WWD: Defining the New Luxury

WWD | MILES SOCHA

Luxury for all? Not like it used to be.

So-called aspirational customers — who helped lift the luxury category to unprecedented heights during the boom years — seem to be sitting on the sidelines in the postrecession period: still aspiring, but spending less.

“The concept of luxury has restricted again,” said Concetta Lanciaux, principal of Switzerland-based Strategy Luxury Advisors, describing a shift in consumer priorities favoring heritage luxury brands or — at the other extreme — masstige retailers. It makes business more challenging for players in the middle and products that “look like luxury but it’s not luxury.” For example, designers’ second brands are “not doing as well as before [People] prefer to buy less, but a little bit higher,” she explained.

“There are consumers that overreached, and during the recession they had to go back to a more appropriate spending habit,” agreed Michael Burke, chief executive officer at Fendi in Rome, noting that was particularly the case in the American market, hard hit by the financial crisis. “The market has become more polarized: either it’s entry price or true luxury….The middle has hollowed out.

“You either have to be resolutely upscale, or you’re battling it out on prices,” he continued. “[Luxury goods] is not a democratic product category.”

Pam Danziger, president of the Stevens, Pa.-based research firm Unity Marketing, said scores of American consumers who reached beyond their means into the luxury sphere during the boom years pre-2008 have since simply “dropped out” because of the recession.

Danziger estimates consumers with household incomes in excess of $250,000 — the top 2 percent in the U.S. — spend three to four times more on luxury goods than the next affluent tier, those in the $100,000-to-$250,000 range.

What’s more, given a choice between buying the “best of the best” or “better and occasional best,” the richest consumers preferred the latter option in her most recent research.

Based on a survey of some 1,200 affluent consumers in the U.S., conducted last month, Danziger is predicting “cautious behavior” even among elite consumers whose “pent-up demand” for luxury goods led to a spree early in the year that is unlikely to continue.

Lanciaux also foresees a tougher second half, noting European luxury brands were buoyed in the first two quarters by a “huge restocking,” plus a rise in the value of the U.S. dollar against the euro that has since eased.

To be sure, luxury has come roaring back compared with the doldrums of 2009, with most European firms posting strong double-digit sales gains in the first two quarters of 2010 (albeit against low comparisons the year before).

While there are detractors, many executives, consultants and analysts agree the change in fortunes is largely thanks to elite consumers — and emerging markets — rather than a broader buying public.

In a recent report, Bernstein Research analyst Luca Solca said “overseas markets will represent the future driver of luxury growth in the medium and long term. Although the two largest luxury markets — the United States and Japan — make up the majority of current overseas luxury demand, we expect the growing importance of emerging markets to become increasingly pronounced as these markets mature.

“This should bring overseas luxury markets to 66 percent of total demand by destination (versus Europe at 34 percent) in 2020, with emerging markets representing nearly one half of the total overseas portion,” Solca wrote.

Coach’s 34.1 percent bump in fourth-quarter income, reported Tuesday, was also deemed encouraging, suggesting the “ ‘affordable luxury segment’ is also well oriented,” according to a research note by HSBC analyst Antoine Belge.

“We are not saying that everything is rosy for luxury in the U.S., but brands which engage the luxury (or affordable luxury) consumer with products offering clear ‘perceived value’ should continue to do well in our view, even in a jobless recovery phase,” he wrote.

Guy Salter, deputy chairman of Walpole, the association that represents British luxury goods firms, argued the recent rebound in sales in luxury is “not only due to the very wealthy shopper but to other consumers as well. The luxury goods houses have come out with more accessibly priced lines, and the brands that have positioned themselves in the ‘affordable luxury’ space have done well. Links of London, for example, has had very strong results, and all sorts of brands are doing well in that space. I think affordable luxury as a category is maturing.”

Salter noted the crisis forced consumers to change the way they shop. “I think they will continue to buy classic products from high-end brands because they feel they are getting value for money in the long term,” he said. “What they have dropped is the irrational shopping — having to have a certain number of shoes each season or a certain bag because it’s so ‘in.’ The frothiness has been stripped away. To that point, the affordable luxury brands — like Coach — have played the value card by offering classic, well-made products at affordable prices.”

Fendi’s Burke pointed out that fortunes in luxury goods are closely correlated to the stock market, suggesting the core customers are those with financial assets. “We all do very well with that core, elite segment,” he explained, noting the Roman firm’s business remained buoyant through the recession in Europe and Japan, and that furs in the 50,000-to-100,000-euro, or $66,000-to-$132,000, range continue to sell strongly. Meanwhile, the brand’s most expensive leather goods, the Peekaboo range, continue to garner the longest waiting lists. “In luxury, we shouldn’t be in the instant-gratification business,” he said.

Burke noted that Italy remains the one market in the world where the aspirational business has not diminished, thanks to wealthy parents who continue to indulge their adult children with high-end leather goods and fashions, even through the 2009 downturn. “We’re taking market share in Italy,” he noted.

Robert Polet, president and ceo of Gucci Group, said “impulse buying” of luxury goods, seen during the boom years, has decreased. Meanwhile, appreciation for higher-quality, timeless and discreet products has risen, giving a competitive advantage to “reference” luxury brands, he said.

In disclosing first-half results last week, PPR chairman and ceo François-Henri Pinault echoed the sentiment, saying Gucci Group would move away from logos, “adjusting to this new perception of luxury, which is more subtle, more sophisticated.”

“The whole trend we are seeing — from fashion through to beauty — is antimass, antifaux, antibling,” said Marigay McKee, fashion and beauty director at Harrods. “What customers are looking for is heritage, provenance — and embellishment.”

The landmark London department store said recent bestsellers include 10,000 pound, or $15,825, embellished Balmain jackets and 1,400 pound, or $2,215, Balmain jeans. She said fragrance and beauty sales are tracking in a similar way, with Tom Ford, Creed and Bond No. 9 fragrances — all with price points of 150 to 200 pounds, or $237 to $315 — driving fragrance sales. She said customers on the whole are looking for outright luxury and/or unusual ingredients that make a product unique — signals for a healthy trend of trading up.

“The trigger point is always desirability,” said Gucci Group’s Polet. “People aspire to belong to the world of a brand.”

But how many today can afford the admission price?

“There were more aspirational customers prerecession than there are now,” said Robert Burke, head of the New York-based Robert Burke & Associates consulting firm. In his view, sharply priced handbags, shoes and clothes were beneficiaries of the downturn — particularly from contemporary and designer second lines — and will continue to be so.

However, aspirational customers will still save up to buy iconic luxury products, especially from blue-chip brands such as Chanel, Hermès and Louis Vuitton. “I see heritage brands only getting stronger and more desirable to the aspirational customer,” the consultant Burke said. “Consumers are more discerning and more selective in what they buy. I don’t see the market switching right back to where it was.”

During the economic crisis, even well-heeled customers accustomed to designer labels experimented with mixing price points. “I think there’s more opportunity launching contemporary and below price points than launching designer right now,” said Burke. In that vein, he noted the success of American labels such as 3.1 Phillip Lim and Alexander Wang, priced under traditional designer brands.

Lucian James, founder of strategic consultancy Agenda Inc., based in New York and Paris, said luxury was not only impacted by the economic crisis, but a “crisis of meaning” as well.

“Consumers spent some time away from luxury products, and the spell was — to some extent — broken,” he explained. “The recession was a time when consumers really connected to discount and fast-fashion brands and found them surprisingly good.”

To win shoppers back in the postcrisis period, luxury brands “need to create more powerful messages, not just evoke aspirational lifestyles and expect consumers to be seduced….They need to explore ways that they can connect the brand to emerging consumer lifestyles and emerging consumer moods,” James said.

He noted the clientele for luxury today is less tied to income levels than to which brands consumers choose to adorn themselves with, counterfeit or otherwise. “People don’t reach up en masse to luxury brands. They go to the ones that are meaningful for them,” he said.

According to Danziger, the postrecession period creates opportunities for premium brands, and will compel luxury players to put “luxe back into luxury,” the theme and title of her next book.

Luxury players “need to recognize that people are being cautious and figure out ways of bringing additional values to premium brands,” she said. “If we look at the luxury department stores, they have asked their vendors to offer lower opening price points.”

Even affluent men now brag about bargains they scored in Danziger’s focus groups, a first. “That’s the next level of shopping: Being the smarter shopper, finding the better deal and bragging about it,” she said.

In Lanciaux’s view, luxury players will have to adapt to changing spending patterns in mature markets like Europe and Japan, where travel, technological products, art and entertaining are attracting more discretionary dollars. “Luxury brands need to cautiously but surely enter these new territories more tied into cultural lifestyle if they want to continue to grow,” she said. “In addition, they may eliminate licenses that dilute their brands.”

The consultant James suggested Europe’s luxury players lessen their dependence on the “old grammar” of luxury and look beyond heritage. In Japan, meanwhile, brands should look for ways to “connect to a nervous economic culture where security is more important than status.”

Meanwhile, emerging markets like China offer chances for masstige or aspirational brands, positioned at the opening price points for luxury, to write a new luxury grammar. James noted that Coach, for example, recently opened a store in Shanghai and invited young artists to customize bags, leveraging Chinese culture to tap into new generations of high-end consumers. The vodka brand Absolut also successfully introduced a premium product that taps into the Chinese mentality.

Brands such as Nike and Puma, which are perceived as premium but “not weighed down by outdated codes of luxury” also have an advantage in the fast-growing region, James noted.

WWD: Reason No. 1: Luxe Lust

WWD | FN STAFF

During the height of the recession, retail pundits declared that the days of the $800 shoe were over. How wrong they were.

Led by Christian Louboutin, who posted double-digit increases last year, many of the luxury shoe stars have continued to shine, from the red carpet to the oval office.

“I don’t think shoes have ever been as dramatic or as extreme as they are now,” said Robert Burke, former fashion director at Bergdorf Goodman and founder of the consulting firm bearing his name.

And even as more ready-to-wear designers dive in to the footwear game, shoppers continue to gravitate to the footwear specialists. In a recent survey conducted by the Luxury Institute, Christian Louboutin and Manolo Blahnik were ranked No. 1 and No. 2 for designer shoes, while Jimmy Choo came in fifth on an extensive brand list spanning Giorgio Armani to Versace.

“It’s like consuming candy when you were a little kid,” said Milton Pedraza, the Luxury Institute’s CEO. “These are beautiful, attention-getting shoes that make you feel really special and great.”

WWD: As Luxe Would Have It: The High-End Market Rebound

WWD | JEAN E. PALMIERI

For a long time, luxury labels were above it all. Brands aimed at the most affluent sliver of the market were simply immune to recession, they had long maintained. So it caused a minor stir this spring when Kiton, the renowned Neapolitan tailored-clothing company, introduced a lower-priced line called CIPA 1960 at Bergdorf Goodman Men.

Everything remains relative. Although CIPA is pronounced “cheap-a,” the new collection is anything but. It includes beautifully tailored suits for $5,500, stitched entirely by hand, but made with fine archival wool or linen fabrics instead of Kiton’s usual cashmere blend. This helps shave about 30 percent off the typical $8,000 price of a classic Kiton suit—a meaningful saving for the upscale shopper still skittish after the Wall Street meltdown of fall 2008. And if the economic crisis has taught luxury marketers and retailers one lesson, it’s this: The old notion that they are recession proof is a myth.

Leaders in the luxury field are quickly adapting to a seismic shift in the market, one that affects not just pricing, but also consumer attitudes, shopping patterns and the very definition of luxury. As Gregory Furman, founder and chairman of the Luxury Marketing Council, puts it, “The luxury shopper has changed and will continue to be changed as never before.”

Ron Frasch, vice chairman and chief merchant of Saks Fifth Avenue, sees opportunity for those who respond to this rapidly evolving consumer. The Great Recession, he says, was a “wake-up call that significantly changed what we do. And perhaps it was long overdue.”

The shake-up stems in part from a significant decline in the size of the core luxury market. According to the 2009 World Wealth Report by Merrill Lynch Global Wealth Management and Capgemini, the world’s population of high-net-worth individuals—defined as those with investable assets of more than $1 million—shrank 14.9 percent to 8.6 million people in 2008, as their combined wealth fell 19.5 percent to $32.8 trillion. The ultrahigh-net-worth population—individuals with assets of $30 million or more—saw an even steeper decline of 24.6 percent.

And the market didn’t improve in 2009. According to the global consulting firm Bain & Co., last year was the worst ever for the global luxury goods business, with sales falling 8 percent—albeit from a very lofty perch.

Lately, there have been hints of a rebound. Sales began to regain some strength by holiday 2009, and Bain forecasts a 4 percent increase for 2010. “We’re seeing now that consumers are going back into stores,” says Claudia D’Arpizio, lead author of the Bain study.

Cara David, senior vice president of corporate marketing and integrated media for American Express Publishing Corp., also reports a “modest resurgence” in the luxury sector. “We’re seeing a little slack in the guilt and angst over purchasing luxury products,” David says. According to Amex Publishing, 45 percent of affluent consumers now say they feel guilty buying luxury goods, down from 54 percent last year, and David says this attitude adjustment will have an estimated $28 billion net impact on the luxury market, or a gain of 6 to 8 percent.

But even if luxury has begun to bounce back, the profound shift in the consumer mind-set is expected to endure. Jim Brennan, a principal at McKinsey & Co., predicts an ongoing emphasis on value and values that could last five to 10 years. Consumers will buy fewer pieces at lower prices, he says, and they will favor products they consider iconic or authentic. Brennan notes that luxury shoppers have returned to buying jewelry, watches and other “statement pieces that can be handed down to their kids.” Apparel has not rebounded as quickly.

But America’s luxury retailers have already set out to change that.

Saks is “resetting our ways,” says Frasch, “particularly in tailored clothing, dress shirts and shoes.” While offering more goods at opening price points, the store is creating exclusive products and brands to distinguish itself from the competition. “We’ve enhanced our good, better, best model,” Frasch explains. “In the past, our assortment of ‘good’ was OK; our ‘better’ offering, brands like Corneliani and Canali, was respectable, and we had a fine ‘best’ offering, with Zegna, Brioni, Armani and Kiton. But our ‘good’ model has really grown.”

The core suit price is now around $1,500, down from $1,700 in 2008, as Saks lures new customers with younger silhouettes and lower prices from brands such as Michael Kors, Hugo Boss, Z Zegna, Versace, Calvin Klein and Burberry. The retailer has also scored with its new Saks Fifth Avenue Men’s Collection, a comprehensive assortment of modern classic men’s wear with sharp prices. Suit separates, for example, retail at $695 for jackets and $195 for pants.

As Frasch tells it, the men’s luxury shopper is “looking for a quality product at a fair value, not low price.” He cites the “tremendous resurgence of made-to-measure” as evidence the customer is willing to pay a premium for products with clear intrinsic value. Frasch sees potential in luxury sportswear, as well. “As bad as last year was, we had a good year with Brunello Cucinelli, which can never be called volume pricing,” he says.

Russ Patrick, senior vice president and general merchandise manager of men’s wear at Neiman Marcus, acknowledges the luxury retailer “took a hit” during the recession. “So we worked to get our inventories in line,” he says. “With less open-to-buy, there was less room for error, so we had to be spot on. It required us to be better editors.”

“We worked closely with our important vendors to adjust costs on specific ranges of fabrics so we could retail a portion of their suit offering under the $2,000 price point,” said Patrick. “In addition, we introduced two lines, Z Zegna and Caruso, this year, which offer a full collection of suits under $1,500.”

The strategy is paying off: Sales have improved across all categories as shoppers respond to fresh offerings. Still, the Neiman’s customer will continue to be “more mindful about shopping,” Patrick says. “So we have to remain focused on product, challenge our vendors for newness and give him things so he can continue to update his wardrobe.”

One of the ongoing challenges in the luxury field is the aspirational consumer, who has pulled back, according to Pam Danziger, president and founder of Unity Marketing. Danziger defines this segment as households with income of $100,000 to $249,900—23 million households in the U.S., compared with only 2.5 million with incomes of more than $250,000. “The buoyancy in the luxury market prior to the recession was due to aspirational shoppers trading up,” she says. “But now, they’re simply not participating.”

As Danziger sees it, future luxury-market growth will depend upon attracting “ultra-affluent consumers” who “will demand higher quality and more value in luxury purchases.

They also demand more information. Although the affluent consumer remains willing to pay a premium for quality, he now insists on knowing why a product costs what it costs—a phenomenon that Furman, of the Luxury Marketing Council, calls “connoisseurship.” According to Furman, 90 percent of luxury shoppers started out in the middle class. Luxury brands, he says, must “not assume they understand the underlying value of a product.”

That gives an edge to brands that convey “craft and heritage,” says Robert Burke of Robert Burke Associates, citing classic clothing labels such as Kiton, Brioni and Zegna. “The consumer is happy to invest in long-term pieces, but they’re not spending frivolously,” he says. Nor are they spending at the same rate as they did in the past. “It doesn’t feel or sound right today to buy 14 custom suits,” Burke says. “They’re buying luxury in a quieter way.”

Bergdorf Goodman has responded by bringing in key classifications at a “more gentle price point,” says Margaret Spaniolo, senior vice president and general merchandise manager of men’s. “There were men who took a couple of seasons off, but we felt our customer still wanted the brands that we carry in our store,” she says. That desire for luxe brands minus the sticker shock prompted Bergdorf to bring in Kiton’s CIPA 1960 suit collection and other accessible offerings.

“It worked,” Spaniolo says. “We saw the customer come back in shopping.” But not in the same way he did in the past. “The consumer psyche has changed,” she explains. “All of us used to just buy what we liked without thinking about it. Now we think about what we’re spending. If this didn’t wake us all up, I don’t know what it’ll take.”

Tom Kalenderian, executive vice president and general merchandise manager of men’s at Barneys New York, says shoppers have acquired a “more measured” perspective—and more price consciousness. “We’ve consistently dropped tailored clothing prices 5, 10, 15 percent,” Kalenderian says. “We’re selling more value, and that isn’t going away. The customer is supersmart, and our clients know which manufacturers failed to rise to the challenge.”

What the new luxury consumer really wants is “a variety of price points,” according to Bob Mitchell, co-president of the Mitchells Family of Stores, headquartered in Westport, Conn. “He still wants luxury, but he wants to mix in some other pieces, primarily in sportswear.” The Mitchells have paid increased attention to what they call “approachable” pieces, such as cashmere sweaters for $300 to $400, or denim-friendly sport coats and shirts. At the same time, luxury brands that have “repositioned their suit prices are getting traction,” says Mitchell. That includes Brioni, which came in under $5,000, and Zegna, with some basic models for $1,995 or less. Canali offered $1,495 suits, down from $1,900. “That kind of choice had vacated the market before,” Mitchell says.

Robert Ackerman, president and chief executive officer of Ermenegildo Zegna’s North American business, says, “Broadening the assortment of suits helped the business.” The brand also has seen an uptick in its sportswear sales, along with shirts and ties—smaller-ticket items that can “freshen a wardrobe,” Ackerman says.

Mitchell, meanwhile, sees the spreading of price points as an opportunity for additional sales. “There’s potential for us to get more closet share,” he says. “They’re buying Cucinelli, but they’re also picking up a $195 sweater they can play golf in.

“We drank our own Kool-Aid,” Mitchell adds. “Even in the [luxury] heyday, they bought other stuff, they just bought it elsewhere. We’re better merchants today, having that breadth.”

WWD: Stores Lure Back Luxury Male Shopper

WWD | EMILIE MARSH & JEAN SCHEIDNES

Welcome back, department stores.

Luxury retailers say they have experienced a strong start to 2010 and expect continued improvement in the second half of the year, buoyed in part by men returning to stores, as well as inventory control and focus on gross margin. Men’s buyers are heading to Pitti Uomo in Florence next week, followed by the Milan and Paris men’s ready-to-wear shows, in search of enticing product at fair prices.

“We feel that confidence has returned and that men are back in the store at full force,” said Kevin Harter, Bloomingdale’s vice president of men’s fashion direction. “The biggest surprise is how strong the tailored business is. Men are definitely dressing up, and they are coming to Bloomingdale’s to update their suits and accessories that go with them, such as ties, shirts, etc.”

In the U.K., Selfridges’ business has been “consistently strong” this year with contemporary fashion and edgy designer labels such as Alexander McQueen and Balenciaga leading the way, according to David Walker-Smith, director of men’s wear and beauty. “We expect the second half of the year to also be robust,” he said, adding that good management of inventories has been key to the store’s ongoing success.

Although their recovery has trailed that of brands’ own stores, department stores across the globe have reported increased sales for the year to date.

At Liberty of London, “sales have been on fire this year” with total first-quarter sales up 30 percent and men’s wear performing “even stronger” than overall sales, according to buying director Ed Burstell. “As we have been able to increase market share this past year, we are aggressively looking to grow men’s wear this fall, with the budget increased by 15 to 20 percent.” The size of the men’s wear department will also increase by 20 percent.

Chastened by the recession, department stores have made top-to-bottom adjustments to stimulate sales and improve margins: tighter-edited collections, careful assortments of brands, balanced price ranges, more employee training, locally targeted marketing, in-store events, revamped men’s spaces, enhanced loyalty programs, exclusive product (especially private label collections) and perhaps, above all, inventory discipline.

Harvey Nichols “experienced strong double-digit growth” in men’s wear sales for the first half on significantly reduced inventory levels, said Richard Johnson, men’s wear buying manager. “Our more contemporary designer collections and casual sportswear collections have seen the most rapid growth. This has allowed us to keep sale periods short and focus customer attention on full-price product. It is of the utmost importance that we retain the integrity of the products we offer and premium position of brands whom we partner with,” said Johnson.

At the same time, luxury brands have grown increasingly dependent on their own stores, eroding the dominance of the wholesale business. In the latest quarter for Polo Ralph Lauren Corp., for example, retail sales jumped 31.4 percent, while wholesale declined 2.6 percent. The trend will likely continue, as the company has deep cash reserves to spend and has identified international retail and e-commerce initiatives as top priorities for investment.

As a brand grows more international, the balance of distribution shifts even more toward freestanding stores. China, for example, simply does not have department store networks for wholesale distribution that the U.S. has, so brands looking to expand rapidly there must open stores.

Calvin Klein Inc., which operated 67 CK Calvin Klein stores worldwide at the end of 2009, plans to ramp up to 151 by the end of 2012, and about 60 of those will be in China alone.

“The freestanding stores are really important because they present the lifestyle and they’re a branding platform,” said Tom Murry, chief executive officer of Calvin Klein.

Luxury consumers sometimes want to see the largest possible assortment from a brand, said Robert Burke of the fashion consultancy Robert Burke Associates.

“Also, because of all the inventory reductions and economic instability, sometimes department stores had played it very safe. And what we’ve found is safe product is not motivating the customer to spend….People who had a strong store presence realized during the last two years that they could control their own stores, but they couldn’t control the department stores.”

Indeed, brands have not quite forgiven retailers for the great discounting panic of 2008.“We will be more selective in the future, proceed with more caution and control and put limitations where necessary,” said Pier Luigi Loro Piana, ceo and deputy chairman of Loro Piana. “That said, we don’t want to lose the sense of competition department stores offer. They play a key role in determining how your merchandise fares compared to others.” With wholesale comprising 20 percent of sales, Loro Piana eked out a 1 percent sales increase in 2009.

For their part, department stores say they don’t discourage vendors from opening stores, which add credibility to the brand, ultimately benefiting everyone who carries it.

Besides, if brands are out to reduce their dependence on retailers, the feeling is mutual, since department stores are aggressively ramping up their private label businesses that afford them maximum control over the margins, the flow of goods and the floor space. As they head to Pitti Uomo next week, one of their top priorities will be to find manufacturing partners for their private labels.

“Our men’s collection has pretty quickly become our largest brand,” said Ron Frasch, Saks Fifth Avenue president and chief merchandising officer. “We have very, very aggressive plans for it, and we’re investing aggressively in it from all angles — store staff, brand management, product development, real estate, visual, marketing, every aspect. And we think it has a big number attached to it, with a very high margin.”

Private label has also gained a foothold in Europe, with department stores looking to invest in their own brand names, which more often than not predate that of the labels they carry.

“Historically, private label’s share of the market has increased over time, especially during recession, and almost a quarter of all consumer goods sales in the U.S. are private label,” said Umberto Angeloni, citing Harvard Business School professor John Quelch. Angeloni co-owns Caruso, which manufactures tailored clothing for such brands as Dior Homme, Lanvin, and Ralph Lauren, as well as a handful of private label brands. “I view the exercise as that of building a retail brand…a brand that they can totally control and thus will never betray them or compete unfairly. Stores realize that sometimes their most valuable asset is their own name.”

To wit, Harvey Nichols said it would launch private label product in selected core categories later this year.

And Paris-based Printemps is gearing up to introduce a cashmere collection for both men and women, priced between 95 and 120 euros, or $114 to $144 at current exchange, under its own banner in September.

“We are positioning the collection at a very affordable price point while maintaining a premium quality and style quotient,” said Tancrède de Lalun, general merchandising manager for men’s and women’s apparel.

Liberty is taking the strategy a step further, with plans to wholesale a contemporary men’s line it created with licensee Slowear Group, banking on the cachet of the retailer’s own heritage. The 200-piece line, which marks Liberty’s first licensing pact, will bow in Milan for next spring, and sales in six years should reach 30 million euros, or $38.6 million, Liberty said.

“It’s a clear margin-building strategy where we can control the product so it does not conflict with anything else we carry,” Burstell said, adding the store’s 135-year history and heritage provided the ideal background.

Brands with perceived heritage continue to enjoy a competitive advantage, and playing up history — in the form of origin myths, legacy stories, reverence for forefathers, founding dates and artifacts — is now front and center of many marketing strategies. Retailers are embracing the trend as well.

From a merchandising standpoint, “I see stores being much more edited and selective. That’s a fine line, because you want to take a specific point of view but you also want to have a breadth of product and especially unique and high-positioned product,” said Burke.

Despite tensions with brands that also have retail strategies, Burke added, “It’s important to be able to grow the department store business, because there’s a customer who doesn’t want to shop in a specialty store, particularly a men’s customer who wants a one-stop-shopping situation.”

Brands and retailers still have plenty of common ground. All parties want to provide distinctive product that will inspire consumers to buy. While no one wants to relive the nightmarish overstocks of the recession, vendors say it’s time for stores to loosen the purse strings a little.

“We’re not seeing this recovery as much in Europe as in Asia and the U.S., but what I’d like to see [in the healthier regions] is more aggressive purchasing. They were so cautious and gun-shy during the downturn. Now I’d like to see more confidence in the recovery,” said Calvin Klein’s Murry.

Indeed, buyers said they had to “chase inventory” for most of the spring. But that doesn’t mean they’re about to abandon their newfound discipline.

“The budgets are up, and we’re feeling confident but cautious,” said Frasch of Saks. “I don’t want the inventory to outpace the sales growth. We learned we could improve our margins significantly with targeted investments and very disciplined inventory management. We’re not going to walk away from that.”

Alluring product offerings go hand in hand with alluring environments and, to that end, many stores have revamped their men’s spaces to lure shoppers in.

Barneys New York, which has identified men’s contemporary sportswear as a category with significant growth potential, last month revamped the fourth floor of its flagship to seize the opportunity. Le Bon Marché is making room for Balthazar, its men’s department, to devote more space to high-end tailored brands and shoes. The LVMH Moët Hennessy Louis Vuitton-owned department store on Paris’ Left Bank will unveil a revamped 44,000-square-foot men’s wear space in September.

“Men’s wear is a growth sector for the store,” said Le Bon Marché deputy ceo Bruno Villeneuve. “We intend to go higher end.”

Meanwhile, Andrew Keith, president of Joyce, said men’s wear will find a new home in the brand’s Canton Road store in Hong Kong in August.

“We are seeing an increased level of confidence from our male customers. They are responding to new brands and key trend items well,” said Keith.

By managing inventory levels and chasing early deliveries, inventory is down 35 percent from last year, and it has delayed season-end discounting by nearly a month. Exceptional levels of service, such as home-shopping visits, tailoring services and personal orders for top clients, have also helped to entice shoppers.

“We have been caught short a little by the strength of customer reaction to certain key items [that] in certain cases we have had to do multiple reorders on. We now have male customers putting down deposits on fall 2010 runway,” said Keith.

Vendors complain that when buyers scramble for inventory too late in the season, everyone loses.

Polo Ralph Lauren told analysts that with production mostly offshore involving requisite lead times, it might be difficult for suppliers to react as quickly as some stores would like. Roger Farah, Polo’s president and chief operating officer, said, “Retailers will need to learn what is realistic and what is not.”

WWD: Young Designers Build Overseas Sales

WWD | MARC KARIMZADEH

NEW YORK — “If I can make it there, I’ll make it anywhere.”

Where once designers used to live by the iconic Liza Minnelli lyric and come to Seventh Avenue to build their businesses in New York and the U.S. before tackling opportunities abroad, the city’s young designers are now thinking globally almost from the moment they launch their labels.

And these days, they see the biggest potential in the East — from China to South Korea, India to the Middle East, including the Emirates and Lebanon. Many said Europe and Russia remain challenging, given their economic turmoil, while markets such as Brazil are still relatively untapped even though major luxury brands are flocking there.

To build their overseas presences, designers have either partnered with sales showrooms in other fashion capitals or started to go to Paris during the city’s fashion weeks to show and sell their collections to buyers who don’t make the trip to New York.

Jason Wu, for instance, plans to travel to Paris in July during the couture season to present his resort collection to European and Asian stores in town at the time. Currently, 30 percent of his sales are overseas and, of those, London, where he sells to Browns, Selfridges, Harrods and Net-a-porter, and Japan, with stores like Estination and Designworks, are the largest, accounting for 10 percent each. And Wu takes these markets as seriously as his American business. For instance, the designer just created a limited edition T-shirt collection for Tokyo’s Designworks with prints from his fall 2010 collection.

Asked about his fastest-growing market, Wu, who had wholesale sales of $10 million last year and projects $14 million for this year, pointed to China, “especially Beijing. It’s an emerging market in terms of demand for luxury goods. In designer clothes, it has always been the big players like Chanel and Louis Vuitton. Young designers are a new thing for China, whereas they are not as new for Japan or Korea.”

Alexa Adams, who designs the Ohne Titel line with Flora Gill, concurred. “China has a whole new group of people with money that can afford to buy designer clothing, and they are open to new designer labels,” she said.

Robert Burke, head of the Robert Burke & Associates consulting firm, works on projects in China, the Middle East, Brazil, Kazakhstan and Korea, and said there has been interest from all those countries in emerging American talent. “They see the talent coming out of the U.S. as a potentially very strong business, and the young designers see opportunities there,” Burke said. Within them, “Korea and China are the two that seem to be the most focused in the sense of interest in buying from young designers.”

And these designers are eager to sell to overseas stores — partly because they have little choice if they want to survive. The worldwide recession hit the U.S. retail sector particularly hard, prompting stores from Saks Fifth Avenue to Neiman Marcus to cut their number of vendors or the amount they buy from individual designers. In addition, a slew of specialty stores, long a launchpad for young talent, went out of business.

So, left with little choice, they got on a plane.

“American designers, for a long time, had difficulty breaking into international markets,” said Elana Posner, Peter Som’s business partner. “I think this generation of designers learned from that.”

Wen Zhou, chief executive officer and president for 3.1 Phillip Lim, said, “Especially with the crisis in the economy, you have to be in as many countries as soon as possible in order to have a viable business. It’s no longer this idea that a designer comes out with a collection and makes it in the U.S., and then in the rest of the world. The world is much smaller now, and you have to almost build a global brand instead of a U.S. brand from Day One.”

When 3.1 Phillip Lim launched in fall 2005, the line was sold in 27 countries. Today, it is sold in 49 countries, and the designer projects wholesale sales of $50 million for this year. International accounts for 45 percent of the designer’s total business, of which Japan and the U.K. represent 10 percent each. Lim also has a significant business in the Middle East, selling to stores such as Plum in Beirut, Beymen and Harvey Nichols in Istanbul and Boutique One in Dubai.

“The Middle East is the fastest growing for us,” Zhou said. “In Europe, Italy is our other fastest-growing market. Italy has many small towns, and in every single town, there is that beautiful boutique that people go to locally and they embrace fashion. While Italy is not huge, the amount of boutiques available for us is interesting.”

With its Singapore partner, Club 21, 3.1 Phillip Lim is planning to open a freestanding store in August. Zhou added China is expected to grow into one of the most important markets for Lim in the future, and to that end, the designer is planning to stage a fashion show in Beijing in October to present the spring 2011 collection.

Posner at Peter Som agreed that Asia is among the fastest-growing markets. “Japan and Korea have always been strong, and Taiwan and Singapore are starting to be strong,” she said, adding that, in China, “main brands have opened their stores, and now specialty stores are starting to open and they will want European and American brands.”

Maria Tomei Borromeo, Thakoon’s ceo, said that, since launching the collection in 2004, the business has been roughly evenly split between domestic and international. Overseas accounts for 45 percent, while the U.S. represents 55 percent. By region or country, Asia accounts for 14 percent, which includes “a significant business” in Japan, Hong Kong, the Philippines and Korea. Russia and the Middle East are about 10 percent of Thakoon’s business and Europe is 21 percent. “A lot of focus and attention are being paid to what is going on in New York, and our brand is coming up at a time when a lot of interesting things are happening in New York,” Tomei Borromeo said of international demand for the brand.

Many designers also cited developments on the Web as another instigator for global growth. It not only allows potential overseas customers to familiarize themselves with emerging U.S. talent through the click of the mouse, but also makes it easier for designers to communicate with their international stores through e-mail, Skype, BBM and other tools of online communication.

“Because of technology, five years ago, if you were a young designer, wherever you were based, it was very much about growing there slowly, and eventually international people caught up,” designer Prabal Gurung said. “But because of such things as Facebook, Twitter, the way the shows are going viral, information is instant. When you do a runway show, or a celebrity wears your clothes, it can be picked up by everyone around the world.”

Brian Reyes said, “I think the world is so focused on fashion now, through the Internet or entertainment at large, that the idea of American style has penetrated more markets.”

Stephanie Cozzi, president of Brian Reyes, agreed that technology played a key role in changing the perception. “It wasn’t as easy five years ago, when no one had a BlackBerry,” Cozzi said. “Until very recently, it was really the specialty stores that drove overseas business and it was all about relationships. Now you can BBM your buyer in London as easily as your best friend around the block. Technology has really taken down the barriers.”

That said, there are still benefits and hurdles for American designers looking to build their businesses abroad.

Joseph Altuzarra, who designs in New York and Paris, said he benefits from doing business in Europe.

“We produce in Italy and all of our fabric mills and all of our suppliers are in Italy, as well as some in France,” he said. “On a practical level, we pay everything out in euros, so building a euro business outside of the U.S. is a priority for us because it helps us balance what we take in versus what we pay out.”

Doo-Ri Chung said, “[With] the amount they mark up with the duties [in Europe], you can’t be as competitive. You don’t really have that problem in the Middle East, and so we are able to open up more freely. For us, the emerging market had been Russia, but we felt that, with the recession, a lot of accounts have gone out of business, or had their budgets slashed. The Middle East market has remained stable for us.”

For Iranian Behnaz Sarafpour, her native Middle East represents the largest overseas region, and she sells to countries such as Dubai, Saudi Arabia and Kuwait, followed by Russia. She also has seen growth in Turkey and Korea. “There is interest in American fashion from other countries, regardless of the issues there are with exporting American goods,” said the designer.

Sometimes, however, styles need to be adjusted for local preferences and religious considerations, particularly in Saudi Arabia, where many designers have to lower the hems of their dresses to adhere to local dress codes. But if it gets them more business, so be it.

“It’s a huge playing field, with countries like India and China and a lot of other Asian countries and the Middle East,” Gurung said. “It’s not just domestic. You can’t just focus on domestic and think you can be successful.”

WWD: David Yurman's Madison Avenue Leap

WWD | SOPHIA CHABBOTT

NEW YORK — David Yurman is making a statement on Madison Avenue.

The fine jewelry firm is marking three decades in business with the opening today of a multimillion-dollar flagship in a converted town house on Madison Avenue at 63rd Street here that represents the brand’s biggest single retail investment.

The five-floor flagship, which Yurman calls the Townhouse, punctuates a two-year global expansion that included the company’s entry into Europe with a 400-square-foot in-store boutique at Printemps in Paris, which launched in March, and another shop-in-shop at the Moscow luxury retailer Tsum. There are also plans for a London location.

In Asia, Yurman has opened four boutiques and is eyeing a second store in Macau. The firm has also bolstered its presence at U.S. stores such as Saks Fifth Avenue and Bloomingdale’s, where the new looks of the in-store shops gave a taste of the new flagship, which will be the inspiration for the brand’s 15 domestic stand-alone boutiques. These units could be retrofitted in the Townhouse’s design.

“We built this home together,” said company chairman and designer David Yurman, referring to his wife, Sybil, president and chief marketing officer, and their son, Evan, design director of men’s, timepieces, bridal and Couture Jewelry. “It’s an evolution. Design is in my bones.”

Yurman’s chief executive officer, Paul Blum, said the flagship will be a prime platform for generating brand awareness.

“Every one of our stores is a very important example of each market we’re in,” he said. “Retail is the ultimate in local marketing…our retail really sets the standard [for] someone that really wants to get the pure form of the brand.”

Blum said beyond diversifying product assortment — with prices starting at $250 — the current economic environment requires wowing the consumer with impressive product, displays and an educated sales staff.

“People have a lot of options of shopping today: online, jewelry stores,” he said, adding that he expects “a healthy increase” in sales versus Yurman’s former Madison Avenue store. “If you’re going to bring something to the retail landscape…it’s got to be transcendent; transcend the assortment, transcend the training, transcend the shopping experience. It’s a higher level of service.”

Industry sources estimate the brand’s sales range from $500 million to $700 million, but the privately held firm declined to provide figures.

The flagship has 2,000 square feet of selling space over three floors — the fourth and fifth are back office space — compared with just 800 square feet at Yurman’s previous Madison Avenue locale, one block north.

The store, which was under construction until the 11th hour and was designed by Gabellini Shepherd Associates, echoes the Yurman aesthetic with clean lines, unexpected textures and light. The narrow building has been given an enhanced sense of depth with double- and triple-height ceilings and an atrium. The focal point is the store’s nave, where a steel rod sculpture — evoking Yurman’s iconic cable bracelet — is suspended from the triple-height ceiling and wrapped by a curving staircase.

The facade has hand-etched glass onto which a projector within the building displays the brand name and other images. Gray canvas walls recall Sybil Yurman’s background in painting and the door handles have been hand-sculpted by David Yurman. Smooth planks of American walnut unfold across the ceiling and reflect the couple’s reverence for midcentury American design and furniture.

The first floor, which houses women’s jewelry, features striated Nublado marble floors, mirrors and steel and wood trim. Collections will be merchandised together, such as the Silver Ice, or the edgy new Midnight Mélange collection, a line of pavé diamonds set into oxidized silver that debuted at Yurman’s Printemps boutique.

The second floor displays men’s jewelry and timepieces. The denlike atmosphere includes a bar, club chairs and a flat-screen television.

The third floor represents newness. The bridal jewelry collection is on display along with the new Couture jewelry line. The Couture collection reflects the fine jeweler’s push into a high jewelry-like category in which the one-of-a-kind pieces escalate from $18,000 into the millions.

Yurman previously had a line called Couture that was comprised of limited edition pieces. That line has been renamed David Yurman Limited Edition. The Couture project was championed by Evan Yurman, a fan of the work of jewelers in the highest, most rarefied echelons of the market, such as Joel A. Rosenthal of JAR.

The jewelry pieces are focused on color with large, unique stones such as a 12-carat Kashmir sapphire perched atop a white gold ring with signature Yurman cable detail and pavé diamond accents, an 80-carat peridot set in a necklace of color change medallion spinels or a 25-carat red spinel cocktail ring. The line represents some of Yurman’s highest-ticket items.

“Part of David and Sybil Yurman’s success has been in anticipating consumer needs,” said Robert Burke, head of the Robert Burke & Associates consulting firm. “They’ve always been ahead of the curve. Making a statement like this [store] and pushing the brand up in price point and design in a lifestyle environment will only set it apart.”

David Yurman has not be averse to taking some risks. When injecting diamonds into sterling silver for his revolutionary Silver Ice collection, Yurman shifted the paradigm in fine jewelry — something that was frowned upon by old guard jewelry houses that view silver as an unworthy metal to combine with precious diamonds, but was ultimately accepted by consumers who appreciated the lower price and everyday wearability of the pieces.

The chairman and designer has long been fascinated by geometric shapes and sculpture forms. Yurman’s cable bracelet was one of his first designs and is still a top seller that his most devoted clients collect year after year.

The growing involvement of Evan Yurman, who pushes his parents to do edgier styles, is indicative of how the Yurmans view their business — as a family matter. The husband-wife team is closely involved with day-to-day operations at the firm’s headquarters on Vestry Street in lower Manhattan, and within their store network. There is a familial sense among employees, several of whom have been with the Yurmans for decades.

The couple said they will never sell the company, and that Evan Yurman will eventually take command.

“We are a family and we like to design,” Sybil Yurman said. “We don’t live to work. Design is part of our romance and our life.”

Ultimately, the company’s expansion and creative energy — including a fragrance and eyewear through licenses with Clarins and B. Robinson, respectively — are generated by the Yurmans themselves.

“I made my first cuff links when I was 11 years old,” said Evan Yurman, now 28. “Six years later I wanted to buy a surfboard and [my parents] promised me the [royalties of sales from the cuff links]…we sold thousands of pairs so I bought a surfboard and went to Europe for a month.”

He has developed a particular affinity to rare gems because of the craftsmanship involved in the pieces and the relationship that blossoms between jeweler and customer.

“It’s an intimate process between myself and the client,” Evan Yurman said of working on the Couture collection. “It’s a dialogue and it’s an heirloom.”

WWD: New Online Sites Aim to Connect Industry

WWD | SHARON EDELSON

First consumers, then business people in general and now there are a slew of new fashion industry-specific Web sites springing up that combine marketplaces with social media.

Consumers, designers and retailers have embraced e-commerce, Facebook and Twitter, yet most in the industry are still using outdated tools to perform their jobs. For example, buyers still generally rely on pencil and paper to write orders.

BrandOrders.com, created by retail and fashion executives, is a wholesale online community for brands and stores to increase buying efficiencies, with a social media component as well. The site is targeting high-end labels and retailers, with Barneys New York and Showroom Seven participating in the test phase.

BrandOrders will go live in the spring, with 75 brands from Prêt à Porter, a trade show in Paris, and its New York show, The Train/The Box. Lilla P, Pure Amici, Real Truth, Lauren Balgiore and Tiia Vanhatapio are among the site’s apparel vendors, while Lockhart, Jennifer Elizabeth, Abas, Pono and Lexi Lu represent accessories and jewelry resources, said Lincoln Brown, BrandOrders’ chairman.

Brown, a venture capitalist whose Next Generation Ventures invests in fledgling firms, is funding BrandOrders.com.

BrandOrders founder and chief executive officer Chris Guerra got the idea for the site after accompanying his mother to trade shows and buying trips for Bamboo Clothiers, the stores he and his parents own in South Florida. “When we got home, I watched mom piece together orders with carbon paper all over the place,” said Guerra. “She wrote orders and faxed them in. This [site] eases some of the pain of the wholesale buying process.”

“We saw an opportunity to create a platform for brands and retailers to interact and communicate,” said Robert Burke, a former senior vice president of fashion and public relations at Bergdorf Goodman, who now owns a retail and consumer products consulting firm and is working on the project. “I’m an old war horse retailer who writes orders by hand. The goal now is to have as lean an inventory as possible, but not so lean that you can’t maintain proper stock levels. BrandOrders allows retailers to communicate more quickly.”

Brands can post new items on the site and retailers can search for products by showroom, trade show or product category. “This is a cross between Facebook and Amazon for the wholesale industry,” Guerra said.

Communications between parties is private, but the format offers opportunities for networking. Brands can view a retailer’s inventory, see what’s selling and what’s not selling, and suggest ways in which their products might best be sold. BrandOrders is charging wholesalers about $200 a month for the service, and it will be free to retailers. A cell phone app is coming in the fall.

As a buyer at Mimi Maternity and Ann Taylor, much of Mona BiJoor’s time was spent rushing to showroom appointments, poring over line sheets and scouting emerging talent. She conceived of Joor, an online contemporary fashion network, “to eliminate multiple pain points such as line sheets and phone calls,” she said. “This is a tool I wanted when I was a buyer.” Boutiques can use Joor to search for new designers, view collections and manage transactions. Designers can search for new boutiques and display their collections. Like an online dating service, brands and buyers must request a match before mutual access is granted. The site has 75 designers who pay an annual fee, which Joor declined to disclose, and 500 boutiques.

Another similar site is Afingo.com, which launched last month at MAGIC and “connects the dots for people,” said Liza Deyrmenjian, ceo and co-founder. “It’s a Web-based roundtable where all four building blocks of the fashion world — designers, retailers, professionals in the industry and consumers — meet.”

Parts of Afingo.com are free to consumers, but access to special events, sample sales and special designer-retailer offers requires a subscription for $49 a year. Designers, retailers and suppliers pay $299 a year.

WWD: Experts Weigh in on Juicy Designers' Departure

WWD | LISA LOCKWOOD

The fashion industry has had a mixed track record when its comes to companies surviving the departure of founders-designers.

WWD polled industry experts to see whether they believed Juicy Couture could survive without the creative leadership of its co-founders, Pamela Skaist-Levy and Gena Nash-Taylor, after their wildly successful run.

“It’s certainly possible to have designers go on to the next thing, as long as there are designers there to keep the DNA alive and keep it current,” said Andrew Jassin, managing director of Jassin Consulting. He pointed to brands such as Gucci, Lacoste and Hugo Boss, which have had successful futures without their original designers. “Some have suffered, such as Ungaro, but Dior has been fantastic and Chloé has had its ups and downs. Under Stella McCartney, it was great,” he said.

He also cited Claiborne’s Kate Spade brand. “The Kate Spade brand got stale with Kate, and it’s been reinvented with someone else. You need to have reinvention. Calvin Klein’s business without Calvin has been terrific and has grown geometrically year to year in categories that would have been difficult to do with Calvin,” Jassin said.

Hal Reiter, president and chief executive officer of Herbert Mines Associates, agreed companies do survive changes in creative leadership. “Founders-designers can be replaced and transitioned from the original. Look at Anne Klein, Calvin Klein; J.Crew is a perfect example of a whole new J. Crew. Many of these faces of the brand are no longer designing, but they edit and veto. These eponymous companies can go on with a new designer provided they stay loyal to the brand,” he said.

Marshal Cohen, chief industry analyst at The NPD Group, explained that if a company is able to keep the personality of the brand, but find the balance with someone who’s got professional experience, it will allow the company to grow to the next level. He said when a designer partners with a company like Claiborne, the expectation is to grow, not stay stable. He believes Juicy will survive if certain things are done right. “Sometimes it’s even better,” he said, pointing to firms like Perry Ellis, which survived a long time after the death of its designer, whereas Williwear went downhill after Willi Smith died.

Cohen believes Claiborne is doing the right things to succeed. He said it’s not about how many stores a brand opens or how many skirts it sells. “It’s, ‘How profitable can you become?’” he said, adding he believes leaner, more focused, more differentiated brands are the future.

Robert Burke, president and ceo of Robert Burke Consultants, said, “I think that Juicy Couture has certainly been an enormous success since its creation. They have created a very distinctive image, and diversified with men’s, women’s and children’s and freestanding shops. It’s well on its way as an established brand. I can foresee it moving forward.

“It’s not in that crucial phase of still defining the brand. Any time there’s a loss of a designer, there’s concern, especially at the collection level because they’re doing such a good job. It will probably live on. They’ve been very much the face of Juicy. It worked for the brand’s benefit, but the brand is so well established,” said Burke.

“I would never say it’s a recipe for disaster. The creative director-founders’ leaving can very often have an impact on the brand, especially when they’re strong product people,” added Kim Vernon, ceo of Vernon Co. She pointed to Calypso founder Christiane Celle, who sold Calypso and later had irreconcilable differences with the new owners, which had a dramatic impact on the brand and the business “because she was an extremely strong product person.”

As far as the Juicy designers, she said, “They were involved many years post-acquisition, and [their departure] might be very dramatic for the brand. They don’t have teams there anymore. There’s been so much turnover. Juicy Couture is hitting a bit of maturation in the market. Their involvement was petering out. Frankly I’m surprised they stayed in this so long.”

Marc Gobé, president of Emotional Branding, believes Juicy Couture has developed an enviable cult following.

“Juicy Couture is interesting. The brand is really cool, fresh and imaginative,” he said. “People who start the business and are the inspiration of the business, when they walk away, it signals trouble even if it’s for a good cause. Do they want to leave? Then it’s their prerogative, or are they leaving because they realize that being part of a bigger corporation does not give them the freedom they were accustomed to?”

But, he warned, “The hardest thing in fashion, or in any creative field, is to find a good creative director. Some companies do well. Look at Gucci, they were able to continue with a new designer, but generally it’s very challenging because it’s the business of fashion and inspiration and feelings, and understanding what the market wants by emotionally connecting. That won’t show up in any report.”

“It [Juicy Couture] still has a tremendous amount of potential, and what it has is the ability to grow globally,” said Gilbert Harrison, chairman of Financo Inc. “Bill [McComb] understands the business. He inherited, to a great extent, a perfect storm. He’ll survive it. I have confidence in him, and the board has confidence in him.”

WWD: Jewelers Craft a New Path to Luxury

WWD | SOPHIA CHABBOTT

Excess is out and prudence is in.

A year after the financial markets melted down and the days of freewheeling spending on luxury goods came to a grinding halt, top-tier jewelers have adapted to marketing their best pieces in this economy. In an era when conspicuous consumption appears on the wane, pitching diamond and gemstone jewelry that can sell for upward of $100,000 and go into the millions is definitely a challenge. Consumers’ new mind-set makes it even tougher, executives and retailers say, even as they stress consumers are getting more comfortable with spending again.

So fine jewelers are adopting two tactics. One is to market the pieces as an investment that can help diversify the customer’s financial portfolio. The other strategy plays on the limited nature of truly rare pieces: buy now or it may never be available again.

David Klein, executive director at Leviev, said clients come into the firm’s Madison Avenue boutique looking for value. “We have people that come in and say, ‘I want something special, something that’s going to keep the value,’” he said, noting that Leviev, which is known for its white and yellow diamonds, had several important sales in the past several months and that clients come in asking which pieces would be solid investments. “People are interested in seeing [what we have]. They want large, whites and yellows.”

One client is said to have come in with his wife a few months ago wanting to invest in diamonds and she got to choose the piece. Initially they spent $2 million, but after a few months of evaluating the purchase, he upped the ante with the purchase of a pair of $4 million diamond earrings.

Leviev is aggressively procuring new pieces made with ultrarare and pricy stones. Standout pieces include a collar of oval- and round-cut white diamonds interspersed with intense pink diamonds, and a 76-carat pink diamond that has been reset as a pendant surrounded by smaller colored diamonds in orange, green, yellow, pink and blue that retails for $18 million.

“We haven’t changed because times have changed and it’s serving us well,” added Klein.

Graff America president and chief executive officer Henri Barguirdjian said the London-based firm would never dream of selling its rarefied jewels from an investment aspect, saying, “It’s never a consideration.” But with diamonds and gems escalating in price year upon year, the investment aspect is not to be discounted.

Barguirdjian claims Graff’s business in America is good, although the nature of sales is different.

“My business has changed completely,” he said. “Most of the bread-and-butter [opening price point] business has disappeared, and we are selling only important pieces.”

The average price point at Graff is $200,000.

“It’s logical to a certain extent,” said Barguirdjian. “Clients realize that fine diamonds and fine colored stones keep their value.…When you think about it, each piece of jewelry [costs] more than a house.”

Barguirdjian noted a client to whom Graff sold a 5-carat fancy pink diamond four years ago doubled his investment when selling the stone through Christie’s in Hong Kong in December.

“They are buying, and in the back of their mind is an investment,” he added.

While diamonds are universally graded by carat, clarity, cut and color, their prices aren’t monitored like gold is on the commodities index. The international industry standard for a wholesale price gauge for diamonds is through a company called Rapaport. The “Rap Sheet” periodically lists diamond prices, offering a barometer for industry members. The October 2009 Rap Sheet printed wholesale prices of $23,100 for a 1- to 1.49-carat D-color, flawless stone and $121,500 for an E-color 10- to 10.99-carat round diamond, VVS1, meaning it has an inclusion invisible to the naked eye.

Even as fine jewelers target consumers with products that are either an investment or a not-to-be-missed one-off, there is no doubt the sector, like all luxury goods, continues to see tough times. In March, Bulgari SpA cut jobs, reducing the number of products and closing unprofitable stores after the company’s earnings fell 45.1 percent in 2008. In July, the Roman jewelry firm reported a net loss of $53.8 million in the first half ending June 30, citing a slowdown in demand for fine watches and jewelry in the U.S. Chopard, a privately held firm, cut staff and expenses in the spring and summer.

In August, Tiffany & Co. beat earnings estimates by cutting costs and expenses, but profits fell by 29.7 percent. In September, Harry Winston Diamond Corp., which supplies rough diamonds to the global market from its 40 percent ownership interest in Diavik Diamond Mine, reported an operating loss of $5.6 million for the three months ended July 31, versus an operating profit of $5.9 million a year earlier amid significant layoffs. In the U.S. alone, revenue decreased 48 percent to $15 million.

However, Winston, which controls the Harry Winston retail network, said it would resume production for winter at Diavik Diamond mine in Canada’s Northwest Territories, after planning to shut down for the season. Summer production was halted, affecting some 600 employees, in response to market conditions.

Diamond mining giant De Beers SA also cut production by 73 percent compared with the same period last year, to 6.6 million carats, and reduced the global workforce by 23 percent. In July, the company reported a 99 percent decline in first-half net profit citing “historically difficult trading conditions,” and, in the six months to June 30, net profit fell to $3 million from $316 million in the same period last year, while total sales fell 54.2 percent to $1.71 billion from $3.74 billion during the same period last year.

But Gareth Penny, managing director of De Beers Group, said American buyers are for the first time viewing diamonds as assets across the board.

“People want to invest in diamonds,” said Penny. “A year ago, no one asked if they were a good store of value.…People are conscious of lasting value.”

Industry consultant Robert Burke of Robert Burke & Associates, agreed. “Pitching [high-end jewelry] as an investment is going to make more sense in this economy and state of mind,” he said. “Passion purchasing or anything that is emotionally motivated or whimsical doesn’t feel correct right now.”

De Beers has launched a major marketing campaign called Everlon. The diamond-mining giant has partnered with several Sightholders and designers across many price levels to play on the motif of a round diamond being hugged by a rope of pavé diamonds inspired by the Hercules knot, an ancient symbol of strength. According to Penny, the styles symbolize hope, support and faith of a loved one in these uncertain times. Prices start as low as $249.59 for a pendant with diamonds totaling 0.2 carats at J.C. Penney to the high thousands for a one-of-a-kind pair of large diamond pendant earrings designed by venerable jewelry designer Martin Katz.

For Stephen Russell, the Madison Avenue jeweler specializing in top-quality, signed vintage pieces as well as new designs, the main selling is buy now, because pieces are one of a kind and won’t necessarily come back on the market in the near future.

Zelenetz told the story of a client who hemmed and hawed over buying a piece a year ago and ultimately didn’t. That same client came into the boutique recently and said he regretted he didn’t buy the piece, as the money he was bound to spend on it foundered in the stock market.

“[Jewelry] is not necessarily an investment instrument — it’s a passive investment,” said Zelenetz, who added he has seen clients pop up and move capital from the stock market into jewelry. “People are comfortable with spending money again, but it has to be the best. When you deal in unique things, it’s a double-edged sword: Pieces are hard to find, and when they become available, you have to buy them. If it’s something that’s manufactured by the hundreds, there’s no sense of urgency. They’ll always be available.”

Marc Hruschka, Chopard’s U.S. president and ceo, said discerning clients make all the difference. “We went from a nation of spenders to a nation of savers in a short period of time,” said Hruschka. “People will feel more comfortable acquiring things again, whether it’s cars, jewelry, watches or homes. You have to be a sophisticated and savvy diamond buyer, however beautiful, unique or special [an important] diamond is. They are still one in a million or one in 10 million.”

Then there are those firms, like Chanel, whose fine jewelry category is focused on distinctive design more than large stones.

“A stone is more a commodity. We are selling the creativity of the product,” said Benjamin Comar, international jewelry director at Chanel.

Comar shared an anecdote that there were two clients in July who wanted to buy the same one-of-a-kind high jewelry piece, adding: “It was difficult to arbitrate which customer would get the pieces.”

Ultimately, Chanel sold the piece to its longer-standing client and offered the newer one another exclusive piece to purchase. Comar said the high-end business is doing better in the U.S. than other segments.

“Clients are looking very carefully in the design component on the high end. It’s first and foremost jewelry,” said Thomas J. O’Neill, ceo of Harry Winston. “If customers are interested in buying jewelry for other reasons…we aren’t marketing our designs in that way.”

For Winston, pieces above the $1 million mark are what are selling well.

“The U.S. customer tends to be more sensitive than other parts of the world,” said O’Neill, noting business is stronger in Asia and Europe. “It’s the U.S. where the customer continues to think carefully about what they purchase and when they purchase. Are they going to get the piece they have their heart set on, or are they going to moderate the price?”

While business may show some bright spots for jewelers, it’s an uphill battle to begin to match sales figures from two years ago. Brands focusing on value overall and pedigree are seeing results. The fact that jewelry of such ilk is collectable, not trendy, bodes well for sellers. Verdura, for one, has sold out of the recently reissued limited edition run of the famous Maltese cross cuffs made originally for Coco Chanel, according to a company executive. The cuffs sell for $65,000 each.

Emmanuel Perrin, president and ceo of Van Cleef & Arpels North America, focuses on the value and design factors when selling any piece.

“In the heyday, you’d buy things without thinking,” he said. “The pattern of purchases is for fewer things, but better things. You’re going to look for maximum value for your purchase.…Life goes on; real estate is an investment. Jewelry always links back to an emotion or a celebration — birthdays, anniversaries, engagements. You can’t postpone the celebration, but you can always postpone an investment.”

WWD: Big and Little Retailers Join Forces

WWD | MILES SOCHA & ELENA BERTON

PARIS — After designer collaborations and celebrity tie-ups, it’s now time for stores to pair up — even Davids with Goliaths.

As fashion retailers continue to feel the pinch from the worst recession since World War II, they’re becoming increasingly creative to offer more exclusive products and experiences that can persuade regular shoppers to open their wallets and hopefully attract new customers as well.

Over the weekend, Gap and edgy Parisian boutique Merci wrapped up a monthlong project in which each hosted a selection of the other’s products in their New York and Paris stores. Also over the weekend, Parisian department store Printemps christened the opening of a Maria Luisa location within its recently revamped Boulevard Haussmann flagship here.

Uniqlo recently set up shop in hip Paris concept store Colette as a teaser for the arrival of its Paris flagship, which opened last week.

And Target is mulling a one-off collaboration with Britain’s Liberty to launch clothing and accessories bearing the store’s trademark flower prints.

“In an effort to lure back the consumer, retailers are increasingly having to be more creative by devising events and promotions that promote the concept of uniqueness, exclusivity and scarcity. The partnership with an exclusive brand is just one example,” said Patricia Pao, founder of New York-based fashion consultancy The Pao Principle. “I think we are going to increasingly see more of the big brand-little brand pairings.”

Through these kinds of partnerships, large retailers acquire a degree of exclusivity and scarcity, as well as the prestige of carrying the smaller but highly desirable brand. The smaller retailers gain brand awareness and a degree of exposure they couldn’t afford to buy on their own, as well as trialing their products on new consumer segments.

“I do think it’s the next thing,” said Robert Burke, president of Robert Burke Associates, a New York-based consulting firm. “The designer collaborations have been played out quite a bit. This is a new angle. It’s one of those win-wins.”

He noted that for giant stores, “there’s a great deal of cachet with these small retailers, particularly French retailers.” Whether big or small, all retailers jockey to carry exclusive designer brands and products. Now big retailers are competing to gain access to buzzy specialty store banners, Burke said.

Indeed, according to market sources, Galeries Lafayette recently made overtures to Dover Street Market, the quirky multibrand emporium in London masterminded by Rei Kawakubo of Comme des Garçons, which has everything from vintage Cutler & Gross sunglasses and Christopher Kane dresses to Rose Bakery pound cakes under one roof.

“It allows us to bring in new talents, which can’t really stand commercially on their own feet in a big space, but which we think have potential for our customers,” said Maurizio Borletti, chairman of Printemps Holdings, which controls France’s Printemps and La Rinascente in Italy.

Industry experts pointed out there has to be synergy between each brand’s customers, because both brands still need to produce and sell merchandise to their core customer.

“These arrangements need to be more than merely puff and noise. It requires consistency in terms of brand identities so the hype around the event and cobranding does not dilute any of the brands,” said Florian Gonzalez, a London-based brand consultant. “Hopefully, by sharing their customers, products or retail spaces, brands experience cross-fertilization, rather than cannibalization or confusion.”

Borletti noted there are considerable challenges in meshing the “industrial mentality of a big retailer” with the more instinct-driven one of an independent fashion boutique. “That business in retail is what haute couture is in fashion,” he noted. “The chemistry to make it work is not easy.”

The business model is also vastly different, with the independent boutique dealing more with the vagaries of fashion and therefore operating at a higher risk to margins.

“We think as a department store we should have that competency. And I think we can do it more profitably because we have a lot of traffic,” Borletti said, noting Printemps’ personal shopping service will bring even more attention to the brands Maria Luisa plans to showcase.

Borletti said European department stores are no strangers to collaborations with other retailers. Printemps, for example, long had departments for Zara and Mango. “But back then, Zara was a totally new thing,” he said, whereas today, they wouldn’t “contribute to the exclusiveness of our offer.”

Inspired by the chic Merci boutique in Paris, Gap opened a “Merci Gap” pop-up store in New York. Meant to stay open only a month, the store occupied a 500-square-foot space next to Gap’s flagship on Fifth Avenue, re-creating the look and feel of the original Parisian shop, with proceeds going to various children’s charities. Across the Atlantic, Merci hosted a selection of one-off Gap designs. The original Merci is the brainchild of Marie-France and Bernard Cohen, the founders of Bonpoint, a children’s wear brand they sold in 2003.

Merci is a concept store stocked with unusual house wares, fashions, perfumes, fresh flowers and an ice cream stall. All the proceeds from the shop benefit Accueil des Sans-abri, a nonprofit organization that helps Madagascar’s homeless.

Jean-Luc Colonna, co-founder of Merci, said he was surprised by the reception the Merci shop-in-shop received from Gap customers.

“Many New Yorkers now have placed Merci on their radar screen,” he said.

Specialty fashion store Opening Ceremony is considered a pioneer in hookups with giant retailers, being the first American store to carry Topshop at its first outpost on Howard Street in Manhattan. Five years later, Topshop operates a flagship on nearby Broadway, and Opening Ceremony counts branches in Los Angeles and Tokyo, too.

“We’ve never felt that these giant retailers would detract from our merchandise,” said Opening Ceremony’s co-owner Humberto Leon. “We have a great customer that can see the inherent value of fun, well-curated fast-fashion and then turn around and buy a Rodarte knit or Proenza Schouler bag.

Opening Ceremony also bills itself as the first retailer to partner with Target on its 2004 collaboration with Proenza as part of its Go International initiative featuring limited edition, low-cost collections from established designers. Opening Ceremony also did a collaboration with Uniqlo earlier this year, introducing the brand to the Los Angeles market.

“I think it set a tone that having these goods in your store is cool and modern,” Leon said. “We think this is something fun for the customer. It also helps to highlight the designer collaboration and take it out of context. This reiterates the importance of design within these collaborations.

“It’s exciting to introduce a curated segment of the giant retailers to cities or countries that they do not have a presence in,” he added.

According to Leon, “the possibilities are endless. If other retailers offered us great products, we would look at it.”

In that vein, Opening Ceremony plans to carry special Rodarte products the Mulleavy sisters created in tandem with their one-month residency at Paris boutique Colette. “For us, it’s a way of sharing the marketplace and sharing ideas,” Leon said.

WWD: Luxury Retailers Turn Back to Basics

WWD | EVAN CLARK

Luxury retailers are scrambling — in as dignified a manner as possible — to hold the attention of well-heeled shoppers who aren’t as immune to recessions as once thought.

But the changes they’re making are, in some ways, course corrections marking a return to the roots of luxe with an emphasis on both quality and scarcity. Price, however, has entered the discussion after years of being a secondary concern.

“If the dress is $5,000, it should look like $5,000,” said Joseph M. Boitano, group senior vice president and general merchandise manager at Saks Fifth Avenue.

The price-value relationship, a staple topic for mass-oriented stores, was one of the points tackled in a panel discussion with Boitano, Intermix co-founder and chief executive officer Khajak Keledjian and Chicago boutique owner Ikram Goldman at the WWD Luxury Forum in New York on Sept. 17. The discussion was led by Robert Burke, president and chief executive officer of Robert Burke Associates.

Boitano said the customer is looking for options, such as shoes or handbags at lower prices, but that quality remains paramount.

“If the garment doesn’t look great and it doesn’t look like value, I don’t care what the price is,” he said. “It can be as cheap as cheap and it’s still not going to work.”

Retailers are spending more time trying to better understand — and then meet — the needs of their consumers.

Intermix’s Keledjian said, “You really have to understand the lifestyle, and the psychographic is becoming even more important than the demographic.”

The chain has 26 stores in the U.S., and the ceo said they all require a different approach. Keledjian looks at everything from the hotels his customers stay at to where they wine and dine and what they do for fun to understand their needs.

“If you have great product, consumers are buying,” he said. “But in today’s market, it’s not OK to be good. You have to be great.”

To entice its shoppers, Intermix has offerings from 250 to 300 vendors in its stores, which cover an average of 2,500 square feet.

For Goldman, who rose to national prominence as a style gatekeeper of sorts for First Lady Michelle Obama, the formula for selling high-end fashions hasn’t changed at her store Ikram, where new looks are combined with personal service and an obvious passion for style.

“We’ve always bought collections that are new and exciting and that aren’t very well-known, in hopes that we can introduce them to the market and introduce them to the clients — and by doing so, it’s made our store stand out a little bit more,” she said.

And although being small can have its disadvantages, Goldman said the size of the operation makes it easy to motivate and communicate with the sales staff.

“Because we’re a mom-and-pop store, we’re always talking,” she said, pointing to outings with her staff to dinner or the movies. This close connection helps create an environment that, along with the styles, keeps customers coming back.

“They actually come to us because they know that we’re going to give them a sense of excitement that they’re not going to get at another stores,” she said.

Goldman also keeps a tight rein on what makes it into her store, returning looks from designers if the fabrics are not as luxurious or the quality isn’t what she expects them to be.

Burke asked the retailers fresh from the tents in Bryant Park at Mercedes-Benz Fashion Week if runway shows were still necessary. The answer was generally yes — if they’re exciting.

“In order for me to process the season and in order for me to process what the designer has created, I have to see it the way that they present it,” Goldman said, who was an enthusiastic fan of Rodarte’s spring offering. “I loathe a collection that just goes down the runway…but I’m inspired by a collection like Rodarte. If we didn’t have fashion shows like that, it wouldn’t be as exciting — and then we’re just selling clothes.”

WWD: Carlos Campos Launching Women's

WWD | ROSEMARY FEITELBERG

After five seasons of designing men’s wear, Carlos Campos is adding women’s contemporary sportswear to his repertoire this spring.

The extension has always been part of his business strategy — the men’s side of things just happened to evolve more organically. During an interview Wednesday in his West 35th Street showroom in New York, the designer said while growing up in Honduras, he learned the ropes working for his father after school in one of the two tailor shops his family owned there. After graduating from the Fashion Institute of Technology, Campos started making suits for select male clients and his signature collection sprang from that.

While he has offered a few women’s pieces each season, he will unveil the 60-style women’s collection for spring with a presentation and party on Sept. 11 during New York Fashion Week at Twelve21, a West 21st Street event space that was once home to the Sound Factory. The sleek interior is similar to the one in his showroom and the one in his two-month-old freestanding store in Honduras, as well as the work of architect Tadao Ando, who, along with photographer Richard Pare, was a source of inspiration for the premiere women’s collection. To emphasize his point, Campos presented a book of Ando’s creations, noting how traces of a rounded stairway can be seen in a futuristic two-layer blouse or how an image of a reflection pool is reminiscent of a print for a short dress.

Campos, who is working with Robert Burke & Associates, said the recession offers an opportunity for emerging designers, since many department stores and specialty stores are trying to differentiate themselves. Geared to be at the opening price range for contemporary sportswear, wholesale prices range from $30 for a T-shirt to $300 for a dress.

“We wanted to have consistent price points and keep the design element,” said Campos, Fashion Group International’s Rising Star for men’s wear for 2008-09. “In times like these, we also want to support the people who produce our clothes. We have to support each other for a while and deliver a higher quality without breaking price.”

Eighty percent of the collection is made in New York, with the remaining 20 percent produced in Honduras. The designer’s freestanding store in his homeland has exceeded sales expectations despite the political unrest stemming from Manuel Zelaya’s ousting as president.

“It hasn’t affected us in any way there,” he said of the political situation. “We’re doing really well there.”

The designer has been scouting locations in the Meatpacking District for his first store in the U.S., which he expects to open next year. On another front, he has collaborated with Danielle and Jodie Snyder, the designer sisters behind the Dannijo jewelry collection, to develop pieces for his presentation.

WWD: Burke, Coplan Hurowitz Form Joint Venture

WWD | MARC KARIMZADEH

NEW YORK — From Michael Graves for Target to Takashi Murakami for Louis Vuitton, the past decade has seen many artists or design gurus link with fashion brands and retailers.

Now Robert Burke, president of the Robert Burke Associates consulting firm, and Sharon Coplan Hurowitz, the art consultant and author who runs an art advisory business, are joining forces to further the concept. The two have formed CounterpART, a joint venture that will serve as a platform to form partnerships between artists and lifestyle brands.

“We want to help edit and curate to find the right connection between artists and retailers or brands,” said Coplan Hurowitz, who previously worked as a specialist in contemporary prints for both Sotheby’s and Christies.

Coplan Hurowitz added artists are “on the cusp of culture,” which is something from which brands can benefit.

“We felt we could provide something personal, unique and highly creative,” Burke said.

He added that collaborations have often had a limited run, but can become more of a long-term partnership if strategized correctly.

“Retailers are looking, particularly in this economy, to drive consumers into stores,” Burke noted.

And it’s not just fashion brands or retailers the duo is targeting — the two agree an artist’s touch could reinvent a host of things, down to a toothbrush.

“I think that brands and companies want something contemporary and alive, and that is what I believe artists do for us,” Coplan Hurowitz noted. “We see them as forerunners of ideas and concepts.”

WWD: Fashion Firms Brace for a Crucial Season

WWD | MARC KARIMZADEH

Fall could be the make-or-break season for small fashion companies.

The heat is on firms with retail sales of $7 million to $10 million as stores reduce inventory, dump nonperforming labels and order collections closer to the season. Along with those pressures, the number of specialty stores that are typically more willing to take a chance on little guys is shrinking.

Given the horrendous retail scene since last fall, rumors of a possible demise swirl around almost every small company or young designer. And the list of casualties and labels struggling to make it seems to be growing. From Jane Mayle, who shuttered her Mayle line earlier this year, to Peter Som, whose future was uncertain until he inked a deal with Milan-based clothing manufacturer Margon and New York multiline showroom ADC in May, the economy has taken its toll across a wide range of designers.

Many of the newer designers don’t have the infrastructure or financial strength to weather continuing economic turbulence. They face few to no prospects of significant financing and aren’t ready or capable of opening their own freestanding stores to minimize the impact of woes at the department and specialty store level.

Industry consultants believe a number of smaller firms were able to survive the past two seasons on a shoestring, limping along without significant sales. But the third season of the financial meltdown looms as a crossroads — and could mean that, come January, there will be a raft of closures and liquidations.

“Now, if they don’t get the kind of sales they need, they will have to decide to go forward or not,” said Robert Burke, founder of the Robert Burke Associates consultancy. “Many of them were having a challenging time when the economy was good, and now, with retailers reassessing assortments and with the importance of timely deliveries, it will be challenging. The minimums have also gone down, sometimes affecting their ability to produce with factories at lower prices.”

Allan Ellinger, senior managing partner at Marketing Management Group, noted, “For a lot of companies whose businesses have been marginal and growth has been marginal if at all, their financial partners — if they have them — and their banks will be looking at the season very critically. You can only carry a business for so long. The economics have to work. Unless a company has unlimited financial capabilities, this is a very crucial season.”

Competitive pricing could become a key to a business’ health this fall and experts believe smaller firms that don’t have the clout of megabrands will be hard-pressed to negotiate better deals with their manufacturing partners.

“The established people and big retailers have more freedom to tighten their margins,” said David Wolfe, creative director at The Doneger Group. “When we hear people like Dolce & Gabbana saying prices will be [10 to 20] percent lower, we know they can do it. It will be difficult for a young start-up designer to [do] that kind of price manipulation.”

 New launches also will have a hard time showing retailers’ consistent sales for the simple reason they don’t have much of a track record. In contrast, some of the established brands are expected to perform better on paper this fall compared with last fall’s dismal figures.

“This fall will be crunch time for a lot of young and new designers,” Wolfe said. “Even specialty stores seem to be looking at lines that have a performance record already. Retailers want a guarantee that it’s going to sell.”

Jeffry Aronsson, founder of the Aronsson Group, noted that undercapitalized houses that incurred expenses in anticipation of business that didn’t materialize are at a particularly high risk.

“I would imagine that there will be a number of companies that won’t be able to survive,” he said.

Adding international distribution will be essential for these smaller firms, among other strategic moves, Burke said, to avoid depending solely on one economy. To do so, however, often requires the help of local distribution partners.

“Many are looking strategically at how to position their opening prices, their core product and their international business,” he said. “Those are the three things they have to do to survive.”

Several designer firms have used the last year to make adjustments to their businesses to stay viable, and they take issue with the “make-or-break” mentality.

Doo.Ri designer Doo-Ri Chung added a lower-priced line called Under.Ligne, and she said there has been some positive news amid the industry’s overall gloom.

“We have landed two new accounts, and even though [retailers’] budgets have been slashed, we managed to grow in a small way,” Chung said. “We are pretty much trying to do a lot more with what we already have. I think it would have been a different story had we planned on a major expansion and already invested in it. We already braced ourselves and I don’t feel it is a make-or-break season.”

Behnaz Sarafpour said, “I don’t think there is such a thing as a make-or-break season. We have gone through a year now of learning how to adjust, whether it is offering a different assortment of product or price point.”

Sarafpour said she has adjusted her distribution strategy because of the recession.

“When things were better, we were more focused on individual large orders,” she said. “Now, we are not about selling a lot to one place with one order. We are more diversified now with more stores and do business with more smaller orders rather than working with a few with giant orders. If somebody hasn’t been able to make adjustments and run out of cash, it could be [the break season]. But I wouldn’t say that as a general for the industry.”

WWD: Poleci Appoints New President

WWD | JULEE KAPLAN

Poleci is stepping it up a notch.

On Friday, the company said it has named Jean Claude Huon as president of the 15-year-old contemporary firm. Huon joins the brand from Bill Blass Holding Co. Inc., where he was vice president of couture and licensees. Prior to Blass, he was general manager for fashion titles Jalouse and L’Officiel, where he worked to launch the U.S. editions. He has also worked at Pierre Cardin, where he oversaw the brand’s licensing business for 10 years.

In other company news, Poleci plans to show for the first time during New York Fashion Week. The presentation will be held at the brand’s flagship store at 32 Gansevoort St. on Feb. 14 from 6 p.m. to 8 p.m.

In addition, the firm has tapped Robert Burke Associates to serve as a strategic adviser in the development and expansion of the business. Burke will consult on all retail aspects, including merchandising, brand positioning and distribution strategies.

In his new role at Poleci, Huon will work alongside Diane Levin, chief executive officer, and Janice Levin-Krok, creative director, to lead the expansion of the brand both in the U.S. and internationally.

Huon reports to Poleci owner Haresh Tharani, who took ownership of the firm in 2006. Tharani runs Tharanco Group, which also owns Joseph A. and, along with Michael Groveman, sold the Bill Blass ready-to-wear business to NexCen Brands Inc. for $54.6 million in cash and stock. Tharanco was said to be interested at one point in repurchasing the Blass business from NexCen, but the business subsequently was liquidated.

WWD: The Global Challenge: Fashion Heads to the Middle East

WWD | MARC KARIMZADEH

At Ralph Lauren’s spring collection, unveiled during fashion week in September, models made their exits through an Arabian archway adorned with a single filigreed hanging lamp. It set the tone for a beautiful collection full of Middle Eastern touches, from the golden desert textures to harem pants, turbans and exotic jewelry.

Lauren of Arabia — as WWD dubbed the designer — couldn’t have hit the fashion Zeitgeist at the time any better. It’s fair to say that this year, the Middle East eclipsed China as the much-buzzed-about region for fashion companies to explore.

With every rise in the price of a barrel of oil, the oil-rich region got a little richer. Places such as Kuwait, Qatar and Abu Dhabi became even more flush with cash, and that part of the world became one of the fastest-growing regions for luxury and fashion — and deal-making. Dubai amplified its status as the desert region’s epicenter, with tourists from nearby countries, from Iran to Saudi Arabia, descending on the Persian Gulf city to play. They came with deep pockets and a seemingly endless appetite for luxury. It came as little surprise then that major luxury brands were rushing to the region to benefit from the momentum.

That said, even the Middle East hasn’t been immune to the global financial crisis, especially with slumping oil prices. Dubai in particular has found itself in a precarious situation. Unlike some of its neighboring Gulf countries, Dubai’s wealth does not come from oil, and it is largely reliant on tourism, expatriate communities and construction. The Arab emirate has been going through a spectacular building spree in recent years that is widely expected to slow down — especially as the number of tourists and expats arriving in Dubai is expected to decline next year.

“It’s all built of a very precarious base, because it’s all being financed by the other countries,” said one industry source on condition of anonymity. “There is a huge amount of building already accomplished, and a huge amount of building under way. You can’t help but wonder who is going to fill up those buildings, and how are they going to pay for them?”

Despite the caution, many fashion houses have been forging ahead with their plans for the region. Lauren already has two stores in Dubai, Kuwait City and Saudi Arabia, and added another in not-too-far Istanbul in October.

In September, Bloomingdale’s said it was opening two stores — a three-level, 146,000-square-foot men’s and women’s apparel and accessories unit and a one-level, 54,000-square-foot home store — at the Dubai Mall, which is attached to the Burj Dubai, the world’s tallest building. The Burj Dubai will boast an Armani Hotel when construction is completed next year, although it is said to be in a holding pattern at the moment.

Karl Lagerfeld in July teamed up with Dubai Infinity Holdings to conceive and design 80 residential homes on Dubai’s Isla Moda. When finished, the island, dedicated to fashion, will be part of the city’s “The World” project, a man-made cluster of islands in the form of the world’s continents.

Christian Lacroix, meanwhile, said this year that he will add his design touches to a residential tower in Dubai in a joint venture with Kuwaiti-based developer Abyaar.

Roberto Cavalli, too, jumped on the bandwagon, opening his first nightclub, Cavalli Club, at the Fairmont Hotel in Dubai last month. The venture is in partnership with Pragma Group, an investment, outsourcing and business incubator based in the United Arab Emirates.

Qatar, meanwhile, also has been getting its fair bit of attention these days. The I.M. Pei-designed Museum of Islamic Art opened in Doha last month, and a man-made island development called The Pearl will, when completed, offer 280,000 square feet of retail space for luxury brands. In recent months, there also has been buzz about an investment vehicle linked to Qatar’s ruling family looking to invest in Lanvin.

Just how much the economic depression will impact the region remains to be seen. Other emerging markets, for one, are already feeling the pinch. After privatization has created enormous wealth for some in the last decade, Russia has recently been experiencing a slowdown. China, where manufacturers depend on exports to fuel much of the country’s income, has also taken a hit.

“For a Madison Avenue type of retailer, it’s not pretty,” an industry source said. “The top luxury distributors are either freezing or pulling back. The demand for China imports is down and factories are closing.”

As for India — another much-anticipated emerging market — it remains to be seen how the terrorist attacks in Mumbai late last month will affect the local economy. It is sure to have an impact on tourism in the region.

In the Middle East, however, nothing seems to be putting a damper on the party spirit, at least for now. In late November, billionaire hotel mogul Sol Kerzner spent $20 million on the launch of his $1.2 billion Atlantis The Palm resort in Dubai. The three-day party brought out the likes of Kylie Minogue, who performed, as well as Charlize Theron, Mary-Kate Olsen, Janet Jackson, Quincy Jones, Lindsay Lohan and Samantha Ronson, the Duchess of York, Robert De Niro and Mischa Barton.

“You are dealing with countries [in the Middle East] that have significant natural resources,” said Robert Burke, founder, president and chief executive officer of Robert Burke Associates. “Even when [the price of] oil is dropped in half, there is still wealth there, and money that they are interested in using to their advantage.”

WWD: SK Networks Acquires Y & Kei and Hanii Y

WWD | ROSEMARY FEITELBERG

SK Networks Co. Ltd., a $17 billion Seoul-based global marketing company, has acquired Obzee Co. Ltd. and its affiliate brands Y & Kei and Hanii Y.

With a $60 million, five-year investment plan, SK Networks plans to bolster marketing and merchandising for both labels, which were started by the husband-and-wife design team of Hanii Yoon and Gene Kang. The brands generate $100 million in turnover and $10 million in profits annually. The designers, who retain their titles as creative directors, will relocate from Seoul to Manhattan, where SK Networks will open a design center to focus on broadening the pair's global marketing efforts.

After working with SK Networks on different brands, Robert Burke Associates will be pitching in with the development and merchandising of Y & Kei and Hanii Y, as well as widening retail distribution. The labels are sold at Barneys New York, Bergdorf Goodman and other retailers worldwide. The design duo is also considering opening stores in New York, Paris, London, Tokyo and Shanghai, according to a statement on Monday.

Robert Burke Associates is also helping SK Networks to expand distribution in Korea and China and to introduce an undisclosed U.S. retailer to Seoul.

"The desire for luxury goods in Seoul is very interesting,'' Burke said. "What we're finding with the weak dollar is that we're dealing with more international companies looking at U.S. acquisitions."

SK Networks is the exclusive distributor of Donna Karan, DKNY and Tommy Hilfiger in Korea. The company also sells its private label brands through China. Last year the company took a minority stake in Richard Chai's business.