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The situation at Hermes is keeping us fascinated here at the MO Down. Following up on our recent coverage, the Dumas family met on Friday (December 3) to discuss their battle strategy. For those of you just tuning in, we are of course referring to the recent controversy that arose when LVMH revealed its ownership of a 17.1 per cent stake in Hermes. It was quite an unwelcome surprise to the family-owned Hermes, which is now faced with the possibility of a gradual takeover. The Dumas family aren’t happy, and to be honest, neither are many people. Hermes shares fell 9.3 per cent on Friday, and something tells us this was no coincidence.Image credit: http://retail-guru.com
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Turns out Armani aren’t the only luxury brand appealing to the Chinese market via online shopping. Last week, The MO Down reported on the launch of the Emporio Armani store, and shares have since risen 2.17 per cent, outperforming the market. It seems there are many more to follow in 2011, with Italian online fashion retailer Yoox (yoox.mi) planning to bring some of the most exclusive fashion brands to China next year. Yoox powers sites for 23 fashion groups (including Valentino and Dolce & Gabbana) and announced last week that it intends to open several online stores in China in the first half of 2011. China is expected to become the world’s number one market for luxury goods in the next five years (currently the world’s number two, with 2009 sales of $9.4 billion) All luxury eyes are on China at the moment, and the race is on.Image credit: mobilephonescoop.com
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In spite of all the recent controversy, and a potentially imminent LVMH takeover, Hermes is fighting fit with the opening of the hotly anticipated flagship in Brisbane city. The store opened December 1, as forecast, making the third boutique for Hermes in Queensland (one at Surfers Paradise, and the other at Marina Mirage). Bringing a total of five stores altogether in Australia (Sydney and Melbourne each have a flagship), it seems that the highly coveted orange has developed quite a presence Down Under…
With all the hype, we practically heard the stilettos making for the doors of the new Hermes store all the way from The MO Down offices in Sydney. And we won’t lie, we are disappointed we couldn’t have been there. Complete with Birkins, Kellys, and among many favourites, cashmere throws, enamel bangles and exquisite silk scarves, the store is yet another example of luxury’s evasion of economic downturn. Luxury is made to last, and no brand knows that more than Hermes. Its pride at creating art, not consumer goods, is a significant part of its refusal to be taken over by a conglomerate like LVMH. Fads and fashions will come and go, but true luxury, like Hermes, is for life. All we want for Christmas is...
Image credit: secondcitystyle.typepad.com
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A diamond and onyx panther bracelet by Cartier sold for £4.5 million ($7 million) last week, a Sotheby’s and auction record for Cartier (and bracelets, for that matter!). The Sotheby’s auction sold over 20 pieces owned by the late Duke and Duchess of Windsor, raising a total of £8 million. Cartier is certainly one of the world’s most highly regarded jewellers, and this reminder of their rich heritage is nicely timed with their recent expansion. The MO Down reported earlier this week that Cartier are busily opening stores, making a concerted effort to enter the highly lucrative Chinese market in style.
Online is revolutionising retail, and it’s not just for mass-market brands. The MO Down has had much to say on this topic, last week we spoke at length about the relative reluctance of luxury brands to embrace this new domain, and the potential ramifications for sales. Slowly but surely, brands are hopping on the online bandwagon. This week’s medal goes to Armani.
Following up on the Hermes/LVMH debacle, the most recent news from Bloomberg is that Hermes has called a ‘round table’ with the Dumas family to develop a strategy to tackle the large, and not so quiet, monogrammed elephant in the room. For those of you just tuning in, the MO Down has been following LVMH’s sudden acquisition of Hermes shares, amounting to 17 per cent. The surprise revelation a few weeks ago has sparked rumours of a hostile takeover, and led to speculation that a third party may be needed to keep Hermes in the family.
Cartier plans to double the number of its boutiques in the next two to three years, particularly in China, where the luxury industry is experiencing enormous growth at the moment. The MO Down reported last week that Tiffany & Co. is opening stores faster than ever, and it seems that Cartier is following suit. The opening of its Hong Kong flagship last week demonstrates the brand’s strategic response to the expected growth of the watch and fine jewellery industry in Asia over the next five years. China’s increased appetite for jewels and luxury goods presents an exciting and unrivalled opportunity to capitalise on continuing rapid economic growth and bringing brands to a newly affluent urban population. Making up 31 per cent of the global market, we are fascinated by the different strategies brands are employing to make themselves known in this new market. Many luxury brands are new to Chinese consumers, and brand loyalty is basically non-existent. We predict some elaborate efforts to win hearts and minds, and can’t wait to sit back and watch the show. 
Prada joins the ranks of the thriving Burberry and Tiffany & Co. this week. Sales have tripled in the past nine months following increased sales, and (unsurprisingly), huge growth in Asia. Prada has been expected to make an IPO for a while now. Every time the brand reports strong figures, speculation suggests an IPO is just around the corner. In September, we predicted a Hong Kong offering, but still no official decision just yet... 
Tiffany’s holiday season is set to be jolly, following Dow Jones reports of a 27 per cent increase in third quarter profit on Wednesday. Consumer confidence is back on the rise, international expansions, timed nicely with the end of the GFC and the return of prosperity, make music to Tiffany’s earrings.
It seems to be new store galore in China at the moment, with new Chinese openings including DVF, Moschino, Escada and Porsche design. Diane Von Furstenberg’s opening of her first Beijing boutique (which contains two diamond-shaped rooms, we told you the Chinese are all about diamonds!), coincides with the opening of the first DVF Sydney boutique. The MO Down was in attendance at last night’s opening at the new Westfield Sydney, and what a spectacular occasion it was.
Across town in China, Shanghai saw the opening of a concept store for the German luxury brand Escada. Incorporating crystal chandeliers, vases and sculpture, the store appeals to the rising popularity of luxury brands in China. Moschino have taken a different, more flamboyant approach, and incorporated four themed mini art exhibitions into its Beijing opening.
The fastest growing luxury market in the world, China is set to see the best luxury brands have to offer in the upcoming months. As brands battle with one another to assert themselves in a highly competitive market, with malleable and embryonic brand loyalty, we predict some fine Chinese displays from the world’s finest.
We’ve spoken at length about the relative reluctance of luxury brands to embrace social/online media. Luxury brands pride themselves on being at the pinnacle of innovation and cutting edge, but have lagged far behind the cutting edge of using social and online media to publicise their brands. Some have said ‘luxury are above that sort of thing.’ This is both ridiculous and untrue. There is no brand so exclusive it can afford not to publicise itself at all. Different courses for different horses, sure. Some prefer more traditional avenues, and that is fine. But we caution brands against shunning ‘new media’ and online marketing, these are increasingly becoming the first port of call, particularly for younger consumers.
It has been interesting to watch many brands jump at the launch of the iPad, with an array of different apps, and a varied rate of success. Brands like Burberry seem to have their social networking down pat. Others are flailing. Here at the MO Down, we are curious as to what impact the success/failure of these apps will have on the success/failure of different luxury brands’ popularity. Will big brands like Chanel and Juicy Couture be able to keep shoppers engaged, and loyally within their branded apps? Luxury shoppers will use the Internet, and they will use social media. The question is, can brands find a way to use this to their advantage. Customers want something that will give them what they want directly, and save them weeding through the mass of information online. Can brands provide this? Will fashion shoppers take to fashion-only aggregators like Asos? Or will they default to searching with Google and ebay? As far as we are concerned, the jury is still out.
Rumour has it, Karl Lagerfeld is already contemplating his successor at the house of Chanel. He has a contract for life, thank goodness, so it’s at his own discretion that he will select a suitable candidate to succeed his throne. ‘At the moment, I’d say it would be Haider Ackermann’, says Lagerfeld. The crowd goes wild. Ackermann currently resides in Belgium. He is of Colombian origin, and started his line in 2001. He has dressed Penelope Cruz, and Tilda Swinton and we have an inkling he’s about to get a whole lot more attention. For those of you not familiar with his designs, check out his latest collection here! Looks like there are some great things to come for this talented individual…
Last Thursday, we wrote about Burberry, and how they seem to be experiencing a golden era at the moment. Figures are up, and CEO Angela Ahrendts received two Walpole awards. Well, things are only getting better. She is also 16th out of 50 on Fortune’s Business Person of the Year list. How did Ahrendts and 49 others get there? According to Fortune, ‘we searched for leaders who didn’t just crawl from the wreckage of the GFC, but sprinted from it.’ And this is exactly what Burberry has done. Achieving incredible growth during a difficult time over the past 24 plus months, it just goes to show that true talent will prosper no matter how dire things seem. Burberry has employed deep tissue strategy. They know their customers, and they engage them. In return? They’ve won loyalty. With 3 million facebook users ‘liking’ the brand as of last week, they’re certainly reading the mood right now, so very right. 
The MO Down has impatiently awaited the revelation of the Lanvin for H&M collection. As previously reported, we have a certain opinion on these collaborations. Clever? Yes. Strategic? Yes. Broadening the (luxury) brand’s audience? Yes. Therefore broadening the (luxury) brand’s awareness? Yes. The one box we hesitate to check is status. Luxury brands work hard to maintain their status. They invest in sourcing the world’s finest materials, in ensuring unrivalled quality and excellence. Mass-produced fashion can be stylish. It serves a purpose, and it’s accessible. But there is a difference between luxury and mainstream, and if there weren’t, we would be out of a job.
Not quite available in Australia, but Bulgari has announced its decision to make its gem-infused facial products available in stores in the US- so it’s only a matter of time. Bulgari is known for its bold iconic jewellery, but also has an extensive skincare repertoire. Its new Source Defence line contains a blend of fine and precious stones to shield skin from environmental stressors, including antioxidants and hydrators to replenish complexions. This means, there are precious gems ground up within the products. If this isn’t luxury, we don’t know what is.
Burberry has announced its unaudited results for the six months ended 30 September 2010 and things are looking good. Showing strong operating and financial performance, revenue is up 21 per cent, with profit before tax up nearly 50 per cent and comparable sales growth of 9 per cent. Nice. 20 new mainline stores opened, unsurprisingly focused in Asia Pacific, and the Americas. Emerging market sales were up 46 per cent, and we are assuming China is largely to thank for this. Representatives from Burberry have attributed the success to ‘continued focus on the brand, ongoing investment in digital, IT and retail infrastructure (especially in China).’ Good to see they have things in check.
Despite revenue rising, Bulgari’s profit is down, and it has been moved from ‘neutral’ to ‘underweight’ by JPMorgan Chase & Co. Bulgari SpA (BUL IM) dropped 4.8 per cent to 7.10 euros, over the weekend- the largest drop in 8 months. Bulgari is the world’s third largest jeweller, and we find this drop surprising, given the recent overall recovery of the luxury industry. Rivals like Tiffany & Co. are experiencing enormous growth as of late, riding on China’s growth as a luxury market. The popularity of diamonds with Chinese brides has been a contributing factor.
There has been a lot of controversy and speculation surrounding LVMH’s recent acquisition of Hermes shares. We have stumbled across a very interesting article by Bloomberg here at the MO Down. If Hermes needs a white knight to ride to its defence, to fend off any prospective (and potentially hostile) majority buyout by Monsieur LVMH Bernard Arnault, they may find it in Richemont. The Swiss luxury goods company, and third largest luxury conglomerate in the world, might just have room in their wallet for a hint of orange.
Bloomberg hypothesises that Richemont may not have enough money, however in the financial overview from the Richemont press release, sales have increased by 37 per cent, or 27 per cent at constant exchange rate, or 22 percent excluding the impact of Net-A-Porter with an increase in operating profit of 95 per cent. It’s a great result that could compound even more positively over the next 6 months (boosted by Christmas and Chinese New Year trading). It’s nice to know Hermes has another option should it require.
Still, we hope Hermes has enough Euro in its Birkins to canter ahead confidently without support. The family shareholders, who collectively own 73 per cent of Hermes are fighting hard to keep the company independent. We are following all happenings closely and will report as soon as we hear.
Image credit:travel.webshots.com
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China is the world’s fastest growing luxury market. Here at the MO Down, we have certainly noticed that Chinese consumers are increasingly gravitating towards luxury brands, and luxury brands are in turn clambering to stand out and make themselves known. The habits of wealthy individuals in the Chinese market are still largely unbiased, brands are new and unfamiliar, and customer loyalty has not had time to develop. Something of a blank canvass, it's every marketer’s dream, right?
We were very interested to learn which brands seem to be getting it right. According to a survey conducted by luxury goods consultancy FDKG and Dr Lu Xiao of Fudan University, Louis Vuitton, Dunhill and Gucci are the three most popular luxury brands in China. The study canvassed the opinion of 800 wealthy Chinese, based on their spending habits. The survey claims to give the “most comprehensive understanding of the spending behaviour and aspirations of China’s ever-growing super-rich’, and is of serious relevance to the luxury brands seeking to engage with this highly lucrative market.
In a sense, many brands are starting from scratch when entering China, especially if they are unable to rest on the laurels of reputation. Marketing that works in Europe or America, could very likely be totally irrelevant in China. Common characteristics among respondents have endless marketing potential. One statistic we found of interest indicated that 90.9% of wealthy Chinese regularly give money to charity– see our article on social responsibility and how brands might use this as part of a marketing strategy. We are interested to see how brands approach this new market, and how strategies are adapted and replaced.
Image credit:about-sichuan-china.com
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Sydney is in the midst of a shoe revolution. Salvatore Ferragamo and Stuart Weitzman for Hermanns are amongst those being unveiled at Westfield Syndey this month. Christian Louboutin is about to move in. Miu Miu is coming in June, and Prada in July 2011. Yet another Jimmy Choo stores opens in Sydney, this time at Bondi Junction, setting a new precedent in luxury shoe shopping. According to retailers, shoes are an area of enormous confidence– one of the fastest growing retail categories. And its not only luxury brands, Steve Madden and ALDO are establishing themselves in Westfield Sydney. The MO Down has visited the new Westfield and loves the luxury and premium cluster that is represented so strongly. The centre is very impressive thus far, and we look forward to further shoe developments!
Image credit: redsoleshoes.com
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We’ve said it before, and we’ll say it again: things are looking up for the luxury industry. All Hermes business sectors have indicated growth this quarter, and according to media representatives at Hermes, all major world markets have indicated growth also– excluding Japan, where sales dipped 1 per cent.
In Europe, sales rose 19 per cent during the third quarter, in the USA, by 23 per cent (the opening of the first Hermes store dedicated to men on Madison Avenue in NYC is perhaps largely responsible for this). Non-Japanese Asia demonstrated an astronomical 41 per cent increase in sales, to be expected given the company’s increased concentration in investment in the region– three new stores have opened in China since the beginning of the year. Other exciting initiatives have included the new Shang Xia brand.
It’s exciting to see Hermes doing so well, and we wonder if these reports of success will up the anti re: the recent controversy surrounding LVMH’s acquisition of Hermes shares. LVMH is still insisting it has no plans for a takeover, but regardless, has clearly made a solid investment. Hermes plans to maintain control of its operations and has motions in place to increase its distribution network. Its plan for sustaining its current growth, you ask? The answer lies in its creative designs and the vitality of its craftsmanship. Of course, as one of the world’s most iconic luxury fashion names, we are hardly surprised.
mage credit: hermesfan.com
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