Wednesday, 31 December 2008

Strategies to maintain the aspiration - 31/12/08

We have said it before here at the MO down, that there are various routes that luxury brands should be weary of venturing down... heavy discounting and/or discounting more regularly in particular. With the current financial turmoil many luxury multi-brand stores globally Neiman Marcus, Saks in the US and David Jones here in Australia have resorted to heavy discounting of current season product. Ouch... this does a lot of damage to the brand equity.

Customers are clever, even those with a lot of money..(!), whilst in the past they would want the new seasonal product right now and didn't need or want to wait until four months or so to 'see' if it is still in stock. They also didn't need to purchase at markdown, however with alot of the luxury brand VIP clients being affected in some way they too would be considered 'mad' if they did not take advantage of the incredible range of international and local high end and luxury brand reductions of current season.

Some of the strategies that luxury brands either must enhance, review or be aware have been listed in and makes for some interesting reading. We support wholeheartedly these sentiments, including the latent pick up of on-line retailing. The other point is that brands need to bring in webs specialists, the danger that many publishing companies as well as brands have done is 'assume' the strategies for print media can be replicated (template style) and be successful on-line... This is so incorrect, many have poured way too much money into on-line websites but do not understand the very different approach needed.

Chanel reduces headcount at Paris HQ - 30/12/08

As reported by Reuters online, the historic and quintessentially luxury Parisienne House of Chanel is ending some 200 temporary contracts. We believe this represents a relatively small percentage of the head office headcount. Not such a happy new year for some.

Chanel, being a private company does not have its financial status scrutinised by shareholders and the public alike, as do many other luxury brands. The Wertheimer family, owner's of Chanel have been able to operate and maintain this successful international business as a private one to-date, so for this and the announcement of the Mobile Art Exhibition to cease, rings a small bell, (with a leather entwined chain). The real story is on the inside, however as the brand has strong foundations, extraordinary history and immeasurable brand equity, we are confident of its continued success.

As all good businesses do when times are tough, they reign in expenses that will not ultimately effect the creativity, quality and uniqueness of their product. They go back to their roots, perhaps somewhat nostalgically.

Saturday, 27 December 2008

Post Christmas Retail Therapy - 27/12/08

If your addictive retail consumer habits did not quite reach a peak prior to Christmas, you may now be pacing the halls, that are decked with holly, wondering when you are able to add some more debt to your credit card... well it's only been one day of pause between spends.

Boxing Day Sales... known as one of the biggest single retail days of the year, it is anticipated that, just in New South Wales alone, $4.5billion will be spent in the annual post Christmas sales, commencing on Boxing Day. Just in case clients were holding off their purchasing until after Christmas, although according to an article in today's $38 billion were spent in the weeks leading up to Christmas. A record amount in fact... it looks as though retail should finish the year reasonably when this plus the post-Christmas sales are consolidated, the actual figure is some weeks away, well in Australia anyway. Whilst this news appears to be positive the biggest hit to retailers will be their excessive and variable markdowns they were having weeks in advance of Christmas, impacting their gross margins and reducing their bottom line.

We wait and say. Looking at the 1000's of people waiting to pop into Elizabeth Street Sydney David Jones store yesterday, who would have thought things were tough. Where are they heading? Mainly to the women's shoe department where they will buy up designer brand names for incredible prices, Giorgio Armani, Prada, miu miu, Sergio Rossi..., accessories, manchester and men to the business shirt and plasma/LCD electronics department. Over in the UK, with some retailers slashing their prices by up to 90%, one woman lined up outside Selfridges from 2am Boxing Day morning to see if she could snag a CHANEL handbag at an incredible price.

Wasn't Boxing Day about 'boxing' gifts for those less fortunate? Somehow, like many things, the true meaning has been lost.

Happy Holiday. What a luxury - 24/12/08

All I want for Christmas is ....some holiday time... yes, that's a luxury worth working for. The MO down wishes you a wonderful festive season and happy and safe holidays.

MO HO HO.....

Wednesday, 24 December 2008

All I want this Christmas is one Chanel Jacket - 24/12/08

One of the questions that many are pondering, including us, is with the dynamic economic climate we all find ourselves in and with a view to this continuing for some period of time, does the luxury consumer:

  • Reduce the number of items they purchase each season from their favourite brand, to say one Chanel jacket this season, down from two-three previously, three pairs of Manolo's instead of several....? or;
  • Shift their brand loyalty to the more inconspicuous labels so they may continue purchasing but by stealth... (read: pared down brands)? or;
  • Increase their purchasing of markdown items, afterall with a lot of brands reducing 30-70% for current season, you are literally 'throwing' money away if you pay full price... or;
  • Realise they really don't need it all and opt for their own retro moment, in a re visitation of their multi-marque mini boutique, aka their own wardrobe?
For some markets the success of luxury retail is based on consumption by local clients for others it is driven by inbound tourism; or it is a combination of both. In Australia currently there is a two-pronged issue, the volatile dollar against both the US dollar and the Euro is causing havoc for importers and the now increased prices that the brands have had to introduce as continuing to absorb the price differential is no longer an option. This coupled with many of the solid luxury clients that travel the world loyally supporting brands having their own wealth slashed due to stock markets and other investments going south, will make the"Partridge in a pear tree" probably about as good as it may get for some this Christmas.

An article in Associated Press looks at some changed consumer behaviour taking place in the US, particularly with regards to the luxury consumer.

In Australia some core luxury brand clients, VIPs, VVIPs etc can contribute in the vicinity of 10-20% of retail sales in a year, reduce this, along with the spend of the aspirational shopper there is the potential of a 30+% shortfall. The success of these brands is still in the hands of the loyal VIPs, they are a 'known entity' to each brand and more than ever they need to be courted strongly, consistently and respectfully so they don't shift focus and purchase elsewhere. Buy for who you know and just a little for who you may know..

Monday, 22 December 2008

Luxury Markdowns by Stealth - 21/12/08

Whilst it is not uncommon for luxury and premium end brands to go on markdown or sale prior to Christmas, this is usually left to a handful of brands that reduce their autumn/winter season to make way for Cruise or pre-summer collections. Most brands offer VIPs pre-sale opportunities to purchase prior to Christmas or immediately after, with the sale going public end of December/early January. However across the globe there are more brands trying to move inventory in more surreptitious means, private showroom sales, VIPs and "please bring a friend" invitations, a suite in a hotel away from their retail stores... It is all about 'moving current inventory' out, bring the sales in and trying not to reduce the gross margin too much.

There is a sign of some desperation, more particularly seen in markets such as the US and London, with greater markdown activity at more greatly reduced prices. It is concealed desperation, dressed up as value added and loyalty needs to be done and with luxury and premium end brands making these strategic decisions, the reputations have greater chance to remain in tact and their raison d'etre will continue untarnished. It's harder to do something that not do anything at all. These dynamic times call for considered strategic action to ensure continuity of business.

If autumn/winter is not moved through Spring/Summer 09 and Autumn/Winter 09/10 will be sparse offerings indeed. The challenge of seasonality is constant however no more so than now.

Saturday, 20 December 2008

Hedi Slimane photographs for Prada; Prada finally opens in Melbourne - 20/12/08

Hedi Slimane has done extremely well, with relatively limited experience in fashion prior to joining Yves Saint Laurent and working in the men's apparel and accessory area in the 90's before being promoted to the Rive Gauche Homme designer role... only years after he was snapped up by DIOR Homme. Since leaving he has focused on photography and now Prada has tapped him on the shoulder to provide some moody and slightly rebellious photography for their up and coming campaign spring/summer 2009 men's campaign. Read more...

After a very long gestation period of almost 18 months the Prada flagship store on Collins Street finally opened its doors yesterday, just in time for Christmas. A stunning store that has a combination of both Prada Milan's Heritage store in the Galleria and the more modern contemporary designs. The store beautifully showcases the Donna and Uomo ready-to-wear collections, handbags, luggage, small leather goods, accessories and eyewear and will be a definite treat for the Melbourne customer. The store is situated in a wonderful part of Collins Street between Russell and Exhibition Streets and is housed under the exclusive Melbourne ladies club, The Alexandra Club.

Yet another fine coupe for Melbourne with the international brand presence growing ever with Bvlgari's new store just opening, Paspaley Pearls first store in Melbourne, Louis Vuitton's newly renovated store, Emporio Armani, Rolex... all in and around the new Grand Hyatt complex. Further complimenting the incumbent luxury neighbours such as Hermes, Gucci, Giorgio Armani and Chanel. A delightful mix of brands for this fine city.

Chanel to close Mobile Art - 19/12/08

Chanel announced today, Friday 19 December that it will not proceed with taking the Mobile Art Exhibition, which is now currently in New York's Central Park, onto London, Paris and Russia as originally planned.

Mobile Art, an incredible collaboration between Karl Lagerfeld, Creative Director for the House of Chanel and Zaha Hadid the celebrated architect. Mobile Art launched originally in Hong Kong in March 2008 then travelled to Tokyo, Japan before arriving in New York in October...... what do they say, timing is everything.

It is an exhibition open to the public to build brand equity further and is a wonderful showcase of how fashion and art can work together. It is also an overt display of dollars spent by the House, given the size of the space and the works commissioned by various artists to create pieces inspired by Chanel's famous 2.55 quilted classic chain handbag. To continue with this exhibition road show, whilst ignoring the actual cost of this, would be perhaps inappropriate and seen as too indulgent in these uncertain times. Without a doubt it would have been a very considered decision for Chanel, they have been in business since before around 1918, they have seen a few things and dare we say, their decisions would be quite appropriate. Read more in WWD and Google news.

Brands delay openings in Moscow - 18/12/08

Although some brands are saying delayed openings or decisions not to proceed with a new store opening(s) are unrelated to the economic crisis, we wonder if these 'no comments' are a way of keeping a 'foot on each side of the fence'. Ensuring the situation does not become a self-fulfilling prophecy, negative feeds negative. Also saying it is unrelated to the crisis shows subtly the brand is OK with its original plans for growth, however 'something' else is stopping this, i.e. we would if we could, but perhaps we can't, well right now at least.. Some brands are weathering the storm, in its early days, better than others, whilst some other fine jewellery brands have noted reduction in sales over the past months, the Boucheron store in Moscow is finding no change, thus far and saying that clients prefer jewellery over fashion.

Read more about this in the WWD article. It's amazing, how things change, Moscow, the new hot market which was still being talked up as recently as July with soaring commercial real estate prices and a haven of opportunity for new brands is pausing momentarily to see understand if this is just a blip on the radar or something more serious.

Friday, 5 December 2008

Star Temperature Check at Louis Vuitton - 05/12/08

Marc and Madonna - Just like that....the morning after the night before doesn't usually conceive such immediate results.

In a morning meeting at 'the office', following Marc's attendance at the Madonna concert the night before, being so inspired by her performance, energy and what she had to say. He more than posited, he blurted out "I think we should do Madonna", and now, the rest is very recent history. The spring/summer 2009 campaign will feature Madonna, a-la-francaise-style, and the advertising campaign will hit in February and March. To read more...

Wednesday, 3 December 2008

Kanye Hints at Internship at Louis Vuitton - 3/12/08

Kanye West - An all singing, all dancing all designing man. Kanye has announced that he wants to work as an intern at either Louis Vuitton or Raf Simons, he is prepared to hang up his microphone for a period of time and commit himself to an internship to understand all aspects, we guess, of design and producing quality luxury product.

The New York Times article has more insight for you on this...

Who's behind the MO DOWN

Melinda O’Rourke is the founder and Director of MO Luxury, a dynamic, Sydney-based management firm specialising in luxury brands and services. Melinda and her associates at MO work with local and international brands across prestige retail, fashion, fine jewellery, timepieces and specialised services. Melinda is well-connected, well-read, and well-versed in the demands of the luxury market and its client base. Her advice is firmly based in objectivity and ultimately, accountability. Melinda offers constructive counsel and both strategic and creative thinking and is able to draw upon a strong network of specialised talent to compliment the MO Luxury team as needed. Melinda enjoys excellent industry relationships and is regularly quoted in the business and fashion media. Read more about MO Luxury,