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With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)

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  • djrajio
    Senior Member
    • Sep 2006
    • 143

    With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)

    With Good Times Rolling, Labels Have

    The Luxury of Planning for Bad Ones



    By CHRISTINA PASSARIELLO
    September 29, 2006;PageB1




    MILAN -- As the luxury-goods industry enjoys one of
    its biggest booms ever, the mood on the catwalk during fashion week
    here has been bright and upbeat: glittering mini-dresses at Gucci,
    canary yellow jackets from Ferragamo, and toe-tapping pop music at
    nearly every show.


    Buoyed by a better economic outlook in both the U.S.
    and Europe, affluent shoppers have boosted sales at major European
    luxury-goods groups, the world's leading players, by an average of 14%
    in the first six months of this year, according to Swiss bank Lombard
    Odier Darier Hentsch. Sales are expected to reach a record of nearly
    $200 billion by year end -- higher than when sales of shoes, watches,
    dresses and other luxury items previously peaked five years ago,
    according to luxury consultancy Intercorporate.



    To meet demand, fashion houses are aggressively
    opening shops again after a long hiatus. Louis Vuitton recently
    inaugurated a new boutique in Budapest, while Valentino and Ferragamo
    signed leases in India. French fashion house Hermès International is
    expanding its flagship Paris boutique so it will take up half a block.


    "It makes people feel confident if there are more people getting rich and the rich are getting richer," Gucci Group
    Chief Executive Robert Polet said in an interview. Sales at the group,
    which includes the core Gucci brand, Bottega Veneta, Yves Saint Laurent
    and others, increased 20% between January and June.


    Behind the scenes, though, fashion houses are planning
    for the next, inevitable downturn. Their strategy: Make their business
    less dependent on tourism flows -- a traditional driver of sales -- by
    developing stronger local clienteles.


    Luxury-goods companies were caught off guard when the
    1990s go-go years screeched to a halt with the Sept. 11, 2001 attacks.
    One of the industry's top sources of revenue in the past decade has
    been high-spending tourists in places like Hawaii and Europe, where
    many Asian tourists shop. That source suddenly shriveled for more than
    two years as people stopped traveling because of terrorism fears, then
    the SARS virus and war in Iraq. Added to the weak dollar, which made
    European goods more expensive for American consumers, sales plummeted.
    On the runway, the looks reflected the pessimism as designers in 2002
    and 2003 turned to military silhouettes, cargo pants and somber colors.



    Gucci opened stores in wealthy enclaves to combat downturns.

    Luxury goods executives, such as LVMH Moët Hennessy
    Louis Vuitton Chief Executive Bernard Arnault, insist that they are
    seeing no early symptoms of a downturn. Yet U.S. luxury goods consumers
    polled by consulting firm Unity Marketing in the second quarter said
    they were much less confident about spending because of worries about
    their personal finances. Analysts say a cooling of housing prices, and
    terrorism scares like this summer's arrests in an alleged London plot
    to blow up airliners over the Atlantic are possible risks. And some
    executives admit that the current growth spurt isn't sustainable long
    term.


    "We've got to be realistic, at the rate we're growing,
    it's hard to imagine it continuing forever," says Alan Grieve, a
    spokesman for luxury-goods company Cie. Financière Richemont SA.
    Richemont clocked an 18% increase in sales in the period between April
    and August, but Mr. Grieve says the firm is targeting high-single-digit
    sales over the next several years.


    Richemont, whose jewelry and watch brands include
    Cartier and Vacheron Constantin, was one of the hardest hit by the last
    industry slump. It is now preparing for worse times by putting more
    accessibly priced products on shelves. Cartier, for example, expanded
    its best-selling Love collection, which dates from the 1970s, into a
    30-piece line of bracelets and necklaces.


    Necklaces with a small gold hoop on a satin cord sell
    for around $495, compared with $6,700 for a ring from its new, more
    artistic, orchid-themed collection. The Love line has been a huge
    success in attracting new customers to the brand -- especially young
    professionals in the U.S. The line's ad campaign -- set against a New
    York-like skyline -- resonated with local consumers.


    But a top focus of fashion brands is to burrow deeper
    into each of their markets by extending to smaller, yet wealthy
    enclaves. Gucci recently opened stores in Naples, Fla. and East
    Hampton, N.Y. Its second Southern California boutique, in Costa Mesa,
    is aimed at a less-highbrow clientele than its Rodeo Drive store in
    Beverly Hills, which sells more fashion items rather than logo bags,
    says Gucci Group's Mr. Polet.


    The luxury-goods industry "is more resilient not by
    chance, but because companies have reacted to reinforce their key
    brands," says Armando Branchini, managing director of Milan-based
    luxury consultancy Intercorporate. "They have rethought the product
    range and the target consumer."


    French fashion house Louis Vuitton, a unit of LVMH, is
    soon planning to open stores in secondary Chinese cities such as
    Shenyang and Wenzhou. "Ten years ago when we opened our first store in
    Beijing, there were very few clients," says Mr. Arnault. "Today, it's
    very different." Analysts from Lombard Odier Darier Hentsch estimate
    that the Vuitton brand generates the highest portion of its sales from
    China of any major luxury fashion label, at 7%.


    The French fashion brand known for its brown and gold
    LV logo has also multiplied its presence in the U.S., recently opening
    a boutique in Nashville, Tenn. Vuitton has tried to whet consumers'
    appetites in the U.S. by bombarding them with flashy new products, such
    as 2003's colorful Murakami logo bag or its recent denim styles
    incorporating the brand's monogram.


    The idea is to make the changes alluring enough that
    women will buy a new handbag every year, even when times get tough.
    Analysts say luxury-goods companies are, in part, succeeding.


    If American women buy many more handbags every year
    now than ever before, says HSBC Holdings PLC luxury analyst Antoine
    Belge, "it's not just because the value of their houses has gone up,
    but it's a cultural trend."

  • tweeds
    Senior Member
    • Sep 2006
    • 246

    #2
    Re: With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)



    i guess this drives home the fact that ultimately fashion is a commercial vehicle. which is a pity, since much of other artistic media is inherently non-commercial.

    SITE | TWITTER

    Comment

    • Fuuma
      Senior Member
      • Sep 2006
      • 4050

      #3
      Re: With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)

      [quote user="tweedlesinpink"]

      i guess this drives home the fact that ultimately fashion is a commercial vehicle. which is a pity, since much of other artistic media is inherently non-commercial.



      [/quote]





      Fashion is not art, it isdesign, which makes all the difference in the world. At it's best it isart with a purpose and at it's worsta way to make $$$ with no creative integrity whatsoever. I don't find design to be inherently inferior to artistic pursuit as the added two-way relationship between creator/makerand spectator/user adds the dimension of expectations to the typicalsubject/object relationship in artistic fields. Great designers understand the importance of expectations and play with them, giving you something that will satisfy your needs but that is totaly different from what you expected andinitially wanted.





      Oh and Djrajio: good post

      Selling CCP, Harnden, Raf, Rick etc.
      http://www.stylezeitgeist.com/forums...me-other-stuff

      Comment

      • xcoldricex
        Senior Member
        • Sep 2006
        • 1347

        #4
        Re: With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)

        and i was under the impression the american economy wasn't doing so good lately.

        Comment

        • djrajio
          Senior Member
          • Sep 2006
          • 143

          #5
          Re: With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)

          I was under the same impression. I guess this article really drives home two trends I have been seeing. One. China. The 7% figure for China is just amazing IMO and its only going to keep increasing. It really drives come the reality that Asians have and continue to drive the luxury goods market. Two. Even in lean economic times, its now the case that consumers will purchase luxury goods. It's kind of amazing because this phenomena never exist prior to the mid-90s. We can all thank LV and Tom Ford for instilling in every women the necessary desire to the IT bag every season.

          Comment

          • Fuuma
            Senior Member
            • Sep 2006
            • 4050

            #6
            Re: With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)



            [quote user="djrajio"]Two. Even in lean economic times, its now the case that consumers will purchase luxury goods. It's kind of amazing because this phenomena never exist prior to the mid-90s. We can all thank LV and Tom Ford for instilling in every women the necessary desire to the IT bag every season.
            [/quote]



            The current assessment, at least according to some specialists, is that in "lean times"luxury shopperswill have a tendency to reduce their clothing spending BUT, and that's the new idea, they'll concentrate on "safer" items which are easily identifiable and carry a very clear connation of luxury/success/high class lifestyle. So byebye Margiela hello Vuitton.

            Selling CCP, Harnden, Raf, Rick etc.
            http://www.stylezeitgeist.com/forums...me-other-stuff

            Comment

            • sbw4224
              Senior Member
              • Sep 2006
              • 571

              #7
              Re: With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)



              I feel like you're assessment is correct, Fuuma. Just for comparative purposes, the Gucci store in Boston nets around 10 million dollars per year, which is a ton of money for such a small store. I don't know the profits of smaller boutiques in the area, but I'm positive they don't do anything even close to that.



              Boston doesn't have the niche markets that NYC does, but it definitely has a market for mainstream luxury goods. I feel like this is a good representative example of the rest of the US. Smaller expensive labels just aren't wanted when there are mainstream designer labels that can show off a person's relative wealth.

              Comment

              • Faust
                kitsch killer
                • Sep 2006
                • 37852

                #8
                Re: With Good Times Rolling, Labels Have The Luxury of Planning for Bad Ones (WSJ Article)



                [quote user="djrajio"]I was under the same impression. I guess this article really drives home two trends I have been seeing. One. China. The 7% figure for China is just amazing IMO and its only going to keep increasing. It really drives come the reality that Asians have and continue to drive the luxury goods market. Two. Even in lean economic times, its now the case that consumers will purchase luxury goods. It's kind of amazing because this phenomena never exist prior to the mid-90s. We can all thank LV and Tom Ford for instilling in every women the necessary desire to the IT bag every season.
                [/quote]



                Three (kind of ties in with Two) - Buying luxury goods is no longer an economic, but a cultural phenomena - there is a sense of entitlement and glam that exists in the American consumer that wiped out common sense as a deterring mechanism. It's not entirely true that buying luxury goods in lean economy times never existed - during the Great Depression the Upper East side billionaires financially supported Bergdorf Goodman from going out of business because it was the only place where you could by English suits. But it's a new phenomenon for the middle class, and even lower middle class, for sure.



                I think part of that cultural phenomenon is that the celberity status has changed. It used to be that a celeberity had clothes that noone else did, it was so exclusive that you could only sit and admire what they wear sort of how one admires theater costumes that you will never wear in real life. When the marketing forces (whatever they might be) realized that it should be the reverse, that every Joe Shmoe should be able to buy the exact same handbag or jeans that the celebrity wears (regardless of how much Joe makes), and thus made the celebrity an employee and the best billboard.



                Thanks for the article, BTW. I don't have WSJ access, and it's pretty well written. Keep them coming, please.

                Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

                StyleZeitgeist Magazine

                Comment

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