The Changing Landscape of Luxury Retailing
"As a journalist covering the fashion beat for much of my career, I have observed a number of changes on the retail scene. First, it was the consolidation process followed by the bankruptcies with the department stores. Suddenly, out of nowhere, came companies like the Gap that started to rewrite fashion.
My first story about casual dressing was published in 1992 after a trip to Alcoa in Pittsburgh, the first company to change its dress code. It turns out the Chairman of Alcoa told employees that if they contributed to the United Way drive, they could wear jeans or whatever they wanted to work. This was so popular the company said 'Let's get rid of the dress code. No more suits.' IBM followed in 1995 and we began to see companies like Wallach's go out of business. Now, retailers like Brooks Brothers are trying to reinterpret business dressing. The suit is no longer a symbol of corporate authority; in fact the word's richest man goes to work in chinos and a plaid shirt! That's pretty revolutionary!
There are 6.5 million US households with an asset value of more than one million dollars, double the number a decade ago. One-third of them are between 18 and 39. Today, these millionaires are all over the place; they're eclectic, they don't act like rich people and the challenge is how to connect with them.
A whole generation of kids has grown up wearing small, medium and large size clothing. A lot of girls have been wearing athletic shoes and for the first time they wear high heals is when they go to their prom. This is a generation that has never been exposed to quality. Ralph Lauren and Tommy Hilfiger have done a great job of figuring out how to connect with consumers. Neither is a designer; they simply take classics, repackage them, and make it all look very appealing.
Celebrity marketing has become big business. Georgio Armani was one of the first to figure it out when he started with coach Pat Reilly over 15 years ago.
So, how do you tap into the wealthy customer? Every marketer is trying to figure this out and how to make them keep coming back for more. Cartier introduced a stainless steel watch for $2500., a lower price point than a lot of watches to attract young people who are not in the habit of spending money on jewelry. Rolls Royce introduced a smaller Bentley that sells for around $140,000., less than half the starting price of most Bentleys. Saks Fifth Avenue and Neiman Marcus are starting to break down a lot of those walls between the boutiques. Luxury marketers need to look for new places to advertise. Versace loved IN STYLE magazine and started to advertise there in 1996. Armani and Cartier are reaching a lot of affluent people who don't read fashion magazines through the pages of WIRED, INDUSTRY STANDARD and other non-traditional publications.
Branding is very important to this customer as people need something to go by and now, it is often the brand of the store. Young people are often reluctant to try new brands if they're not familiar with them as they aren't confident of their own tastes. Established brand names are opening up new opportunities in licensing. Sherwin Williams went after Ralph Lauren saying 'Do paint for us. We'll be able to charge $40 for it. We'll make it look great and it will give you a new outpost at the store.'
It costs a lot of money to establish a brand. For example, the Hilfiger organization and its licensees spend more than $70 million a year on advertising and many companies spend more than that."
(above comments by Teri Agins, Senior Special Writer for THE WALL STREET JOURNAL and author of the book "The End of Fashion" October 2000 during the Fall New York Tabletop Market at Forty One Madison)