tough spot many fashion brands are in, I began to think or speculate who might be the ones to disappear or at least scale back almost entirely.

        We can mention any number of new, small brands (like aforementioned "premium denim" brands like Habitual or something), but I think even some venerable brands are going to disappear because they've over extended without requisite updates to their design catalogues or image.

        Some of these are PURE speculation... I haven't kept up with most of them in a few years so maybe they've turned around, but I'll just toss them out to get a discussion going.

        1. Versace- If Russian and middle east oil money dries up... who is going to buy their stuff?
        2. Gianfranco Ferre- same as above, only MUCH more so. I think the only place Ferre is expanding is in Dubai and Russia.
        3. Helmut lang- Has the Theory redeployment been working? I don't know.. I never hear anybody talk about it.
        4. Givenchy- As discussed on the Tisci thread, their menswear might go caput and they might realize it's not worthwhile to keep producing a whole collection. Womenswear and fragrances will be fine, though.
        5. Trussardi- They just started the 1911 line... did it go anywhere?
        6. Ungaro- They've tried to do a lot here... but I haven't seen much worthwhile.
        7. Prada- They're going to have to scale back and do SOMETHING... they just don't have the clout they used to and they spend money like it's going out of style. I think they're smart enough to stay in business, but they won't be a giant conglomerate like they used to be.

        Comment

        • Faust
          kitsch killer
          • Sep 2006
          • 37852

          #5
          Unfortunately, I think that some of these are wishful thinking on your part, John. :-) Not that I don't wish for all the above to disappear!!! I think Versace is too strong of a brand to go just yet - remember, it's all about the learning curve, and for the emerging markets Versace is the luxury equivalent of Coca-Cola or McDonalds. It is a SYMBOL of the brand new capitalist world that the nouveau riche are getting a piece of. And Prada is their next stop, when they start thinking of themselves as "refined."

          I am afraid that it is some of the good brands that have been struggling that are going to go - people will still buy an LV bag, but how many will buy one from McQueen? I do hope that a lot of these midprice labels that produce trash, a la "Helmut Lang" will go. Basically I would like to see Barneys Co-Op halved.
          Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

          StyleZeitgeist Magazine

          Comment

          • rach2jlc
            Senior Member
            • Sep 2006
            • 265

            #6
            Originally posted by Faust View Post
            Unfortunately, I think that some of these are wishful thinking on your part, John. :-) Not that I don't wish for all the above to disappear!!! I think Versace is too strong of a brand to go just yet - remember, it's all about the learning curve, and for the emerging markets Versace is the luxury equivalent of Coca-Cola or McDonalds. It is a SYMBOL of the brand new capitalist world that the nouveau riche are getting a piece of. And Prada is their next stop, when they start thinking of themselves as "refined."

            I am afraid that it is some of the good brands that have been struggling that are going to go - people will still buy an LV bag, but how many will buy one from McQueen? I do hope that a lot of these midprice labels that produce trash, a la "Helmut Lang" will go. Basically I would like to see Barneys Co-Op halved.
            Yeah, I agree... definitely wishful thinking, but more subject for discussion of the kind you bring up and certainly contingent upon the continued economic stability of those emerging markets. In US/Japan/Europe, I think most of them are sort of.... done. I have several friends in Japan who own boutiques or are peripherally involved in the luxe goods market... and aside from LV and Hermes, it's all a lot of smaller innovative brands that are doing well. Prada, Versace, even Gucci... are becoming "meh" brands.

            I read on Drudge that oil is rumored to drop to possibly $25 a barrel. Economic instability in the rest of the world will affect emerging markets... and if so... Prada and Versace are "runnin' home to momma." (haha)

            But, I think you are right... they've all still got amazing brand recognition and a lot of potential and I'm afraid we'll be seeing the Medusa head and the "America's Cup" sneakers for $340 in every Saks and Neimans for years to come. :( And Burberry nova-plaid! (eeeek!)

            I'm one of the people who actually think that these sorts of economic crises are GOOD for art/fashion/literature... it trims the fat, gets rid of excess, and even makes the "old players" realize that they aren't immune and invincible. They, too, have to get smart.

            Comment

            • Faust
              kitsch killer
              • Sep 2006
              • 37852

              #7
              In this case, where we are dealing with luxuries, I agree with you John. Economic necessities are of course an entirely different matter.
              Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

              StyleZeitgeist Magazine

              Comment

              • rach2jlc
                Senior Member
                • Sep 2006
                • 265

                #8
                Originally posted by Faust View Post
                Economic necessities are of course an entirely different matter.
                Of course! Sadly, though, I wonder how many people who are in tough economic times are still saying, "Hmmm... what can I cut out or how can I increase my limit on my CC to get that new MJ bag???"

                Comment

                • Faust
                  kitsch killer
                  • Sep 2006
                  • 37852

                  #9
                  /\ plenty! where2kop? anyway, it's nice talking to you about something interesting. funny no one else has chimed in yet considering all the bitching about SZ losing its flavor
                  Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

                  StyleZeitgeist Magazine

                  Comment

                  • rach2jlc
                    Senior Member
                    • Sep 2006
                    • 265

                    #10
                    Originally posted by Faust View Post
                    /\ plenty! where2kop? anyway, it's nice talking to you about something interesting. funny no one else has chimed in yet considering all the bitching about SZ losing its flavor
                    Agreed; it seems (not just on this forum, but literally every one I'm on from clothes to shoes to perfumes to Education to Foreign languages) that people lament a seeming internet trend in the "dullness" direction. Nevertheless, as you mention, it seems odd that many seem to enjoy TALKING more about the "blandness" and "dullness" than in doing anything themselves to get out of it. THAT requires a bit of thinking and many would rather just descry what they perceive as a lack of critical thinking in others.

                    Oh well, there is still time. Maybe others will chime in on some of the 5-6 different potential ideas/trends running through this thread.

                    Comment

                    • Jon
                      Senior Member
                      • Apr 2008
                      • 677

                      #11
                      ... not sure what to add. following the article you both made for a very compelling discussion.

                      Certainly all these things have been on my mind. LVMH and Prada group will be cutting back on their lines, I'm sure.

                      Other brands with outside ownership (Jil Sander, Helmut Lang come to mind) are also especially vulnerable, as rather than being funded by a passionate stakeholder, are parts of a business that may be seen as expendable economically.

                      Young designers are screwed, though. At least according to the trend I've been seeing which is rapid expansion thanks to borrowed money, from small groups of private investors or banks. From most we'll still see a AW 2009 collection, but whether that collection makes it into production is another matter entirely. We're only just getting started, and the process of contraction is only just beginning.

                      The process will be very 'darwinian' indeed - expect many big, lumbering companies that have gluttoned themselves on this credit market to take a big hit, while small, dynamic brands may still have a chance but will have to sacrifice a lot just to stay around.

                      In the end, it's about the passion the designers have to create. For some there is no other alternative.
                      Originally posted by merz
                      perhaps one day pipcleo will post a wywt so non-euclydian & eldrich in its shapes as to turn all onlookers into throngs of dishevelled, muttering idiots

                      Comment

                      • Jon
                        Senior Member
                        • Apr 2008
                        • 677

                        #12
                        To compensate for the blandness of the last post, here's my prediction regarding the brands that carry cache on sz:

                        In general:

                        Japanese brands that are already established should do well. The Japanese market is very dense and passionate about this product and more open to the 'avant-garde'. Having direct access to the Japanese market gives these brands an advantage and almost puts them on another level compared to their European and American counterparts. Textiles and manufacturing in Japan are also top-notch.

                        Europe is more identified by it's luxury brands than any avant-garde movement of late (MMM and the Antwerp 6 being the one exception). High production costs and a less dense market (compared to Japan, Asia) reduces their competitiveness. A cultural disdain for disposable consumption may give smaller brands with great product an advantage, and luxury brands are already losing their foothold, focusing instead on emerging markets in Asia.

                        American designers are in tough. Not only is the USA probably the most financially stretched and vulnerable of markets mentioned there is an immediate disadvantage due to quality concerns. There are few, if any, premium textiles manufacturers and factories. Coupled with a spread-out market it's no surprise that historically only the most 'obvious' of brands have any long-term success.

                        Example 1: Raf Simons, due to the rapid expansion and diffusion of the brand recently will be forced to cut back on a lot of their recent growth. There's no way that their recent investments will meet their one-time predictions. I can only see this as a positive. The opening of their shops this year complicates things. Hopefully we see a focus on the product rather than expansion of the business... (Brands that may also apply: Number (N)ine, Undercover, Lanvin)

                        Example 2: Rick Owens, despite rapid expansion this year will have few problems - the product IS that good. Growth won't be what they may have expected, and money may be tight due to said expansion (London, NYC). Prices seem inflated, and maybe will come back down to reality to reflect a shrinking market. (Brands that may also apply: Yohji Yamamoto, Ann Demeulemeester, Comme Des Garcons)

                        Example 3: Carol Christian Poell. As close to immune to this crisis as possible. The people that already buy his product now will most likely buy it in a recession. It's a small operation and not very integrated into the market, furthermore he's well-established. As with all brands the biggest concern is how many retailers are willing to take a chance on the brand? You've got to have balls to carry CCP in your shop, recession or not. (brands that may also apply: MA+)

                        Example 4: Damir Doma may be one of the few young designers that really has a chance. He has very quickly established his brand in the best shops and is backing it up with his unique aesthetic. Provided that the brand takes a more cautious controlled approach to growth in the future (already in 85+ shops in the world, I believe) he is set to last for a few more years - as we all know, fashion is a very fickle business and more than that is a lot to ask for. (Brands that also apply: Julius, Boris Bidjan Saberi, The Viridi-anne, Giuliano Fujiwara)


                        Thoughts???
                        Originally posted by merz
                        perhaps one day pipcleo will post a wywt so non-euclydian & eldrich in its shapes as to turn all onlookers into throngs of dishevelled, muttering idiots

                        Comment

                        • Chinorlz
                          Senior Member
                          • Sep 2006
                          • 6422

                          #13
                          solid Jon and very well thought out.

                          I can see all your predictions happening, although for example 4 the Japan based brands will likely stay afloat since they've been around for a couple/few years now at least prior to this. Saberi and Doma are definitely in the same category of open to potential pitfalls if their direction and production are not handled carefully.

                          I honestly find MA+ to be going in a direction similar to Doma in the sense that his own line is quite new and expansion has been incredibly rapid (with arguably dubious stores carrying the line now according to their stockists on the Amadei website) with fewer and fewer innovative "must have" pieces each season.

                          Even on SZ almost no one bought MA pieces this season when compared to CCP pieces where almost every major piece was purchased by at least ONE person on here from the pantograph ring on up to the invisiseam suit. CCP is almost certainly immune to this global economic problem in terms of future sales.

                          It'll be interesting to see how the economy will affect the "superboutiques" such as Maxfields, Archive, L'Eclaireur, The Library and Atelier in terms of sales. Their images are very closely controlled and thus owners are less likely to do a crazy early sale in the same vein as neimans/saks, but it would be very interesting to know how they are doing and how they have been doing month to month since last year. It's often mentioned on here that stores like these are recession-proof, but I'd love to see if that were actually true.
                          www.AlbertHuangMD.com - Digital Portfolio Of Projects & Designs

                          Merz (5/22/09):"i'm a firm believer that the ultimate prevailing logic in design is 'does shit look sick as fuck' "

                          Comment

                          • Jon
                            Senior Member
                            • Apr 2008
                            • 677

                            #14
                            Chinorlz, agree about MA+... i am hoping for the best, as he is a true genius, but things are not looking great for him right now. as is evident on SZ, as you pointed out.

                            not knowing enough about the boutiques out there I refrained from commenting (not to mention a conflict of interest...) but retailers are the pillars on which the industry is built and analyzing their situations will give a better insight into the industry as a whole.
                            Originally posted by merz
                            perhaps one day pipcleo will post a wywt so non-euclydian & eldrich in its shapes as to turn all onlookers into throngs of dishevelled, muttering idiots

                            Comment

                            • Chinorlz
                              Senior Member
                              • Sep 2006
                              • 6422

                              #15
                              [quote=Jon;106760]Chinorlz, agree about MA+... i am hoping for the best, as he is a true genius, but things are not looking great for him right now. as is evident on SZ, as you pointed out.

                              not knowing enough about the boutiques out there I refrained from commenting (not to mention a conflict of interest...) but retailers are the pillars on which the industry is built and analyzing their situations will give a better insight into the industry as a whole.[/quote]

                              I know you couldn't really comment on this, which is unfortunate but totally understandable :)
                              www.AlbertHuangMD.com - Digital Portfolio Of Projects & Designs

                              Merz (5/22/09):"i'm a firm believer that the ultimate prevailing logic in design is 'does shit look sick as fuck' "

                              Comment

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