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Has Luxury Fashion Priced Itself Into Extinction?
Big-name high-end brands like Burberry, Prada, and LVMH are in the midst of difficult financial times: The public simply doesn’t covet their once-desirable labels as much as it used to.
The fashion eco-system needs and feeds on luxury brands.
To see how deep its dependence runs, leaf through the opening pages of the April issue of American Vogue. Eliminating cosmetics and jewelry brands, you’ll find, in order, expensive (between $175,000 and $200,000 per page, according to the magazine’s rate card), sometimes multi-page ads from Ralph Lauren, Dior, Gucci, Prada, Chanel, Bottega Veneta, Saint Laurent, Celine, Dolce & Gabbana, Fendi, Marc Jacobs, Michael Kors, DKNY, and La Perla.
Now, look at that another way. Of those front-of-book advertisers, only the publicly traded Michael Kors and privately held Chanel are stand-alone brands and independent operations. La Perla belongs to a Luxembourg-based private investment firm that also owns modeling agencies.
Dior, Celine, Fendi, Marc Jacobs, and DKNY are all units of the publicly-traded Louis Vuitton-Moet Hennessey (aka LVMH) group. Bottega Veneta, Gucci, and Saint Laurent belong to the LVMH rival Kering. Ralph Lauren and Prada are the name brands that sit atop other competing so-called luxury groups that trade on public markets.
Polo Ralph Lauren now owns 13 distinct clothing brands, including Club Monaco, as well as other businesses (one of which serves yummy hamburgers). Though it’s divested its Jil Sander and Helmut Lang units, publicly-traded Prada still owns the footwear brands Church’s and Car Shoe, as well as 80 percent of the Milanese pastry shop Angelo Marchesi.
And by the time I hit Vogue’s Table of Contents (on page 46, in case you were wondering), I’d still not hit ads from the publicly-traded competitors Richemont (owner of Chloe, Alaia, and lots of watch brands), Hermés International, or Burberry Group, the fashion brands that rounded out a 2015 Ernst & Young list of the world’s top luxury concerns.
So many big, well-known names. So many ads. But what the fashion magazines and blogs that depend on them as babies do mothers’ milk don’t tell you is this: They are all in so much trouble. This month, Burberry shares fell after the company reported falling revenues and issued a warning to investors that the outlook for near-term profits and revenues was checkered at best. It blamed currency gyrations and political problems in China.
A few days earlier, LVMH reported an anemic 4 percent growth in first-quarter revenue, and flat sales in its fashion and leather goods divisions, saying terrorist attacks in Paris had hurt handbag sales. Storm warnings first issued from Prada in February; Bloomberg headlined a story on the company with the scary phrase, “Growth Evaporates.”
In fact, things were worse than that, and this month, Prada reported a 26.6 percent drop in its annual profits. Kering’s Gucci also posted a bigger than expected drop in first-quarter sales, Reuters reported this month, “which it blamed on a transition period as its flagship brand works to regain momentum under a new creative and management duo.” And even Hermés, maker of staid classics that stand apart from the sturm und drang of fashion, has warned that 2016 is “a complicated year.”
Outwardly, luxury purveyors are putting the prettiest face possible on their fraying frock fortunes.
On Friday, Kering’s chief financial officer, Jean-Marc Duplaix, kept a stiff upper lip, telling analysts on a conference calls that a first-quarter drop in sales of 7.6 percent at its Bottega Veneta brand was caused by “strong headwinds”: declining European tourism, sluggish sales in Asia, and the strength of the American greenback.
A week earlier, Burberry’s CFO issued similar excuses for its shrinking revenues and sinking stock price: As WWD reported, “the external environment continues to be challenging for luxury goods players.”
Certainly, our terrifying world and roller-coaster currencies are part of the problem. But the big brands are using those big issues to paper over an internal rot that runs much deeper and threatens to gum up the works in the machine the manufactures and sells the status signifiers so many once craved like junkies do a fix.
It’s no coincidence that designer heads are rolling all over fashion’s fields: Alexander Wang has ankled Balenciaga, Hedi Slimane said sayonara to Saint Laurent, and Raf Simons walked away from his Dior. Ennio and Carlo Capasa sold and exited Costume National. Alber Elbaz was canned by Lanvin. Most recently, Francisco Costa and Italo Zucchelli left Calvin Klein. And inevitably, there are the rumors of more disruptive departures: Will Phoebe Philo file out of Celine? Will Karl Lagerfeld step down after 33 years at Chanel?
Despite fashion’s prideful embrace of novelty, none of this is new. Fashion memories are short, but Marc Jacobs’s 2013 departure from Louis Vuitton after 13 years as its designer was an earlier omen of how brutally unsentimental his business had become, and long before that, in 2008, Donna Karan was effectively sidelined by LVMH, which had bought her eponymous company for more than $600 million in 2001.
Though Karan was allowed to save face and retain the title of lead designer, fashion insiders whispered that she’d been banned from the design studio. Her official retirement in 2015 also marked the end of her signature line. It’s likely that in the year since, her wealth has been more of a salve than her continuing role as an advisor to DKNY, the last remaining shred of her once glorious empire.
At least Karan doesn’t have to worry about the fashion calendar anymore. That’s another straw man argument fashion is having with itself. Some brands have decided that shows for buyers and press held months in advance of clothes arriving in stores are obsolete and the solution is “Show today, Sell tomorrow.”
Most of those brands sell basics, though, or else they are vertically integrated companies that control the process from factory to retail, obviating the need for long lead times to source fabrics and yarns, refine patterns, produce samples to show buyers, gauge the market and manufacture accordingly.
Designers who already produce multiple lines, one atop the next, are apoplectic over that idea. Says one who asks not to be identified in order to stay in favor with the bean-counters, “You can’t do a small show for the press and a big show for the public four months later. You’ll have already moved on creatively. And if you’re any good, you’ll hate the old stuff.”
The public may not realize it yet, but it’s lost its passion for prevailing fashion. “People don’t care anymore,” that designer continues. But what about that giant Givenchy show on the Hudson last year? Didn’t people love it? “Sure, as spectacle,” she continues. “But I heard it cost $10 million. They wouldn’t like it so much if they understood they’re paying for it every time they buy overpriced goods.”
“People perceive they’re not getting value for their money, so they’ve stopped buying the stuff,” agrees Dana Thomas, whose decade-old book Deluxe first predicted luxury fashion’s fall. Thomas charges fashion brands with over-expansion. “Customers are sick of seeing the same stores on every street corner. They’ve saturated the market to the point that luxury feels common. That’s the antithesis of everything these brands are based on. People want something nobody has. What’s cool is what nobody else has heard of. Louis Vuitton is now as common as Samsonite. If you’re pulling a Vuitton roller case through an airport, you’re not living the Vuitton life.”
Making matters worse, any longtime luxury customer will tell you, quality has gone down while prices have skyrocketed. A basic Vuitton weekend bag, Thomas says, has more than doubled in price in the years since Deluxe was published. “And certainly, my income hasn’t doubled,” she adds.
“Luxury brands have alienated the luxury customer,” says Cameron Silver, founder of Decades, the posh Los Angeles vintage clothing store, who’s watched as bloggers and celebrities who either borrow or get clothes free have replaced paying customers in the hearts, minds, and front rows of fashion’s nabobs.
“Runway clothes are made for magazines or loans,” Silver continues. “Customers are low on the totem pole and they’re starting to rebel. It started in the mid-’90s with the red carpet and celebrities. Who wants to pay $250,000 for a couture dress they’ve seen loaned to some actress six months earlier?”
The same goes for ready-to-wear, which, thanks to the Internet, is also now instantly over-exposed. “By the time it’s in stores, it looks tired,” says Silver. If it ever reaches stores at all. “Most runway pieces never get produced. They’re marketing exercises. The legacy brands aren’t in the fashion business anymore. They’re selling handbags and lipstick. The quirkiness of luxury, the artisanal experience, has largely been lost.”
The good news is that the digital culture that’s killing fashion-as-we-know-it could, perversely, prove fashion’s salvation. Alongside the paid bloggers and pampered celebrities flogging $3,000 branded goods on Instagram are just plain folks taking selfies of themselves in outfits that reflect individual creativity, not the needs of vampire corporations sucking quarterly profits from purses and perfume bottles. Luxury fashion may be walking dead but self-expression through dress won’t die with it. Hans Christian Anderson had that right. The procession will go on.
Has Luxury Fashion Priced Itself Into Extinction?
Big-name high-end brands like Burberry, Prada, and LVMH are in the midst of difficult financial times: The public simply doesn’t covet their once-desirable labels as much as it used to.
The fashion eco-system needs and feeds on luxury brands.
To see how deep its dependence runs, leaf through the opening pages of the April issue of American Vogue. Eliminating cosmetics and jewelry brands, you’ll find, in order, expensive (between $175,000 and $200,000 per page, according to the magazine’s rate card), sometimes multi-page ads from Ralph Lauren, Dior, Gucci, Prada, Chanel, Bottega Veneta, Saint Laurent, Celine, Dolce & Gabbana, Fendi, Marc Jacobs, Michael Kors, DKNY, and La Perla.
Now, look at that another way. Of those front-of-book advertisers, only the publicly traded Michael Kors and privately held Chanel are stand-alone brands and independent operations. La Perla belongs to a Luxembourg-based private investment firm that also owns modeling agencies.
Dior, Celine, Fendi, Marc Jacobs, and DKNY are all units of the publicly-traded Louis Vuitton-Moet Hennessey (aka LVMH) group. Bottega Veneta, Gucci, and Saint Laurent belong to the LVMH rival Kering. Ralph Lauren and Prada are the name brands that sit atop other competing so-called luxury groups that trade on public markets.
Polo Ralph Lauren now owns 13 distinct clothing brands, including Club Monaco, as well as other businesses (one of which serves yummy hamburgers). Though it’s divested its Jil Sander and Helmut Lang units, publicly-traded Prada still owns the footwear brands Church’s and Car Shoe, as well as 80 percent of the Milanese pastry shop Angelo Marchesi.
And by the time I hit Vogue’s Table of Contents (on page 46, in case you were wondering), I’d still not hit ads from the publicly-traded competitors Richemont (owner of Chloe, Alaia, and lots of watch brands), Hermés International, or Burberry Group, the fashion brands that rounded out a 2015 Ernst & Young list of the world’s top luxury concerns.
So many big, well-known names. So many ads. But what the fashion magazines and blogs that depend on them as babies do mothers’ milk don’t tell you is this: They are all in so much trouble. This month, Burberry shares fell after the company reported falling revenues and issued a warning to investors that the outlook for near-term profits and revenues was checkered at best. It blamed currency gyrations and political problems in China.
A few days earlier, LVMH reported an anemic 4 percent growth in first-quarter revenue, and flat sales in its fashion and leather goods divisions, saying terrorist attacks in Paris had hurt handbag sales. Storm warnings first issued from Prada in February; Bloomberg headlined a story on the company with the scary phrase, “Growth Evaporates.”
In fact, things were worse than that, and this month, Prada reported a 26.6 percent drop in its annual profits. Kering’s Gucci also posted a bigger than expected drop in first-quarter sales, Reuters reported this month, “which it blamed on a transition period as its flagship brand works to regain momentum under a new creative and management duo.” And even Hermés, maker of staid classics that stand apart from the sturm und drang of fashion, has warned that 2016 is “a complicated year.”
Outwardly, luxury purveyors are putting the prettiest face possible on their fraying frock fortunes.
On Friday, Kering’s chief financial officer, Jean-Marc Duplaix, kept a stiff upper lip, telling analysts on a conference calls that a first-quarter drop in sales of 7.6 percent at its Bottega Veneta brand was caused by “strong headwinds”: declining European tourism, sluggish sales in Asia, and the strength of the American greenback.
A week earlier, Burberry’s CFO issued similar excuses for its shrinking revenues and sinking stock price: As WWD reported, “the external environment continues to be challenging for luxury goods players.”
Certainly, our terrifying world and roller-coaster currencies are part of the problem. But the big brands are using those big issues to paper over an internal rot that runs much deeper and threatens to gum up the works in the machine the manufactures and sells the status signifiers so many once craved like junkies do a fix.
It’s no coincidence that designer heads are rolling all over fashion’s fields: Alexander Wang has ankled Balenciaga, Hedi Slimane said sayonara to Saint Laurent, and Raf Simons walked away from his Dior. Ennio and Carlo Capasa sold and exited Costume National. Alber Elbaz was canned by Lanvin. Most recently, Francisco Costa and Italo Zucchelli left Calvin Klein. And inevitably, there are the rumors of more disruptive departures: Will Phoebe Philo file out of Celine? Will Karl Lagerfeld step down after 33 years at Chanel?
Despite fashion’s prideful embrace of novelty, none of this is new. Fashion memories are short, but Marc Jacobs’s 2013 departure from Louis Vuitton after 13 years as its designer was an earlier omen of how brutally unsentimental his business had become, and long before that, in 2008, Donna Karan was effectively sidelined by LVMH, which had bought her eponymous company for more than $600 million in 2001.
Though Karan was allowed to save face and retain the title of lead designer, fashion insiders whispered that she’d been banned from the design studio. Her official retirement in 2015 also marked the end of her signature line. It’s likely that in the year since, her wealth has been more of a salve than her continuing role as an advisor to DKNY, the last remaining shred of her once glorious empire.
At least Karan doesn’t have to worry about the fashion calendar anymore. That’s another straw man argument fashion is having with itself. Some brands have decided that shows for buyers and press held months in advance of clothes arriving in stores are obsolete and the solution is “Show today, Sell tomorrow.”
Most of those brands sell basics, though, or else they are vertically integrated companies that control the process from factory to retail, obviating the need for long lead times to source fabrics and yarns, refine patterns, produce samples to show buyers, gauge the market and manufacture accordingly.
Designers who already produce multiple lines, one atop the next, are apoplectic over that idea. Says one who asks not to be identified in order to stay in favor with the bean-counters, “You can’t do a small show for the press and a big show for the public four months later. You’ll have already moved on creatively. And if you’re any good, you’ll hate the old stuff.”
The public may not realize it yet, but it’s lost its passion for prevailing fashion. “People don’t care anymore,” that designer continues. But what about that giant Givenchy show on the Hudson last year? Didn’t people love it? “Sure, as spectacle,” she continues. “But I heard it cost $10 million. They wouldn’t like it so much if they understood they’re paying for it every time they buy overpriced goods.”
“People perceive they’re not getting value for their money, so they’ve stopped buying the stuff,” agrees Dana Thomas, whose decade-old book Deluxe first predicted luxury fashion’s fall. Thomas charges fashion brands with over-expansion. “Customers are sick of seeing the same stores on every street corner. They’ve saturated the market to the point that luxury feels common. That’s the antithesis of everything these brands are based on. People want something nobody has. What’s cool is what nobody else has heard of. Louis Vuitton is now as common as Samsonite. If you’re pulling a Vuitton roller case through an airport, you’re not living the Vuitton life.”
Making matters worse, any longtime luxury customer will tell you, quality has gone down while prices have skyrocketed. A basic Vuitton weekend bag, Thomas says, has more than doubled in price in the years since Deluxe was published. “And certainly, my income hasn’t doubled,” she adds.
“Luxury brands have alienated the luxury customer,” says Cameron Silver, founder of Decades, the posh Los Angeles vintage clothing store, who’s watched as bloggers and celebrities who either borrow or get clothes free have replaced paying customers in the hearts, minds, and front rows of fashion’s nabobs.
“Runway clothes are made for magazines or loans,” Silver continues. “Customers are low on the totem pole and they’re starting to rebel. It started in the mid-’90s with the red carpet and celebrities. Who wants to pay $250,000 for a couture dress they’ve seen loaned to some actress six months earlier?”
The same goes for ready-to-wear, which, thanks to the Internet, is also now instantly over-exposed. “By the time it’s in stores, it looks tired,” says Silver. If it ever reaches stores at all. “Most runway pieces never get produced. They’re marketing exercises. The legacy brands aren’t in the fashion business anymore. They’re selling handbags and lipstick. The quirkiness of luxury, the artisanal experience, has largely been lost.”
The good news is that the digital culture that’s killing fashion-as-we-know-it could, perversely, prove fashion’s salvation. Alongside the paid bloggers and pampered celebrities flogging $3,000 branded goods on Instagram are just plain folks taking selfies of themselves in outfits that reflect individual creativity, not the needs of vampire corporations sucking quarterly profits from purses and perfume bottles. Luxury fashion may be walking dead but self-expression through dress won’t die with it. Hans Christian Anderson had that right. The procession will go on.
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