Michael Tonello's Blog, page 22
April 29, 2014
Hermès Revenue Jumps 10 Percent
PARIS, France — Hermès International SCA, the French maker of Birkin bags and silk scarves, reported first- quarter sales that beat estimates, led by demand in Japan.
Revenue jumped 10 percent to 943.5 million euros ($1.31 billion), Paris-based Hermès said today in a statement. Analysts predicted 921 million euros, according to the median of nine estimates compiled by Bloomberg. Sales excluding currency swings advanced 15 percent.
Sales on a constant-currency basis surged 22 percent in Japan, exceeding estimates, as Hermès raised prices and shoppers splurged in advance of a sales tax increase, the maker of $10,000 handbags said. An 18 percent revenue gain in the rest of Asia confirmed a positive trend, particularly in China, Hermes said. In Europe, where sales rose 7.9 percent, business remains sustained in a difficult economic environment, the company said.
“Hermès will continue its long-term strategy,” the luxury-goods producer said. “Above all, it is our company’s unwavering determination to continually reinvent itself in order to push the limits of excellence.”
Hermès is adding production facilities in France and opening more stores as the highest segment of the luxury industry resists a slowdown. Italian cashmere clothier Brunello Cucinelli said this month that he’s very confident about the top end of the market because super-wealthy consumers continue to seek exclusive products.
Profitability at Hermès is likely to shrink this year from a record in 2013, weighed down by the weakness of the Japanese yen, the company said in March. First-quarter sales advanced 13 percent last year at constant currencies.
Hermès rose 1 percent to 254.65 euros at the close in Paris yesterday. The stock has declined 3.4 percent this year, valuing the saddle-maker part owned by rival LVMH Moet Hennessy Louis Vuitton SA at 26.9 billion euros.
LVMH reported its fastest fashion and leather-goods sales growth in two years when it published first-quarter revenue figures on April 10.
By Andrew Roberts; Editors: Celeste Perri, Tom Lavell.
Bloomberg
Snobby Staff can Boost Luxury Retail Sales
Customers wait outside a Louis Vuitton store in Hong Kong. Photo: Winhorse, iStock.
When it comes to luxury brands, the ruder the sales staff the better the sales, according to new research from the University of British Columbia’s Sauder School of Business.
The forthcoming Journal of Consumer Research study reveals that consumers who get the brush-off at a high-end retailer can become more willing to purchase and wear pricey togs.
“It appears that snobbiness might actually be a qualification worth considering for luxury brands like Louis Vuitton or Gucci,” says Sauder Marketing Prof. Darren Dahl. “Our research indicates they can end up having a similar effect to an ‘in-group’ in high school that others aspire to join.”
For the study, participants imagined or had interactions with sales representatives – rude or not. They then rated their feelings about associated brands and their desire to own them. Participants who expressed an aspiration to be associated with high-end brands also reported an increased desire to own the luxury products after being treated poorly.
The effect only held true if the salesperson appeared to be an authentic representative of the brand. If they did not fit the part, the consumer was turned off. Further, researchers found that sales staff rudeness did not improve impressions of mass-market brands.
“Our study shows you’ve got to be the right kind of snob in the right kind of store for the effect to work,” says Dahl.
The researchers also found that improved impressions gained by rude treatment faded over time. Customers who expressed increased desire to purchase the products reported significantly diminished desire two weeks later.
Based on the study’s findings, Dahl suggests that, if consumers are being treated rudely, it’s best to leave the situation and return later, or avoid the interactions altogether by shopping online.
Backgrounder
The study, Should the Devil Sell Prada? Retail Rejection Increases Aspiring Consumers’ Desire for the Brand, will appear in the October 2014 edition of the Journal of Consumer Research. It was co-authored by Assistant Prof. Morgan Ward of the Cox School of Business at Southern Methodist University.
THE PIED PIPER OF PARK AVENUE - Part 2: a Birkin Bag for the Salvation Army
By Jesse Kornbluth
In Episode 1 of The Pied Piper of Park Avenue, seniors from the most prestigious private schools in Manhattan walked out of school and filled a convoy of their parents’ SUVs with $6,000 of food and delivered it to a food bank in Harlem. Their parents were furious. The kids promised not to do it again.
The next day, when the seniors of Manhattan’s elite private schools walked out after lunch, no one thought it was a flash mob. A Chapin senior had shared the plan with a junior she hoped to sleep with, and the junior decided to score some points by telling a teacher, and from there the news moved quickly. To the headmistress. To the lawyers.
Within hours, the heads of the elite schools and Hays Nolan, who was Henry Kravis’s lawyer and a member of the Brearley board, were on a conference call. What to do? Someone suggested making an announcement: “We know what you’re up to, and…” And what? Call their parents? And tell them what? The next bad idea: a lockdown, a prudent response to a “threat” that would never be confirmed. That was quickly rejected. Silence descended.
Over four decades Hays Nolan had seen many looming disasters, and his advice rarely varied: Don’t rush to respond. That’s what he suggested now. “The kids are putting on a show, and it’s a good one. But it has a half-life. This time, they’ll discover it doesn’t matter what they do, only who they are. TV and the Post will go after them as spoiled rich kids — and in the glare of the bright lights, they’ll fold.”
So school administrators busied themselves at their desks as their seniors streamed out after lunch and again made their way to 86th Street and Park Avenue. Again the marchers were exuberant, chanting “PEOPLE FIRST! PEOPLE COME FIRST!” and making videos for YouTube, flipping their photos onto Instagram and mugging for the TV crew.
This time the march was followed by a single SUV. A smaller food donation? Hardly. There were gasps — first from the TV crew, then from some of the marchers — when the kids started to pile their gifts in front of the Salvation Army store on Lenox Avenue.
A Birkin bag. A fur coat. Dresses that had been photographed at the Ballet Gala. Men’s suits. Shirts that would have been at home in Gatsby’s closet. Women’s shoes, several pairs flashing red Louboutin soles. Nikes that looked as if they’d never touched the pavement.
The women who worked at the Salvation Army knew what a Birkin bag was because they’d read on Page Six that Jay-Z had spent $350,000 on them for Beyonce one Christmas, but they’d imagined that bought enough Birkins to fill a closet. They had no idea what it would cost to buy the Birkin Capucine Togo Leather model with Gold Hardware that was sitting on the sidewalk. But the TV crew had an idea, and the cameras went close-up on the bag, which they quickly discovered belonged — correction: used to belong — to Lisa Brandt, wife of the CEO of Palomino Management.
Dinner chez Brandt was a simple coq au vin that night, but the real meal was sure to be Tina’s conversation with her father. David wanted to talk about the march. Tina wanted to turn her defense into an attack. Lisa, wanting neither, jumped in first.
“So I called, and told the Salvation Army about the misunderstanding…”
“It wasn’t a misunderstanding,” Tina snapped. “The Birkin was a gift.”
“A $20,000 gift.”
“No way.”
“That’s what it cost.”
“I had no idea.”
“And did you have any idea,” David Brandt said, struggling for the calm, even tone that has been so highly praised by business media, “that we could have had you arrested for theft?”
“Why didn’t you?”
Lisa made a second attempt at peacekeeping: “Don’t you think the embarrassment is punishment enough?”
Tina shrugged. Parental disapproval was new to her, but it got old fast.
“Punishment,” she said, and her tone was drenched in contempt, “is not a concept you guys have the least clue about.”
David and Lisa took this as criticism of their parenting, which had been passive in the extreme. Tina meant something else: unpunished Wall Street criminality, not excluding Palomino Management.
“Tell me, Dad — you own Apple, don’t you?”
“A big chunk. So what?”
“You know about what Apple does in Ireland?
“Yes. So what?”
“You think it’s okay that they register in Cork but they say the company isn’t a tax resident of Ireland — or anywhere?”
“It’s legal. So what?”
“So they’ve got about $100 billion tax-free dollars parked there while the people who make their stuff in China are jumping out of windows.”
“If corporate taxes were lower, they’d bring it back.”
“Corporate taxes are low, Dad, once the accountants dive in.”
“Low? Apple paid $6 billion in 2012.”
“And what about…”
“Wait a minute, Miss Holier-Than-the-Pope. You’ve got the 5s, the super-thin MacBook with retina display and an iPad Air — if you’re so outraged by Apple, why contribute to corporate crime?”
Tina was in no way interested in pledging allegiance to Samsung. So she deflected: “Compared to yours, my crimes are minor. Giving away maybe… oh…$30,000 of your stuff…”
David, burning: “Like that’s nothing.”
“I’ve heard you at parties.” Tina puffed herself up, waved an imaginary wine glass in imitation of her father talking to friends: ‘If you have less than $700 million…well, really, you just have no hedge against inflation.’”
That was when David shot out of his chair, hands trembling. When Tina cowered. When Lisa began to hyperventilate.
David left the table and went to his study. He called the headmistress of Brearley. “This is no prank,” he told her. “She won’t apologize. She’ll do it again, and she’ll call it income redistribution or economic justice or some other cute bullshit she picked up at your school. And I have no idea what to do about it. So you’d better get on the ball, Missy, and be quick about it.”
Jesse Kornbluth, editor of HeadButler.com , recently completed a novel, Married Sex. He lives in Manhattan.
In Episode 1 of The Pied Piper of Park Avenue, seniors from the most prestigious private schools in Manhattan walked out of school and filled a convoy of their parents’ SUVs with $6,000 of food and delivered it to a food bank in Harlem. Their parents were furious. The kids promised not to do it again.
The next day, when the seniors of Manhattan’s elite private schools walked out after lunch, no one thought it was a flash mob. A Chapin senior had shared the plan with a junior she hoped to sleep with, and the junior decided to score some points by telling a teacher, and from there the news moved quickly. To the headmistress. To the lawyers.
Within hours, the heads of the elite schools and Hays Nolan, who was Henry Kravis’s lawyer and a member of the Brearley board, were on a conference call. What to do? Someone suggested making an announcement: “We know what you’re up to, and…” And what? Call their parents? And tell them what? The next bad idea: a lockdown, a prudent response to a “threat” that would never be confirmed. That was quickly rejected. Silence descended.
Over four decades Hays Nolan had seen many looming disasters, and his advice rarely varied: Don’t rush to respond. That’s what he suggested now. “The kids are putting on a show, and it’s a good one. But it has a half-life. This time, they’ll discover it doesn’t matter what they do, only who they are. TV and the Post will go after them as spoiled rich kids — and in the glare of the bright lights, they’ll fold.”
So school administrators busied themselves at their desks as their seniors streamed out after lunch and again made their way to 86th Street and Park Avenue. Again the marchers were exuberant, chanting “PEOPLE FIRST! PEOPLE COME FIRST!” and making videos for YouTube, flipping their photos onto Instagram and mugging for the TV crew.
This time the march was followed by a single SUV. A smaller food donation? Hardly. There were gasps — first from the TV crew, then from some of the marchers — when the kids started to pile their gifts in front of the Salvation Army store on Lenox Avenue.
A Birkin bag. A fur coat. Dresses that had been photographed at the Ballet Gala. Men’s suits. Shirts that would have been at home in Gatsby’s closet. Women’s shoes, several pairs flashing red Louboutin soles. Nikes that looked as if they’d never touched the pavement.
The women who worked at the Salvation Army knew what a Birkin bag was because they’d read on Page Six that Jay-Z had spent $350,000 on them for Beyonce one Christmas, but they’d imagined that bought enough Birkins to fill a closet. They had no idea what it would cost to buy the Birkin Capucine Togo Leather model with Gold Hardware that was sitting on the sidewalk. But the TV crew had an idea, and the cameras went close-up on the bag, which they quickly discovered belonged — correction: used to belong — to Lisa Brandt, wife of the CEO of Palomino Management.
Dinner chez Brandt was a simple coq au vin that night, but the real meal was sure to be Tina’s conversation with her father. David wanted to talk about the march. Tina wanted to turn her defense into an attack. Lisa, wanting neither, jumped in first.
“So I called, and told the Salvation Army about the misunderstanding…”
“It wasn’t a misunderstanding,” Tina snapped. “The Birkin was a gift.”
“A $20,000 gift.”
“No way.”
“That’s what it cost.”
“I had no idea.”
“And did you have any idea,” David Brandt said, struggling for the calm, even tone that has been so highly praised by business media, “that we could have had you arrested for theft?”
“Why didn’t you?”
Lisa made a second attempt at peacekeeping: “Don’t you think the embarrassment is punishment enough?”
Tina shrugged. Parental disapproval was new to her, but it got old fast.
“Punishment,” she said, and her tone was drenched in contempt, “is not a concept you guys have the least clue about.”
David and Lisa took this as criticism of their parenting, which had been passive in the extreme. Tina meant something else: unpunished Wall Street criminality, not excluding Palomino Management.
“Tell me, Dad — you own Apple, don’t you?”
“A big chunk. So what?”
“You know about what Apple does in Ireland?
“Yes. So what?”
“You think it’s okay that they register in Cork but they say the company isn’t a tax resident of Ireland — or anywhere?”
“It’s legal. So what?”
“So they’ve got about $100 billion tax-free dollars parked there while the people who make their stuff in China are jumping out of windows.”
“If corporate taxes were lower, they’d bring it back.”
“Corporate taxes are low, Dad, once the accountants dive in.”
“Low? Apple paid $6 billion in 2012.”
“And what about…”
“Wait a minute, Miss Holier-Than-the-Pope. You’ve got the 5s, the super-thin MacBook with retina display and an iPad Air — if you’re so outraged by Apple, why contribute to corporate crime?”
Tina was in no way interested in pledging allegiance to Samsung. So she deflected: “Compared to yours, my crimes are minor. Giving away maybe… oh…$30,000 of your stuff…”
David, burning: “Like that’s nothing.”
“I’ve heard you at parties.” Tina puffed herself up, waved an imaginary wine glass in imitation of her father talking to friends: ‘If you have less than $700 million…well, really, you just have no hedge against inflation.’”
That was when David shot out of his chair, hands trembling. When Tina cowered. When Lisa began to hyperventilate.
David left the table and went to his study. He called the headmistress of Brearley. “This is no prank,” he told her. “She won’t apologize. She’ll do it again, and she’ll call it income redistribution or economic justice or some other cute bullshit she picked up at your school. And I have no idea what to do about it. So you’d better get on the ball, Missy, and be quick about it.”
Jesse Kornbluth, editor of HeadButler.com , recently completed a novel, Married Sex. He lives in Manhattan.
THE PIED PIPER OF PARK AVENUE (part 1)
By Jesse Kornbluth
It looked like a flash mob.
Right after lunch on the first warm afternoon in April, seniors began streaming out of the city’s elite private schools. They came East from Spence and Nightingale and Sacred Heart, West from Chapin and Brearley. They met at 86th Street and Park Avenue. Then the Dalton crew arrived, and there were several hundred kids milling around.
They were the sons and daughters of the very rich in their final weeks of school. They’d just returned from Spring Break in St. Barts and Harbour Island and Palm Beach; in September, they’d be off to Duke and Brown and Harvard. They were tanned and buffed, glowing with good health and good fortune, and when they came together, they looked like a Ralph Lauren double-page foldout in Vogue.
The first sign that this might be something more than a flash mob was the arrival of a convoy. A Range Rover. A Suburban. A Denali. All black. These were the cars of the wives of three Wall Street titans who were, as it happened, friends having their monthly lunch at Swifty’s. Their kids knew their mothers would be drinking Sancerre until at least 2:30, plenty of time for them to borrow their chauffeurs for a grocery pickup at the D’Agostino on Madison Avenue.
They just hadn’t told the drivers that they’d be picking up $6,000 worth of canned food. Bought online. Paid by Platinum cards.
Yes, a huge purchase. But considering who the customers were, it was more like a rounding error. Real money would be more like Kate Nichols — daughter of Billy Nichols, head of equities at Morgan Stanley — getting a $2 million apartment as a pre-graduation present for getting through Spence.
The arrival of the SUVs seemed to be what Kate and her co-conspirators Tina Brandt (daughter of the CEO of Palomino Management) and Greg Lee (son of the #2 at Blackstone) were waiting for. Kate shouted something. Two drummers stepped forward and began to play a complicated, totally addictive military cadence. Kids started to clap, on and off the beat, and then Kate waved her arms, and off they went up Park Avenue.
At 98th Street, a girl produced a piccolo and played a soaring Caribbean melody that got an enthusiastic response from the women from the projects. The crowd swelled. There was some dancing. Off to the side, some kids were taking pictures and making videos and posting them on Instagram and YouTube.
The organizers had alerted the media, and a news truck was waiting for the marchers at 106th Street. Another arrived. And with that, the marchers began to chant.
“PEOPLE FIRST! PEOPLE COME FIRST!”
The cameras got it all. And moved closer when the march arrived at the food bank on 125th Street. As kids began unloading cartons from the SUVs, Kate went inside, followed by TV crews.
“We could use some help,” she said to a woman at the first desk.
The woman looked out the window at the kids stacking cartons.
“Honey,” the woman replied, “you are the help.”
Which was the money quote in the coverage about the march on the 5 o’clock news.
But there was more. The TV crews had done short interviews with the leaders. And when they identified Kate and Tina and Greg, they didn’t fail to mention who their fathers were.
That night, three Wall Street executives made it home in time for dinner. And in those homes, the same conversation played out.
“What was that?”
“Budget cuts have slashed aid to food banks. People are hungry. So we fed them.”
“That’s not how you go about it.”
“What should we have done?”
“Your mother and I write checks to charity. Large checks.”
“I had no idea. I thought your reaction would be: ‘The poor will stop going hungry when they get off their asses and find work and buy their food.’”
“Don’t be ridiculous. I’m only pissed about the publicity.”
“Mom’s in Social Diary all the time.”
“For her causes. And only for her causes.”
These kids prudently didn’t express their less positive view of their mothers.
“So. What’s the learning here?”
“Uh…”
“Just don’t do it again.”
“Of course not.”
Which was, Kate and Tina and Greg knew, a lie.
(to be continued, tomorrow)
Jesse Kornbluth, editor of HeadButler.com , recently completed a novel, Married Sex. He lives in Manhattan.
It looked like a flash mob.Right after lunch on the first warm afternoon in April, seniors began streaming out of the city’s elite private schools. They came East from Spence and Nightingale and Sacred Heart, West from Chapin and Brearley. They met at 86th Street and Park Avenue. Then the Dalton crew arrived, and there were several hundred kids milling around.
They were the sons and daughters of the very rich in their final weeks of school. They’d just returned from Spring Break in St. Barts and Harbour Island and Palm Beach; in September, they’d be off to Duke and Brown and Harvard. They were tanned and buffed, glowing with good health and good fortune, and when they came together, they looked like a Ralph Lauren double-page foldout in Vogue.
The first sign that this might be something more than a flash mob was the arrival of a convoy. A Range Rover. A Suburban. A Denali. All black. These were the cars of the wives of three Wall Street titans who were, as it happened, friends having their monthly lunch at Swifty’s. Their kids knew their mothers would be drinking Sancerre until at least 2:30, plenty of time for them to borrow their chauffeurs for a grocery pickup at the D’Agostino on Madison Avenue.
They just hadn’t told the drivers that they’d be picking up $6,000 worth of canned food. Bought online. Paid by Platinum cards.
Yes, a huge purchase. But considering who the customers were, it was more like a rounding error. Real money would be more like Kate Nichols — daughter of Billy Nichols, head of equities at Morgan Stanley — getting a $2 million apartment as a pre-graduation present for getting through Spence.
The arrival of the SUVs seemed to be what Kate and her co-conspirators Tina Brandt (daughter of the CEO of Palomino Management) and Greg Lee (son of the #2 at Blackstone) were waiting for. Kate shouted something. Two drummers stepped forward and began to play a complicated, totally addictive military cadence. Kids started to clap, on and off the beat, and then Kate waved her arms, and off they went up Park Avenue.
At 98th Street, a girl produced a piccolo and played a soaring Caribbean melody that got an enthusiastic response from the women from the projects. The crowd swelled. There was some dancing. Off to the side, some kids were taking pictures and making videos and posting them on Instagram and YouTube.
The organizers had alerted the media, and a news truck was waiting for the marchers at 106th Street. Another arrived. And with that, the marchers began to chant.
“PEOPLE FIRST! PEOPLE COME FIRST!”
The cameras got it all. And moved closer when the march arrived at the food bank on 125th Street. As kids began unloading cartons from the SUVs, Kate went inside, followed by TV crews.
“We could use some help,” she said to a woman at the first desk.
The woman looked out the window at the kids stacking cartons.
“Honey,” the woman replied, “you are the help.”
Which was the money quote in the coverage about the march on the 5 o’clock news.
But there was more. The TV crews had done short interviews with the leaders. And when they identified Kate and Tina and Greg, they didn’t fail to mention who their fathers were.
That night, three Wall Street executives made it home in time for dinner. And in those homes, the same conversation played out.
“What was that?”
“Budget cuts have slashed aid to food banks. People are hungry. So we fed them.”
“That’s not how you go about it.”
“What should we have done?”
“Your mother and I write checks to charity. Large checks.”
“I had no idea. I thought your reaction would be: ‘The poor will stop going hungry when they get off their asses and find work and buy their food.’”
“Don’t be ridiculous. I’m only pissed about the publicity.”
“Mom’s in Social Diary all the time.”
“For her causes. And only for her causes.”
These kids prudently didn’t express their less positive view of their mothers.
“So. What’s the learning here?”
“Uh…”
“Just don’t do it again.”
“Of course not.”
Which was, Kate and Tina and Greg knew, a lie.
(to be continued, tomorrow)
Jesse Kornbluth, editor of HeadButler.com , recently completed a novel, Married Sex. He lives in Manhattan.
April 26, 2014
Auction Houses Spurred By Luxury Handbag Market
NEW YORK: The bargains start below US$150 and the most expensive go for more than USUS$100,000 (RM320,000): designer handbags are the latest craze taking global auction houses by storm and fetching record prices. Texas-based Heritage Auctions, which calls itself the market leader in luxury accessories, holds its New York spring sale on Monday—and is more than upbeat about how well it’s going to go.“I expect to break into the top 10, but I don’t believe any will break the world record,” its 26-year-old director of luxury accessories, Matthew Rubinger, told AFP.Of the 800 lots going under the hammer, the most expensive is an Hermes “Birkin” in shiny black crocodile, complete with a padlock and diamond and white gold clasp, valued between US$80,000 and US$100,000.The second costliest is another “Birkin” in crocodile red with violet trim, gold clasp and special horseshoe ornament prominently placed in the US$70,000 to US$90,000 price tag range.In the luxury auction market, Hermes bags are by far the most prized, especially those named after British actress Jane Birkin and the “Kelly” line that channels the late Princess Grace of Monaco.In the luxury accessories category, which Heritage created in 2010, Hermes is followed by Chanel and Louis Vuitton, ahead of Gucci, Prada and Celine, says Rubinger.World record is US$203,150In 2010, Heritage sold 200 lots for US$708,200, with gross sales reaching a staggering US$14.5 million in 2013, he said.The auction house has sold eight of the 10 world records, including the reigning record of US$203,150 for a red crocodile “Birkin” measuring a mere 30 centimeters (12 inches) sold in Dallas, Texas, on December 6, 2011.“This is such a new market,” said Rubinger. “That’s why it is so much fun.”Buyers and sellers are often the same, with top clients concentrated in the United States, South America, Europe, the Middle East, Russia and Asia.“What is interesting, for the most part—there is not that much variance in what people are looking for,” he said.Heritage is not the only auction house to take advantage of the new boom. Bonhams in Los Angeles, Christie’s of London and Artcurial based in Paris all offer luxury accessories.The competition does not worry Rubinger, who bought and sold his first handbag on the Internet for his mother when he was just 12 years old.“As these players grow, it helps us,” he said. “The more and more people are in this industry, it’s expanding our market.”The day after Heritage’s New York sale, Artcurial, which holds two of the 10 record sales, follows suit with a “Vintage Hermes” auction offering hundreds of handbags from the famous Parisian brand.Among the most expensive is a 35 centimeter (14 inch) Birkin in matte brown crocodile valued at US$41,520 to US$48,440 and a 30 centimeter (12 inch) Birkin in black matte crocodile estimated at US$19,366 to US$22,133.“Every sale rose on the last,” Rubinger said.The market for the big bucks designer handbag is on the rise—so much so that even men are becoming keen.“Husbands of clients I had for years are more interested now that the dollar figures have gotten higher, we are talking real money here,” he said.“That’s a reason why men got more interested. You can make a really dumb purchase at US$50 and you can make a smart purchase at US$50,000,” he added.
April 25, 2014
April 23, 2014
The Two Sides of Luxury
Aspirational brands rely on a high-low strategy. They price their main lines high for the super rich. But they hedge low on their entry-level diffusion lines.
Aspirants dream about Birkin bags, but they'll settle for anything with an Hermès logo on it. So Hermès sells Birkins to wealthy socialites, and not-quite-Birkins to those who've seen them on TV.
In doing so, it captures all the marketplace demand for its brand name through price discrimination. Some luxury brands eschew aspirational customers altogether - you won't find a Tom Ford suit for less than a couple of grand.
High-end prices have gone off the deep end; as the Wall Street Journal reported, "in the past five years, the price of a Chanel quilted handbag has increased 70 per cent to $4,900. Cartier's Trinity gold bracelet now sells for $16,300, 48 per cent more than in 2009."
And luxury sales are slowing down. Consumption was an impressive $390 billion in 2013, a 7 per cent increase over 2012 - but a drop from 11 per cent growth rate in 2011.
Hermes Ostrich Birkin Bag. Photo / Wikipedia-Wen-Cheng Liu The projected rate in 2015 is only 6 per cent. Time attributes the slowdown to a cooling market in China, where President Xi Jinping recently initiated a crackdown on bribery and corruption (major drivers of luxury purchases, especially among government officials).
China's lower-middle class and "mass affluent" class are giving way to its upper-middle - a curious trend that McKinsey Consulting explains as spending on experiences, like spas and weekend getaways.
In the coming years, China's famed obsession with red Bordeaux, Italian automobiles and Swiss watches will become the sole province of the country's superrich. Others will have to make due with midtier brands.
The pattern is roughly the same in the United States, as aspirational consumers give up on Gucci and turn to the more reasonably priced Michael Kors, Uniqlo and Topshop.
Those that sell to the aspirational range - Armani, Prada and LVMH - are seeing the big bottom fall out. They're being forced into a pickle. They can drop their diffusion pricing even lower, in a bid to win back the aspirational shoppers, but doing so might cheapen their brand image, sacrificing high-end customers in a fruitless quest to recapture the low end.
Or they can let the low-end go, which would mean drastically culling product lines, scaling back operations, and hoping to compete with the 0.1 per cent's growing taste for bespoke and artisanal goods.
Not everyone will be so nimble. BMW has overextended itself by playing more in various entry-level aspirational markets; even BMW enthusiasts are confused about how many market segments, models and diffusion lines the automaker sells.
Luxury brands will have to choose which dream they're selling. Or they'll pay a steep price for their indecision. We won't be able to afford some of them, and that's just as well - many of them can no longer afford us.
http://www.nzherald.co.nz/business/ne...
Aspirants dream about Birkin bags, but they'll settle for anything with an Hermès logo on it. So Hermès sells Birkins to wealthy socialites, and not-quite-Birkins to those who've seen them on TV.
In doing so, it captures all the marketplace demand for its brand name through price discrimination. Some luxury brands eschew aspirational customers altogether - you won't find a Tom Ford suit for less than a couple of grand.
High-end prices have gone off the deep end; as the Wall Street Journal reported, "in the past five years, the price of a Chanel quilted handbag has increased 70 per cent to $4,900. Cartier's Trinity gold bracelet now sells for $16,300, 48 per cent more than in 2009."
And luxury sales are slowing down. Consumption was an impressive $390 billion in 2013, a 7 per cent increase over 2012 - but a drop from 11 per cent growth rate in 2011.
Hermes Ostrich Birkin Bag. Photo / Wikipedia-Wen-Cheng Liu The projected rate in 2015 is only 6 per cent. Time attributes the slowdown to a cooling market in China, where President Xi Jinping recently initiated a crackdown on bribery and corruption (major drivers of luxury purchases, especially among government officials).China's lower-middle class and "mass affluent" class are giving way to its upper-middle - a curious trend that McKinsey Consulting explains as spending on experiences, like spas and weekend getaways.
In the coming years, China's famed obsession with red Bordeaux, Italian automobiles and Swiss watches will become the sole province of the country's superrich. Others will have to make due with midtier brands.
The pattern is roughly the same in the United States, as aspirational consumers give up on Gucci and turn to the more reasonably priced Michael Kors, Uniqlo and Topshop.
Those that sell to the aspirational range - Armani, Prada and LVMH - are seeing the big bottom fall out. They're being forced into a pickle. They can drop their diffusion pricing even lower, in a bid to win back the aspirational shoppers, but doing so might cheapen their brand image, sacrificing high-end customers in a fruitless quest to recapture the low end.
Or they can let the low-end go, which would mean drastically culling product lines, scaling back operations, and hoping to compete with the 0.1 per cent's growing taste for bespoke and artisanal goods.
Not everyone will be so nimble. BMW has overextended itself by playing more in various entry-level aspirational markets; even BMW enthusiasts are confused about how many market segments, models and diffusion lines the automaker sells.
Luxury brands will have to choose which dream they're selling. Or they'll pay a steep price for their indecision. We won't be able to afford some of them, and that's just as well - many of them can no longer afford us.
http://www.nzherald.co.nz/business/ne...
‘Bringing Home the Birkin’ - Chapter 1: Barcelona on the Brain
Barcelona on the BrainI've always thought the use of a ringing phone to symbolize the onset of great personal change was a cheap plot device, and a gross oversimplification of the various factors that inspire human metamorphosis. However, now I know better: sometimes you really can trace it all back to a phone call.
In my particular case, that life-changing phone call came early one wintry Cape Cod day — early enough that my roommate, Kate, and I were still cheerfully ensconced in our morning routine of Peet's coffee, PJs, and Rosie O'Donnell. Neither the caller nor the subject matter was by any means unusual — it was the Boston — based agency that represented me, giving me my newest assignment. A weeklong hair and makeup job for IBM in Barcelona, it had the allure of an escape from the drab and drear of mid-March Provincetown. The call certainly felt routine at the time, but we don't always know our Rubicon when it rings ...
At least workwise, things weren't so shabby. I had a career that people who didn't know better might consider glamorous. As a beautician who specialized in commercial photography, I had spent most of the last decade trigger-happy with a can of hairspray and a powder puff. And somehow, along my merry way, I had also cofounded a company. Named Team, it was an agency that represented artists who worked, in one capacity or another, in the photography and advertising industries. The concept was both convenience and strength in numbers. Normally, an advertising exec needed to make about half a dozen phone calls to pull together a photo shoot. What my company did was turn those six calls into one. Makeup artists, hairstylists, wardrobe stylists, location scouts, production managers, food stylists — we had it all under one roof. But good as it had been to me, my initial euphoria at being part of the fashion industry I had always worshipped as spectator was starting to wane. I had learned that celebrities were just people with name recognition, and photo shoots were as tedious as board meetings, once you had been to hundreds of them. Ten years of crafting updos and vanquishing shiny noses had driven me to uncharacteristic self-analysis. Was this really how I wanted to spend the rest of my life? Maybe not, but for now I knew one thing: I was going to Spain.
I loved traveling for work, eagerly snapping up what the industry called "go-away jobs." Nomadic by nature, I took the adage "home is where the heart is" literally — a hotel room morphed into home as long as I was in it (with the added bonuses of crisp sheets, fresh towels, and chocolates on my pillow). But lately I found myself becoming more jaded by my globe-trotting. Not because of the silly things you always heard those bridge-club biddies bemoaning in the airport — it wasn't lost luggage or the lack of a proper bagel that had me down. I didn't mind the calculus of currency conversion or the etymology of exotic entrées. No, it wasn't the inconvenience inherent to travel that was burning me out. It was boredom. I had increasingly noticed a sinister sameness about each of these foreign cities. Before my very eyes, every place was turning into every place else. I fervently hoped that Barcelona would prove to be the exception.
I sighed with disappointment and slumped against the hot vinyl seat of the taxi. Other than the flamenco music on the radio and the blinding glare of the Catalan sun, so far Barcelona felt about as foreign to me as Boston. Tacky billboards advertising electronics and cheap hotels flashed by my window at an alarming rate. Was there any place left in the world that didn't look like one giant strip mall? Maybe it was time for me to settle down. Maybe I needed the white picket fence and the Weber grill after all.
A mere five minutes later, my cynicism forgotten, I was as mesmerized by the view as a midwesterner crossing the George Washington Bridge into Manhattan. I didn't know which way to look. To my left loomed the impressive bulk of the 1992 Olympic Stadium, capped off by a towering white spire that was an unlikely mating of futuristic space station and computer-generated sculpture. To my right, the Mediterranean. I was dazzled not only by the turquoise shimmer of the sea but by the hundreds of boats lining the docks. Luxury cruise ships, privately owned yachts, behemoth tankers, modest sailboats — somehow, seeing one of the world's biggest ports was far more impressive than reading about it in Fodor's. Suddenly, I was as excited as a little kid on his first field trip.
But it wasn't until we left the highway and entered the city's perimeter that I truly fell under its spell. None of my extensive jet-setting had prepared me for Barcelona's unique urban landscape — palm trees edged the narrow streets, ornate buildings leaned companionably against each other, and laundry adorned nearly every balcony. The architecture spanned centuries of design — gothic intermingled with modernist, contemporary coalesced with classic. It could have been jarring to the senses, but as I would later learn, Barcelona had a way of turning the incongruous into the harmonious. It looked like the European city I had always dreamed of but, of late, had despaired of ever finding. I was captivated.
My eight-hour days of grooming models and painting faces put a dent in what little time I had to prowl the city. However, even with the constraints of the IBM gig cutting into my tourist time, I still sampled enough of the Barcelona lifestyle to grow ever more enamored. My first instincts about the city's physical charm had been wrong — it was far more spectacular than I originally supposed. With a population of nearly two million spread out over sixty square miles, Barcelona is segmented into dozens of neighborhoods, each possessed of its own particular charm. I was hard-pressed to find an undesirable location; the place was a real estate agent's wet dream.
(Continues...)
Excerpted from Bringing Home the Birkin by Michael Tonello Copyright 2008 by Michael Tonello. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Illustration by Hiroshi Tanabe, the New York Times.
http://www.amazon.com/Bringing-Home-Birkin-Pursuit-Coveted/dp/0061473340
April 21, 2014
Wrapped Handles: So Ugly, So Tacky
Who do we have to blame for this nightmare trend?
