Hitting the Streets - retailing of luxury brands

Brandweek, June 25, 2001 by Sandra Dolbow

Coming soon to an avenue near you: Gucci, Chanel, Escada--The Store, What's behind fashion's rush to retail?

Stroll through the premier shopping centers in any world-class city from Rodeo Drive in Beverly Hills to Tokyo's Ginza district, and check out the names now appearing above the glass doors: Armani, Chanel, Escada, Fendi, Gucci. Once the province of exclusive boutiques with invisible "Luxury Spoken Here" signs in the window, or the showcase collections of high-end retailers like Bergdorf, Bonwit Teller and Harrods, these luxury purveyors are forging their own retail brands. Like the bonbons that line the gilded boxes of Godiva chocolates, their names adorn one storefront after another above displays of leather coats, designer purses and gold bracelets.

In New York's SoHo district, where starving artists and students once roamed the cobbled alleyways, the likes of Chanel, Louis Vuitton, Coach and Salvatore Ferragamo all boast new stores on or around Prince Street. Luxury jeweler Cartier joins the crowd later this summer, followed by Prada in the fall. Prada is taking over 23,000 square feet of space formerly occupied by the Guggenheim museum.

On the opposite coast, Dolce & Gabbana built a two-level flagship store on Rodeo Drive, its third after New York's Madison Avenue and Bal Harbor, Fla. Louis Vuitton opened two boutiques in California last year, with further expansions planned through 2001.

In March, hip Italian designer Fendi opened its doors in Paris and plans a second store within the next two years. Haute designer Jean Paul Gaultier will arrive on Madison Avenue early next year. And just this month, Coach announced a new flagship on Michigan Avenue, in the heart of Chicago's Magnificent Mile.

And the list goes on.

Call it fashion's rush to retail. The luxury market is expanding its boundaries to greet nouveau riches and wannabe wealthies with (slightly) less expensive product lines show cased in glitzy flagship stores. Bill Faust, CEO of Fitch, a consultancy based in Worthington, Ohio, considers the trend "a convergence of mass and class," as brands like Donna Karan, Calvin Klein and even Coach pursue younger, slightly less upscale demos. Conversely brands at the other end of the spectrum--such as Hush Puppies, Chrysler and Swatch--are ratcheting up their images with retro-inspired designs that appeal to a sense of class and tradition.

Luxury's retail push is driven by a number of factors. One reason is the New Economy has created a wave of wealth that, despite the recent rollbacks of big stock market gains, has spilled over into a wider demographic. Luxury brands are finally acknowledging that there is a market of young professionals who aspire to the lifestyle they represent. Companies are responding with goods at slightly more affordable price points than their core luxury line such as Rolex's Tudor brand of "starter" watches, priced at about $1,000. Piaget has launched its Miss Protocole luxury watch line with interchangeable leather bands at $4,200, quite a bit lower than its $15,000 gold Polo timepiece, an icon of luxe in the go-go '80s.

Creating retail outlets also takes some of the mystique out of names like Gucci and Chanel, ultimately making the brands more accessible. Jeffrey Paisner, a broker with Lansco in New York who represented Cartier in its move to Prince Street, points to luxury brands popping up in shopping centers and other unexpected retail locales. Case in point: fiber-luxury jeweler H. Stern's new store in SoHo.

"Two years ago, no one would have imagined it," Paisner said. "Jewelers are recognizing people who may not be able to afford a $12,000 neck lace perhaps will buy one for $1,200. That's not that far off from an $800 Prada dress."

Some view the retail trend as part of an overall strategy that allows a venerable brand to speak to both old and new luxury consumers. Traditional luxury brands such as Burberry and Hermes, famous for expensive silk ties and scarves, are refashioning themselves as "style" brands, explained John Frierson of ad agency frierson mee partners, New York.

Burberry has positioned itself as a hip brand worn by young people around the world. Its traditional tartan-check trench coat lining now appears on everything from towels to ties to capri pants. It is expanding into baby and childrenswear, leather goods and home products and with 58 stores around the world, including 18 in the U.S.

Ditto for Gucci, once a favorite with the blue-hair set and now a hip, hot brand thanks to CEO Domenico De Sole's efforts to limit distribution and buy back its licenses. Last year, Gucci renovated every major store in the U.S. and will open another 16 stores this year. It backed the effort with sexy, provocative ads featuring a newly coiffed and healthier looking Kate Moss this spring.

Prada likewise is trying to reposition itself as young and cool. With 140 stores around the world, and more to come in Tokyo, San Francisco and Beverly Hills, Prada still sees itself as the very definition of sophistication--a message that came across in serene spring ads portraying beach scenes and simple, unadorned fashions.