I came across this WSJ article by Teri Agins on Friday which I thought was very interesting. It talks about the economic downturn’s effect on the luxury goods market. Some of the more captivating points brought up are the implications of heavy discounting on the overall perception of luxury brands and the effects of moving production from France and Italy to China or other low-cost manufacturing centers (and therefore replacing “Made in …” tags of origin with “Designed in …”).
We’ve already seen a surge in designer capsule collections for discount retailers (think Giles Deacon for New Look, Viktor & Rolf for H&M, Alice Temperly for Target) as well as diffusion labels (Marc by Marc Jacobs, 3.1 Phillip Lim, KORS Michael Kors). And some think moves like these are watering down what was once an elite market.
This is a topic that I’ve long been fascinated with. I’ve just started reading Teri Agins’ book The End of Fashion: The Mass Marketing of the Clothing Business and as soon as I’m done with that one, I have Deluxe: How Luxury Lost Its Luster by Dana Thomas ready to go.
At base, I think luxury goods shoppers are broken down into two categories. The first is the group who are proud to be able to buy everything at full price the minute it hits the floor at Bergdorf (or as soon as it goes live on Shopbop.com for us suburban gals). The second are those who brag about scoring a $1,500 bag at 85% off.
The bottom line is that prices of luxury goods are expected to drop. The WSJ article specifically quotes Alber Elbaz of Lanvin saying he’s been calling around to their suppliers asking for better prices so they can, in turn, lower theirs. The CEO of Emanuel Ungaro says the prices for high fashion have gotten out of control. Michael Kors’ CEO says he recognizes that consumers are cross-shopping (buying half your wardrobe from designers and the other half from mall outlets like Banana Republic) these days and part of the reason the KORS and MICHAEL diffusion labels were created was so their customers could cross-shop between one parent label. Smart? Or shooting yourself in the foot? Seems like the opinion is split on that one.
I’ll revisit this topic once I’ve read my books…