Monday, 23 June 2008

Want to understand the growth model for the IHT as luxury brand?

If you want to understand the potential growth model for the IHT as a luxury brand, you could do a lot worse than read this article by Suzy Menkes:

Weak dollar puts America outside luxury's "Golden Triangle"The Middle East, stretching via the Mediterranean coastline to Turkey and Greece, is the most buzzy area.
The result is a fractured market in which designers are being asked by one part of the world to tone down to whisper quiet luxury - and in another, to be bold and out there."It makes my job very interesting," said Robert Polet, chief executive of Gucci Group, on Sunday. "The world is contrasted - no longer as a year and a half ago, when everything was optimistic. In the Unites States, it is not business as usual. Europe is full of contrasts, with Germany quite optimistic, the U.K. doing well but Italy, more difficult. It's country by country; the Middle East roaring and Asia Pacific strong. Then there are contrasts between the different brands. It's all about segmentation."But designers agree that it is definitely not, as it used to be, all about America setting the pace as the market for luxury, even if the weak dollar is saving retailers in America's tourist regions. The Middle East, stretching via the Mediterranean coastline to Turkey and Greece, is the most buzzy area. And Stefano Gabbana is brutal about Dolce & Gabbana's perspective."The problem with America is that it is no longer in the 'Golden Triangle,"' Gabbana said, pointing out that Dolce & Gabbana has three shops in Istanbul, with further energetic growth in Beijing and across China.The figures speak for themselves. Gabriella Forte, a Dolce & Gabbana executive working in America, said that the United States now represents 14 to 15 percent of the company's retail market share, while Russia is up to 38 percent, if you count Russian travelers, who are the biggest spenders in Milan. But Forte said that comparison was difficult, as American sales have been built on wholesaling to department stores.That very system is being called into question as sales stick or slump in America and designers find their goods discounted in stores before they are marked down in their own boutiques.The current system for global expansion involves a thread of wholly owned flagship stores, bolstered by franchises. And it has led to rapid growth for many brands. For example, Salvatore Ferragamo, which was one of the first labels to spread across China, is now extending its Russian reach from Moscow through Saint Petersburg to Ekaterinburg, near the border with Kazakhstan. It is also opening three stores in India, another intriguing luxury destination.It is the same story at Bottega Veneta, part of Gucci group, where the 147 global stores include only 21 in the United States, with growth focused on the Middle East: Dubai, Qatar, Bahrain, Kuwait, with Jeddah and Riad to come.All this is music to the ears of Sheik Majed al-Sabah, who once had to cajole designers to consider selling to his Villa Moda boutique in Kuwait and now has them begging to become part of his spreading empire. He sees a series of reasons for the changing axis away from the United States and Europe."Look at oil prices," Sabah said. "We come out of a tax-free nation, where the government is trying to help the poorer people, and where 70 percent of the population is under the age of 30. That equals a lot of surplus cash in people's pockets. Business is booming and we are still underdeveloped as an emerging market."And Sabah endorses a general view that the BRIC countries of Brazil, Russia, India and China - all in different stages of development - are being challenged by the MENA, or Middle East/North Africa area.
What about growth in America? Ferragamo's chief executive, Michele Norsa, is focusing on the East Coast, opening boutiques in Westchester and White Plains outside New York City, as well as in the Beverly Center in Los Angeles.But when brands are faced with a choice between America and Azerbaijan, it seems that the Unites States comes a dollar-poor second.
http://www.iht.com/articles/2008/06/22/style/rsima.php?page=2


Interestingly, here's how a Think! reader responded to the above:

"I briefly worked for a fashion company you mentioned in one of your last posts. When the fashion shows were on, everyone seemed to be turning to the IHT to read the latest Suzy Menkes piece. But most people I worked with just picked out the fashion insert and trashed the rest. They wanted those four pages of the IHT bad enough to buy stacks of the paper at €2.5/copy for themselves as well as extra copies to give away to their fashion-buddies.

Luxury ads indeed seem to be a trend (now more than ever they abound in Le Monde, El Pais and la Repubblica—just to name a few). I don't see a problem with the luxury industry supporting print journalism if it can help guarantee the survival of the less ad-friendly parts of the paper: news, analysis, opinion, book reviews... (Certainly preferable to ads from oil companies and weapon manufacturers whose interests are often related to the stories covered in the paper).
"

AMEN.

1 comment:

OPL (Very Small But Loyal Reader) said...

I briefly worked for a fashion company you mentioned in one of your last posts. When the fashion shows were on, everyone seemed to be turning to the IHT to read the latest Suzy Menkes piece. But most people I worked with just picked out the fashion insert and trashed the rest. They wanted those four pages of the IHT bad enough to buy stacks of the paper at €2.5/copy for themselves as well as extra copies to give away to their fashion-buddies.

Luxury ads indeed seem to be a trend (now more than ever they abound in Le Monde, El Pais and la Repubblica—just to name a few). I don't see a problem with the luxury industry supporting print journalism if it can help guarantee the survival of the less ad-friendly parts of the paper: news, analysis, opinion, book reviews... (Certainly preferable to ads from oil companies and weapon manufacturers whose interests are often related to the stories covered in the paper).