July 10, 2009
It wasn’t all that long ago that luxury retailers were able to float from fiscal year to fiscal year with relative ease, banking on their customers’ costly whims and coasting on their platinum reputations.
But now, by all accounts, those days are over — maybe forever. And high-end brands have to figure out where they fit into the new order of consumerism.
One thing’s for sure: simply slashing prices isn’t an option. “Putting a sale sign on the same old product leaves the customer feeling compromised,” Paul Raffin, CEO of Frette — the Italian linen maker famous for $1,500 sheets — told me in an interview. “Playing it safe is a sure path to failure.”
So what are they doing instead? Well, instead of summering contentedly in St. Tropez this year, luxury executives are hunkered down in their offices, studying, for the first time, strategies better known to mass retail brands. Such as:
Launch an economy line
A diffusion line makes sense for every luxury retailer right now — after all, why should a department store that teams up with a designer reap all the profits from budget-friendly fashion?
Still, there are some companies — most of them with long luxury lineages — for which a lower-priced collection seemed inconceivable, fatal to their cachet. Frette, which has been charging top dollar for their fine bedding since 1860, is one such company.
But this fall, the linen maker will introduce U.S. customers to Edmond Frette, a line of sheets that will start at $500 per set (current prices start at $1500) and will allow customers to buy pieces separately, rather than as a complete set, for the first time. Coach, too, is defying their long history by launching Poppy, a lower-priced line of bright metallic and graphic-emblazoned accessories that start at $48.
Pop up wherever you can
Realtors have been trying for years to coax Hermes to come to the Hamptons — the summer getaway for New York’s well-heeled set. For years, the company resisted.
But with the recession pummeling seaside real estate prices, one broker came up with a new proposal that was music to the company’s ears: a summer rental.
“The answer, in these times, was ‘why not?’” Hermes CEO Bob Chavez told me. “We’ve always shipped an extraordinary amount of product to our retailers in the Hamptons during those months – we have a built-in business there.”
Now through September 20, East Hampton shoppers will be able to buy Hermes items like a $295 scarf or a $530 beach towel at what’s called a pop-up shop — a temporary store format that bigger retailers like Target and Gap have used to create buzz. The East Hampton pop-up will be the first in Hermes’s 160-year history.
Tagging along on the company’s summer vacation is couture brand Temperley London. The company, known for its floaty dresses, will operate a store through December in East Hampton. So will girly designer Cynthia Rowley, who is out on her own on Main Street this year after testing the waters with a section in the Montauk boutique Haven last year.
Stage an Asian invasion
It’s hard to fathom a luxury jeweler opening 30 new stores across the U.S. this year-which is why Cartier is planning to do it in Asia, where it already has 28 boutiques.
Faced with waning sales among their Western clientele, Cartier is trying to make up losses by driving hard and fast into the continent where an appetite for luxury still lingers. “In the United States, sales among our aspirational clients have slowed down,” Cartier CEO Bernard Fornas explained to me in an interview. “But sales in China are up by 50 to 100 percent, year after year. We see Asia as an opportunity to break through the crisis.”
They won’t be alone in the region. Tory Burch recently inked distribution deals in Japan and South Korea, and Jimmy Choo will have opened three stores in Hong Kong by the end of the year. And upscale California boutique Kitson, after enjoying $1.5 million in sales from their first store in Japan, which opened in March, has announced that they’ll open two more in the coming months — and they’re also scouting locations in China, South Korea and Singapore.
“Each day in Asia sees the emergence of a new millionaire,” says Fornas. “Even if this is only 0.1 percent of the population, it’s still an overwhelming reservoir of potential customers.”
Of course, not every high-end designer is taking pages from the mass retail playbook. Some maintain that the safest thing to do is to continue to push aspirational styles that come with four-digit price tags.
Consider Derek Lam, a fashion-set darling. Not only is the company not pulling back–they’re launching their biggest ad campaign to date, with print buys in the August editions of Vogue, Elle and Harper’s Bazaar.
But that doesn’t mean they’re not realistic about their customers’ current finances. “It’s not that we don’t respect the values of the recession,” says Jan Schlottman, CEO of Derek Lam. “We are as scared as everybody else. But we want to say: we know you don’t feel like shopping right now, but we’re here, and we’re going to be here in five years.”
For further information, visit: http://www.walletpop.com/blog/2009/07/10/fancy-brands-look-to-mass-retail-for-lessons-in-survival/