Robert Burke, Chairman & CEO at Robert Burke Associates, and Bloomberg Contributing Editor David Kirkpatrick preview fashion week and examine technology’s role in the fashion industry on Bloomberg Television’s “Bloomberg Surveillance.”
Reed Krakoff
NEW YORK TIMES | RUTH LA FERLA
Dana Taylor, a model, stood straight as a maypole as Reed Krakoff circled, paused, then peered intently at his handiwork. Ms. Taylor was wearing Mr. Krakoff’s cobalt-blue sleeveless officer’s coat, a sample from the fall collection he will show on Wednesday, a piece stripped to its essentials: welted seams, slant pockets and a pair of outsize lapels its only embellishment.
Was it too much? Too little? Mr. Krakoff considered before snatching up a swatch of matching blue leather, attaching it briefly to a lapel, then rejecting that notion, slipping it beneath the coat like a T-shirt. He toyed with the neckline, gathering it in his fingers. Then something clicked. “I like the ruched effect,” he said. “And we might finish it with a little black tape on the top.”
Then again, maybe not. With just two weeks remaining before his runway presentation in Chelsea. Mr. Krakoff was in the fitting phase of his collection, the first he will show since buying his namesake business from Coach last year to introduce a label that was conceived at the outset to compete in the fashion world’s top echelon.
Bound to strike some industry insiders as an act of sheer chutzpah, Mr. Krakoff’s departure from the company that nurtured him and that he helped recast as a global megabrand, has, on the eve of New York Fashion Week, placed him under redoubled scrutiny.
“His timing took guts,” said Robert Burke, a New York retail consultant. “The expertise and the needs in luxury fashion require a different skill set.”
Was he feeling the pressure? Not much, Mr. Krakoff said the other day, though the designer, 50, was, in fact, striving quite visibly to affect an aura of masterly serenity. Pacing his temporary headquarters in the Coach building on West 34th Street, his office a soothing medley of springy gray carpet and gray felt-covered furniture, he pondered a collection that, like Mr. Krakoff himself, is in continual flux.
Inevitably at this juncture, “nothing looks good,” Mr. Krakoff said flatly. “Then something goes well and you’re happy again. Those moments of self-doubt in between are part of the process.”
That candor was unexpected, coming as it did from the former Coach executive creative director whose octopus reach extended into clothing and accessories, advertising, store design and merchandising, and who, during his 16-year tenure at the company’s creative helm, sold handbags, fragrances, jewelry raincoats, shoes and ready-to-wear, elevating the $500 million brand into a retail behemoth with revenues of more than $4 billion.
It was, after all, Mr. Krakoff who, in a New Yorker interview after the debut four years ago of his first high-end collection at Coach, told the writer Ariel Levy, “It’s not that I have the best answer, but I have the right answer.” Indeed, Mr. Krakoff seemed fixed at the time on presenting himself, from his stern black-rimmed glasses to the elongated tips of his John Lobb shoes, as a man with a plan.
But the other day, it was a strikingly low-key, soft-spoken Mr. Krakoff who stood sliding a length of rubber-dotted lace inside a black-and-white shearling aviator coat. “Nothing I do is planful,” he said, making free with the language, as is his wont. “You are always kind of schmooshing things together to see how they feel.
“I don’t think much happens creatively if you are too much in control.”
Letting go, he said, repeatedly, has become integral to his learning curve, his method a developing process of trial and error. “Fashion is a dialogue with your customer,” he said. “You want for people to respond to your work.”
Those who have include Julianna Margulies, who wore a modestly embellished Reed Krakoff gown to the Golden Globes last month; the models Stella Tennant and Laetitia Casta, who have featured prominently in Mr. Krakoff’s advertising campaigns; and most influentially, Michelle Obama, who wore Reed Krakoff on inauguration day in 21012 and, again, for her official portrait last year.
They were clients he has never had to chase, Mr. Krakoff all but boasted the other day. When Julianne Moore, like Mr. Krakoff, an aficionado of midcentury and contemporary design, first approached him, “we found we had a lot in common,” he said. “On an aesthetic level, we really connected.”
Designer and actress cemented their friendship in the late 1990s, after he photographed her for a Coach campaign. These days she counts among her go-to pieces a leather “track bag,” an understated tote with a stark white stripe down the side, and a leather-piped black cashmere coat. “They are clean, not tricky, and they have a lot of integrity,” Ms. Moore said. “As a designer, he gets better all the time.”
But his true aesthetic beacon has been Delphine Krakoff, his wife. “Her style,” he said, “is the ultimate expression of my brand.” A gamine figure sheathed in orange or white, according to the season, Ms. Krakoff greets guests at her husband’s shows, and stands beaming her approval as the models saunter along the runway.
“Everything she does is considered, and at the same time everything feels natural,” he said. “We’re both purists.” Mr. Krakoff may consult with her by phone six times a day. “She will tell me what she likes and what she doesn’t like, and why.”
He is otherwise learning to silence the cacophony of critical voices in his head. “To me, it’s the hardest thing in the creative process,” he said. “You have to learn how to trust yourself.”
His confidence, fragile at first, has firmed by degrees. The debut in 2010 of the first Reed Krakoff collection, designed while he was still at Coach, freed him, part of the time, to stop chasing mass appeal and play, rather showily, to a more discerning, moneyed crowd.
There were flaring leather military coats, shearling jackets and belted and buckled frocks, their lines influenced obliquely by Modernists like Alexander Calder and Jean Arp, whose pieces are displayed in his townhouse on the Upper East Side. Still others seemed indebted to Helmut Lang and Phoebe Philo of Céline and industrial designers like Marc Newson, whose work has long been a touchstone and is captured on Mr. Krakoff’s Instagram account.
In all, Mr. Krakoff has positioned himself as a man of protean talents, his multiple passions moving him to create chairs and lamps and a body of black-and-white photography. Portraits of models, boxers and, most glamorously, his wife are hung from a picture rail over his desk.
“I don’t see myself as a fashion designer,” he said, explaining his restless pursuit of things streamlined and austere. “I see myself as a person in design.”
Elements of the art, architecture and furniture design that Mr. Krakoff so visibly champions have found their way into his fashions as well, the sensuous curves of an Arp table filtering onto his runway, and the hand-drawn Sharpie lines reproduced on his new porcelain collection meandering onto a shirt for fall.
That visible cross-pollination, and an adamantine refusal to be categorized, represents “a new way of doing things,” Mr. Krakoff said. So new to some that his earliest collections were greeted with skepticism or dismissed outright as starchy, pretentious and, most damningly, unwearable.
“Krakoff has a way to go,” Women’s Wear Daily wrote of his inaugural collection. “Cut from thick-looking leather, long skirts and wide pants read heavy. More significantly, often they felt like cover for a clear point of view.”
In assembling a creative team that included Valérie Hermann, formerly the president and chief executive of Yves Saint Laurent, Mr. Krakoff invited complaints of dilettantism. As Cathy Horyn put it in a review in The New York Times, Ms. Hermann “will leave her dream job to run the vanity label of Reed Krakoff, the creative director of Coach, whose one dream is apparently to be successful.”
The comments stung. They were reflected in what was widely considered a poor retail performance. Coach declined to provide sales figures. Looking back, Mr. Krakoff acknowledged that he flailed at first. “Those earlier collections were just me, trying a lot of things,” he said. “Sometimes they became too forced.”
There are signs, though, that Mr. Krakoff is loosening up. His spring 2014 collection was compelling, said Mr. Burke, the retail consultant. “There were plenty of luxurious silks, cashmeres and leathers that were sophisticated and modern, but not stiff,” he said.
Milton Pedraza, the chief executive of the Luxury Institute, a brand consulting firm, chalked up Mr. Krakoff’s bumpy ride to growing pains. “The experience of having some pushback is part of a designer’s maturation process,” he said. “I don’t think he’s been damaged by any of this.”
Certainly, Mr. Krakoff has toughened. “To get on this business,” he allowed the other day, “you need a really thick skin.”
“You need to think it doesn’t matter what other people think,” he continued, “to believe that you can invent something that’s nonnegotiable.”
And then, like a gridiron hero, to run with it.
WASHINGTON POST | Roxanne Roberts It started with sneakers. When he was about 10, Brett Johnson began customizing his white Nike Air Force 1’s, adding fabrics and touches to make them one-of-a-kind. “I felt they told a story,” he says. “And my mom would preach that women always look at a man’s shoes.”
Then again, the son of BET founders Bob and Sheila Johnson always had a leg up on other kids when it came to exploring his creative side. His personal shoe collection now numbers 600 pairs, and last fall he launched the Brett Johnson Collection, a line of luxury streetwear for men.
“Dude, I didn’t know you were ballin’ like this!” says former Redskin Darrell Green. “I look good.”
Green showed up at Johnson’s trunk show Saturday in Middleburg, where he slipped on a baby soft leather bomber vest with sheepskin trim. At $1,695, it’s the most expensive item in Johnson’s small collection; Green was also eyeing a black wool vest with leather trim ($695) and another casual jacket. According to its young creator, it’s contemporary clothing designed for fashion-savvy guys who rarely slip on suits but like high-end fabrics and craftsmanship: artists, celebrities, tech moguls and athletes of any age.
“I’m 54 next month and I’m still cool,” Green says with a laugh.
Sold. Johnson is one more satisfied customer closer to his dream.
His self-made parents are worth $1 billion or so, which they split when they divorced a decade ago. That fortune launched their children into a world of almost unlimited choices, with all the advantages and pitfalls extreme wealth can bring. Daughter Paige, 28, fell in love with horses as a young girl and is a champion equestrian; Brett, 24, wanted to be a fashion designer — one of the most challenging and competitive businesses out there.
“Brett always knew he wanted to do this, but I didn’t pay much attention to it because I thought it was just a phase he was going through,” his mother says. Loving fashion — and wearing Louis Vuitton and Lanvin — didn’t mean he could design clothes himself. Both parents insisted he go to college, where he studied sociology instead of business because, as he explains, “I have two of the best professors at home.”
But he quickly bored of classrooms and was itching to start a career in design. His mother was skeptical: “Do you understand what you’re really getting yourself into?” It took two years and a “bit of a tussle” before his parents finally agreed to let him, at age 21, dive into the fashion business.
At first, he just focused on shoes, trying to create a high-end sneaker that sold for $295, something between Nike and Gucci. He started with three styles — all with a signature orange footprint — which he shopped around. The feedback? Cool, but he needed more to create a viable line. Johnson added outerwear and polos for his first collection. (And then pants, sweaters, belts and scarves for the second.)
He headed to Florence, where he picked out leathers and fabrics and began the “very intricate” manufacturing process. Spliting time between his Arlington County home, a Bethesda office and a New York showroom, he’s both boss and student — up at 4 a.m. to micro-manage details via Skype with the Italian factory, touring tanneries to discover new leathers and finishes.
His vision: A line of “contemporary luxury” for “creatives,” all those young power players in hoodies. His designer role models are Brunello Cucinelli, the Italian designer who specializes in cashmere, and London-based Ozwald Boateng, best known for his classic bespoke suits. Johnson is trying to create a brand that blends the best fabrics with a street sensibility. “I look at it as art,” he says. “I’m tired of seeing terrible product.”
Affable but a little shy, he’s humble enough to admit he hit the family lottery and smart enough to understand how hard it will be to be taken seriously. “Being the son of Bob and Sheila Johnson creates another hurdle,” he says. “I just want my work to speak for itself.”
Easier said than done: One of the few VIP heirs with a serious fashion career is Stella McCartney — daughter of the Beatles’ Paul McCartney — who got her start in 1995 when supermodel friends Naomi Campbell and Kate Moss modeled her design school collection; just two years later, she was named head designer at Chloe. Some groused that the McCartney name jump-started her rise, but the designs established her as a talent in her own right.
Johnson has a famous name, famous friends and, like almost every other newcomer in fashion, his family as primary investors and cheerleaders.
As chairman of New York’s Parsons The New School for Design for seven years, his mother introduced him to designer friends such as Donna Karan and Tim Gunn, loaned her private plane and traveled with him to Italy to tour factories. “He had more knowledge than I had ever thought,” she says. “It was a matter of me sitting back and letting him blossom.”
Although she stayed in the background, Saturday’s trunk show was held at Sheila Johnson’s new Salamander Resort & Spa in Middleburg. Waiters offered prosecco and hors d’oeuvres as well-heeled men and women wandered in the resort’s gift shop, where Brett Johnson’s outerwear and sneakers were set up amid sweet-smelling designer soap and golf shirts. The party was something of a two-fer: A couple of family friends dropped by to offer Johnson congratulations and to wish his mother a happy birthday.
His father put up most of the start-up capital for his son’s venture. “Brett’s business model is not just a wealthy dad indulging his son,” says Bob Johnson, well aware that that’s how a lot of people might see it. “He believes in it, I believe in it, and I have some smart outside people who are advising him and encouraged by what he’s trying to achieve.”
As the biggest investor (he declined to discuss the amount), the elder Johnson required his son to come up with a business plan and said he was persuaded by his son’s passion, work ethic and design team. He’s not concerned that Brett didn’t go to design school because, well, he didn’t go to business school before founding BET, and that worked out just fine.
As investors go, a designer couldn’t ask for more: There’s no timetable in years or cap on financial support. “He’ll have time,” Bob Johnson says. “Some things will work and some things will fail, but he’ll have the time and resources to recover.”
Money, time, even fame are no guarantee of success: Rapper Kanye West had all three when he launched a women’s line in 2012. It was largely mocked by fashion insiders as a disaster, mostly because West had the resources to do anything he wanted — and (shocker) didn’t listen to advice.
Most designers last three seasons or less, doomed by a crowded field and store buyers reluctant to give floor space to unproven brands. African American designers have a harder time getting recognition: Only a handful appear in New York’s Fashion Week, and even fewer are featured in top department stores. Tracy Reese, one of the most successful black designers in business today, failed at her first attempt to launch her line. Despite all the talented African American designers working behind the scenes at major labels, none has won a prestigious Council of Fashion Designers of America award, the industry’s top prize — except Sean “P. Diddy” Combs, a celebrity who does not design his own line.
“Breaking into the market today can be challenging for young designers because there are so many brands competing for attention, but there are definitely opportunities for designers that make a strong statement or offer niche collections,” says Robert Burke, chief executive of Robert Burke Associates, a luxury retail consulting group. “If we think about designers like Alexander Wang or Jason Wu, they’ve both achieved success and recognition because they offered fresh perspectives and distinguished themselves from what others were doing.” Johnson’s resources will certainly help, he says, “but the success of that label will ultimately depend on how strong the product is, how focused it is and if it captures the attention of its target audience.”
At this point, nobody knows whether Brett Johnson will be another Stella McCartney or simply another rich kid with his logo on some shoes. The big challenge now is to win over store buyers and then customers. The collection was introduced in a soft launch at parties last fall, and he’s hoping for a New York show. There’s a Web site, ads in luxury magazines and famous friends (the Redskins’ Josh Morgan and Pierre Garcon, celebrities Kevin Hart and Bradley Cooper) interested in helping out. Johnson says he’s sold about 40 pieces of outerwear and 200 pairs of sneakers in the past two months.
“Some good traction,” he says, with a relieved smile. Or, as his father aptly put it, “He’s got runway.”
GLOBE AND MAIL | AMY VERNER After an extensive renovation and expansion, Holt Renfrew’s Yorkdale location in Toronto has doubled in size and, some would say, in lustre. In-store boutiques from Prada, Gucci and Louis Vuitton face into the mall and give the facade the feeling of a prime shopping strip in Europe. A new beauty floor features exclusive-in-Canada brands such as Aesop and private “cabines” for specialized facial treatments. And, as a finishing touch, tucked away from sight down a corridor past the lingerie is The Apartment.
Technically, the 1,000-square-foot space is a private shopping suite. But, as its name suggests, it can be used as more than your usual souped-up change room. Guests can host a Parisian-themed lunch for friends in it, for example, or even a small reception for a visiting designer. They can stop by with the kids after school and let them play jury while their parents overhaul their work wardrobe. The suite can even be the site of an after-hours shopping surprise for a friend or partner. Think of it as a fashioncentric home away from home.
The space, designed by the New York firm Janson Goldstein, does indeed have the feel of a swish flat, complete with a full ensuite bathroom and kitchen in a style that can be described as a carefully calibrated blend of classic and contemporary. It’s just a shame that Holts isn’t selling the space’s decorative accents. Take the bronze light fixture with smoked glass shades by Lindsey Adelman Studio. If it were up for grabs, surely someone with the means to purchase a trousseau of resort wear might be tempted to throw in a cool chandelier.
This raises the question of tenancy: To begin, The Apartment will be available on a complimentary basis to Holt Renfrew’s “high-value clients” – that is, the store’s big spenders and longstanding customers. Like unlocking a bonus secret door in a video game, the suite represents a next-level amenity designed to keep Holt Renfrew top of mind for those who now shop through a myriad of other channels.
“Department stores have realized for quite some time that a small percentage of customers can make up 65 to 70 per cent of the luxury business,” says Robert Burke, founder of an eponymous retail consulting firm and former senior vice-president of fashion and public relations at Bergdorf Goodman. “The department stores have become very focused on marketing and appealing to that high-net-worth spender.”
And, to be sure, the features in private shopping suites have been edging ever upward. At Paris’s Le Bon Marché, new suites geared towards women and men, designed by Jean Louis Faillant Dumas from the agency LOVE, opened in November. Entry comes at the cost of €150 for two hours or €350 for the half-day and includes a wardrobe consulting service.
At Selfridges in London, a spacious 5,200-square-foot personal shopping “retreat” that draws inspiration from the apartment of the avant-garde art-deco-era interior designer Syrie Maugham was unveiled in August 2012. Nine individual suites are arranged around a library, bar and drawing room.
But bigger isn’t always better. As Janson Goldstein partner Steven Scuro notes, the design team bestowed Holt Renfrew’s space with residential features (club chairs, an ottoman as big as a daybed, a bar cart, lighting on dimmer switches) and was conscious of the need for numerous seating areas without having the layout resemble a hotel lobby. The grid of metal shelving can be merchandised with the latest Louboutin heels and Givenchy handbags, to give it the feel of a private dressing room, or propped with books and objets d’art for an exclusive-club effect.
And this, Holt Renfrew divisional vice-president and general manager of its Yorkdale location Barbara Wolfson says, helps to underscore the difference between shopping from your sofa at home and a plush in-store settee. “There’s still a big part of the shopping population that doesn’t get the experience they want from spending off the Internet,” she says. “And it is still our role to provide a number of things that make people want to come in.”
Or as Burke puts it, “It’s important for stores to look up to date and the idea of a basic dressing room is no longer appealing to the luxury customer. Their standards are higher now.”
NEW YORK TIMES | ELIZABETH A. HARRIS
All of a sudden, Ugg boots were everywhere. Knee-high Hunter rain boots also seemed to sprout from the ground directly onto millions of American feet. And last year, denim in the colors of Skittles candies, like green and red, were inescapable.
So what is the must-have item in apparel this year that beckons last-minute gift shoppers, the trend that is hotter than all others?
Unfortunately for retailers, there isn’t one.
“Every year there seems to be something, but I would say, this year, there’s not one standout thing,” said Eva Chen, editor in chief of Lucky magazine. “It’s the culmination of an entire year of personalization and smaller microtrends.”
Retailers have been girding for a difficult holiday shopping season this year, with wages stagnant and consumers wary. A major fashion trend can offer companies a traffic boost and can draw attention to their clothes.
But so far, no such luck. Perhaps it’s a marketing miss or overall consumer apathy. Some even suggest that the ubiquity of gift and fashion showcases on the Internet makes it difficult for one item to shine.
“Periodically you’ll see it with a particular demographic, like teens, but I can’t remember a time when it was quite this clear-cut, and quite so much across the board,” said John D. Morris, an analyst at BMO Capital Markets. “Merchants would say you can’t know when it starts, when it ends, or how long it lasts,” he said of major trends, “but you know it when you’re in it — or when you’re not.”
Plenty of items are fashionable and trendy. Leather is very popular, for example, and even Uggs are still plentiful in stores. Macy’s, which announced strong earnings for its third quarter this year, says its shoppers have spread their interest across a variety of categories, including sweaters, boots, coats and fragrances.
While there are many smaller trends, retail analysts and fashion experts say that a truly dominant trend, available across a spectrum of prices and appealing to various demographic groups, is something different.
“It makes it easier to buy, to market, and to sell when there’s a very defined theme or trend, and even easier when there is a must-have item,” said Robert Burke, a former fashion director at Bergdorf Goodman and a prominent industry consultant.
Analysts and fashion editors say that traffic and sales can get a modest boost when an item catches fire, as skinny jeans did for men some years ago, perhaps because there is more excitement in the air, or because consumers don’t have to spend as much time trying to figure out what they want to buy.
In some cases, a powerful trend can be even be like the tide that lifts all boats. Richard E. Jaffe, an analyst at Stifel, said the brightly colored denim trend had a “pervasive effect” on apparel last year and the year before.
“If you had bright jeans, you couldn’t wear the same top in muted earth tones,” he said. “And the reality is you need two tops for every bottom, and if you’re wearing skinny jeans you need new shoes.”
“Now, that doesn’t exist,” Mr. Jaffe said. “So what’s on the top of the gift list for your family and friends? Chocolate?”
Mr. Burke said the “billion dollar question” was why some trends raced to the head of the pack, while others just puttered along.
“As much as you want to push trends and push a must-have item, they tend to have a life of their own,” he said.
Mr. Morris of BMO Capital Markets said the lack of a cohesive trend this year might be traceable to the economy. Making a big bet on a particular item entails some risk, and in a shaky economy retailers are often unwilling to do so. Some in the fashion world say consumers have been gravitating toward more individual style this year, like monogrammed items, for example, which is a trend in itself.
Others point instead to the Internet.
Today, a trend can zip around the world on the back of blog posts or a Twitter message, so items can flare up and spread — and burn out, some say — far more quickly than in the past.
Melissa Davis, the general manager of ShopStyle.com, said that the Internet had also made the message of what’s hot much more diffuse, so it is more difficult for one item to stand out.
“Traditionally, you would open up a magazine or walk into a well-merchandised store and you knew what the hot item was,” Ms. Davis said. Now, instead of a handful of publications and a few personalities, people can find fashion on countless blogs, and even sites like Pinterest.com. “Discovery is everywhere,” she said.
Not everybody in fashion agrees that “there is no hit-you-over-the-head item,” as Mr. Burke put it. Ken Downing, fashion director at Neiman Marcus, said biker jackets had been a huge seller this year. Joyann King, digital director at Harper’s Bazaar, said that leather leggings, both real and fake, were the item of the moment.
“There’s always got to be one,” Ms. King said. “Even if people disagree.”
There have also been memorable duds. “Retailers have been trying to jump-start corduroys” for years, said Mr. Morris of BMO Capital Markets. “They haven’t.”
Erika Serow, who will take over as head of Bain & Company’s North America retail practice, cautioned that the lack of one unforgettable item this year doesn’t prophesy a long-term trend. And not everyone is discontented by the absence of a hit.
“When there’s one big thing, people are a little bit on autopilot,” said Ms. Chen of Lucky magazine. “Isn’t it better to get what you want, and not what everybody wants?”
BLOOMBERG | KATIA DMITRIEVA
Bain Capital LLC, the global private investment firm with $70 billion in assets under management, bought a majority stake in Canada Goose Inc., the maker of parkas worn by researchers at the South Pole.
Dani Reiss, chief executive officer of Canada Goose, will remain in his position and will keep a “significant minority stake” in the company, according to a statement today. The price wasn’t disclosed.
“Bain Capital has a long and impressive track record of successfully investing in beloved Canadian companies, and we are thrilled to bring them on board,” Reiss said in the statement.
Bain Capital, based in Boston, has invested in other Canadian retailers and consumer brands including Toronto-based Shoppers Drug Mart Corp. and BTI Systems Inc.
Canada Goose, which began in a small warehouse in Toronto about 55 years ago and is headquartered in that city, employs more than 1,000 people. Its fur-lined coats are sold in 50 countries, and are used by researchers in the South Pole and the Canadian high Arctic, the company said.
Canaccord Genuity Group Inc. (CF) advised Canada Goose, with financing for the deal provided by Canadian Imperial Bank of Commerce.
Robert Burke Associates Chairman and CEO Robert Burke discusses the high end retail holiday shopping season on Bloomberg Television's "Bloomberg Surveillance."
Full episode of "Bloomberg Surveillance." Guests include Belus Capital Advisors Chief Equities Strategist Brian Sozzi, Bugaboo Chief Marketing Officer Madeleen Klaasen and Robert Burke Associates Chairman and CEO Robert Burke.
FINANCIAL TIMES | ELISA ANNISS
Mocktails, music and dancing marked the first birthday of Dubai’s 96,000 sq ft Level Shoe District, the world’s largest luxury shoe store, last month. Customers and luxury-world luminaries such as Vogue Italia editor-in-chief Franca Sozzani attended the party at the footwear centre in Dubai Mall.
“We bought shoes, mingled with designers and were able to put faces to names,” says Bulgaria-born Dubai resident Mira Martinova, who thinks the huge store offers “the best customer service and collections”, including her favourites Phillip Lim and Alexander Wang. Such is Martinova’s passion for shoes that she claims to own more than 100 pairs – and to shop at Level Shoe District every week.
British luxury shoe designer Nicholas Kirkwood, who also flew in for the party, says: “When I heard about the size [of the store] I thought, ‘How are they going to make it work, make it intimate, stop it being a sea of shoes?’ But it really does work. There are wide walkways and it is very well designed.”
New York designer Paul Andrew, also at the event, agrees. “Every department store is looking at their shoe floor right now – but this is impressive. Quite simply, it has the best shoe offering.” Edgardo Osorio, founder of luxury footwear brand Aquazzura, describes the place as, “Shoe heaven ... You have department stores with incredible shoe departments – but nothing at all like this.”
In London, Selfridges was the first to supersize its shoe department when it opened its 35,000 sq ft women’s Shoe Galleries in 2010. In New York, recently expanded shoe departments can be found at Barneys, Saks Fifth Avenue and Macy’s, whose shoe area stands at 63,000 sq ft. Lane Crawford opened the largest shoe floor in China (30,000 sq ft) at its new Shanghai flagship store last month. Back in London, Harrods will launch a new footwear floor in 2014.
As yet, nothing rivals the scale of Level Shoe District. But is bigger necessarily better? “Personally, I am sceptical of supersize retail concepts,” says George Wallace, chief executive of London-based retail consultancy MHE. He says that while “they are very much a feature of the Middle East”, huge areas dedicated to a single clothing sector risk overwhelming customers; he points out that 96,000 sq ft is “much bigger than an average whole department store in the UK”.
Still, Level Shoe District has its fans: 12m people visited in its first year. Nadia Revenkova, a stylist for wealthy Russian women, flies to Dubai from Yekaterinburg in Russia every month to shop for shoes. “Many of the world’s fashion houses make a collection especially for Dubai. Only in Level Shoe District have I seen such an impressive selection in one place,” she says. A large range of sizes, a VIP area for fittings and the convenience of shopping in one place all contribute to its appeal, she says.
Patrick Chalhoub, chief executive of the Chalhoub Group which runs Level Shoe District (along with many luxury retail outlets across the Middle East), says the concept has been much more successful than was anticipated and has generated interest internationally. Two US mall owners have approached him asking him to replicate the idea in America, he says, and there have been overtures from China and Thailand. But Chalhoub is adamant that there will be only one such store. “We don’t intend to take it elsewhere – we want it to be a unique place and a unique experience,” he says. He hopes the store will in time be considered as much of a Dubai attraction as the Burj Khalifa, the world’s tallest building.With 300 brands on offer at Level Shoe District, you would be hard-pressed to think of leading shoe labels that are missing. As well as 40 designer shop-in-shops – ranging from Harrys of London and Berluti to Chanel, Dior, Miu Miu, Prada and Roger Vivier – the store carries many independent brands such as Ancient Greek Sandals, Castañer, Gianvito Rossi, Grenson, Rupert Sanderson and Ugg. It also houses the 1,400 sq ft Sole Lounge – podiatrist Margaret Dabbs’ largest and first foot spa outside of London.
So is this the apotheosis of large-scale shoe retailing? Robert Burke, head of New York-based luxury goods consulting group Robert Burke Associates, thinks the Dubai store will be “tricky to top” but reflects a change in how consumers view shoes.
“In the past, shoes were bought to complete an outfit or a look,” he says. “Now they are a separate fashion statement – this is a major shift.”
FINANCIAL TIMES | VANESSA FRIEDMAN
Not long ago, no matter where you were in the world, there was a particular smell to a Burberry store. An earthy scent tickled the memory, sparking thoughts of loamy ground and windswept moors, warm fireplaces and woolly sweaters.
It was also, as it happened, the smell of the Burberry headquarters, a 150-year-old landmark building with a remodelled interior a stone’s throw from the Houses of Parliament – not to mention an office on the top floor, a broad white expanse of glass belonging to Christopher Bailey, the brand’s chief creative officer.
This makes sense, in many subtle ways. Burberry Hearth, the olfactory representative of the company, was not only Mr Bailey’s idea but is also an expression of its creator. It is a candle and room scent that references his memories of growing up in the Yorkshire countryside, and has been successfully monetised.
As such, the scent represents the way Mr Bailey has long bridged the gap between fashion’s creative and corporate worlds. And it offers a clue as to why, when Angela Ahrendts, Burberry’s chief executive, announced she was moving to Apple , the board of one of the UK’s biggest luxury fashion companies took an unprecedented step by naming Mr Bailey as her replacement.
When he takes over in mid-2014, he will become the first designer of a leading public brand to take the top spot on both the business and aesthetic sides.
“It’s a unique and very risky move on Burberry’s part,” says luxury brand consultant Robert Burke. “Traditionally, luxury groups such as LVMH and Kering keep a balance between a creative director and a CEO. That makes this a case study that will be very closely followed by the rest of the industry. If it works, it will change the playing field for the future. If it fails, it will drive everyone back to the old ways.”
There are £2bn in revenues, more than 50 different collections annually, and 11,000 employees depending on the outcome.
Not that you would know it to look at him. Mr Bailey, 42, is a low-key figure who favours jeans, classic Harris tweed jackets made in a Burberry factory in Yorkshire, and button-down shirts. His hair, a nondescript dirty blond, is messed up and slightly spiky. In a world where designers use image as a short cut to fame, his nondescriptness sets him apart. Along with his politeness, this has earned him the title of “fashion’s Mr Nice Guy”. He remembers “every employee’s name, plus their children’s names, plus their dogs’ names”, according to former Burberry vice-president Justin Cooke.
This may be partly a result of a working class background that he says keeps him humble. He was born in Halifax, West Yorkshire, a historic wool industry centre, and raised with his elder sister by a carpenter father and window dresser mother. After graduating from the Royal College of Art and working at Donna Karan and Gucci, he was plucked by Rose Marie Bravo, then chief executive, to be Burberry creative director in 2001.
Yet niceness is a quality not often associated with a pioneering chief executive. This fact – combined with a lack of formal business education and the luxury sector’s tough environment – explains the mixed investor reaction to his appointment.
“We believe that in a company as big and complex as Burberry, even for a person as talented as Mr Bailey, it is hard to have enough time to carry out both these roles,” wrote analysts at Sanford Bernstein. On Tuesday, the day of the announcement, the stock closed down almost 8 per cent, even though the same day the company reported revenues up 14 per cent to £1bn in the first six months of the year.
Insiders say this scepticism demonstrates ignorance of the way Burberry has functioned in recent years. There has long been a “dual reporting” structure in place for every area of the business, from creative to licensing and retail – and Mr Bailey, with Ms Ahrendts, has had the last word in strategic decisions as much as skirt lengths.
“I was in a number of interviews with him where he was asked about the share price or expansion strategy, and he was quite capable of responding for himself,” says Mr Cooke. “When he spoke to the retail team, it wasn’t about what a hanger looked like. It was about how many units were sold.”
“This is rare in my experience,” says Mimma Viglezio, a luxury management consultant and former executive vice-president at Gucci Group. “Most creative directors can’t read a profit and loss statement.”
Mr Bailey has played a crucial role in the brand’s success, in design terms and beyond. He elevated the iconic, if dated, Burberry trenchcoat to such a multidimensional extent that he was named designer of the year in 2005 and 2009, and menswear designer of the year in 2007 and 2008. The Queen recognised his services to his industry with an MBE in 2009.
He also conceptualised Burberry’s identity as the ultimate British brand, enlisting young talent from singers to actors to models for the advertising campaigns. He drove the move from multiple London offices to the seven-storey Westminster headquarters, arguing that it needed to be united in an environment that communicated its mission “to protect, to explore, to inspire”. With Ms Ahrendts, he was the architect of the digital strategy; the brand is now routinely called the “most connected in luxury”. Ironically, criticism of the company in recent years has centred on the lack of fashion-forward product on the runway rather than any corporate decisions.
“People are always saying his collections are quite commercial, as if that’s a bad thing,” says Mr Cooke, pointing out that for someone running a global business, this may be the crucial job qualification.
Yet no matter how thoroughly Mr Bailey has shaped the brand so far, formally adding Ms Ahrendts’ responsibilities to his own creates an entirely different set of expectations.
“It could be the best possible decision they have all made, or the worst,” says Mr Burke. ‘The only thing we know for sure at this point is: everyone is watching.”
FINANCIAL TIMES | ELISA ANNISS
I know women. Give them chains. Women adore chains,” said Gabrielle “Coco” Bonheur Chanel, of the 2.55 bag, featuring a brass chain and leather strap, that she created in 1955. Chains have been associated with Chanel ever since – from the “timeless classic” bag, reimagined by Karl Lagerfeld in the 1980s, to the newer “Boy” bag, launched September 2011 – but recently they have also been used by other labels.
This season chains feature on bags in the collections of many labels, including Stella McCartney, Saint Laurent, Lanvin, Louis Vuitton, Victoria Beckham, Reed Krakoff, Céline, Asprey, and newcomer Julien David, indicating that Coco’s observations are as prescient as ever.
The chain bag has been a key look for Stella McCartney’s own accessories line since 2009, when she designed her Falabella style, with its slouchy silhouette and all-round braided chain strap fashioned from brass and anthracite aluminium. “This bag is presented every season with a new twist added to the fabric, colour and texture of the Falabella,” says Pam Brady of Browns, adding that this season’s must-have comes in check-print mohair.
Elizabeth Kanfer, senior accessories fashion director at department store Saks Fifth Avenue, says: “As handbags have become more minimalist, so chain straps have become more important as they add an element of shine or polish to an otherwise pared-down handbag.” She says Christian Louboutin, Alexander McQueen, Gucci, and Dolce & Gabbana also feature bags with chain handles in their collections and that mini bags, in particular look great worn across the body with a chain strap. “Chains also have a nice weight to them, they feel great in the hand and they often feel expensive,” she adds.
New York-based luxury retail consultant Robert Burke says chains provide an important “cool”, “tough” detail and have gathered momentum since the trend first took hold for autumn/winter 2012: “In reality, women are not drawn to über-minimal bags, which is one reason why we are currently seeing chains being used as a design element. It fits in with the punk/grunge trend, redolent of the 1990s.”
The Betty bag, a black suede version with a gold chain, was the only bag worn in Hedi Slimane’s debut Saint Laurent catwalk show last October. It first hit stores in January 2013 and has become a permanent piece in the collection, available this season in mini and medium sizes and colours that include ice blue, blush, chalk and red leather.
Accessories designer Katie Hillier was appointed as a consultant at Asprey in April 2012, and one of her many standout designs has been the £7,000 Ritz bag complete with a sterling silver chain. Hilary Lewis, Asprey’s leathergoods and accessories director, who works closely with Hillier, says: “It is very much a jeweller’s type of chain, which emulates a necklace, rather than an accessory-type chain.”
Also launching this season is the quilted lambskin “pillow” bag by French-born designer Julien David. He says that after he won the Andam fashion award in 2012, luxury group LVMH helped put him in touch with a “fantastic” bagmaker in France. “For me bags are all about the craftsmanship, so to find the right people to work with was crucial,” he says, adding that he uses a large, compact, solid chain that comes silver plated or in vintage brass “because it gives the bag strength”.
BLOOMBERG NEWS | SUSAN BERFIELD
For fifteen years, Tamara Mellon was the muse, face, and legs of Jimmy Choo, the luxury shoe company she co-founded in London with her parents’ money in 1996. The stilettos regularly appeared on Sex and the City and quickly became an object of desire; wearing them suggested a life of carefree glamour. Eventually, she says, Jimmy Choo became a $900 million business. Mellon had an extravagant clothing allowance, and a make-up artist and hair stylist on call, too. She was photographed at store openings and celebrity-filled parties, on the red carpet, on vacation in St. Bart’s, in her closet, in the nude. Her 2000 wedding to Matthew Mellon, an heir to the banking fortune, was photographed for British Vogue
It turns out, though, that for much of this time, Mellon felt aggrieved. She says she was unappreciated by executives at the company and exploited by the private equity investors who funded its expansion. She was betrayed by those close to her. She had night sweats and panic attacks and was always exhausted. She left Jimmy Choo in 2011 with a reported $135 million and enough resentment to fill a book. It’s called In My Shoes and went on sale Tuesday. “To me the truth is always the best way,” she says.
This autumn, Mellon, who’s 46, is launching her own line of clothes and shoes. It’s called Tamara Mellon. On an afternoon in late September, she sits amid racks of sleek dresses, skirts and jackets in her Manhattan office as her staff prepare for fashion week in Paris. Louis Vuitton suitcases are open on the floor. Mellon is calm, almost still, and sits very straight with her hands in her lap. Her hair is pulled back into a tight pony tail. She’s wearing a deep blue wool skirt and vest with a black cashmere turtleneck from her label. Her black suede boots are thigh-high and, like all of the shoes in her collection, are made in the same Italian factories as Jimmy Choo stilettos. She named the boots Sweet Revenge; they will sell for $1,995.
Mellon says the idea for her new line had been percolating while she was at Jimmy Choo: she will introduce new items every month, instead of a new collection every season. Most luxury brands still sell only four collections a year; they’re shown months before they’re in stores. The knockoffs, of course, arrive much sooner. “I guess you could say this is fast fashion for luxury. That’s where we are. We want new things and we want them in season,” she says. “What she wants to do is hard. But I think it has real potential,” says Howard Davidowitz, the chairman of Davidowitz & Associates, a retail consulting and investing firm. “In the fashion business, speed is life.”
That her memoir often comes off as the rant someone might write to an ex-boyfriend or boss—and then never send—would seem to complicate the prospects for her new project. That’s not the case, she says. “I have the luxury now to choose who I have in my business. I’ve chosen people with good ethics and values. It’s very different.” One of them is Ronald Perelman, the billionaire investor who is friends with Mellon and has taken a small stake in her company. “I trust her implicitly, her judgment and loyalty and on top of it I think she’s a fun girl, a great girl.”
Notably, the targets in her book do not include the people she now depends on: her new investors; Fritz Winans, her chief executive; the stores that will carry her line. “You never want to make enemies when you’re starting a company,” says Milton Pedraza, the head of the Luxury Institute, a research and consulting firm. “The fact that she expresses a hard-edge point of view might give her the notoriety she needs to get a brand going. Look at Donald Trump: He’s negative about almost everyone and he still seems to have a thriving business.”
Mellon met Jimmy Choo in the early 1990s. She, the daughter of privilege who had gone to finishing school in Switzerland, was an accessories editor at British Vogue who often needed custom-made shoes for photo shoots on short notice. He was a young Malaysian shoemaker living in London’s East End, a technical master with uncompromising work habits. Soon discerning Vogue readers were tracking down Choo and placing orders of their own. Mellon, meanwhile, was using drugs and staying out all night with London’s other “It girls.” After she was fired from the magazine, she entered rehab. Six weeks later she emerged with a business plan: a Jimmy Choo line of ready-to-wear shoes.
“I had my share of demons. One of them was, of course, my mother and the enigma of why she’d always despised me so,” Mellon writes. “But the other force at play was a demonic drive for the financial security I hoped would keep me out of her clutches.” Elsewhere, Mellon describes her mother, Ann Yeardye, as a narcissist, a sociopath, and an alcoholic who’s responsible for Mellon’s adolescent depression, adult addictions, and sense of victimization. Yeardye, through her son Gregory, declined to comment on Mellon’s depiction of her or their family. Gregory, a real estate agent and developer in Beverly Hills, is three years younger than Tamara. “I don’t recall my mother being a raging lunatic,” he says. “It’s hard for me to understand where Tamara is coming from. I think a lot of it is sensationalism to sell the book.”
Jimmy Choo started as a family business. Mellon’s father, Tom Yeardye, had been the money man behind the Vidal Sassoon empire and turned out to be the only investor Mellon could find who believed starting a luxury brand from scratch made sense. The Yeardyes took a 50 percent stake in the company; Jimmy Choo owned the other half. Trouble soon emerged. Mellon says that Choo was incapable of putting together a collection; she and Sandra Choi, the shoemaker’s niece and apprentice, were the real designers. “I had set up a business with a ‘creative head’ who, in fact, had no creativity,” Mellon writes. “The few times Jimmy had anything to say about design, it was with a complaint that I was making the heels too high.”
Five years after starting the company, Mellon and her father offered to buy Choo’s half, but he wouldn’t sell, she says. They turned to a private equity firm, Phoenix Equity Partners, that bought out Choo for $13 million and claimed a 51 percent stake. Choo also had to agree to never speak publicly about the company without permission—a deal the current owners likely wish they were able to extract from Mellon.
Phoenix turned out to be the first of three private equity firms that would own and flip Jimmy Choo over the course of a decade. During that time, the company grew from four stores to 110 and its valuation increased from about $29 million in 2001 to nearly $900 million in 2011. Yet it was certainly disruptive, and stressful, for the company to be sold every three or four years. For Mellon, it seemed worse: twice, she was almost pushed out. “Private equity will use you, suck every ounce of blood, and then kick you to the curb when they exit,” she says. “They are the sociopaths of investment banking.”
During those ten years, Robert Bensoussan served first as chief executive, then as a board member. He had run Christian Lacroix and Gianfranco Ferrè and he built the managerial and strategic infrastructure that made Jimmy Choo’s rapid growth possible. Mellon, though, resented what she considered interference in the creative side and questioned many of his business decisions. When conflicts arose, it was Mellon’s father who helped resolve them. But he died suddenly in 2004, leaving the company without a mediator and Mellon without a confidante. “Robert was very effective at opening stores and in bringing in partners, but that skill set was replicable,” Mellon writes in one of the less emotional passages about Bensoussan. Elsewhere, she describes him as insecure, small-minded, and stingy. Also: “an obstructive, pain-in-the-ass employee who could be replaced.”
Bensoussan calls this “rubbish,” and says he feels more sadness than anger toward Mellon. He also says he hasn’t read the whole book yet. “She always wanted something bigger for herself, she wants to be a celebrity, another Tom Ford,” he says. “But she’s starting by tarnishing the Jimmy Choo story. And I wonder if she’s tarnishing herself, too… It’s not very elegant.”
Lyndon Lea, a partner at Lion Capital, the second firm to own Jimmy Choo, says that the company’s performance speaks for itself. “The results were due to the strong leadership of Robert Bensoussan and the hard work of many people in the organization,” he wrote in an email. Towerbrook Partners, which owned Jimmy Choo from 2007 to 2011, offered similar praise for Bensoussan, noting his outstanding reputation in the industry. Phoenix didn’t respond to requests for comment.
Mellon’s home life was often tumultuous, too. She met Matthew at a London Narcotics Anonymous meeting in 1998; six months later they were engaged. She says he was bipolar; soon after their wedding he began taking drugs again and disappearing for days. Becoming a father didn’t change his behavior. “We had a board meeting at my house a week after I gave birth and all the while I was worried my husband might be freebasing in the kitchen,” she writes. Their divorce in 2005 received as much press as their wedding did. The Mellons are on friendly terms now; Matthew didn’t respond to a request for comment.
Around that same time, the Yeardye family began feuding. Tom’s death had precipitated the sale of their stake to Lion Capital. That led to confusion among everyone but Mellon about some of the money they received. The fight between Mellon and her mother, over some $7 million, eventually ended up in court, in the Isle of Jersey, in 2009. During the trial, which Mellon attended with her therapist, her mother withdrew the case.
Jimmy Choo was sold to its current owners, the private equity firm Labelux, in May of 2011 for almost $900 million. Three months later, Mellon resigned as chief creative officer. She says Labelux refused to allow some designers and marketers to move to New York, where she had relocated with her daughter. Nor was it paying her enough. The final insult: No one tried to stop her from leaving. The company issued a statement about Mellon that says in part: “We note comments made by Tamara in conjunction with the promotion of her autobiography. We remain ever grateful for the start she gave to Jimmy Choo and confirm that her legacy lives on.”
“Me and Francesco, the most amazing last shoe maker. Back in the factories!” Mellon tweeted from Italy on May 15. She says she’s using the same factories Jimmy Choo uses and the same quality fabrics as other designers, but she’ll reduce her margins to keep prices down: Dresses will sell for $800 or so; a cashmere T-shirt goes for $295; a pony skin leopard-print trench coat is $4,500.
“Tamara is the customer. That’s what she’s always based her business on,” says Robert Burke, the founder of consulting firm Robert Burke Associates.
“It will be interesting to see how she differentiates her shoes from Jimmy Choo,” says Jane Kellock, a senior vice president at Stylus.com, a research and advisory firm. “She claims she was Jimmy Choo. Now she’ll have to reinvent that.”
Mellon has gathered a cozy group around her. Her investors are all friends: in addition to Perelman, Tory Burch has a stake. Mellon raised $22 million in total, she says, and put in some of her own money. She has a majority stake in the company and will be the creative director. Mellon has known her artistic director, Charlotte Pilcher, for decades. Winans, her chief executive, came recommended by friends. (He also came from Hudson Bay.) “It’s not necessarily that I can trust them because I know them. It’s that we want the same things,” she says. Should they worry about providing material for her second book? “I don’t think they have anything to worry about,” she laughs. “I expect to have a much easier working relationship with them.” Perelman says he won’t be involved in the company. “I’m a small investor. Even if I were a big investor I have such confidence in her that I would just close my eyes and let her do whatever she wants to do.”
The line will be sold in Bergdorf Goodman, where the one Jimmy Choo executive she got along with, Joshua Schulman, is president. It will be in Neiman Marcus, which owns Bergdorf, and Harrods. It will also be available on Net-a-Porter, the website that sells luxury designer clothes. Back in 2000, Jimmy Choo was the first brand to agree to sell on the site. Mellon hopes to introduce her own website, as well as boutiques in London and New York, next year. “If she’s successful, she’ll get more money when she needs it,” says Davidowitz. “All is forgiven if you make money, nothing is forgiven if you lose money.”
FINANCIAL TIMES | VANESSA FRIEDMAN
When the lights dim and the credits roll on the cinematic premiere of the “21st century re-imagining” of Shakespeare’s Romeo and Juliet next month, the list of names will read much like any high-profile independent movie – written by Julian Fellowes of Downton Abbey fame; directed by Italy’s Carlo Carlei; and starring Hailee Steinfeld, Oscar nominee for True Grit. But there is one difference.
Along with Amber Entertainment, the film has been co-produced by Swarovski Entertainment, the new production arm of the family-owned Austrian company that is far better known for its little crystal animals and work with young designers than its cinematic credentials.
With the launch of Romeo and Juliet, Swarovski has become the first luxury brand to fully step into the world of film-making – not simply as a supplier of products but as a financial and creative partner.
Nadja Swarovski, chairman of Swarovski Entertainment, said: “We see it as a natural extension of our work with emerging fashion talent, and a way to express our philosophy, ideas and values, and achieve a greater reach for the brand.”
The division was set up in 2011 with the aim of funding two films or documentaries a year at an average cost of $10m-$20m a film, as well as becoming involved in the casting, location and other production choices.
“It is a very substantial investment for us, but not an extraordinary one,” said Ms Swarovski of the costs of creating the entertainment division. Romeo and Juliet has been sold in 12 territories, including the US, the UK, China, the Middle East and Russia.A Romeo and Juliet collection is to be sold in 200 Swarovski stores worldwide and there are plans to sponsor the premiere.
Fashion has become increasingly involved with the film industry, moving from dressing celebrities for the red carpet to product placement such as designer Catherine Martin’s collaboration with Prada, Tiffany and Brooks Brothers on The Great Gatsby. The brands contributed to the movie and displayed costumes or jewellery from it in their stores.
Gucci is a partner of Martin Scorsese’s Film Foundation, which is dedicated to restoring cinema classics, and in 2011 the brand inaugurated its Women in Film prize at the Venice film festival.
Many brands such as Christian Dior, Lanvin, and Miu Miu also finance short films related to advertising campaigns that they then post on their websites and YouTube. And Tom Ford directed a feature, A Single Man, before starting his eponymous brand.
Robert Burke, a consultant to the luxury industry, said fashion groups were attracted by the “endless marketing opportunities” of film. But until now brands had been afraid of the risk of eroding brand equity – more than simply losing their initial investment – by being associated with a badly reviewed movie or one that dealt with risqué subject matter, he said.
“As creative as fashion brands are, they are also wildly conservative,” Mr Burke added.
Stefano Sassi, chief executive of Valentino, cautioned: “A brand would have to be very sure the film expressed its core values. I think it’s a stretch.”
Ms Swarovski acknowledged the dangers, saying the company chose its subject matter very carefully, and it would never be involved with a film about “violence, witchcraft, black magic, perversion”.
“I think it’s an incredible business opportunity,” she said.
Ms Swarovski said the move had been welcomed by the film industry. The entertainment division is already developing its second property, to be scripted by David Seidler, who wrote The King’s Speech.
BUSINESS OF FASHION | LAUREN SHERMAN
NEW YORK, United States — It’s easy to find a nice-looking pair of shoes for $40 these days, and even easier to find a trendy $40 dress. But while “fast fashion” prices are so light on the wallet they almost feel as though they’re going to disappear altogether, the cost of luxury goods continues to rise and rise, with no end in sight.
Currently on luxury e-tailer Net-a-Porter, there are more than 100 pairs of shoes priced over $1,000. (Two pairs of sparkly Christian Louboutins exceed $6,000.) And the price of Chanel’s famous 2.55 bag now rivals that of an Hermès Kelly. That is, an Hermès Kelly a decade ago. In the US market, the famous bag, which in the year 2000 started at $4,800, now starts at $7,600.
A nearly 60 percent price increase may seem excessive — especially when compared to the US Consumer Price Index (a measure of the price level of consumer goods, published by the US Bureau of Labor Statistics), which has increased by 27 percent over the past decade — but it’s typical in the luxury fashion category.
Indeed, in recent years, prices of luxury fashion products have grown at more than twice the rate of general inflation. In 2003, Carrie Bradshaw’s famous Manolo Blahniks cost $485. Exactly ten years later, the same style is $755, a 56 percent increase. (And several pairs of current season Manolos cost well above $1,000.) Ready-to-wear-dresses in the $10,000 and up range barely existed 10 years ago. Now they’re commonplace. In fact, popular luxury fashion e-commerce site Luisa Via Roma is currently selling a Fausto Puglisi embroidered tartan skirt for over $10,000 and a leather-and-bouclé Fendi dress for more than $13,000.
So what’s driving up the prices and how far can they go?
First, let’s consider the rough costs of producing a luxury product. Gross margins for luxury companies typically hover around 65 percent — that sounds like a lot, but it’s what shareholders now expect. It also means that a $3,500 bag costs roughly $1,225 to produce and bring to market, all the way from materials to sale. There are many steps along the way that contribute to the final price. There are the costs of raw materials, design, manufacturing and fulfillment. Then, at retail, there’s the cost of prime real estate and sales staff. And finally, there’s marketing: those glossy fashion adverts cost a pretty penny to produce, let alone to place. Over the past 10 years — and particularly since the end of the recession — many of these costs have increased dramatically.
Raw materials are more expensive and more scarce than ever before. Cattle prices (which are relevant to leather goods) will rise in the US by 7.3 percent in 2013, according to market research firm Allendale. And in the years since the global financial crisis, cotton prices have risen to previously unheard of levels, with demand from China pushing them even further in 2013 — to $93.08 in June 2013, a 13 percent increase year-on-year. Both Louis Vuitton and Hermès have recently invested in Australian crocodile farms to ensure their supply of the expensive skin, while Kering, in March, acquired Normandy-based crocodile tannery France Croco for the same reasons.
Rising labour costs are a factor, too. The wages of private-sector workers in China (where many brands manufacture) increased by 14 percent in 2012, according to China’s National Bureau of Statistics. Over the past 10 years, monthly average wages almost doubled in Asia, with an 18 percent increase in Africa, and 15 percent in Latin America and the Caribbean (also important manufacturing centres) according to a report released by the UN’s International Labour Organisation. And it’s not just emerging markets. In France, labour costs will, this year, reach their highest levels ever, according to the OECD.
Perception and desirability play a huge role in the pricing game, too. The more expensive something is, the more exclusive and, therefore, desirable it becomes. Burberry, for instance, said as recently as March that it would raise prices to increase its appeal to the upper end of its customer base and attract new, wealthier customers.
For some brands, the anticipation of markdowns is another factor. “Brands’ biggest fear is having to mark things down,” says New York retail consultant Robert Burke.
Though a few luxury brands, like Hermès and Louis Vuitton, do not discount, it’s typical for most fashion retailers to mark down at least a portion of their product in order to efficiently clear inventory. One need look no further than the department stores and monobrand boutiques currently offering discounts of more than 70 percent on Spring product to see that customers can, with the requisite strategy and patience, easily buy a pair of $1,400 stilettos for a much more palatable $300. “People who are on the really cutting edge of fashion might buy pre-season [at full price] but many folks wait for the discounts,” says journalist Ellen Ruppel Shell, author of Cheap: The High Cost of Discount Culture.
“Designer brands repeatedly going on sale may eventually be forced to artificially inflate prices to counter the margin pressure,” notes Matthew Walker, Creatures of the Wind chief executive, who served as president of The Row from 2008 to 2011. Though this could “lead to price resistance and eventually impact brand loyalty,” he cautions.
But perhaps the most powerful driver of fast-rising luxury fashion prices is the fact that there are simply more people who are able to pay up. The number of high-net-worth individuals (HNWIs) in the world increased by 9.2 percent in 2012 to 12 million people, with combined total assets of $46.2 trillion, according to a report by Capgemini, a management consultancy. North America still hosts the largest number of HNWIs (3.73 million people, up 11.5 percent year-over-year, with $12.7 trillion in assets, up 11.7 percent year-over-year), but the number of HNWIs in the Asia-Pacific region increased by 9.4 percent, during the same period, to 3.68 million, with total assets up 12.2 percent to $12 trillion.
Yes, the rich are getting richer. But is there a limit to what a sane person — billionaire or not — is willing to pay for a pair of shoes? “The question is, how high is high?” Burke asks. “These are people who have their jets outfitted in Hermès leather and Loro Piana vicuna. If demand is there, brands will continue to move up.”
FINANCIAL TIMES | ELIZABETH PATON AND ARASH MASSOUDI
Coty slipped on its stock market debut on Thursday, after raising $1bn from what was the largest consumer products initial public offering on the US market for more than a decade.
Shares fell by as much as 3.5 per cent in early trading on the New York Stock Exchange before slightly rebounding, after the fragrance and beauty group sold 57.1m shares at an offering price of $17.50.
Coty, which makes perfumes for luxury labels such as Marc Jacobs and Calvin Klein and owns nail polish brands including OPI and Sally Hansen, finished 0.8 per cent lower giving it a market value of $6.6bn.
The first-day jitters reflected investors’ concerns over whether Coty was priced at a multiple that was only slightly cheaper to its publicly traded competitors. Investors also pointed to Coty’s flat revenue growth in its most recent year as potential source of weakness.
“Everyone is looking to Coty and pondering its growth potential,” says Gilbert Harrison, chairman of Financo, a New York-based investment banking firm.
He added: “Recent luxury IPOs may have gone extremely well but that doesn’t necessitate a warm reception from the markets. Investors will be looking for clear signs that the company is able to continue sustainable growth in all aspects of its business.”
The New York-based company will not receive any proceeds from the 19 per cent float. Joh A Benckiser, Coty’s controlling shareholder and the holding company for Germany’s billionaire Reimann family, is drawing down its stake in the company while retaining voting control.
Minority shareholders Berkshire Partners, the Boston-based private equity group, and Rhône Group, the private equity firm, have also used the IPO to reduce their holdings.
Coty’s owners have been seeking to capitalise on booming global demand for cosmetics and fragrances, particularly from growing middle classes in developing markets.
Research from Goldman Sachs estimates that the prestige cosmetics market is worth $46.4bn, which constitutes around 15 per cent of all luxury sales.
Beauty purchases by middle-class customers – particularly those in emerging economies who are becoming increasingly sophisticated and concerned with personal care – are considered a gateway to higher spending and the largest future influencer on luxury shopping.
“The industry is seeing a seismic shift not unlike the one witnessed within the apparel sector several years ago,” says Robert Burke, a New York-based luxury retail consultant.
“The aspirational consumer is increasingly looking for a seamless lifestyle experience from a beauty brand; any company able to harness that is likely to see considerable return on its investments.”
The company’s public offering is the largest in the personal consumer products industry since the Carolina Group raised $1.1bn from an IPO in January 2002, according to Dealogic.
BLOOMBERG | COTTEN TIMBERLAKE
Coach Inc. (COH) has fought for relevance in recent years by introducing bling-laden products to attract younger shoppers and then bringing back more classic lines for its long-time customers. Yet the company remained true to its roots: finely crafted leather bags.
Now, in a defensive move as upstarts such as Michael Kors Holdings Ltd. (KORS) and Tory Burch LLC challenge its dominance of that market, New York-based Coach is trying to become a full lifestyle brand that outfits customers from head to toe.
It’s starting with shoes, a business that is more competitive and growing more slowly than handbags, while also presenting challenges Coach hasn’t faced much before. Where bags will always fit over a woman’s arm, Coach runs the risk of having too many or too few shoe sizes in stock. Shoes also don’t lend themselves to the gallery-like presentation of Coach’s bags. Analysts say the whole idea could put the company’s legendary profitability at risk.
“Coach’s shoe strategy is an uphill battle,” Brian Pitera, a Chicago-based principal at the consulting firm A.T. Kearney, said in an interview.
In an e-mail response to questions, Andrea Resnick, a Coach spokeswoman, said footwear is “a significant opportunity.”
“We are in the early stages,” Resnick said. “We will move purposefully.”
While Coach isn’t the first company to try to extend its brand into new areas, it is trying to do so from a position of weakness, said Robert Burke, founder of a namesake luxury research firm in New York. Companies typically expand this way when they’ve grown so strong in their initial market that customers demand the brand on other items, Burke said.
Designer Halo
Successful lifestyle brands usually start in apparel and enjoy the halo that comes from a celebrity designer sending fashion down runways, Burke said. Ralph Lauren began selling men’s ties four decades ago and diligently built his English country life and American West brand imagery, methodically applying it to more and more categories from men’s to women’s to kids’ to home goods, layering in labels in different price ranges. Tory Burch started out in 2004 with apparel.
Accessories-driven brands such as Prada SpA (1913) have turned themselves into successful lifestyle brands by moving quickly to stage fashion shows and add categories, Burke said.
In recent years, Michael Kors, Ralph Lauren Corp. (RL), Tory Burch, and Fifth & Pacific Cos.’ (FNP) Kate Spade brand moved more aggressively into Coach’s territory, chasing handbags’ lucrative margins. Coach for the first time lost North American handbag market share in the quarter ended in December. In January, Coach responded by saying it would work harder to become more of a lifestyle brand after spending years content to dominate the handbag market.
Faux Python
Coach has offered some shoes before, such as $98 casual “C” logo sneakers. Its new line, introduced in more than 170 North American stores in March, is larger, more fashionable and higher-priced, with styles including “Nala” faux python pumps for $248 and “Dalia” ballet flats at $138. The company has installed shoe salons in some flagship locations and made shoes the feature of its windows in more than 75 locations.
The shoes will be added globally in the second half of this year, and Coach also plans to work on boosting sales at the department stores that carry its wares. The retailer will consider developing men’s shoes in the quarters ahead and may add footwear to its factory outlets, executives have said.
“We see ourselves growing a very substantial footwear business,” Victor Luis, who becomes chief executive officer next year, said at an investors conference last month.
The new shoes are being produced by Jimlar Corp., the Great Neck, New York-based company Coach has had a licensing deal with since 1999.
Footwear Sales
Coach said footwear sales at retail would be about $250 million in the fiscal year ending in June, while declining to provide the previous year’s footwear sales or provide targets. In the previous year, Coach got about 7 percent of its revenue, or about $333.4 million, from products other than accessories and handbags, a category that also includes scarves, jewelry and sunglasses.
Investors and analysts have so far been skeptical of Coach’s plans. The shares rose 4.9 percent this year through yesterday, trailing the 20 percent gain for the Standard & Poor’s 500 Consumer Discretionary Index and Michael Kors’s 25 percent increase. Coach traded at a 22 percent discount to the index on a price-to-earnings basis and a 52 percent discount to Michael Kors yesterday. About 55 percent of the analysts tracking Coach recommend buying the shares, compared with 84 percent for Michael Kors. Coach was little changed at $58.25 at 9:31 a.m. in New York today.
Shoe Market
Part of the caution is due to the business Coach is pushing into. Total U.S. sales of women’s shoes climbed 3.5 percent to $23.5 billion in the 12 months ended in March, slower than the handbag category’s 5 percent advance to $7.24 billion, according to NPD Group Inc., a Port Washington, New York-based market-research firm.
Stores also have to carry lots of sizes, and markdowns to clear inventory could eat into margins, said Faye Landes, an analyst with Cowen & Co., who is based in New York, said in a phone interview.
Coach’s gross margin -- the portion of sales left after subtracting the cost of goods -- was 72.8 percent in its most recent fiscal year. Ralph Lauren posted 59.8 percent while shoe-focusedDeckers Outdoor Corp. (DECK)’s was 44.7 percent.
Coach Chairman Lew Frankfort said last month that footwear will help boost sales and profitability and won’t materially affect the company’s overall operating margin.
The early read on the shoe strategy has been positive, Coach said. Shoes as a percentage of sales at the Coach stores where they were reintroduced grew to almost 12 percent in the first five weeks from 3 percent, according to the company.
‘Powerhouse’ Brand
Coach is making “a very good move” because shoes are a hot category and the company has a “powerhouse” brand that can sell a lot of footwear along with its handbags globally, said Mortimer Singer, president of New York retail consulting firm Marvin Traub Associates.
While the early shoe sales results are encouraging, the boost occurred in a limited number of stores and was helped by national ads, Landes said.
The gain also may not last because the shoes look like “a me-too product,” with some being discounted down to $69 a pair Pitera said.
Cowen’s Landes, who rates the shares neutral, the equivalent of hold, sees another reason for caution, the same one that drew Coach to expand beyond handbags.
“There is more competition,” she said. “The competition has greater momentum.”