BoF: How American Department Stores Plan to Fight Back in 2019

BoF: How American Department Stores Plan to Fight Back in 2019

BOF | LAUREN SHERMAN

NEW YORK, United States — It’s been a month of turbulence for some of America's most venerable department stores. In late December, Saks Fifth Avenue announced the closure of its women’s store in lower Manhattan after just two years in operation. The news was followed by the early January announcement that Richard Baker, executive chairman of Saks-owner Hudson’s Bay Company (HBC), was buying out one of its stakeholders. This indicated that there will likely be more sweeping changes at the group, which also sold off, and then closed, its famous Lord & Taylor flagship last year.

Also in early January, Neiman Marcus Group (NMG) investor and adversary Marble Ridge Capital filed another motion against the Dallas-based company, the latest in a series of lawsuits stemming from NMG's decision to separate successful German luxury e-commerce site MyTheresa from Neiman Marcus, which is facing a serious debt load. (Marble Ridge has accused NMG of “being in default under its agreements with its debtholders” and trying to protect MyTheresa from a potential bankruptcy.)

Despite the peripheral drama, Saks Fifth Avenue and Neiman Marcus both experienced positive sales momentum during the holiday shopping season. By contrast, their down-market competitor Macy’s Inc — which includes Macy’s, Bloomingdale’s and Bluemercury — missed analysts’ expectations, posting just a 1 percent increase in sales over November and December, driving shares down by 20 percent.

And 2019 is just getting started. America’s department stores, which have struggled in the past five years to adapt to shifting consumer behaviour despite the strength of the US economy and improved shopper sentiment, are set to face their most challenging year yet. New York is shaping up to be a key battleground — and possible stumbling block. Nordstrom, which recently lost co-president and third-generation executive Blake Nordstrom, who passed away from cancer in early January, has made a major bet on its inaugural New York women’s store, set to open this year. Neiman Marcus, too, is entering Manhattan, marking the first time every major upscale American department store player will have a presence in a highly competitive market that has long been saturated with more luxury retail than even its top-earning denizens can likely support.

While most of America’s high-end department stores are not immediately threatened by bankruptcy, they are all pushing up against fundamental changes in consumer behaviour that have forced them to rethink their models. “The whole concept of the department store is outdated,” said Robert Burke, a retail consultant.

"There was a time when you had a designer customer, a contemporary customer, a sale customer — people stayed within these boundaries," Burke added. "Today, there are no rules. The customer wants and demands to cross-shop all of these areas."

And the apparel category — a major driver of sales for department stores — has been hit harder than many. (Department stores will account for just 8 percent of the apparel market by 2022, down from down from 24 percent in 2006, according to Morgan Stanley.) “There aren’t massive apparel trends anymore; they’re micro in nature, which is harder for retail to forecast,” said Oliver Chen, an analyst at Cowen & Co. “There’s hyper-fragmentation, not to mention pricing pressure in the market.”

Chen said that Nordstrom and Saks Fifth Avenue in particular have made noticeable changes to their strategies by investing in technology and upgrading the experience both online and in-store. “Clothing is only one piece of the puzzle,” he added.

But these shifts require massive investment. “Often, these stores are not as nimble as smaller [multi-brand retailers],” Burke said. “It takes time for them to change.”

And yet, change they must — and quickly. On top of all of the company-specific challenges they’re facing, and the macro changes in consumer behaviour they’ve been facing for a while, there is also the fact that they're operating in a highly promotional environment — which could intensify if the economy weakens.

Reliance on Chinese tourism dollars is another concern. While tourism from the region began to dip with the 2016 election of President Trump, it stills drives significant sales to all of these retailers. More recently, it has slowed in the midst of the trade wars and increased Chinese spending at home. Department stores’ off-price channels, too, are no longer the saving grace they once were. (Sales at Saks Off Fifth, for instance, were down more than 2 percent in parent company HBC’s most recent fiscal quarter.)

So, what’s next for these department stores, which many fashion brands still rely upon in order to hit their own sales targets?

Neiman Marcus Group
The Dallas-based group is making significant operational changes while facing pushback from investors and a large debt load.

The Neiman Marcus Group (NMG) — which includes Neiman Marcus and Bergdorf Goodman — is still fending off activist investor Marble Ridge Capital, which remains indignant over Neiman’s plan to transfer ownership of fast-growing e-commerce player MyTheresa to investors Ares Management and the Canada Pension Plan Investment Board, effectively blocking creditors from making claims on the asset if NMG were to file for bankruptcy. (More than half of its $4.7 billion in loans are due in 2020.)

Chief executive Geoffroy van Raemdonck, a veteran of Louis Vuitton and Ralph Lauren, who joined the business in February 2018, is laser-focused on two major initiatives that could move the retailer forward. Neiman Marcus Group has seen five quarters of comparable store sales growth — up nearly 3 percent in the most recent quarter — although it is still operating at a loss. Sales in the 2018 fiscal year were $4.9 billion, with comparable store sales up 5 percent year-over-year.

“I really don’t think of us as a department store; department stores have so many different things; they’re an aggregation,” Van Raemdonck told BoF. “The luxury fashion world is where we compete.”

Neiman Marcus has long sat in the top-tier of multi-brand retail, but many of the exclusive services it offers to VIP customers, such as personal styling, are now readily available across retail. In order to compete with other luxury retailers — Saks, yes, but also Farfetch, as well as independent multi-brand and mono-brand stores — Neiman Marcus will need to scale those services so that more of its customers can take advantage of them. Which means upgrading its technology.

Currently, 20 percent of Neiman Marcus sales categorised as in-store already take place via phone, email or text exchange with a sales associate. Much of that is done through an app called Sales Floor, which, at present, allows approximately 275 sales associates across the country to create tailored mood boards from which clients can shop. While Sales Floor has been in use for about seven months, the company has also launched a “digital stylist” service, an invite-only programme that allows customers to consult 50 dedicated “stylists” — with plans to add 25 more — through digital channels like text or FaceTime. So far, customers using a digital stylist are spending two times as much as the average and returning products 40 percent less of the time, with more than 50 percent making second purchases.

At the same time, Neiman Marcus is gearing up for its long-awaited Manhattan store opening in the much-hyped Hudson Yards development this spring. There, it will not only face competition from retailers throughout the city offering similar product — including its own sister store, Bergdorf Goodman — but also Forty Five Ten, the Dallas-based independent multi-brand retailer that has long vied for the dollars of the Texas city’s most adventurous fashion customers. It just so happens that Forty Five Ten is opening its first New York outpost at the same time, in the same development.

Van Raemdonck seemed unphased by this, saying that that Neiman Marcus’ strong digital and e-commerce presence in the New York metro means that it already has been cultivating a loyal customer base in the area for almost 20 years. (In the fourth quarter of fiscal 2018, online sales accounted for 36 percent of Neiman Marcus' overall business.) He believes that this leg up, combined with exclusive products and experiential elements geared toward an art-loving customer — the company’s art collection is renowned — will draw people in. “I don’t see this as a traditional shopping experience,” he said.

Hudson’s Bay Company (HBC)
With executive chairman Richard Baker buying another chunk of the business, onlookers are eager to see what debt-shrinking deals the company will make in the coming year.

The group that owns department stores Saks Fifth Avenue, Hudson’s Bay and Lord & Taylor made historic moves in 2018, starting by selling off Lord & Taylor’s famous Fifth Avenue flagship for more than $850 million to WeWork, best known for its leased co-working spaces. HBC subsequently announced the closure of that store and up to 10 Lord & Taylor locations — out of 50 — overall. It also spun off its European business in a joint venture that generated proceeds of CAD$631 million, or about $475 million at current exchange.

Then, right at the end of 2018, the company announced that it would close its Saks Fifth Avenue women’s store near the World Trade Center in downtown New York, which opened just two years ago, stating that the smaller-format store — adjacent to the offices of several publishing houses and banks, meant to serve the commuting customer along with those living in upscale developments close by — was a “test concept.” In the end, its clients preferred the larger Fifth Avenue location, which offers a greater breadth of product, or shopping online.

Regardless of why HBC decided to close the downtown store, the swift move is indicative of the state of retail overall, not to mention the state of the group. Gone are the days of waiting out a novel concept to see what sticks in the long-term; companies must iterate and cut losses as quickly as possible. HBC expects to pay off about $2 billion in approximately CAD$3.98 billion ($3 billion) in debt in the fourth quarter of its fiscal year, which ends February 2.

Some of the company’s investments in digital technology and physical upgrades have paid off: Saks Fifth Avenue reported six consecutive quarters of growth in comparable store sales, up more than 7 percent year over year in its most recent fiscal period. Along with a $250 million reorganisation and renovation of its Fifth Avenue flagship — once appraised at about $3.7 billion — it has continued to upgrade the tools with which it communicates with clients, using technology to enable in-store stylists to communicate with geo-located customers asking questions online.

“For so long, luxury owned the high-touch, one-to-one relationship with clients,” said Marc Metrick, president of Saks Fifth Avenue and Saks Off Fifth. “If you went to a grocery store in 1987, you didn’t experience that one-to-one. Same thing if you went to Blockbuster. Fast forward to 2017 and now Netflix is emailing you. On customer experience, we compete with everybody.”

Metrick and his merchandising team have also worked over the past three years to reposition Saks Fifth Avenue as a pure-luxury destination, convincing established brands to sell with the retailer for the first time, and gaining exclusives on new and emerging labels. (Exclusives are increasingly important given that most products are available at multiple competing retailers at once.) During Metrick's tenure, Saks has earned standing as a good partner to its brands. Today, women’s designer fashion is one of the store's fastest-growing categories.

But will it be enough in the long term? Luxury marketplace Farfetch is perhaps the biggest threat, given that it is sourcing product from hundreds of multi-brand and mono-brand stores. As mid-market stores like Lord & Taylor continue to be trampled by Amazon and increased competition at the high-end continues to further segment market share, winning over customers will become increasingly difficult.

In November 2018, activist investor Joe Sitt of Land & Buildings called upon the HBC to sell Saks Fifth Avenue and Lord & Taylor in order to pay back the rest of its debt and generate a return for its investors. HBC chief executive Helena Foulkes has not ruled out the scenario, stating that “everything is on the table.”

One scenario that has emerged again and again is some sort of partnership between HBC and the Neiman Marcus Group, which has a more pressing debt problem. Talks have fizzled multiple times, most recently at the end of the summer when a plan was proposed for NMG to acquire Saks in an exchange of assets, with NMG head Van Raemdonck leading the new group and Metrick staying on in a strategic role, according to a source familiar with the negotiations. HBC would have remained a minority shareholder in the new venture. However, talks ended before fashion week in September after an inability to reconcile certain realities of such an arrangement, including an increased store fleet. As more spending shifts online, retailers are trying to right-size their physical footprints, not increase them.

Barneys New York
The New York institution has never faced more competition and its costs for maintaining the status quo have never been higher.

With just 23 stores in its portfolio — 10 of which are outlet — Barneys New York, which has been majority-owned by hedge-fund billionaire Richard Perry since 2012, is a small player compared with main competitors Neiman Marcus and Saks Fifth Avenue. But its cultural capital was once far bigger than its business.

In 2015, Barneys generated close-to $900 million in annual sales, with EBITDA more than doubling since the team of (former chief executive) Mark Lee and (current chief executive) Daniella Vitale joined in 2010. Lee and Vitale transformed the image of the store, long known as a place where fashion eccentricity and young designers were celebrated to something far slicker and more commercially minded.

With concept stores like Dover Street MarketThe Webster and 10 Corso Como courting high-fashion obsessives with niche interests, Barneys has never faced more competition in its hometown of New York City. In 2016, Perry sought a partial sale of Barneys, courting funds in Silicon Valley and beyond, hoping to position the retailer as a serious competitor to next-generation luxury players like Net-a-Porter. No deal materialised, and Perry closed his hedge fund later that year.

In 2019, Barneys faces a steep rent hike on its 230,000-square-foot flagship Madison Avenue store, the crown jewel in its portfolio and biggest driver of sales, although the company said it has not plans to leaving the building or downsize its footprint there, as earlier reports posited.

Barneys’ Chelsea location, which opened in 2016 as a part of a $200 million investment to overhaul its physical store network, has underperformed, according to sources. However, a company spokesperson denied this, and said that the location continues to perform well. While chief executive Daniella Vitale could not be made available for comment, a company spokesperson said that the several key results — including double-digit growth of the online business — means that Barneys remains optimistic about growth.

The spokesperson said that Barneys, which was profitable as of 2016, is not currently for sale. But if Perry, who sources say has in the past compared owning Barneys to owning the Yankees, were to entertain offers, he will likely need to look outside of the US.

“It’s a trophy asset,” said David Tawil, president of Maglan Capital, a hedge fund that focuses on distressed assets. “I don’t think that any other operator is going to want to buy it. You have to get a foreign buyer ... or someone very innovative who already has some massive cash product.”

Nordstrom
With high-low mix that has impressed brand partners and shoppers, Nordstrom is in an enviable position. But can it successfully sell women’s clothes in the highly competitive, already too-crowded New York City market?

Seattle-based department store chain Nordstrom’s successful move upmarket — fueled by a high-low merchandising approach and early investment in both back-end technology and online user experience — has cemented it as the preferred partner of brands big and small, regardless of price point. Today, 30 percent of Nordstrom’s sales are through digital channels, outpacing many of its competitors.

In its 2017 fiscal year, Nordstrom hit more than $15 billion in sales for the first time, up 4 percent from a year earlier, and is projected to reach $15.5 to $15.6 billion in fiscal 2018, beating its own expectations.

Can it keep up the momentum? This year, Nordstrom is betting heavily that it can carve out a significant business in Manhattan, where it’s opening a women’s store for the first time in its history. (There is already a Nordstrom Rack and a Nordstrom Men’s outpost, which opened last year.) It won’t be easy. While Nordstrom’s location near the Time Warner Center should benefit both from commuter and local traffic as well as tourism traffic from Central Park, business at its men’s location nearby has been slow-going, according to market sources. (Nordstrom did not respond to a request for comment regarding the performance of the men's store.)

The company will also have to address the operations hole left by the passing of co-president Blake Nordstrom in early January. While the three Nordstrom brothers ran the business as equal partners, eldest sibling Blake, who disclosed in December that he had been diagnosed with lymphoma, was president from 2000 to 2015 and touched many parts of the operation.

Still, despite unexpected challenges, Nordstrom remains better positioned than most of its competitors, said Cowen & Co.'s Chen. The retailer is further ahead when it comes to tech-driven services, such as curbside pickup, and experience-driven retail, thanks to long-running initiatives such as the Nordstrom “Pop-In” concept.

“[Blake Nordstrom’s] instinct was always to make decisions based on what customers wanted, with one eye on how demand was changing,” Neil Saunders, an analyst at GlobalData Retail, said in a statement at the time of the executive's passing. “This, along with his view that the business should be run on a long-term basis, meant that Nordstrom was usually one step ahead of rivals on big retail trends like omnichannel, own-label development and the creation of an off-price spin-off.”

Macy’s Inc.
It was only recently that Macy’s was unseated as the largest apparel retailer in the US. Can it fight off Amazon with experience?

While every product maker has been affected by the rise of Amazon, directly or indirectly, perhaps no apparel retailer has suffered as much as Macy’s. Brands that Macy’s is known for stocking — including PVH-owned Calvin Klein and Tommy Hilfiger — now sell more units to Amazon than they do the 161-year-old department store, according to Morgan Stanley research.

In early January, Macy’s reported holiday sales that missed expectations, causing its shares to fall by 20 percent. This year, eight more Macy’s stores will close as part of a 2016 plan to close 100 locations overall. Selling off valuable real estate and shedding leases at undesirable low-performing malls has allowed the company to continue shrinking its long-term debt, which is around $5.5 billion.

Like many retailers, Macy’s, which also owns Bloomingdale’s and Bluemercury, plans to fight back by focusing on experience as well as non-apparel categories, such as beauty. In 2019, the company said it will open 60 new outposts of beauty retailer Bluemercury, the calmer, gentler, smaller-format competitor to Sephora and Ulta.

Last year, it also acquired rotating-concept-shop Story, which has long served as a case study for bigger retailers. Story, which changes concepts driven by big-picture ideas and cultural touchstones every four-to-eight weeks, uses live interactive experiences and frequent product turnover to create foot traffic and excitement on a steady basis.

“A store needs to be broader than just a place of transaction,” chief executive Jeff Gennette told BoF earlier this year. “It needs to be a place where people gather and if you don’t bring in experience, education and entertainment, you’re not going to do as well.”

While investor focus is on Macy’s, the group also owns Bloomingdale’s, which competes at a higher price point, most directly with Nordstrom. Bloomingdale’s has a history in experiential retail — it was a celebrity hangout spot in the 1970s — but the latest iteration is a concept called the Carousel, where the store showcases its more fashion-forward offering through a rotating series of pop-up installations.

“Putting out average product with a recognisable brand name is not going to work,” said Bloomingdale’s chief executive Tony Spring. “You have to really get it right.”

WSJ: Saks Doubles Down on Department Stores With New Restaurant in New York City

WSJ: Saks Doubles Down on Department Stores With New Restaurant in New York City

WSJ | JOSHUA LEVINE

WHEN I WAS a young boy in New York, it was always a special treat to eat lunch in the big department stores when my mother dragged me downtown with her. I will never forget the tiny tea sandwiches and the clatter of purposeful feeding in B. Altman’s Charleston Garden, done up to look like an antebellum plantation house. (This would be unthinkable today.) Or the shopping ladies hunched over dainty salad bowls under the empty bird cages in Lord & Taylor’s restaurant, called the Bird Cage.

Both stores and their restaurants are gone now, swept away in the rush of modern life. B. Altman closed in 1989, and its landmark building is now occupied by CUNY. The New York Lord & Taylor recently announced it will be leaving us, to be replaced by workspace landlord WeWork.

Saks Fifth Avenue is still very much with us. The 11-story neo-Renaissance palazzo, right next to St. Patrick’s Cathedral and across Fifth Avenue from Rockefeller Center, remains a stalwart purveyor of luxury fashion to New York’s carriage trade after nearly a century. But it is not accidental that Saks just opened a flashy new restaurant this month, replacing the kind of shopping canteen I might have patronized with my mother had she not considered Saks above our station. It is called L’Avenue at Saks, and the store imported it from Paris at great expense. L’Avenue is meant to be a lot more than a brisk pit stop between purchases. For Saks, it is the gilded figurehead on a refitted flagship as it pushes out into stormier seas.

“I think over time, whether it’s because of the internet or brands opening their own stores or new entrants to the market, making a transaction wasn’t going to be why you came into a department store. You have to come to a department store for other reasons,” says Marc Metrick, Saks’s president. “That’s what we’re talking about with L’Avenue.”

Anyone who has shopped their way down the boutique-lined Avenue Montaigne in Paris will recognize the name L’Avenue (as Saks means them to). It is one of the brightest jewels in the crown of Paris restaurants and hotels owned by the Costes brothers, Jean-Louis and Gilbert. (The Parisian L’Avenue is owned by Jean-Louis Costes and Alex Denis.) Over the years, the Costes restaurants have made a killing with a simple formula, executed with military precision and consistency: reliable if unsurprising food in haute-design habitats at the city’s postcard hits—the Louvre, the Pompidou Center, the Esplanade des Invalides and, bien sûr, the intersection of Avenue Montaigne and rue François Premier. “Paris without us—well, that would be rather a different story,” Jean-Louis Costes told me in an interview for Time in 2003 (he almost never speaks to the press, and he declined for this article). As immodest as that sounds, he’s right.

You go to L’Avenue to see who’s eating le club sandwich next to you, not so much to eat one yourself (although it happens to be very tasty). Few in Paris can beat the Costes brothers at attracting the human plumage the French refer to as people, pronounced pee-pole—though in the past L’Avenue has been accused of culling its waiting flock a bit too selectively. What the Costeses have managed—and it’s a very tricky thing—is to make their restaurants and cafes feel insidery and outsidery at the same time. Somehow the regulars don’t seem to mind all the irregulars who come to gawk. For Jean-Louis Costes, as he said in the same interview, the secret is steadiness: “Chez nous, you won’t find much that pisses you off.”

Metrick, 45, expects similar magic from the new L’Avenue at Saks, which will be the first Costes outpost in the U.S. Patrons can expect to find several of the Thai-tinged specialties that Costes restaurants serve in Paris, like le tigre qui pleure, a spicy beef tenderloin, or tom yam chile sea bass. L’Avenue at Saks will keep its portions small, the way Paris does.

“The restaurant is a big bet,” Metrick says. “You and I both know you’re not going to win on the ninth floor of Saks just by saying, ‘We’re going to have the best food in the city.’ You’re not going to out-restaurant anyone in New York. So we said, ‘How do we build an environment where people are going to want to come whether or not they’re shopping in our store?’ It can’t be kitschy or derivative. The new luxury loves authentic. It doesn’t like fake. It doesn’t like ornate. It likes behind the scenes. It likes real.”

“The new luxury” is a phrase Metrick sprinkles around liberally. He has a lot to say about it, but in the main, he means that his customers today favor warm, sticky experience over cold, frictionless commerce. His benchmark is a surprising one: Starbucks . “I got a lot of shit for saying that, but think about it. Coffee is a commodity, and I don’t even know if Starbucks’s coffee is any good, but they made it so I paid $5.06 for one this morning, and I didn’t care. No one’s getting coffee anymore, they’re getting Starbucks.” That’s what he wants for Saks, he says.

Metrick walked me around L’Avenue at Saks while it was still a work in progress to show me what he’s talking about. The view is to die: The neo-gothic spires of St. Patrick’s shoot up just outside the north-facing windows, while the splendid Art Deco of 30 Rock towers over it to the west. The Paris L’Avenue was designed by Jacques Garcia, who has worked hand-in-hand with the Costes brothers for a long time. For the Saks version, Jean-Louis Costes tapped Philippe Starck, who created the brothers’ first venture, Café Costes, in 1984. Starck, barely known back then, borrowed the look of the old Budapest railway station’s waiting room. It was a wild idea. Paris cafes had their own strict visual codes. The thunderous reception put both Starck and the Costes brothers on the map.

In the ninth-floor dining room at Saks, Starck conceived a salon that you might find in Paris, in beige and ivory, with tables surrounded by curio-filled cabinets. Customers enter a long hallway lined with a stained-glass window that highlights the silhouettes of busy chefs behind it. The new luxury loves to peek into the kitchen, says Metrick. “Here’s where someone like me could be dangerous, because I’m like, ‘Open up the kitchen!’ and six months later open kitchens are over. I know what I’m good at, and I know what Philippe Starck is good at.”

A bar area one floor down gets the full-on dude treatment, with red upholstery, tree-trunk beams, hanging moose heads and old ski photos. This is where Metrick sees patrons taking meetings or chilling with laptops—Starbucks with booze. He doesn’t necessarily imagine all 337 seats filled with Saks customers, either. A separate entrance on 50th Street leads directly to the restaurant, which stays open long after Saks closes for business. “I want my customers to eat here, but I want their customers to shop with me,” says Metrick.

Starck has a grand vision for the spaces. “What I do is symbolic and semantic, based on functional requirements, but enlarged—almost Freudian,” says Starck. “I’ve lived in New York, and sometimes it can get oppressive, tough, not funny. I wanted to create two bubbles here—two worlds. One is an ideal bubble—ivory, refined—where everything carries you towards an elegance of thought, and where everybody will try to be more intelligent. The other bubble is more masculine, where you forget about time in a European chalet in Grindelwald or Gstaad or St. Moritz.”

L’Avenue is just the last piece of a much bigger puzzle. In 2015, Saks started a $250 million renovation project, turning itself inside out to embody Metrick’s new luxury. As we rode down the escalators, he pointed out all the little ways Saks is chipping at the eternal verities of department-store style, which the writer Alice Munro once called “the old-fashioned modern look of the Fifties.”

“The department-store customer has changed enormously, but the department store itself, not so much,” says Robert Burke, a former Bergdorf Goodman executive who runs his own retail consultancy. “There’s always a risk the investment doesn’t pay off, but you have to do new stuff.”

First, Saks cleared away all the stockroom space lining the building’s blacked-out windows on every floor. Sunlight now enters for the first time in decades. Traditional thinking had long been that no store wanted its shoppers gazing dreamily out the window when they could be browsing.

Next, Saks knocked out the interior barriers that had made each floor a warren of, yes, little departments. Metrick has called it “de-departmentalizing the department store.” This too was a minor heresy. “It had been like that for 80 years, and not just at Saks,” says Metrick. “Now you can see across the whole cavernous floor. We’ve gutted everything. People want to see other customers; they want to see who’s shopping. They’re social!”

The second floor is where Saks took a sledgehammer to convention. Saks moved its beauty department up from the first floor last May. The redone main floor will now be devoted largely to handbags, the high-margin pedestal on which so much of today’s fashion industry rests.

Beauty on One could be the Nicene Creed of department stores—an unshakable faith that the woman dashing in for a quick lipstick must be served first and fast. The melee just inside the front door comes close to capturing what every department store used to feel like. “We all have the same exact memory,” says Metrick. “My mom drags me there, it smells, people are spritzing in my face, people are bumping into you, strollers are coming through.” Not the new luxury by a long stretch.

Saks’s new second-floor beauty department is another thing altogether. It is spacious, wide open and chockablock with vehicles for much fussier personal attention: 15 treatment rooms, a “beauty concierge,” a “beauty curator,” a FaceGym, a Blink Brow Bar and a Skinney Medspa. Bottom line: “No one’s going to be spritzing you,” says Metrick.

The outcome of all these changes will determine whether Saks can flourish in much thinner air or whether it will one day go the way of the New York Lord & Taylor, owned (as Saks is) by Canada’s Hudson’s Bay Company, led by Richard Baker.

HBC acquired Saks Inc. in 2013 for $2.9 billion. (There are 41 U.S. stores. The deal also gave HBC the Saks Off Fifth discount outlets, which now number 133 locations.) HBC has struggled recently—it lost just over $800 million between January 2016 and January 2018. But Saks has been a bright spot, despite closing the much-ballyhooed Brookfield Place women’s store in downtown Manhattan after just two-and-a-half years. Same-store sales have risen for six consecutive quarters, the latest quarter by a very healthy 7.3 percent. Beyond that, the acquisition now looks particularly canny for one big reason: the Saks building on Fifth Avenue.

Saks & Company started life on Herald Square, old New York’s department-store hub, across the street from bigger rivals Macy’s and Gimbels. Horace Saks and Bernard Gimbel ended up getting friendly. Together they hatched a plan to open a posher store farther north, closer to the new big money on Fifth and Park avenues. A merger of Saks & Company with Gimbel Brothers paved the way, and Saks Fifth Avenue opened in 1924. The building, designed by the firm of Ernest Van Vleck and Goldwin Starrett, boasts not one but three imposing facades—one limestone, one brick and one cast stone.

Sadly, Horace Saks died one year later of septic poisoning. It was a Gimbel—Adam Gimbel, Horace Saks’s second-in-command—who steered Saks to prominence as one of the city’s first luxury department stores. (Edwin Goodman’s Bergdorf Goodman had beaten Saks to the punch, opening across the street in what is now Rockefeller Center in 1914. Bergdorf moved to its current location in 1928.)

By the time Metrick joined Saks straight after earning a degree in business administration from Boston University in the mid-’90s, its upper-crust image, while still intact, had acquired a thin coat of dust. “You had your suits. You had your ties. You had your jewelry. It still stood for luxury, but Saks was definitely that staid department store,” says Metrick, who worked his way up the ranks at Saks. In 2012, he moved to Hudson’s Bay, where he worked on the deal to buy Saks, which was finalized in the next year. A year later, HBC took out a loan against the flagship store that valued the building at $3.7 billion—far higher than the price HBC had paid for the whole company. “Honestly, the real estate behind this deal made the rest of the thinking and the rest of the imagination possible,” says Metrick.

To some people, the treasure in its brick and stone makes Saks look like a future real-estate development waiting to happen. (Indeed, one of HBC’s biggest shareholders, Jonathan Litt, has been badgering the company to sell the building off.) The looming shadow of luxury condos puts even greater pressure on Metrick to make the new Saks work—particularly since he wasn’t originally meant to come back to Saks at all. In 2013, HBC hired Marigay McKee away from Harrods, where she had given the ponderous Knightsbridge merchant just the kind of pizzazz Saks was also looking for. McKee lasted only a year and a half.

Metrick replaced her. “Coming back as president after starting out as a trainee in 1995 is like being principal of your old high school,” says Metrick. “You get to come back and do all the things that you said you would do.”

Except that everything has changed since Metrick’s high school days, and not for the better. Across the country, department stores are under siege. Online retailers keep taking bigger bites of their business. So do their own biggest brands, which have shown a growing appetite for opening their own stores and cutting out the middleman. Overall, revenues at big-box and department stores in the U.S. have fallen from around $250 billion in 2006 to an estimated $149 billion in 2018, according to advisory firm Mazzone & Associates, and they are expected to keep falling.

Even within the department store, the most powerful brands have started to change the ground rules. Increasingly, they insist on operating as wholly owned concessions—basically, free-standing stores within the larger store. The old way of doing things, where a merchant buys wholesale and sells at marked-up retail, is disappearing. This past November, Chanel became the latest fashion powerhouse to move to the new model in the U.S. (it is already a more accepted way of doing business in Europe).

“As concessions, the brands will pay a fairly low rate back to the department stores, under the threat of exiting their doors,” says Ron Frasch, a retail consultant who served as Saks’s president until 2013. “It’s a very difficult environment—the brands are becoming much stronger, and it’s mandatory for a department store to have them.”

None of these trends has discouraged two of Saks’s toughest out-of-town competitors from coming to New York. For all the turmoil, this is where luxury lives. Last April, Nordstrom, the Seattle department-store chain, opened a big men’s store on West 57th Street (a women’s store will follow). In March, Neiman Marcus will open a store in the new Hudson Yards development on the far west side. Both of them will do many of the same things as Saks. The game has changed for everybody, and the new game plan is no secret. Hudson Yards is already boasting about restaurants co-curated by star chef Thomas Keller. Things are going to get scrappy.

Metrick grew up on nearby Long Island, and he sounds like it when talk turns to the new kids on the block. “I’m not overconfident. I think our competitors are smart and they know what they’re doing. We aren’t sitting back. We are spending $250 million.

“But this is New York City, and we’re Saks Fifth Avenue. We said, ‘You’re not going to come to our city, where we’ve been since 1924, open a store and think you can steal my customers.’ Not a chance.”

WWD: What’s Next for Calvin Klein Following Raf Simons Split?

WWD: What’s Next for Calvin Klein Following Raf Simons Split?

WWD | LISA LOCKWOOD

The much ballyhooed Calvin Klein-Raf Simons marriage has ended in divorce — and now observers wonder what’s next for the iconic American fashion brand, and whether it can flourish without the “halo” of a designer collection.

As reported, the tie-up between Klein and Simons came to an abrupt — but not unexpected — end Friday night when Calvin Klein Inc. sent out a terse press release at 6:17 p.m., right before the Christmas holiday weekend, stating the company and Simons, who was chief creative officer, had “amicably decided to part ways.” The statement said that Klein has decided on a new brand direction which differs from Simons’ creative vision — but provided no details on what that new direction is.

Calvin Klein will not be having a fashion show during New York Fashion Week in February (it had been scheduled for Feb. 12 at 8 p.m.), and the company will now have to figure out how to move forward after the pricey, multimillion dollar experiment with Simons went bust after a mere 28 months, and eight months before the end of a three-year deal with the Belgian designer.

PVH Corp., parent company of Calvin Klein, invested between $60 million and $70 million in Calvin Klein 205W39NYC (the name given to the high-end designer collection by Simons) over the past three years. While wholesale distribution of the designer collection expanded from about 20 to 25 doors under former Calvin Klein women’s creative director Francisco Costa to about 40 doors under Simons, the line struggled at retail, PVH’s chairman and chief executive officer Emanuel Chirico admitted in a conference call with Wall Street last month.

At its peak in the mid-Nineties, Calvin Klein Collection was generating around $60 million in wholesale volume, and has never seen those numbers since, said sources. Global retail sales for all Calvin Klein brand products exceed $8 billion.

The failure of the Simons experiment accentuates that Calvin Klein is a largely wholesale-driven company, while directly controlled retail is the dominant business model for the most successful designer labels and luxury goods companies.

Observers question since Simons isn’t a household name, whether having “that halo effect” really does anything for the bulk of the Calvin Klein business, which is driven by better-price sportswear, jeans, underwear and fragrance, rather than designer apparel.

”Today, if you took a poll on the Calvin Klein customer, who’s Macy’s and Dillard’s, and ask them who Raf Simons is, I think you get a zero. I think you probably get less than 10 percent of the fashion population that knows who he is,” Morris Goldfarb, ceo of G-III Apparel Group, which has the Calvin Klein license for ready-to-wear, accessories, outerwear, swimwear and dresses in North America, told WWD on Saturday.

Market sources believe the Klein-Simons match-up seemed a little naïve from the start and the company made too big a deal about it when Simons joined in August 2016, after having been artistic director of Christian Dior, responsible for women’s haute couture, ready-to-wear and accessory collections, and before that creative director at Jil Sander.

At Calvin Klein, Simons was basically handed the keys to the kingdom, with as much responsibility as founder Calvin Klein himself had when he was at the company. Klein himself was unavailable for comment over the weekend. Observers believe Simons was given too much responsibility, made changes too quickly, eliminated key positions, brought in longtime associates whom he had worked with both on his own men’s wear line and at Dior and didn’t connect with his fellow employees.  The liaison appeared troubled from the start, and went off the rails fairly early on.

For his part, Simons was said to be frustrated by what he saw as a lack of infrastructure and know-how to support the collection business. His supporters alleged to WWD last month that PVH had breached its contract with Simons in several ways.

Steve Shiffman, ceo of Calvin Klein Inc., whom Chirico has said was the impetus behind the hiring of Simons and a big supporter, sent out an e-mail, obtained by WWD, to his associates at 8:30 p.m. Friday night explaining what had occurred.

“As we look at the next stage of Calvin Klein’s evolution, we are exploring various operational and organizational structures for our halo collection business and our overall business. Because our new direction differs from the vision of our chief creative officer, Raf Simons, we have mutually and amicably decided to part ways. In light of these changes, Calvin Klein will not show during New York Fashion Week in February 2019. I want to thank Raf for his contributions; Calvin Klein is a more creative company today as a result of his vision. We wish Raf the very best with his namesake brand and all of his future endeavors. I look forward to communicating our go-forward plan in January.”

Calvin Klein officials had no further comment over the weekend, and Simons couldn’t be reached.

But as the company looks to the future, myriad questions are swirling throughout the industry:

—Can Calvin Klein flourish without the halo effect of a designer collection — and, having experimented with Simons, does PVH even want to try again?

—If so, who might be on the short list to succeed Simons?

—Will there be any collection for fall?

—Will Calvin Klein ship its 205W39NYC collection for spring?

—What’s next for Simons, beyond his eponymous men’s wear line?

—Finally, what impact will Simons’ exit have on Shiffman and Michelle Kessler Sanders, president of Calvin Klein, who was another big proponent of hiring the designer?

As one observer put it, “It’s a black eye for all of them.”

The two-year liaison had several bright spots, when one considers all the buzz the initial partnership brought to the house. Calvin Klein’s fashion shows were packed with A-list celebrities such as Gwyneth Paltrow, Brooke Shields, Julianne Moore, Sarah Jessica Parker, Millie Bobby Brown, Sofia Coppola, Nicole Kidman, Margot Robbie, Michael B. Jordan, Lupita Nyong’o, Rachel Brosnahan and Cindy Crawford. Simons  also dressed Saoirse Ronan, who was nominated for best actress, at this year’s Academy Awards.

The American fashion community also seemed to swoon over Simons’ arrival at one of its best-known brands. Simons won a slew of awards for his work at Calvin. For the second year running, he won the CFDA Award for Womenswear Designer of the Year, and the year before, he scooped up both the women’s and men’s prizes — a feat that had never been done before.

Still, now that PVH has to plot out a new strategy for the brand, G-III’s Goldfarb said that he believes the Calvin Klein business can flourish without the designer collection.

“Yes, I certainly do. There’s no doubt that they’ll continue to spend aggressively on the marketing side of their business. They always have. That’s been for me more the driver than Raf Simons,” he said.

Market sources estimate that G-III’s Calvin Klein business, which has healthy distribution in major department stores, is reportedly on track to generate about $1.2 billion in wholesale volume by yearend.

As for whether Goldfarb believes Chirico gave Simons enough time, or if he feels it was wiser for PVH to cut its losses, the G-III ceo said, “You and I don’t know what goes on behind the scenes. Creative people aren’t always easy to manage. They have their own point of view. They don’t share very well, and in all candor, I have no clue what experience they both had, whether Raf just couldn’t take it, or the business side of Calvin Klein, who has a business to run, and yes, halo is important and image is important, but at the end of the day, this is about earnings.”

Goldfarb pointed out a key element to the dissolution. “Sometimes creative people don’t get the concept of earnings quite as well as the business side of a company does. Manny [Chirico] comes out of public accounting. He didn’t grow up in a fashion world. He grew up in the finance world. He was able to read a financial statement better than most, and he was able to structure a company better than most, but I wouldn’t tell you he could identify fashion better than most. That’s not his skill set. Maybe the two didn’t marry well.

“I don’t think it’s as big of deal that the world is making it,” he added. “Dior survived and he [Raf] was much more a key element to Dior than he was to Calvin Klein. He was everyday Dior. He was absolutely it. I think that everything that came out of Dior was touched by him. You can’t say that with Calvin. He didn’t touch all the product.

“I’ve never met him [Raf]. He’s never said pink, and not orange. I’ve seen him at all the fashion shows,” said Goldfarb. “I have the greatest respect for what he tried to create. I do think it was a good idea to hire him. I don’t think it was money that was wasted. It raised the profile. It brought the company back to light in the designer area. The store on Madison Avenue has never made money. It is image, it’s Madison Avenue, it’s designer. He, in a sense, was an extension of Madison Avenue.”

Susan Sokol, cofounder and ceo of High Alchemy, and a former president of Calvin Klein Collection, believes that the collection business has changed, and it may not be necessary to have that halo aspect for it.

“Clearly Raf brought a much-needed renewed energy, gravitas and excitement to the sleepy halo business now branded Calvin Klein 205W39NYC as well as to NYFW in general. And for sure this part will be missed. Will the business do well if this part goes away? When I left as president in the mid-Nineties of that business, the Calvin Klein Collection, I would have said a resounding no!” said Sokol.

“But things were very different then. The collection truly was the umbrella business and set the tone and spirit for all the other products. It was positioned as a designer women’s business, prices were much different and there were many more retailers to sell, fewer competing designers and no Internet. For the last two decades all or the majority of Calvin Klein is about mass marketing and classification businesses that drive the revenue — jeans, underwear, perfume, sunglasses, all the moderate businesses under the G-III licenses, etc.,” said Sokol.

“In retrospect, Calvin himself was a genius when it came to marketing and he surrounded himself with some of our industry‘s best talent — Madonna Badger, Sam Shahid, Fabien Baron, all the while truly believing in and supporting the women’s collection business as the top of the pyramid. And in those days, it was a respectable size and made money for the company,” she added.

She said things are so much harder today. “And yes, I think Raf, as talented as he is, was a disconnect for the Calvin Klein business today, 25 years later. There was too much on his plate and quite frankly he did not have the experience and perhaps skill set to oversee all creative for such a well-oiled machine. Too massive a ship to steer. So at the end of the day, PVH learned a tough lesson and now needs to course correct and get the ship back into smoother waters. I have no doubt they will.”

Asked about a possible successor to Simons, Sokol said she believes PVH is thinking about creative innovation for Calvin Klein “but not at such a high risk or price.”

“I can’t imagine they will bring in another big name,” she said. “They made a huge investment in Raf and I doubt they will make the same mistake.” Sokol said they could hire someone up and coming like Puig did with Wes Gordon at Carolina Herrera, or there may be someone within they could promote. Sokol said they will most likely remove “chief” from the title and divide and conquer the role leaving marketing, digital and retail creative control to a different team.

Discussing whether Calvin Klein can flourish without the halo of a designer collection, Kim Vernon, president of Vernon Company, who was  a former chief marketing officer of Calvin Klein Inc., sees the importance of Collection. “This is a huge concern. There is and always has been a significant design gap in the Collection and the Calvin Klein products in wider distribution. (Unlike Tommy Hilfiger, which is an elevated American sportswear brand that has maintained appeal globally through collaborations and exciting presentations and deliveries, and which PVH also owns). The Collection gives credibility to the house, to the brand, and has never existed without it. I see this as a huge challenge currently and to close the Collection would require a significant rethinking of the brand,” said Vernon.

In her opinion, the collaboration faced multiple challenges. “The idea of hiring Raf to lead design and creative was very exciting at the time.  We all talked about how important and pivotal this could be after some years of splintered design. Raf was given too much control by leadership to remake a brand that has a huge history and identity. He went too far into his personal design concepts (intellectual and often morose) and left the core brand ethos behind.”

She feels the ad campaigns proved to be another misfire. “The brand moved to unrecognizable and the campaigns were often not appealing, compelling, aspirational. The Collections and very imaginative, directional runway shows while lauded by the editorial community, did not translate into enough great wearable clothes and failed in stores. He didn’t treat the other products with the seriousness of the Collection and missed on those, too. Nothing in fragrance, jeans or underwear, the stalwart moneymakers for the company, was a huge success in the past two years. The one flagship for the brand was re-envisioned and unshoppable. A lot of money was invested in 205W39NYC without the necessary returns. Art without commerce doesn’t work at a public company,” said Vernon.

Ken Downing, senior vice president, fashion director of Neiman Marcus said, “It’s very sad and unfortunate. Raf Simons is a great designer, Calvin Klein is a great American brand; that began as a brilliant fashion moment with great promise. It’s unfortunate the vision for the revitalization of Calvin Klein under Raf’s design direction didn’t see it to fruition. Raf Simons at Calvin Klein brought great excitement to the New York fashion scene and New York Fashion Week. But ultimately, like in any relationship, if it’s not working, it’s best that both parties determine that earlier than later.”

Robert Burke, ceo of Robert Burke Associates, believes that Simons was given too much responsibility from the get-go.

“I think for a company the size of Calvin to give over complete creative control is a huge leap of faith, especially without guardrails.  There was also so much anticipation and the expectation level was so high. When we look at certain brands that have had a major turnaround such as Gucci, it kind of happened organically. This was a major manufactured turnaround or change. People were raving the first season, but it quickly started to lose its shine and seemed to be kind of troubled from the very beginning,” he said.

“This was not a right match on either side. Maybe they happened to recognize it early, or didn’t feel it was going anywhere. To me, it was probably way more advanced than the Calvin brand could handle at one time. Its message and its audience, and the creative was extremely advanced, given the customer base. It was under the microscope from the very beginning.”

Asked if he thinks the Klein business can flourish without the halo effect of a designer collection, Burke believes the brand needs a designer collection.

“I think brands need direction and they need a strong point of view,” he said. “And it’s a fashion brand at the end of the day, and it has to stay relevant. And it needs someone guiding it from a fashion standpoint.” He said it’s a predominantly licensed business. “Otherwise, every license takes it in the direction they want.”

While many pointed at Simons for the reason for the breakdown in the relationship with PVH, other sources said his growing disenchantment seemed to stem from changes that were made last fall in his responsibilities and reporting structures.

According to sources, the company decided in September to reduce some of Simons’ duties and wanted him to agree to a new contract with fewer responsibilities. Sources said Klein officials wanted certain areas of the business such as store design, visual merchandising, e-commerce, public relations and communications, and corporate social responsibility to report to Marie Gulin-Merle, chief marketing officer, (who came from L’Oréal), rather than Simons, who had been given total responsibility for all creative areas when he joined in August 2016.

Last month, Chirico was outspoken in his disappointment in the Calvin Klein Collection and Jeans business. He said in rather blunt terms on the company’s earnings call that the reimagined Calvin Klein — under Simons’ direction — was not working. He said the collection, 205W39NYC, needed to become more commercial and that investments in the collection and advertising would be shifted elsewhere.

Calvin Klein’s earnings before interest and taxes for the quarter decreased to $121 million, from $142 million a year earlier,“ primarily attributable to an approximately $10 million increase in creative and marketing expenditures compared to the prior-year period.” The company also cited  gross margin pressure, principally due to more promotional selling in the Calvin Klein Jeans business, particularly in North America.

“While many of the product categories performed well, we are disappointed by the lack of return on our investments in our Calvin Klein 205W39NYC halo business and believe that some of Calvin Klein Jeans’ relaunched product was too elevated and did not sell through as well as we planned,” Chirico said on the earnings call.

Further, Chirico said that the redesigned Calvin Klein Jeans was a “fashion miss,” telling investors: “From a product perspective, we went too far, too fast on both fashion and price. We are working on fixing this fashion miss, and we believe that our CK Jeans offering will be much more commercial and fashion-right beginning in 2019, especially for the fall 2019 season.”

The Calvin Klein Jeans line, reworked for fall 2018 in upgraded fabrics, featured bold pop-inflected irreverence, oversize logos, trucker jackets, Western shirts, cowboy boots, colorblocking, patchwork denim, an Andy Warhol segment, and a theme Simons made his own at Calvin: Americana.

Soon after the earnings call, Klein sent out a communication saying that starting in February, it would stop doing print advertising and would shift those dollars to digital media.

Sources indicated that Simons caused a lot of havoc in the company and insiders said they were relieved the designer, who surrounded himself with his own friends and longtime staffers, was leaving. While insiders said he stuck mainly to himself or his inner circle, Simons had apparently been spending a lot of time away from the office.

But Simons’ team did have strong supporters. His inner circle that he brought with him to Calvin Klein included Pieter Mulier, his longtime number two who became creative director of Calvin Klein, and Mulier’s boyfriend, Matthieu Blazy, the design director of women’s ready-to-wear.  Followers posted on Mulier’s Instagram account over the weekend that they were sorry to see Mulier go, that he’ll find something in Europe, that he was “too cool for America,” and that Chirico was too impatient and “was ridiculously short-sighted.”

“You elevated Calvin Klein and made it relevant, they’ll go downhill again,” said one post.

It is understood a renewal offer came to Simons in recent weeks, even though his current pact didn’t expire until August 2019.  Sources indicated that Simons decided not to accept the renewal due to restrictions on Collection spending and a reduction in the full creative control that he previously had.

Upon joining the company, Simons immediately set out to rethink the collections, change the teams, change the ad campaigns and basically reinvent the business, which had lost its momentum in some respects. Chirico has repeatedly said he believes Calvin Klein will become a $10 billion business.

Some sources indicated to WWD that CKI should have established ground rules before giving Simons so much responsibility to completely change the company’s well-established aesthetics and advertising.

Despite Chirico’s disappointment in 205W39NYC, Simons’ directional, often disquieting fashion shows brought the company a lot of buzz, taking the brand in a different direction from the clean, modern, minimalist roots planted by its renowned founder and strengthened by Simons’ predecessors as women’s creative director, Francisco Costa, and men’s creative director, Italo Zucchelli.

Over the last two years, Simons has explored the dark side of the American pop landscape, the immigrant “outsider” experience, cowboy culture, the high school years, horror movies and the actual apocalypse with models walking the runway in hazmat suits, firefighter coats and Mylar accessories.

While Simons helped popularize cowboy-style boots, he didn’t produce any hit bags or broad fashion trends during his tenure. However, he did touch on several aspects of American culture with his Andy Warhol collaboration and the use of Eighties “Jaws” movie graphics. He was obsessed with cheerleaders, pom poms and prairie dresses and also used blue collar utility uniform references, elevating the everyday New York construction worker.

Throughout his career, Simons has collaborated closely with artists. One of Simons’ first campaigns featured underwear-clad models standing in front of Sterling Ruby’s oversize tapestry. Ruby also redesigned Klein’s flagship on Madison Avenue, a bright yellow space filled with scaffolding, a 180-degree turn from the former John Pawson design with its sandstone floors and white walls and columns.

The brand’s ad campaigns, shot by Willy Vanderperre, had futuristic and artistic overtones and have featured androgynous and otherworldly looking models, as well as the Kardashian-Jenner clan. The ads were a major shift from the highly sexualized and controversial campaigns for which the brand has been known.

“There’s no sex in anything that he’s doing. It’s all neutral, or neuter,” said one observer.

NYT: Calvin Klein’s Nightmare Before Christmas

NYT: Calvin Klein’s Nightmare Before Christmas

NEW YORK TIMES | VANESSA FRIEDMAN

The most high-profile brand reinvention experiment in 21st-century American fashion came to a crashing halt last Friday when Calvin Klein announced it was parting ways with its chief creative officer, Raf Simons, “after Calvin Klein, Inc. decided on a new brand direction which differs from Simons’s creative vision.”

The departure of the Belgian designer, who won three awards from the Council of Fashion Designers of America in only two years, comes just over six months before his contract was due for renewal, and is effective immediately. There will be no Calvin Klein show during the upcoming New York Fashion Week, and there was no time frame given for when a successor would be named.

“It’s very sad, and unfortunate,” said Ken Downing, the fashion director for Neiman Marcus. It “began as a brilliant fashion moment with great promise. Raf Simons at Calvin Klein brought great excitement to the New York fashion scene and New York Fashion Week.”

The decision casts a shadow not only on the Calvin Klein business, but also on the growing belief in the fashion world that for a brand to be successful, it must hand all power over to a single creative who is empowered to impose his or her vision throughout.

Both Calvin Klein and Mr. Simons declined to elaborate further on the decision, though the relationship had been publicly troubled since November, when Emanuel Chirico, the chief executive of PVH, the corporation that owns Calvin Klein, effectively blamed Mr. Simons for a decline in Calvin Klein sales, calling his work a “fashion miss.” Even though he did not use the designer’s name, it was an unprecedented public slap-down for a designer still at a house.

“While many of the product categories performed well, we are disappointed by the lack of return on our investments in our Calvin Klein 205W39NYC halo business and believe that some of the Calvin Klein Jeans’ relaunched product was too elevated and did not sell through as well as we planned,” he said during an announcement of third quarter earnings this year.

PVH said earnings before interest and taxes fell to $121 million compared to $142 million the year before, a decrease it blamed primarily on a $10 million increase in “creative and marketing” costs, which is to say: Mr. Simons spent too much on his ideas.

It was a noticeable contrast to the enthusiasm that greeted the announcement in August 2016 that Mr. Simons was coming to Calvin Klein, which had the brand declaring its ambitions to grow revenue from $8 billion to $10 billion.

What went wrong between then and now will be the subject of study for branding experts and fashion executives for years to come.

A favorite of the fashion world, known for his low-key personal style, affinity for the contemporary art world, and talent, Mr. Simons originally made his name with an eponymous men’s wear line, but achieved broader fame thanks to his ability to breathe new life into troubled brands.

He took on Jil Sander after the brand’s founder had come and gone twice, later moving on to Christian Dior following the ouster of John Galliano. He left Dior in 2015 after three years, frustrated that his creative oversight was limited to the women’s runway collections.

It was a situation Mr. Simons ensured would not be replicated at Klein, where he was given authority over all the brand’s product categories, including the runway lines, jeans, underwear and homewares, as well as advertising and store design. Previously, these responsibilities had been shared by a troika of designers: Francisco Costa for women’s wear, Italo Zucchelli for men’s wear and Kevin Corrigan for jeans and underwear.

Though commercially the brand was a success, it had not been a driver of fashion since the sale of the company in 2002. Indeed, the runway collections were so minor, they were classified as a marketing expense on the brand’s balance sheet, according to Tom Murry, the former chief executive.

Mr. Simons was supposed to change all that.

In handing the keys to the Klein kingdom to Mr. Simons, Steve Shiffman, chief executive of the brand, was following the model popularized by Gucci. The wholesale reinvention of Gucci under Alessandro Michele, the creative director, has been the biggest success story of the current fashion industry.

Also influential has been Hedi Slimane, a designer and the former creative director for Yves Saint Laurent and current creative chief of Celine. Mr. Slimane, who is famous for insisting on control over every aspect of a brand down to designing the fittings in the stores, sent Saint Laurent sales soaring, and currently has everyone watching Celine. Along with Mr. Michele, his success set trends not just on the runway but in the C-suite as well, and paved the way for the deal between Mr. Simons and Calvin Klein.

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But unlike Gucci, where Mr. Michele arrived as an unknown, the expectations for Mr. Simons were high. And unlike Celine, which is owned by LVMH, which does not break out the individual performances of brands, Calvin’s performance during Mr. Simons’s tenure would be on display for all investors to see. The bet was enormous and, in retrospect, it seems the expectations were unrealistic for both parties.

In the beginning, however, it seemed to make so much sense. Mr. Simons’s first show was the most anticipated of fashion week. His second, a tour through the American nightmare via Andy Warhol and the badlands, coincided with President Trump’s first term. For the third, he filled the former American Stock Exchange with tons of popcorn to create a cartoon apocalypse. He had the artist Sterling Ruby create an installation for the Madison Avenue flagship. He created a made-to-order dress department and filled his front row with celebrities such as Brooke Shields, Millie Bobby Brown, ASAP Rocky and Rami Malek. He spent a lot of money.

He made Calvin cool, but cool is by definition a niche quality. It was perhaps a sign of what was to come that no one could be bothered to pronounce the full new name of the signature collection: 205W39NYC.

“As the world evolves, the need for an edit, a curation and point of difference remains, but the need to package it holistically for today’s consumers and be relevant will never go away,” said Marigay McKee, founder of MM Luxe consulting.

While Mr. Simons shared many values with Calvin Klein — a penchant for minimalism, a fascination with youth culture and art — he had limited experience with the mass market of jeans and underwear on which the brand’s profits were built. For its part, PVH, which also owns Tommy Hilfiger, had never worked with a high-concept designer house, and it did not have experience with the amount of investment such a reinvention would require — and the length of time it would take the consuming public, attached to their favorite jeans, to adjust to a new look and offering.

During that November earnings call, Mr. Chirico said, “From a product perspective, we went too far, too fast on both fashion and price.”

As management grew nervous, it began to claw back power from Mr. Simons. In February, the company hired a new chief marketing officer, who did not report to Mr. Simons, and decided to move dollars away from his high-concept advertising toward micro-influencers and social media. It never opened the stores that had been discussed. Mr. Simons became increasingly unhappy, and those familiar with the situation said Mr. Simons had alleged a breach of contract on the part of PVH. Rumors began to fly.

“Turning around a company the size of Calvin takes a certain type of creative person, a significant amount of time, and an enormous amount of money. Calvin wasn’t built in a day or 18 months,” said Robert Burke, of the luxury consultancy, Robert Burke Associates. “Having an impact on a brand the size of Calvin is a very delicate and complex challenge. It seems that this task was more than either party expected. ”

What happens next — exactly how much of a retreat the brand will make from Mr. Simons’s work — remains to be seen. The designer, for his part, is in Antwerp, and will be preparing for his own brand’s show in Paris in January. For everyone else, what is clear is that this is no longer a fashion fairy tale, but a cautionary one.

AP: Suddenly, luxury stores miss free-spending Chinese tourists

AP: Suddenly, luxury stores miss free-spending Chinese tourists

AP | MICHELLE CHAPMAN AND ANNE D'INNOCENZIO

There was something missing at the luxury jeweler Tiffany & Co. in recent months: Chinese tourists.

For the second time in as many months, a big seller of high-end goods noticed that a particularly crucial demographic of its shopping base had made itself sparse, damaging sales and stoking fears of worse to come.

On Wednesday, shares of Tiffany & Co. plunged 12 percent after reporting weaker-than-expected sales in its third quarter. CEO Alessandro Bogliolo said that Chinese tourists have failed to show up, and open wallets up, with the same vigor that they had in the past.

Last month, the owner of Louis Vuitton noted the same phenomenon. Shares in that company were hit hard as well.

Tiffany is considered a bellwether for luxury goods, which is why shares of Ralph Lauren and Movado also fell on Wednesday, even as the broader stock market climbed sharply.

Tiffany’s third-quarter revenue rose 4 percent to just above $1 billion, yet industry analysts were anticipating a bigger boost. Part of the reason for the surprise was fewer tourists, particularly Chinese tourists, at stores in places like New York and Hong Kong.

“What we see is that Chinese tourists are traveling less,” said Bogliolo in a phone interview Wednesday.

Tiffany’s business in mainland China remains strong, he said.

Bogliolo speculated that the deteriorating value of China’s currency is to blame.

The yuan, also known as the renminbi, or “people’s money,” sank to a 10-year low against the dollar at the end of October. It strengthened slightly this month, leading many to believe that Beijing has stepped in to stop its slide.

But others see broader issues at play, including a simmering trade war and the potential for a slowing global economy that is squeezing even the wealthy in China.

“There are major strains in our political relationship with the Chinese government,” said Robert Burke, a luxury consultant in New York. “It doesn’t put them in the mood to come to the U.S. to spend their hard earned dollars. They do have the option to buy in mainland China.”

While the number of people visiting the U.S. from China grew 4 percent in 2017, according to the U.S. National Travel and Tourism Office, that was down sharply from the 16 percent jump in 2016.

It’s not a healthy trend for sellers of high-end goods.

Burke estimates that as much 30 percent of luxury goods sales globally are made to tourists from China.

What may have exacerbated fears Wednesday is that prevailing wisdom has held that consumer spending from China in the high-end luxury shops of the West would not only continue, but that it would grow stronger.

In a study published this month, the Bain consultancy said that Chinese consumers will fuel nearly half of global high-end sales by 2025.

Chinese shoppers will account for 46 percent of global luxury sales of an estimated $412 billion in just six years, Bain said in the study, which was prepared for Italy’s Altagamma association of high-end producers.

Even before the Trump administration ratcheted up the intensity of its trade dialogue with Beijing, there were signs that economic growth in China was slowing.

Chinese economic growth declined to a post-global crisis low of 6.5 percent in the quarter than ended in September. A trade fight with the Trump administration is pressuring communist leaders to energize economic activity that has weakened since Beijing clamped down on bank lending last year as it tries to rein in surging debt.

It’s too early to tell if the spate of weaker-than-expected sales for luxury merchants will continue, or if it’s a bump in the road.

There were some other signs of weakness at Tiffany, like comparable-store sales, which are watched closely by industry analysts.

Tiffany’s quarterly profit of $94.9 million, or 77 cents per share, was actually a penny better than expected, according to analysts surveyed by Zacks Investment Research.

But the company stuck to its previously issued full-year earnings guidance of between $4.65 and $4.80 per share, which led some to suspect that shifting geopolitical agreements or a slowing global economy may soon become a bigger threat.

WWD: Fine Jewelry’s Casual Turn

WWD: Fine Jewelry’s Casual Turn

WWD | MISTY WHITE SIDELL

At a tony, star-studded event celebrating Tiffany & Co.’s latest high-jewelry collection last month, there was an uncharacteristic sense of nonchalance in the air.

The first high-jewelry concept by the brand’s chief artistic director Reed Krakoff exhibited a new, casual mood. While megawatt diamonds and rubies remained consistent with the house’s history, many designs featured an informal twist. A circular pendant, for example — featuring nearly 40 carats of aquamarines and 14 carats of diamonds — was strung not on a bedazzled platinum chain but rather a simple knotted cord made of leather.

This relaxed mood is being felt throughout the jewelry industry — a sign that haute joaillerie is adapting to a more casual moment in fashion and society. It is the result of a tangled web of social changes — particularly the runoff, jewelers say, of post-recession values and an ongoing change in how jewelry is consumed, as an increasing percentage of the industry’s clientele becomes a woman shopping for herself.

“There is no question that life is becoming more casual and as a result, fine jewelryneeds to keep up with that. I think people find themselves dressing up less frequently; they still go to important events but they think differently about how to dress for those events. This has certainly impacted the way we think about designing our collection — we try to design for today’s aesthetic. It doesn’t mean we don’t design important pieces of high value, but we are thinking if someone can wear it often,” said Kwiat and Fred Leighton chief executive officer Greg Kwiat.

“The challenge in such a rarefied world is crafting pieces that are extraordinary but at the same time also wearable frequently and effortlessly. Often these are contradictory ideas. However, everything we create is connected by the notion of everyday luxury — to create something incredible and rare, but also something that can really be enjoyed as a part of modern life,” Alessandro Bogliolo, Tiffany’s ceo, said of the company’s design ethos. Among the images featured in the jeweler’s Blue Book catalog of high jewelry is a photo of actress Gal Gadot reclining in Tiffany lariats — paired with jeans and a white T-shirt, rather than a ballgown.

Fashion industry consultant Robert Burke summarized the movement: “It wasn’t that long ago, people used to discuss what’s appropriate for day and night. All of that is obviously out the window now.”

The fine jewelry industry flourished in the mid- to late-19th century — a time that saw the founding of maisons including Van Cleef & Arpels, Cartier and Bulgari. The Industrial Revolution heralded a new class of private wealth that intermingled with royalty — the two visually sparring off at cotillions and royal balls, outwardly boasting their wealth with lavish jewelry.

Fast-forward nearly 200 years and these formal occasions are now occurring with dwindling frequency. Nowadays, should one buy a diamond wreath necklace, it is likely to sit in the safe for weeks, if not months at a time. Jewelers say that this has become a primary concern among collectors, who wish to buy things they can wear every day.

“There is definitely a feeling today in the broader world that you have to be careful not to show off wealth. People with wealth are not consuming as conspicuously. This has translated into the jewelry world. They don’t mind spending money on jewelry if it’s an important piece, but they don’t want to walk around saying — ‘look at me, how much I spent.’ It doesn’t feel congruent with today’s general atmosphere,” Kwiat said, noting that Fred Leighton has recently passed on acquiring lavish jewels that are out of line with today’s stylistic attitudes.

This is forcing the industry to adapt — designing and dealing in precious stones that suit a new, toned-down taste level. There has been a rise in unpolished gold and unfaceted cabochon stones and designs that feature important stones in less obvious ways (as seen in designer Ana Khouri’s anatomically leaning work). These pieces are no less valuable than the big sparkly gems worn in the past, but their aesthetic is more wearable. This new tone suits Millennial consumers, an age group that is beginning to take an interest in jewelry collecting and tends to avoid ostentatious displays of wealth.

“The younger clients are looking for staples right now. They are not coming in to get the bright pink sapphire ring, they are getting something they can get a lot of wear out of,” noted Frank Everett, Sotheby’s senior vice president for jewelry. He added that Van Cleef & Arpels jewelry from the Seventies — inlaid with turquoise or coral — is performing strongly at the moment, particularly for its casual appeal.

A gold and coral ‘Alhambra’ necklace by Van Cleef & Arpels, sold by Sotheby’s for $68,750 while estimated at $15,000 to $20,000.  Courtesy

Goldsmith Jean Prounis, age 25, launched her namesake collection in 2017 — handwrought from an ancient alchemy of 22-karat gold. Prounis prefers using cabochon stones over those that are sparkly and faceted and polishes her jewelry with a dull luster rather than high shine. Her designs have found their way onto shelves at Dover Street Market New York and Holly Golightly in Copenhagen.

“For me, wearability is the most important part of design. I think it’s important to my brand that you can wear a lot of valuable objects and still feel safe — even as a social target. You don’t want to come off as someone wearing $20,000 worth of diamonds. You can know you are wearing a well-made piece and not feel like everyone else has to know,” Prounis said.

Also at the core of jewelry’s casualization is the rise of women purchasing jewelry for themselves, which is particularly prevalent among Millennials.

Fine jewelry has long been geared toward women, but aimed at a man’s bank account. With self-purchasing, women are buying pieces as “part of their outfits,” and seek unique designs that speak to their personal aesthetics, rather than waiting for a man to bestow them with the jewelry of his choice.

Self-purchasing has become especially lucrative for female designers, who bring an intuitive perspective to their craft. Irene Neuwirth — who has made her name with thoughtful, colorful designs — says that about 90 percent of her clientele is self-purchasing women.

“Back in the day, men would buy their wife or girlfriend jewelry so it would look as expensive as possible. I think now people are much more drawn to something a little less in-your-face. My client is a woman really expressing herself through jewelry. It’s such a personal thing, I think men need a little reprogramming when they are buying fine jewelry, not just looking for things covered in diamonds and emeralds,” she said.

Neuwirth is among a contingency of female jewelers to design pieces that express a more relaxed attitude — the result, they say, of creating items that they would like to wear themselves.

Temple St. Clair founded her namesake line in 1986, and has found a following of “women looking for a very high quality of jewelry made in the old-world tradition, yet modern, wearable and versatile for evening.”

She noted that “self-purchasing women are buying and investing in high jewelry pieces but want to wear it more casually, They don’t have debutante balls, they want to wear and enjoy these pieces — that is the next frontier for me.”

Designs by Sophie Bille Brahe.  Courtesy

In Copenhagen, jewelry Sophie Bille Brahe creates pieces that are “designed for what I want to wear living in Copenhagen — you won’t see a lot of girls in high heels. We are all on bikes. So in that sense, designing jewelry to just be part of your outfit that you can wear from morning to the evening. It becomes a part of you, not just something you dress up with.”

Bille Brahe’s rings are purposefully sculpted “so that they wouldn’t annoy me during my day, and so I can still use my hands when I’m working.” She says that 99 percent of her clients are self-purchasing women, who visit stores like Dover Street Market, Twist and Isetan for her designs.

“I think women have a lot more to say today rather than 20 years ago when men would just buy a classic engagement ring,” she said. “The whole jewelry scene has changed — it’s not just one thing anymore — there is a lot of space for different directions.”

WWD: Chanel to Transform U.S. Wholesale Business to Concession Model

WWD: Chanel to Transform U.S. Wholesale Business to Concession Model

WWD | LISA LOCKWOOD

In a dramatic shift for the company, Chanel Inc., the U.S. subsidiary of Chanel Ltd., is transforming its wholesale business into a concession model.

The company plans to operate concession departments in its major accounts, which include Neiman MarcusBergdorf GoodmanSaks Fifth AvenueNordstrom and Bloomingdale’s. The process began last year with Bloomingdale’s 59th Street location, and this year several others were converted, namely Saks in Greenwich, Conn., and Atlanta and Neiman Marcus in Atlanta. The rest will be phased in over the next year.

“You might be wondering why, after 12 years of relative silence, am I doing a real interview,” said John Galantic, president and chief operating officer of Chanel Inc. “It’s a time of pretty major change here. The old saying is ‘don’t waste a crisis.’ But I look at it the other way more, which is when the business is very strong and the demand very desirable, there’s much more leverage and leeway to make change.”

Luxury players such as Louis Vuitton, Dior, Gucci and Prada frequently operate concession models in department and specialty stores’ handbag departments in the U.S. American department stores are among the few worldwide that continue to operate primarily on a wholesale model; most department stores in Europe and Asia rely primarily on concessions, particularly for luxury brands.

According to Galantic, Chanel’s chief reasons for wanting to have a more direct-to-client relationship with its key partners are:

*Visibility of the client and her purchasing path, allowing Chanel to service her and communicate directly.

*Owned inventory and real-time visibility of inventory across all points of sale.

*Chanel employees in the multibrand retail boutiques will be closely connected to the house and will have access to training and development opportunities.

*Multibrand retail clients become part of the Chanel omni-touch point world and have access to the same e-services that exist in Chanel boutiques.

In addition, Chanel will bolster staffing levels in its freestanding boutiques in North America and shift to a blended model of compensation that focuses on rewarding fashion advisers whose teams work in a collaborative manner in serving the clients’ overall experience, said Galantic. In North America, Chanel has 23 freestanding boutiques for fashion, as well as watch and fine jewelry. There are also four fragrance and beauty stand-alone stores.

Among multibrand retailers, there are 55 doors/locations that carry all Chanel product lines, including ready-to-wear, shoes and accessories.

In discussing the rationale behind the move, Galantic said the brand came at it from a position of strength. The company has been showing very strong results across the board. “The first thing is the desirability of the brand and that always drives the business. The brand is more desirable than ever. On the business side, we are enjoying strong growth. We’re actually gaining share from fragrance to makeup in the doors we’re in, to ready-to-wear, across the board accessories, jewelry, watches,” he said.

He noted that there’s a lot of growth happening at the highest part of the pyramid. That means, high jewelry and pieces above $50,000, as well as the number of clients for couture and its Métiers d’Art collection. “Leading the way is the higher part of luxury, which is the way we want to grow the house,” said Galantic.

Another important metric for Chanel is the total purchasing power of its clients. He said that if the brand looks at certain retail partners, Chanel accounts for roughly 7 percent of their sales, which is significant. But if the company takes the total purchases of that Chanel customer throughout the chain into account, it’s over 30 percent. “When we open new distribution, we’re bringing brand image, and we’re bringing a very powerful shopper,” he said.

So if things are going so well, why change direction?

“There are some fundamentals at Chanel we have no intention of changing,” he said. “We always want to be creation-led, following the impulse of our creator across all our categories, rather than following a trend. We either make the trend, or observe a trend, but we don’t follow a trend.”

Second is human touch. He said that when it comes to human touch, the client expectations for luxury are evolving and are increasingly demanding. “The product makes her dream, and she’s looking for an experience that’s in line with a product at the same level. When we do our research and when we talk to our clients and when we learn, we find 50 percent of the brand image is determined by the experience. When you add brand to experience, you get image. A negative experience can detract from the image,” he said.

While there’s mythology that says that mass is convenience and luxury is experience, Galantic takes a different point of view. “In reality, it’s true for mass, but luxury with the new demands and expectations really has to be both — experience and convenience,” he said. Basically, he said, Chanel wants to make a shift in the way it controls its destiny. “That means to greatly enhance the client experience to become a more direct-to-client brand, with more of a one-on-one relationship,” he said.

Galantic stressed that the move does not mean the company wants to phase out its retail partners. In fact, just the opposite. He said it realizes that its retailers are often initiating the first-time experience a customer has with the Chanel brand. They also provide a multibrand experience, which in some cases the client favors. In addition, there are areas around the country where Chanel doesn’t have a freestanding boutique. “The only option to shop Chanel could be in a multibrand retailer, which is a big chunk of the business and an important part,” he said.

Further, he noted, “For the newer clients, we know the first visit can be intimidating and we know we have a lot of work to do there. In order to be able to handle all the traffic and exceed expectations for everyone, it takes a different model and takes more people. It takes a different kind of training and takes different kinds of rewards,” he said.

One of the biggest advantages is control of data. “It means owning the client experience and being able to connect the touch points for the shopper. So the visit to a Neiman’s or Saks or a Chanel boutique, whether it’s fashion, watch or fine jewelry, is part of the same brand and not happening in different silos,” said Galantic.

As a result of operating a concession model, Chanel plans to hire 700 people. Galantic said he expects this model to be in place by the end of 2019, and by early 2020, it should be finished. The plan is to do most of fashion next year, and then move on to watches and fine jewelry.

Bloomingdale’s 59th Street flagship was the first store to turn its Chanel accessories and ready-to-wear departments into a concession model in October 2017. “It’s doing extremely well,” said Frank Doroff, vice chairman of Bloomingdale’s. “The growth rates are very impressive. We’re very pleased. When they came to us, we always support our partners,” he said. He noted that the growth rates have “increased substantially” from the prior arrangement.

“From a client standpoint, from an employee standpoint, from a business standpoint, from a mix of sales, having the right assortment, we’re very pleased,” said Galantic, about Bloomingdale’s.

“We found that our retail partners have been very supportive of what we’re trying to do. There are advantages to them, in Chanel being able to create a connected business model,” said Galantic. Another advantage is that the customer will have access to an item which might not be in stock in a multibrand retailer. Further, a multibrand retailer might have clients who are significant for them, “but are very significant for us, but not big enough to be VIP level. When we add the purchases together, all of a sudden, they’re very high on our radar and may be invited to a Chanel show, which they wouldn’t have in the past. There are many advantages in the long run,” he said.

“Our partners have been cooperative in helping us engineer these changes and making sure the experience in the stores will continue to be seamless and that people who are helping a Chanel shopper outside the hard shop will continue to be part of the conversation, even though we now own the client data,” he added.

Galantic believes that these moves will elevate and enrich the client experience. “It’s now possible once we have all the touch points connected, it’s possible to really start to raise the bar in our boutiques and everywhere. We’re calling it ’boutique evolution,’ and what we’re doing is enhancing the client experience, reimagining the whole service model in terms of whom we recruit, how we reward our people.”

As a result, commissions will end.

“We are phasing out commission. We’re also rewarding much more collaborative work,” said Galantic. “It’s less of a solo effort and more of a team effort. That, in turn, creates some new career possibilities.”

He believes that collaborative work translates better into management than solo work, and that it’s a skillset that lends itself more to career advancement. A senior fashion adviser in a Chanel boutique in a multibrand retailer can become a boutique director and move onward from there. Galantic said that some people who are working in the Chanel boutiques at specialty or department stores and are on their payroll, will shift to Chanel’s payroll.

Connecting all the touch points is a critical element.

“What the client is really interested in is omni-touch points, the more connected experience. When she engages with Chanel, and it could be chanel.com, or an app, or a wish list or a virtual closet, or making an appointment, or a live chat or a call center, that once she enters any touch point, she’s entered all. Through her ‘My Account,’ she’s now part of a Chanel connection. We’re working very much on this, and we plan to be ready for an omni-touch point connected world in 2019,” he said.

In fashion, watch and fine jewelry, Chanel is adding people in the freestanding boutiques, as well as in multibrand retail, and in fragrance and beauty, it’s building out a combined channel of stand-alone doors and chanel.com, which is its fastest-growing channel in fragrance and beauty. “We’re also working on new retailer models where we’ll also have access to data. We’ll have access to our client data, they’re not strictly lease agreements, and some of them will have connections to our web site, some of them will have shared people. We’re experimenting with different models, but all on the same principal of being able to be more direct, one on one to our customer,” he said.

Ready-to-wear and handbags are not sold on chanel.com, and there are no plans to do that. Fragrance and beauty have been sold online since 2006. Sunglasses have been sold on the web site since 2015. Galantic noted that most of its fashion clients prepare their boutique visits by visiting chanel.com, or the app or call center.

This past summer, Chanel upgraded its web site and introduced a host of new features, including virtual try-ons for sunglasses, and soon, makeup. There are multiple features such as ‘make an appointment,’ wish list and live chat, and it plans to deploy the web site globally in 2019.

Does Galantic feel that the company is missing out on sales by not selling the handbags or ready-to-wear online?

“I think it’s quite the contrary. One of the things that’s special about Chanel and keeps us at the top of luxury is we favor and cultivate human contact so that there’s a human relationship with someone who knows you, with someone you make an appointment with, who takes care of you, who curates the collection for you, who styles you. For high luxury, that needs to happen in a boutique and not on a screen,” he said.

“True luxury is telling a seductive and irresistible story which has to happen in a human way,” said Galantic. He said e-commerce is “an algorithmic-based, anonymous transaction and therefore it’s antithetical with high luxury. That’s what open access e-commerce is,” he said.

Robert Burke, chairman and chief executive officer of consultanty Robert Burke Associates, sees the benefit to the concession model to a brand like Chanel. “Over the past several years, we’ve seen more of the brands go to concession models. Chanel is probably one of the most coveted brands by the consumers as well as the retailers and department stores. As a result, Chanel knows the value they add to the overall brand lineup in a department store, and I’m sure that they’ll negotiate accordingly.”

Two big moments for Chanel will occur in New York this fall when the company opens its renovated flagship on East 57th Street on Nov. 15 and will present the Metiers d’Art collection at the Metropolitan Museum of Art on Dec. 4.

The 57th Street store, designed by Peter Marino, will be increased from 7,100 to 14,000 square feet and will be expanded from three to five floors. “This will be a true global Chanel flagship. It’s reconfigured in a way which makes, in particular, the ground floor more spacious,” he said.

Furthermore, Galantic noted that despite published reports elsewhere, the New York office is not closing. He stressed that the majority of corporate functions moved to London, but that accounted for 47 jobs out of 20,000 global employees. There are 1,350 Chanel Inc. employees in the U.S. He noted that Alain Wertheimer, chairman and ceo of Chanel, is based in New York and is not relocating. Jobs that moved to London, where the Chanel Ltd. holding structure is based, were global functions in human resources, legal, CSR and finance. France remains the creative hub for Chanel, which had revenues last year of $9.62 billion.

Several functions, including innovation and corporate partnerships, are based in New York. “If we’re hiring 700 people, we’ll need someone to lead them along,” he said. In addition to hiring people in the boutiques, Galantic said they’ll be hiring staff in technology, analytics and data. “We now have a lot more data to understand, react to and figure out how to leverage in a human way,” he said.

Looking ahead, Galantic sees the biggest opportunities for the brand as watches, ready-to-wear and beauty.

In high jewelry, he said the company is doubling the business this year and expects to continue these growth rates. In fact, he noted that the brand recently had a $3 million transaction in Las Vegas. “It’s never going to be a big business in units, but it gives a halo of timelessness to the entire house that’s very important, so we tend to communicate about it quite a bit and will continue to do so,” he said.

Chanel is expanding the independent dealers where it sells watches and is adding fine jewelry. In 2018, 30 percent of its existing Chanel retail distribution received an expanded collection/ assortment of Chanel fine jewelry. The company expanded its fine jewelry distribution to five additional Neiman Marcus Chanel shops in Beverly Hills; Chicago; San Francisco; Palo Alto, Calif., and Houston this year. It also opened two independent jewelers with fine jewelry, in addition to Dover Street Market in Los Angeles, with a curated assortment. At present, Chanel has three stand-alone boutiques for high jewelry on Madison Avenue in New York, Beverly Hills, and South Coast Plaza in Costa Mesa, Calif.

In the next year, Chanel plans to open several new fragrance and beauty stand-alone boutiques in key markets.

In addition, a freestanding Chanel boutique is being built and will open at 65 East Oak Street in Chicago in January, replacing one that closed last year in the Drake Hotel.

Discussing what the presentation of the Métiers d’Art collection in New York will do for the Chanel brand, Galantic said, “It’s the ultimate experience for our clients and the echo and resonance around the show spreads around the country. For clients, and for our own employees, it’s incredibly energizing to have Karl [Lagerfeld] and the collection here.”

BoF: End Clothing: Menswear’s Silent E-Commerce Contender

BoF: End Clothing: Menswear’s Silent E-Commerce Contender

BUSINESS OF FASHION | CHRISTOPHER MORENCY

LONDON, United Kingdom — Just a stone’s throw away from Supreme, Palace and Stüssy’s London boutiques, a new men’s fashion mecca has emerged.

Situated within a newly developed apartment complex in the city’s Soho neighbourhood is the recently opened, first London flagship belonging to End Clothing (better known as End) — the Newcastle-based men’s retailer founded by John Parker and Christiaan Ashworth.

Inside, artichoke green plants and neon signs cut through the abundance of sleek marble countertops and concrete floors that form the backdrop to numerous silver railings and stone walls displaying exclusive sneakers, street-luxe apparel and homeware.

Like many of its streetwear peers, the store often sees long queues of young fashion devotees, fully dressed in the latest Off-White, Balenciaga and Nike gear, waiting for the newest, limited sneaker launch to drop. Lines often stretch far beyond the corner of the monolithic 9,500 square-foot building.

While the fashion industry has only recently embraced drops, for End, this has been a weekly occurrence since its inception in 2005. On “drop days,” lines can reach up to 500 shoppers. “We’ve had queues outside of our stores for as long as I can remember,” says Parker, who, along with Ashworth, at the age of 22 founded the menswear destination in Newcastle with £20,000 (about $26,000) of their own money.

The store quickly became known for its unique, curated mix of sportswear brands such as Nike and Adidas and fashion-forward, emerging labels like Henrik Vibskov and Umbro by Kim Jones.

In 2006, End launched its e-commerce website and online sales quickly eclipsed those of its brick-and-mortar shop.

Still, many high-end brands weren't convinced. “Back then, consumers weren’t mixing luxury with emerging fashion, so it was very hard to attract the brands that we were interested in working with,” explains Parker. “Very quickly we understood that we needed to become the best partners to the brands, representing them in right way, paying the suppliers on time and always act respectful.”

It wasn’t until 2009, when End opened a second Newcastle outpost and started to introduce contemporary fashion brands such as A.P.C., Acne Studios and Comme des Garçons, that the business started cultivating a community of loyal, young shoppers. The move paid off and that year revenues grew by 50 percent.

For Parker, dipping a toe into the luxury market was naturally next on End's agenda. “Mixing [streetwear and luxury] is so accepted now with Virgil Abloh at Louis Vuitton and with LV’s Supreme collaboration, but when we started speaking to luxury brands it wasn’t an easy conversation,” he said.

At the time, upscale houses were predominately working with more established department stores and high-end boutiques, which mixed its merchandise based on price points and design aesthetic. Associating themselves with End would have been a risky move.

“We were the new kids on the block [and] one of the first stores to have the vision of how the younger generation would dress, mixing up the styles and brands,” says Ashworth, who started working with luxury brands in 2010. “I spoke to them about our millennial and gen-z consumers and about how we were reaching a different consumer. Some of the more forward-thinking ones got it and came onboard and I don’t think any of them have regretted it.”

By 2014, End passed one million registered users on its website and luxury brands including Saint LaurentMaison Margiela and Valentino started to see the opportunities of working with the retailer and signed on. Around that time streetwear had entered the arena of high-fashion with a new wave of emerging brands. Labels like Off-White, Vetements and Gosha Rubchinskiy started blending fashion-forward design and a luxury-like positioning with community-driven authenticity often found in street culture. The global fashion industry was about to be disrupted by streetwear, and End had seen it coming for years.

For Index Ventures, which has also invested in Farfetch, Net-a-Porter and Grailed, it was enough proof to take a minority stake in the retailer, for an undisclosed sum, in 2014.

“End is a combination of a great secret when it comes to the investment community and a cult following when it comes to its customers,” says Danny Rimer, a partner at Index Ventures. “It’s this community and the close relationship the team has with its suppliers that sets it apart from other retailers.”

The backing — End’s first ever investment — enabled the company to expand its Newcastle store, open a new three-storey flagship in Glasgow and bring its tech team in-house (instead of working with a third-party) where they worked on new developments, including the 2015 introduction of End Launches, a first-of-its-kind online raffle system that lets consumers enter draws with the chance to win and purchase exclusive and highly coveted sneakers.

The changes led the company to grow its team to more than 450 staffers and its revenues from $35 million in 2015 to a projected $180 million by the end of 2018. According to Parker, End has been profitable since day one.

And while End’s annual revenues still track behind those of its competitors — MatchesFashion reported about $393 million in revenue for the year ending January 2018, while Ssense is on track to hit about $800 million in sales in 2020 — it has cultivated a strong community on which it is betting strong future business growth.

According to data from SimilarWeb, a digital market intelligence service whose data is imperfect but directionally accurate, monthly web traffic to End’s website reached 7 million in September 2018, compared to 3 million for MatchesFashion, 5 million for Ssense and 3.6 million for Mr Porter. End also had the highest average page views and average article visit duration per session out of the group. It also has a higher Instagram following than that of its competitors.

“End isn’t eclectic just to be eclectic. Its credibility as a first-mover allows for strong relationships with e-commerce eschewing streetwear brands, which provides it with a competitive advantage against other retailers when it comes to product,” explains Robert Burke, founder and chief executive of retail consultancy firm Robert Burke Associates. “[Meanwhile] luxury brands look to End as a platform to elevate their own brand through sharing a stocklist with cult streetwear brands.”

Now with a solid foundation in place, End is ready to become a sizeable player vying for a share of the fast-growing online luxury goods market, which has tripled in size over the last five years, to about $23.5 billion in 2017, according to global consultancy Bain & Company.

While e-commerce sales make up around 90 percent of End's total sales, the founders see physical stores as key to the company's future growth as it offers additional exposure while providing its target demographic with physical touchpoints to the brand. “Over the next few years we’re looking into opening more stores. Next year we’ll be opening our first international store,” says Ashworth, who declined to disclose the exact location. “Our data shows that the UK, Europe, US, Asia and Australia are all very important markets, so with our physical retail expansion it would be a dream to go all over the world.”

In addition, End plans on increasing its brand collaborations and special projects, which will drive novelty for the consumer and additional marketing for the company. Past product collaborations include those with Champion, Neighborhood, Adidas and Ami.

What’s more, End recently purchased a new UK distribution centre, which the company will move into in early 2019 and will be able to hold five times more stock than its current warehouse. Additional distribution centres in Europe, US and Asia are said to follow.

If all goes to plan, the retailer projects that revenues will double to $350 million by the end of 2020.

“[In the end] it’s about removing friction, so the customer can seamlessly shop across channels, and I don’t think many companies have managed to crack that yet,” says Ashworth. “We’ll make it as convenient and as good of an experience as possible for that consumer. We’ve got some good stuff coming.”

BoF: The Secrets to Selfridges’ Success

BoF: The Secrets to Selfridges’ Success

BUSINESS OF FASHION | VIKRAM ALEXEI KANSARA

LONDON, United Kingdom — When Selfridges staged a large-scale Fendi pop-up last summer, ice cream, postcards and balloons helped to conjure up the energy of a traditional Roman piazza inside the upscale British department store’s Corner Shop, a concept space that’s part of the retailer’s £300 million bet on the power of brick-and-mortar shopping.

The investment is focused on a major, four-year renovation of the accessories hall in Selfridges' London flagship, which was reimagined by English architect David Chipperfield and now spans 60,000 square feet, or about one-third of the Oxford Street store’s ground level. The project includes a new triple-height, art-infused  entrance on Duke Street, a 4,000-square-foot eyewear destination and the Corner Shop, which has also hosted pop-ups with The Rolling Stones, Gentle Monster, Balenciaga and Chanel.

So far, the move appears to be working. Earlier this month, Selfridges posted another set of robust results. For the year ending 3 February 2018, sales hit £1.75 billion ($2.27 billion), up 11.5 percent.

The UK’s looming Brexit has yet to dent luxury consumption in the country, buoyed by international visitors benefitting from a weak pound, and British rival Harrods also saw sales climb in the last year, reaching £862.5 million, up 4.6 percent. But Selfridges stands apart for its strong performance amidst fierce competition from online players and a slump in local consumer confidence.

Tellingly, the retailer cited accessories as a key driver of growth. The opening of major boutiques, including Louis Vuitton and Tiffany & Co. in its Birmingham store, provided an additional boost. And though Selfridges was late to the e-commerce game, digital sales also grew swiftly, bolstered by investment in a Chinese-language site, an Android app and a new unlimited delivery service.

But behind these moves is the underlying secret to Selfridges’ strength: a multi-pronged strategy rooted in a highly focused store network, a unique approach to the concession model and American entrepreneur Harry Gordon Selfridge’s founding insight that a modern department store must be a true destination; welcoming, entertaining and a social landmark.

Selfridges has physical advantages over rivals: it only has four brick-and-mortar locations, all situated in prime, densely populated areas across three UK cities: London, Birmingham and Manchester. This keeps focus and productivity high, which is one of the reasons why Selfridges was able to pour £300 million into the revamp of its Oxford Street store.

Selfridges has embraced a concession model, allowing brands to run their own shop-in-shops. Because brands typically manage their own stock and personnel with greater focus, the approach often outperforms the traditional wholesale model, according to retail analysts. The downside can be a disjointed and undifferentiated shopping experience, exacerbated by store operators who can sometimes act as little more than landlords. But Selfridges avoids this in a few ways.

For one, the retailer has forged strong relationships with its brand partners, encouraging them to be creative with their concessions and ensuring Selfridges gets the very best product, which labels typically reserve for their own flagships. Selfridges also blends concessions with its own product selections, often featuring young and unexpected brands, then knits everything together with entertaining pop-ups to create a seamless and curated customer journey that unites the economic benefits of concessions with a genuine sense of discovery.

“The starting point has to be that nobody should know what’s concession and what isn't,” said Selfridges managing director Anne Pitcher. “I defy you to tell me what is operated by a brand and what we operate directly.”

“One of the challenges with a large format store like Selfridges is keeping it intimate, keeping it highly curated and not just a series of shops-in-shop for major brands — they’ve done both,” added retail consultant Robert Burke. “They’ve really nailed the importance of having a variety of brands: new brands and young brands, and fantastic pop-ups,” he continued. “They have not created a luxury ghetto, meaning that it is not just one big luxury brand after another.”

Alongside its dizzying array of goods, Selfridges also has an uncanny ability to sell the experience of shopping itself, which explains why the new marble-floored accessories hall in its London store comes with a 14-seat circular bar and a Japanese flower market.

“At Selfridges, you can buy flowers, have a glass of champagne, meet a girlfriend and walk around the space, which is architecturally enjoyable,” said Pitcher. “It makes you feel very different if you walk out with a beautiful bag, because you enjoyed everything around it.”

Enjoyment is hard to measure but according to Joseph Pine, business guru and author of “The Experience Economy,” time is the basic currency of experience and the more time your customers spend with you, the more money they will spend now and in the future.

Selfridges offers plenty of novel services like FaceGym, which delivers 30-minute “non-invasive facial workouts” that lift and sculpt the face. (In a sign that department store competitors are closely watching and trying at least some of what Selfridges is doing, Saks Fifth Avenue also opened a FaceGym on the new second floor of its New York flagship in June).

But one of the most important elements of Selfridges’ focus on experience is its food and beverage strategy. Sitting down for a drink or meal at any one of the retailer’s bars and restaurants certainly lengthens the time customers spend in its stores.

It’s also a social activity. “People love people,” explained Pitcher. “People like going shopping together; going to museums together; going to cinemas together. It’s about enabling people to play together. You’ve got to have fun, right? If you don’t have fun, what is the point really?”

Food also plays to the heightened value of sensory experiences you can’t get online. “The role of a physical store must be to engage the senses. We've always had food at Selfridges and we are going to have even more and better food for eating, tasting, smelling,” said Pitcher. Then, of course, there’s the added benefit of a customer that has just had a glass of wine.

A savvy cultural radar is also crucial to the success of Selfridges, which has managed to be relevant to millennial and Gen-Z consumers, who are expected to account for 45 percent of the luxury market by 2025, according to Bain & Company.

At the end of October, Selfridges is set to unveil a 20,000-square-foot space for men's streetwear that’s been three years in the making and will feature Yeezy, Gucci, A Bathing Ape and Off-White, along with a bowl for skateboarding (much like Paris department store Le Bon Marché, which recently launched a skate-able structure). “We would like to say we are in touch with what is coming down the tracks,” said Pitcher. In addition to streetwear, the retailer was also early to the clean and conscious living trends, partnering with the likes of Detox Kitchen and Canada Goose, which created exclusive fur-free jackets for the chain back in 2016.

Selfridges’ Body Studio is another good example of its ability keep up with the cultural conversation. The concept wraps together lingerie, activewear, swimwear, beachwear in a way that’s more in sync with the way modern women think about their bodies than a typical lingerie department. “When we set out to build a great destination for lingerie, we thought: let’s create a studio with a health cafe and a hairdresser and yoga and a whole conversation about your body, rather than just a place to buy underwear,” explained Pitcher.

It doesn't hurt that Selfridges is also one of the world’s most democratic and high-traffic luxury department stores, drawing 160 million visitors a year to its physical and digital channels. “It is not intimidating and exclusive,” said Burke, who noted its wide spectrum of products and prices.

“The world is welcome at Selfridges,” explained Pitcher. The company has been particularly successful at addressing international customers with translations, multilingual staff, foreign payment options, tax-free shopping services and digital tools that help visitors from abroad navigate its stores.

Then, there’s the power of what Pitcher calls “placemaking.” For all that’s percolating inside its stores, Selfridges is trying to think beyond its own walls, contemplating the neighbourhoods around its outlets and creating connections with local communities. “A physical store sitting in a neighbourhood with which it has no relationship is alien,” said Pitcher.

Selfridges is working closely with Crossrail, a large-scale public transport project in London that will shuttle millions of people to the Oxford Street area, many of whom will surely make their way to Selfridges. The retailer has also planted trees and built a marble bench and drinking fountain outside the new Duke Street entrance to its London store in a bid to create a plaza-like feel that is designed to both prettify the area and attract people to the store.

Last week, the retailer kicked off its rock n’ roll-themed holiday event — Selfridges Rocks Christmas — with a bang involving 85,000 baubles, 200 Christmas trees, a holiday cabaret and a series of elaborate window displays. “Selfridges is providing an experience even if you never walk into the store and you can see that specifically with these windows,” observed Burke. “There are people that won’t walk into the store, but Selfridges has already won them over. And in a year or two years, they might buy something from the food hall or meet a friend for a drink. That’s the win.”

And yet despite the strength of the strategy and the latest round of positive results, there may be limits to how much Selfridges can scale. Growth in its last fiscal year was slower than the 16 percent rise the retailer posted in the previous period. And while operating profit hit a record £181 million, that’s only slightly above the £180 million the company reported last year, meaning that margins fell and big jumps in sales may not be sustainable into the future.

There are clear advantages to the chain’s highly focused retail network, as well as longstanding questions as to whether its approach would translate to smaller cities in the UK should the company attempt to expand. But with only four physical stores, it’s clear that Selfridges must do more to boost its digital strategy.

According to Bain & Company, online luxury sales hit $27 billion in 2017, up 24 percent from the year prior, buoying the likes of Yoox Net-a-Porter, Farfetch and Matches Fashion. Selfridges cited strong digital sales in its recent results, but the company declined to disclose specific figures and its global e-commerce business still lags its Oxford Street flagship in revenue terms.

That said, the retailer has invested heavily in wooing international customers and a single visit to the Oxford Street store could drive multiple additional purchases online, if Selfridges was able to better integrate its physical and digital channels.

“The big challenge right now is whether we have the ability to fully integrate digital with physical and the answer is no, not yet,” admitted Pitcher. “However, when we've done that it will be a huge strength. This is the biggest challenge for any department store,” she added.

“Our roadmap to become an omnichannel player is well underway. The plan is securely in place.”

NYT: Getting Shoppers Into Stores Takes More Than Inventory

NYT: Getting Shoppers Into Stores Takes More Than Inventory

NEW YORK TIMES | ARIEL FOXMAN

In 2018, as many as 12,000 stores are expected to close in the United States, according to Cushman & Wakefield, a commercial real estate firm. Nine thousand storefronts shut down last year.

Yet despite this very real reckoning, countless retailers are not only surviving, but also thriving.

The secret to their adaptive success? Almost anything, it seems, that keeps shoppers on their toes is viable. That includes exclusive merchandise (will this location carry that handbag?), pop-up shops (will this store be here next week?) and experiences (can I eat or drink or post as well as shop?).

Innovations that offer intrigue, if not necessarily inspiration, seem to be winning.

Samantha David, chief operating officer of WS Development, one of the largest retail development firms in the country, has spent the last two years directing the Lazarus-esque revitalization of Palm Beach’s Royal Poinciana Plaza. The area was once a destination as prestigious as Palm Beach’s Worth Avenue, but it had lost much of its retail glory by the 1990s.

The project — which reopened in 2016 — is now one of four properties in WS Development’s Up Markets division that focuses on premier retail opportunities. It features 50 boutiques, including new Hermès and Saint Laurent outposts.

Despite her company’s sizable Palm Beach investment, she says she is aware of the crucial retail challenge ahead of her: getting people offline and into her Plaza’s boutiques.

An embroidered tulle dress available only at Mr. Gurung’s West Village boutique.CreditDaniel Dorsa for The New York Times

“Gone are the days of shopping by necessity, as much of that can be satisfied online,” said Ms. David, the daughter of the fashion designer Lisa Perry and the former hedge-fund manager Richard Perry, who also has a majority stake in Barneys. “Today, shopping has to be a part of how I want to spend my day, spend my time, in all aspects.”

To get consumers spending their days at Royal Poinciana Plaza, Up Markets is pairing carefully curated retail with a robust schedule of on-site lifestyle programming like the “Backgammon and Bubbles” series (rosé bubbly for adults, a bubbles bar for the children) and the “Wee Royals” arts and culture activities for children.

Indeed, it would appear that the “hangout” is now as important as what is hanging on the racks.

Prabal Gurung, a Nepalese-American fashion designer, a favorite of celebrities like Priyanka Chopra and Kerry Washington, would agree. As he prepares for his label’s 10th anniversary next year, Mr. Gurung has decided that this is the year to debut his first stand-alone store.

He said his just-opened boutique on Bleecker Street in Manhattan’s West Village is “not the typical retail space where you just sell clothes.” Rather, the store is focused primarily on telling (and experiencing) stories — of the designer’s American dream come true, or the story behind the craftsmanship of handmade merchandise. Mr. Gurung intends to host a rotation of live events.

“We are opening our doors to the next generation to come in and experience that luxury doesn’t have to be cold and distant,” he said.

At the same time, Mr. Gurung has been chosen to be the creative director of “Love, Bleecker,” a joint project from Skylight, a fashion event venue development firm, and Brookfield Properties to reimagine beloved but bruised Bleecker Street, a totem of the past decade’s retail boom and bust.

“My dream for Bleecker Street is that every store should have a back story that can excite,” Mr. Gurung said. Under his recommendation, the “Love, Bleecker” collective showcases small-batch retail shops such as the floral atelier Fleurotica and Bonberi, a vegan and wellness bodega.

While eyes are always on the bottom line, brands like those from the designer Tory Burch are extending the definition of their stores beyond merely pushing new arrivals. Ms. Burch, who has over 100 namesake stores from Azerbaijan to Qatar, said that she wanted her customers to go into one of her stores “and feel like they are going into a home. Where they could hang out, have a drink, have their husband sit on a couch and it would be kid-friendly.”

And this season is now inviting those lounging in her Meatpacking District outpost to get hands-on with her other passion, the Tory Burch Foundation, which has given more than $40 million to causes supporting women entrepreneurs since 2009, including an education fellowship program partnership with Goldman Sachs. “Now that we have had real impact and scale, I am excited to bring it into the store,” she said.

Efforts like Ms. Burch’s reflect the changing nature — and increasing sophistication — of shoppers.

“Gone are the days when stores told the customers what they were going to buy,” said Robert Burke, chairman and chief executive of Robert Burke Associates, a fashion consulting firm with clients like Chloé and Vera Wang. “The customer is now highly educated about the brands. The customer drives the experience and that experience is not entirely transactional.”

That sort of hands-on trial activation can be as literal as Canada Goose’s Cold Room at the brand’s new flagship at the Mall at Short Hills in New Jersey, where customers can try on coats at temperatures as low as minus 13 degrees Fahrenheit. Additional Cold Rooms are set to open in Vancouver and Montreal, where customers could presumably just head outside to check on the efficiency of their purchase.

Other activations are a bit more grand. This September, Matchesfashion.com, an English on- and offline fashion multi-brand store, introduced its retail residence: 5 Carlos Place. The five-story by-appointment “home” in London’s Mayfair allows not only for private on-demand shopping and weekly product curation, but also for entire floors of entertainment. A schedule of panels, podcasts, master classes, dinner parties and performances is available on the Matches site.

One of the pioneers of the “retail residence” is Ralph Lauren, whose first flagship opened in the 1980s on the corner of 72nd Street and Madison Avenue, in a former French Renaissance revival mansion. Rather than gutting the space, Mr. Lauren embraced, renovated and decorated it — turning it into a destination whose value transcended the clothes inside. The store is still referred to by the company and fashion experts as “the Mansion.”

“Ever since Ralph Lauren opened his first store, or shop in shop, he never really thought of retail as just his opportunity to sell clothes,” said David Lauren, the designer’s middle child and the company’s chief innovation officer. “What he did on Madison Avenue was create a home. You would move through it, sit down and enjoy a coffee or a glass of Champagne.”

During its 50 years, the brand has earned a reputation as an early adopter when it comes to technology: embracing everything from online customization to virtual reality and artificial intelligence. That is why it is rather quaint to learn that one of its most successful retail initiatives is Ralph Lauren coffee.

This fall, the brand reintroduced its coffee pop-ups around New York City and it counts the stand-alone Ralph’s Coffee in Hong Kong’s Harbour Cityand Ralph’s Coffee & Bar in London as bona fide hits. “It’s another way to experience the brand,” Mr. Lauren said.

Joel Isaacs, whose New York-based Isaacs and Company is a go-to real estate firm for luxury retail clients including Prada, Marc Jacobs and Jil Sander, said that all of the retailers he was talking to now were considering ways to incorporate events and some sort of food and beverage component.

Mr. Isaacs recently worked with the Texas-based fashion boutique Forty Five Ten as it looked for its first New York space. The shop had one caveat: “We did the deal with them at Hudson Yards, and they specifically chose the fifth floor of the project because on the fifth floor you’ll have four restaurants and they wanted to be in proximity to food.”

Menu or no menu, retailers want you to pull up a chair — or enjoy a performance — and ideally stick around and actually buy something. Even if that means the chairs themselves.

Mr. Gurung said he wanted to be able to highlight the furniture in his store. “We are teaming up with an interior designer,” he said. “If someone wants to buy that, they can.”

THE CUT: Has PETA Finally Won the War Against Fur?

THE CUT: Has PETA Finally Won the War Against Fur?

THE CUT | AMY ODELL

Last winter, on a frigid February day, a group of women gathered in front of London Fashion Week’s Store Studios headquarters and took off their tops. Clad in nothing but body paint reading “WEAR YOUR OWN SKIN,” they marched behind signs emblazoned with the logo of the organization they were representing, PETA.

“Animal skin is not fashion! Where the hell is your compassion?” they chanted as camera crews from the British tabloids scrambled to report a story about topless women in the streets.

Two weeks ago, another London Fashion Week wrapped up. But unfortunately for the Daily Mail, this one afforded no such salacious opportunities. According to the British Fashion Council, not one of the 80 designers who participated in the week showed real fur.

Animal-rights activists have become as much a fixture of Fashion Week as Anna Wintour. They regularly demonstrate outside major shows and occasionally manage to ambush a runway, the way one protester from the group Surge did at Mary Katrantzou’s February London Fashion Week show(ironically, she showed only faux fur). At Paris Fashion Week on Tuesday, PETA activists wore underwear and giant costume bunny heads to demonstrate at the Eiffel Tower, where Saint Laurent showed later that evening.

But these days a lot of people feel that fur is not acceptable, including some of the most influential names in fashion. Burberry, Michael Kors, Donatella Versace, Giorgio Armani, and Gucci’s Alessandro Michele and Marco Bizzarri have all recently made pledges to never use fur in their collections again. Other famous labels like Marc Jacobs and Givenchy haven’t officially gone fur-free, but showed only faux fur on their fall 2018 runways. The cities of Los Angeles and San Francisco have officially banned fur, too. In the decades-long battle between fashion and PETA, it seems as though PETA has finally won — despite its own best efforts.

The organization is loathed within the industry. In 2005, on her way into the Chanel show, a PETA protester threw a tofu pie in Wintour’s face. Almost ten years prior, PETA claimed responsibility for another famous attack on Wintour during lunch at the Four Seasons, in which a woman screamed “Anna wears fur hats!” before dropping a dead raccoon onto her plate and scurrying out of the restaurant (the co-owner of the restaurant later said Wintour “didn’t seem bothered at all” by the raccoon, which was removed and replaced with a burger).

In 1999, an unidentified protester threw tomato juice at then-Gucci designer Tom Ford at a fashion conference in Dana Point, California, while PETA protesters assembled outside in cages wearing donated fur coats to illustrate the inhumane treatment of animals on fur farms. Ford, who also showed faux fur in the February show for his namesake line, has said he remains distraught by the incident to this day. “[I]t was one of the most violent, frightening things that has ever happened to me,” he told WWD. When his attacker reached into her handbag, clearly rooting around for something, “I thought it was a gun,” he said.

Marc Jacobs called out animal-rights activists in an Instagram after a separate group protested his recent runway show, writing, “being abusive and aggressive to people while protesting about cruelty to animals is just plain hypocritical.”

PETA’s associate director of campaigns, Ashley Byrne, said the group never protests a designer publicly without trying to resolve their issues behind-the-scenes first, but feels their approach is justified: “I mean, I can’t think of something that exemplifies harassment and bullying more than killing someone and taking their skin.”

Perhaps unsurprisingly, fashion insiders don’t credit the industry’s newfound rejection of fur to the people who have been throwing food and dead animals at its most important members for 20 years. Instead, they cite a hyper–socially conscious generation of millennials who believe we should be able to experience luxury without contributing to animal suffering.

“The fashion industry’s always concerned with the millennial consumer and the next wave of consumers and I think they’re pretty firmly planted ‘anti-fur,’ ” said Robert Burke of the luxury fashion consulting firm of the same name. “The last thing fashion likes is feeling dated or old.”

Chloé Mendel is a self-described “sixth generation furrier” who worked under her father, Gilles Mendel, one of fashion’s most famous pelt dealers. She recently launched Maison Atia, a line of luxury, reversible faux-fur coats. With every purchase of one of her coats, a homeless pet gets transportation to a no-kill animal shelter from Paws Chicago.

“I’m young. I don’t buy furs,” said the 25-year-old. “If you’re going to buy something more expensive than a bottle of water, then you want something good to come out of it.”

Those who do still buy fur like to argue that it’s better for the environment than faux fur, which has a reputation for being bad for the environment. But even that millennial-friendly argument doesn’t quite scan. So little real or faux fur is used for clothing in comparison to other materials that it’s hard to find a detailed scientific study that properly assesses its carbon footprint. (Sales of fur and faux-fur items in the U.S. represent just 1 percent of total luxury apparel sales, according to retail data-tracking firm Edited.) At the least, it’s fair to say the verdict is still out.

When Gucci swore off fur last year, CEO Marco Bizzarri said the material wasn’t modern and that continuing to use it would impact his ability to attract the best (presumably millennial) talent to work at the company. (Half the label’s customers are millennials; it also employs as a “shadow committee” of millennial advisers.) Michael Kors echoed this sentiment after his fall 2018 show, his first since joining the Fur Free Alliance, telling reporters that even women on the Upper West Side weren’t interested in buying mink. Contrast this with the New York Times’s proclamation in just 2015 that “fur is back in fashion,” crediting Kors with “turn[ing] fur into a runway star.”

Even some activists aren’t sure how much PETA has contributed to the current faux-fur boom. The Humane Society’s PJ Smith, who works with fashion labels to craft fur-free policies, has seen the shock-and-awe tactics commonly associated with PETA backfire. Not long after he started in his position nine years ago, he went into a meeting with Barneys armed with an arsenal of disturbing media, including videos of animals being skinned alive and fetal lambs being used for astrakhan fur.

“I remember watching their faces and seeing them shut down, and it happened very early on in the meeting and we didn’t get anywhere,” he said. “They know it’s already bad and they don’t want to see it.”

PETA’s gruesome viral videos of coyotes being trapped for the benefit of a fur trim on those ubiquitous Canada Goose jackets may make sense to a social media–addicted generation. But their reputation of exploiting women to make their points, as in campaigns like “I’d rather go naked than wear fur” or their topless protests, look dated and problematic in an age of activism powered overwhelmingly by young women who are tired of being taken advantage of. (Jezebel has been slamming PETA’s controversial stances involving women — like Ingrid Newkirk’s statement that “discrimination” against chickens is as bad as that against women — for more than a decade. PETA’s Byrne says men regularly participate in nude protests but aren’t the focus of as much media attention.)

For animal-rights activists, the question isn’t whether the fur trade will end in their lifetimes; it’s who will be next to take a fur-free oath. Joshua Katcher, an adjunct Parsons professor, anti-fur activist, and author of the forthcoming Fashion Animals, has an idea. “Karl Lagerfeld has Choupette. He’s next.”

PETA has its eye on Prada, Byrne said, and wonders why Marc Jacobs hasn’t made a splashy announcement about his label going fur-free for the past year, when the brand has said in its own Instagram comments that it has done exactly that.

When I ask Byrne if she feels like PETA has finally won, she stops short of a simple yes. “Every one of our campaigns is a campaign for the animals. So the way we see it, this is a win for the animals.”

WSJ: Michael Kors Woos Versace in Push for Foothold in High Fashion

WSJ: Michael Kors Woos Versace in Push for Foothold in High Fashion

WALL STREET JOURNAL | MATTHEW DALTON AND SUZANNE KAPNER
Michael Kors Holdings
 Ltd. KORS +0.67% is close to a deal to buy Italian fashion house Gianni Versace SpA for about €2 billion ($2.35 billion), people familiar with the matter said Monday, in a move that would put one of the glitziest names in high fashion in the hands of a budding U.S. conglomerate better known for affordable luxury.

A deal would give Michael Kors a sought-after foothold in European fashion. Although Mr. Kors, who is the chief creative director of his company, has worked in high-end fashion, his brand is now best known for handbags priced at less than $500. Versace’s handbags start at $1,500; its ready-to-wear lineup includes extravagant designs, such as a velvet dress emblazoned with a leopard, with a price tag near $2,500.

The sale would also mark one of the first attempts by an American fashion company to run an elite European brand. With its sales sputtering in recent years, Versace presents Michael Kors with a significant turnaround project. Versace’s revenue stagnated at roughly €700 million in 2017; the brand eked out a profit of €15 million last year.

“Versace has struggled with its accessories business, and Michael Kors could help them with that,” said  Robert Burke, a former Bergdorf Goodman executive, who is now a consultant.

But Versace’s edginess also sits at the opposite end of the fashion spectrum from the Michael Kors aesthetic of classic American sportswear. Michael Kors investors panned the deal, sending its share price down nearly 8% Monday afternoon after news of the acquisition broke.

Versace has been tied for decades to the tumultuous history of the Versace family, whose members remain its controlling shareholders. Founded in 1978 by Gianni Versace, the label quickly became famous for his sexually charged designs, featuring colorful prints and daring cuts. He helped promote the idea of the supermodel, with Naomi Campbell becoming a muse.

In 1997, Mr. Versace was gunned down outside his Miami Beach mansion by a serial killer, who targeted him randomly. His sister, Donatella Versace, who had little formal training in fashion design, became creative director after his death.

The period after Mr. Versace’s death marked a chaotic time for the fashion house. Ms. Versace struggled with drug abuse and checked herself into a rehabilitation program in 2004, casting a cloud over the label. Ms. Versace recovered and has overseen operations at the company ever since.

It is unclear whether the Versace family would remain as minority shareholders in the business, or whether Ms. Versace would stay on as creative director, if a deal is consummated.

Other suitors, such as Tiffany & Co., were involved in negotiations to buy the company, people familiar with the talks said. But they withdrew, concerned about the €2 billion price tag and the management challenges presented by turning around Versace.

Private-equity giant Blackstone Group LP bought 20% of Versace in 2014, hoping to orchestrate an initial public offering of the business. But those plans foundered amid Versace’s problems. Blackstone is planning to sell its stake in the business as part of the deal with Michael Kors, a person familiar with the matter said. Ms. Versace, her daughter Allegra, and her brother Santo own the other 80% of the company.

In recent years, Versace has struggled to boost sales, despite a luxury-fashion boom led by Chinese consumers. The brand has been slow to invest in digital marketing and e-commerce, losing market share among younger shoppers who have become one of the luxury’s core demographics.

Versace has been overshadowed by Italian rival Gucci, which has become one of the fashion industry’s fastest-growing brands. Gucci has embraced a quirky, at times resolutely unsexy, aesthetic.

The Italian newspaper Corriere della Sera reported the deal earlier.

In seeking another distinct brand, Michael Kors is taking a page from European luxury houses such as LVMH Moët Hennessy Louis Vuitton andKering , which own labels as diverse as Christian Dior, Fendi, Gucci and Saint Laurent. In America, it is following the path of Coach, the leather-goods and accessories owner that recently renamed itself  Tapestry Inc. Coach bought Stuart Weitzman in 2015 and acquired Kate Spade in 2017.

Both Kors and Coach turned to acquisitions after growth slowed at their core brands. Kors spent $1.2 billion in 2017 to buy high-end shoe brand Jimmy Choo.

Such conglomerates have striven to run the front end of the brands independently, allowing them to express their individual creative visions, while combining operations on the back-end business operations to realize economies of scale.

The designer Michael Kors got his start at Bergdorf Goodman before launching his own designer collection in 1981. While building his business, Mr. Kors also served as the creative director of French fashion house Céline from 1998 to 2004.

At one point, LVMH was a minority investor in Kors, but was bought out in 2003 by Silas Chou and Lawrence Stroll, the businessmen who turned Tommy Hilfiger into a household name. Under their direction, along with Chief Executive John Idol, Michael Kors expanded rapidly by targeting the affordable part of the luxury market, positioning itself in a similar way as Coach. Messrs. Chou and Stroll sold their stake in the company in 2014.

Both Kors and Coach have tried to appeal to shoppers who aspired to high-end goods but were on more of a budget. Kors rapidly expanded by opening its own boutiques, and it now has more than 800 stores world-wide. It had $4.7 billion in sales as of its most recent fiscal year, which ended in March. Helping the designer was a stint as a judge on the television show “Project Runway,” which vastly expanded his popularity.

Like Coach, the brand hit a roadblock in recent years, with critics calling it overexposed. It resorted to discounting to sell its goods. More recently, Kors has repositioned itself by raising the quality of its products and curtailing discounts.

—Ben Dummett contributed to this article.


WWD: What Is the Current State of American Fashion?

WWD: What Is the Current State of American Fashion?

WWD Staff | Women's Wear Daily 

“We started at the bottom of the American economy, so it’s not like we came into fashion at a time where makeup companies were giving away dozens and dozens of dollars to sponsor a show. We’re not used to that. So it sounds like it was all peachy for some people at some point, but for us, we’ve never known that so it all feels great.” Zoe Latta, cofounder, Eckhaus Latta

“[American fashion is] democratic in that training, experience and quantifications are less important. Anyone with a POV or one hero product can start a brand. A weakness is that many of these designers don’t have the structure and business acumen around them to find success. We shower them with praise and accolades and pages of press, but they don’t have a solid structure around their business to create longevity.”  Lauren Santo Domingo, cofounder and chief brand officer, Moda Operandi

“I think the one thing that’s hard in America — and I would say for myself, too — is we have a tendency to put a lot of light and flashiness onto young people very early on. Their first collection comes out, they’re a star, they’re going to change the industry. The reality is, when you’re running a business, there are going to be successes, there are going to be major failures. I wake up every morning just thinking, ‘Okay, what do I need to figure out today?’ You learn new things.”  Brandon Maxwell

“The question is, what do we qualify as ‘American fashion?’ America has pioneered and owns the concept of easy wear, making American sportswear the worldwide paradigm of great design with wearable usage. A few decades ago, when houses in Europe needed to bring freshness and wearability, many of them turned to American designers — Tom Ford at Gucci and at Saint Laurent, Marc Jacobs at [Louis] Vuitton, Michael Kors at Céline….Now, versatility and movement are new global paradigms that can be seen as opportunities for American fashion. We all watched the influence of Supreme, Alyx, etc., and question whether Nike is fashion? Yes, when we see the level of talent having contributed and contributing to Nike: Sacaï, Riccardo Tisci, Kim Jones, Virgil Abloh, A-Cold-Wall, Matthew M. Williams, Jun Takahashi, etc. — with success.  Floriane de Saint Pierre, Paris-based consulting and executive search specialist

“Perhaps instead of competing with each other, if we were to act as a kind of conglomerate, finding synergistic opportunities amongst ourselves, like brands under the umbrella of big European conglomerates do, big things could happen.” Jack McCollough and Lazaro Hernandez, cofounders, Proenza Schouler

“There is a huge difference in regard to the audience in Paris. That is one of the plus sides for me [showing] in Paris. It is a little bit of a challenge here in New York, just making the world see that New York is as important as it is.”  Thom Browne

“Fashion is evolving and so is the consumer. We’ve all become accustomed to instant gratification, and our consumers expect to have what they want, when they want it. The see-now-buy-now phenomenon in American fashion represents this impatience, and how the industry is becoming more efficient to address shoppers’ needs.” Vanessa LeFebvre, president, Lord & Taylor

“Today, more than ever before, you have to really put the fashion in front of the consumers’ eyes. You can’t wait in this retail environment for the customer to come to you. You have to find her. You [may be] finding her online, in a targeted situation, in a trunk show, in a resort — in the winter or the summer, at an event or at some sort of promotion. You can’t just sit back and wait for her to arrive. That’s key…The return of the quote-unquote trunk show is very much what’s happening in the retail world with direct contact with the consumer.”  Dennis Basso

“For production, there’s a limit to how much we can produce in the U.S. with the union factories. That’s why we’ve farmed it out to Italy for sample development, and they’re closed! I’m like, ‘I have a show in three weeks!’ I used to deal with it better when I was younger, but now I have two companies. Why do I have to deal with this? I pay them. I literally have nightmares every night because of the collection and no one’s sewing anything right now!”  Laura Kim, cofounder, Monse; co-creative director, Oscar de la Renta

“Maybe Europeans should change their vacation time a little bit. It’s really a disaster for us because it slows us down drastically. How can I do knitwear or shoes in August? Their factories are closed. Everything is closed in Europe. They’re all in Capri and Portugal. I think Europe will soon need to change this pattern. They could do much more business with America if we were able to buy fabric. We have to be so ready in advance. I ordered fabric today, because they delivered the wrong fabric twice. Now the factory is closed for a month. So I will have to cut something in the right color at the last moment after Labor Day when they reopen. Because no one can go to the factory to get the fabric that is waiting in a factory somewhere ready to go. That’s absurd.”  Hervé Pierre

“When I started, I always felt like Darwin — it was survival of the fittest. Now, for myriad reasons, the industry, globally as well as domestically, is at saturation. I also believe that building a legacy and building a brand takes a lifetime. Even if you build something — I go back to when I wanted to get into fashion and Helmut Lang was the hottest, most important brand in the world — just look at the evolution. Helmut Lang was hitting from the highest, snobbiest fashion insider to jeans and into luxury fragrances. Now, it’s a whole different brand; I don’t think 20 years ago was the trajectory that they thought it was going to be on, nor do I think Helmut thought that it would end up as the kind of brand it evolved into. People seem to be searching right now for ‘what is the right formula’ and there is no right formula — it’s individual.” Zac Posen

“It’s a very, very, very, very difficult time. I’m not going to say it isn’t. And if people think [fashion] is the way it was, it is not. I tell that to every single young person who wants to be a designer today. Parson’s School of Design is on fire. It’s never had more people wanting to be fashion designers. I sit on their board. I said, ‘Listen, we have to look at it with a different eye. We have to train them differently. Maybe it’s not about aperson, maybe it’s a group of people.’ Everything in life is changing.”  Donna Karan

“[Creativity] is impacted culturally. Meaning if you’re in America, you do not get any global news. I watch the BBC News every night so I don’t just hear Trump, Trump, Trump, Trump, Trump, Trump, Trump and, ‘Live at Five: Lose 11 pounds on the summer watermelon diet.’ You get nothing here. It is so isolated.”  Tom Ford

“The landscape in Europe is dominated by a handful of large, traditional luxury brands. In America, we do not nurture brands in the same way. American fashion needs to pivot; to have a long-term view focused more on longevity and sustainable brand equity. Our insatiable obsession with newness hasn’t set us up for success in terms of establishing heritage houses. The future of fashion cannot be solely a fascination with emerging talents.”  Tory Burch

“I think what we have in common right now is a call to action. The landscape has shifted dramatically — some brands have embraced see now/buy now, others have moved their business to focus solely on direct-to-consumer. Personally, I believe that wholesale, specialty stores and DTC will all continue to have a place and shine because they all work in tandem to create a healthy company. But this is for every business to decide for itself, both American and worldwide. At 3.1 Phillip Lim, we define ourselves as a global brand made up of global citizens. We make decisions based on what is right for the niche we have carved out for ourselves in the industry as a whole, not just in America.”  Wen Zhou, ceo, 3.1 Phillip Lim

“The consumer has changed enormously and then retail has changed. I think designers are doing exactly what they did 10 or 15 years ago. That could be one of the issues — that the consumer has changed at a much faster rate than the designer has. The consumer today is so educated and so demanding for newness. Prior to [now] it was all in a very nice, little food chain that went from fashion shows to magazines and editors…and fed down to the consumer. Magazines would say, ‘These are the 10 handbags you have to have, and the five designer outfits you have to have.’ All of that got wiped away basically because of the Internet, and because the consumer started calling the shots, not the industry. Today, in many ways, it doesn’t matter what the fashion industry says or speaks to each other about. It’s really ultimately the consumer’s decision. That’s relatively new.”  Robert Burke, founder, Robert Burke Associates

“I don’t think anybody anticipated the Internet and the effect it would have on business. I don’t think anybody could have predicted the impact social media has had. Now, we’re having to deal with the impact of direct-to-consumer. The department stores couldn’t have predicted it, nor could the magazines. The traditional resources of how you would go into business has changed and so many of those businesses shifted. It was like, ‘Oh, no. What do we do?’ Another thing that happened was street culture became relevant in fashion circles. You could have a street brand do a fashion show in the system of your fashion week. And then the fact that a handbag is great, but a sneaker is almost a better proposition right now. All of these things have made it extremely difficult.  Julie Gilhart, consultant

“I think we will always be strong on talent and desire. The challenge lies in addressing sustainability in a meaningful way. We cannot continue harming the planet to the extent we have been through the production of textiles and clothing. Creating more sustainable avenues of production is not even on most American fashion companies’ wish lists, let alone mission statements. We need to be focused on long-term value, quality and artistry and less on cheap, throwaway items that will only end up littering the planet. I think our industry is still largely caught up in a race to the bottom. We have to wake up.”  Tracy Reese

“As a woman in this industry, I find this is where America is so behind what has happened internationally. When you look at Stella, Clare Waight Keller, Phoebe [Philo], Maria Grazia [Chiuri], Natacha Ramsey-Levi at Chloé — the number of high-profile women that get so much respect. They’re really championed. In America, it’s Phillip, Alex, Narciso, Prabal, Thakoon, Derek Lam, Altuzarra. What do you have to do as a female designer in America?” — Amy Smilovic, founder and creative director, Tibi

“I think that American fashion continues to be important. What Americans bring to our industry — it’s that Yankee ingenuity of clothes that have a realism to them that customers respond to and want to wear. I do believe that as an industry, we are very much in a moment of transformation, trying to find our place in the world of fashion capitals. Where we were once very coveted — people wanting come to New York City to see the amazing collections — somewhere along the way, the coveted quality has faded. It’s fallen from favor. I believe that a lot of the falling from favor isn’t from the lack of creativity, the lack of quality, [but] from the arduous fashion calendar that seems to bend and slip and jerk all over the city. There’s currently no central core to New York Fashion Week.” — Ken Downing, fashion director and senior vice president, Neiman Marcus

“The strengths of American fashion are access and understanding of the customer and an undying desire to create. There’s an incredible entrepreneurial spirit here and that spirit is valued. America applauds ideas, and there’s a constant appetite for newness from the customer. Its weakness is that it’s a crowded market and there are too many brands that can rise and then quickly fall. I think this shows there’s a lack of understanding of how to create and sustain longevity. The industry feels diluted sometimes because it puts so much pressure on being everything to everyone. That’s what Europe does so well: They’re specific and designers know their strengths.” — Tanya Taylor

“Timeless, basic fashion pieces like denim jeans or sneakers are coming from the United States and are must-haves all over the world. There are also influences from the American hip-hop scene, which actually created the athleisure trend.” — Klaus Ritzenhöfer, founder and owner, Apropos The Concept Store in Germany

“While at first one might be quick to think that American fashion talent is dissipating or migrating, it seems important to take stock, stack ourselves up against the other cities and give thanks for what we’ve got! Still, no other city incubates, encourages and supports rising talent the way the U.S./N.Y does. Even if the shows occur off-shore, the U.S. still has far and away the healthiest bench strength of emerging, established talent and tenured talent in the world….Whereas Europe leans on legacy brands and the power of loyalty to the brand over the designers themselves, enabling a revolving door of designers, the U.S. is a relatively reliable, proprietary and stable market. Most designers here can still boast their name on the door. #AmericasGotTalent.” — Linda Fargo

“Isn’t Carolina Herrera the quintessential American ‘fashion’ dream story — style icon, ago 40, four children, moves to New York and starts a fashion house? And three and a half decades later, [it’s a] globally recognized brand. Carolina Herrera started the company here, inspired by the opportunity to launch a house that blended the European approach to fashion — craftsmanship, couture techniques and gorgeous fabrics — with the pragmatism of American fashion and the desire to design wearable clothes for a modern woman’s lifestyle: bringing glamour to the everyday. That was 1981, but the idea, that fundamental platform, is still relevant.” — Emilie Rubinfeld, president, Carolina Herrera

“New York is an exciting, vibrant city. I always find the source of inspiration for new trends and new ideas here. For sure, the U.S. is the most developed country for the fashion e-commerce, and…is a market for quantity more than for quality. Europe has a lot to learn from how to develop a global business with a large number of customers.” — Riccardo Tortato, fashion director for men’s wear and e-commerce, Tsum

 “American fashion is great about balancing functionality with design. For me, I do have an avant-garde sensibility because I look up to the great Japanese designers, like Rei Kawakubo at Comme des Garçons and Yohji Yamamoto and Kenzo Takada. But I also really value dressing the real woman in everyday life, and I think clothing has to be practical as well as creative and artistic. A lot of great American designers, like Marc Jacobs or Proenza Schouler, do an amazing job of balancing the functionality and everyday aspect of fashion with the creativity.”  — Hanako Maeda, founder, Adeam

“American fashion, like many industries in this country, was largely built by immigrants or first-generation Americans — Oleg Cassini, Charles James, Oscar de la Renta, Carolina Herrera, DVF, Ralph Lauren and their vision of what American freedom represents in fashion. As long as we always welcome talent, no matter where they’re from, we will be diverse and produce interesting points of view.” — Gabriela Hearst

“I do think, though, that American fashion is solid. The customer has become so savvy that designers and retailers have really had to step up their game and provide fashion, styling and service to accommodate the sophistication of the end consumer. There’s a company that can cater to every niche in the market at the right price point, with the right styling, the right fit, the right this and that. Americans are very good at deciphering what women want in all different categories across the board. It’s approached very much as a business. It’s not just an art or an aesthetic.”  Mark Badgley, cofounder, Badgley Mischka

“I think that one of the biggest strengths of NYFW is its focus on products. You definitely see nice, wearable clothes on its catwalks. However, it’s not as relevant as Paris or Milan when it comes to scouting trends. At the same time, the quality of the show productions is really great.”  — Angelo Flaccavento, fashion journalist

“As a designer for an American house, I love that we can authentically reference the clothing archetypes that come from American style and that resonate around the world: the sweatshirt, the biker jacket, the T-shirt.  I think this can be a fresh alternative to some of the formality and conventions of European luxury. Coach’s roots in New York City also guide the attitude of our girl and guy. They have an effortless ease and lighthearted spirit that informs the way we approach our collections.” — Stuart Vevers, executive creative director, Coach

“American fashion is changing exponentially, through social media and the rise of style tribes to the growing awareness of environmental sustainability. We are seeing bold new designers reimagine fashion based on past and present influence, giving a multi-cultural mashup of ideas that is rewriting what it means to be American. It’s moving at such a rapid pace, sometimes it’s hard to [home] in on styles/trends — are [they] going to be here longer than a moment on Instagram?…It can be challenging to identify which of these ideas should be represented in our world and which ones might quickly expire. On the other hand, you have a larger variety of emerging brands popping up, providing a uniquely curated assortment and diverse point of view.” Ashley Petrie, merchandise director, Fred Segal

“I have remained an independent designer, which has kept me out of the politics of geography or comparison. This puts me in a unique position. My vision isn’t grounded in just one culture, one country. It’s really about the mix of inspirations from many. What I do know is, my dream was always to come to New York and become a fashion designer. New York made me who I am, I have a sentimental attachment to it. It is my home, my identity, and the birthplace of my success. I have tried my best to support the Garment Center here. Unfortunately, the difficult retail landscape and the loss of so much American manufacturing has been challenging to make product in the U.S. But the value and importance of American fashion needs to be appreciated and supported.” — Anna Sui

“I think excitement about American fashion has tempered. Partially, it goes back to having this whole crisis of who are we. We’ve become very individualized rather than working as a collective group. When I think back to when we used to show at the tents, you had a one-week New York Fashion Week. It was when it all happened, everyone would come in to see the collections and you had a lot of power as a group. Once everyone becomes individualized and does their own things, a lot of your power [diminishes].” — Lela Rose

 “In today’s market and industry, it’s hard to compare [New York, Milan and Paris] without understanding that we live in the Internet age. It’s much harder to find unique pockets of culture today than it was 20 years ago, for example. With apps like Instagram, a Parisian or Italian designer can be inspired by specific things in Los Angeles, Tokyo, Berlin, etc., all at the same time without having to even go there. Everyone is connected, which makes everything start to blend into one larger industry and scene. Every city’s fashion scene being connected makes designers draw from the zeitgeist as a whole instead of specific things in their surroundings.” — Reese Cooper

I think it would be awfully presumptuous of me to sum up the state of American fashion — I have one point of view, which is [that of] our company….I think that the term ‘American fashion’ is perhaps a bit of an anachronism, one that used to mean some things design-wise. I think American companies were known for certain things, sportswear, whatever — and everybody’s doing everything now….so the idea of American fashion is a little more amorphous. I think we as a group, we could be doing better in terms of common interests. For our company, anyway, issues like immigration and trade have forever been problems. I can’t get people here because H1B visas are taken up, by the likes of Microsoft and IBM, within a nanosecond of those visas becoming available. For me to get a qualified premiere for our sample rooms is incredibly difficult. I can find them, but to get them here is tough….The second issue [is] trade. We’re an odd duck because we manufacture about half of our stuff here in the United States and half of it in Italy. So we face the issues both as an importer and an exporter, both of talent and of goods. So it’s difficult both ways.” — Alex Bolen, ceo, Oscar de la Renta

“While I am loving some of the emerging designers coming out of New York like Rosie Assoulin, Monse, Brandon Maxwell, Gabriela Hearst as well as some of the more established brands such as Alexander Wang, who is really having his moment, I think as a whole, the American market is being overshadowed by Paris and Milan. If you look at the most influential brands at the moment you have Balenciaga, Gucci, Dior, Fendi and of course we cannot forget Off-White. It is all about branding, for now. But ask me the same question next season and my answer will likely be entirely different.” — Eda Kuloglu, chief merchandising officer, Al Tayer Group

“Now is the time for American fashion. We’re in a transition period where streetwear and sportswear are exploding in Europe, and this is inspired by the heritage of our country. Look at what Virgil Abloh, Kanye West or Supreme are achieving. They are bringing back the power of American fashion in a very modern perspective. I think U.S. labels are no longer looking at what other regions are doing and completely embracing their sportswear roots.” — Tommy Hilfiger

“[American fashion’s strength is that] It has a big client base (U.S. citizens, primarily). Its main weakness is a certain middle-of-the-road quality, not very adventurous, not very luxurious…Obviously, you have designers who are extremely creative and also very luxurious. But speaking generally, it’s not what American fashion is known for. From the Seventies through the beginning of the 21st century, off and on, there was a sense that New York was becoming more dynamic. Although you still have some Americans that go, ‘Oh, America has no fashion. It just did blue jeans, nothing else’….A sportswear feeling was very much associated with being modern and American. America is still producing a lot of sportswear and street style, which everybody is doing. Somehow, we’re not getting credit for it in a good way. It only becomes exciting when a European luxury brand does their version of sweatpants or running shoes, things that are primarily American. If you look at American fashion as this giant thing, then the bulk of it is not as well executed. There are definitely many that are well-executed, and also many niche Americans are the ones being copied. I think Thom Browne is fantastic. It was clear to everybody when he showed in Paris that was one of the most exciting shows that season in Paris. Even though Rodarte, Proenza and Joseph Altuzarra have decided to come back to the U.S., these are designers who are doing exciting things and the quality is very, very high. A lot of them don’t get as much credit as they would if they were French or Italian designers. Often because they are American, people are not taking them as seriously.” —  Valerie Steele, director and chief curator, The Museum at the Fashion Institute of Technology

“I really do still feel that American fashion is still a very dominating, creative force. Obviously, I think Paris will always be held to maybe a different place, but I still think that there is such amazing talent coming out [of the U.S.], especially in New York. But it is definitely changing. Retailers have really been dominating the designers for the last couple years. I think, unfortunately, that old model where a buyer comes in and buys the product and it goes on the floor and they hope it works doesn’t really work anymore. There has to be more of a partnership, more communication. The customer is so much more involved, more than ever. We have decided to go in a different route where we got very private client-heavy. Probably at least 60 percent of our clients are private. Some of them are literally spending double what our retailers are spending. So that’s very interesting.” — Christian Siriano

BoF: How to Avoid Becoming a One-Hit Wonder

BoF: How to Avoid Becoming a One-Hit Wonder

BUSINESS OF FASHION | LAUREN SHERMAN

LOS ANGELES, United States — It took Cult Gaia designer Jasmin Larian more than two years to get consumers to notice the “Ark,” a bamboo-cage clutch inspired by Japanese picnic bags from the 1940s. For outsiders looking in — or at least on Instagram — the style, which was first introduced in 2012, appeared to be an overnight success. However, it wasn't until the summer of 2016 that it started popping up everywhere: the kind of accessory that social media influencers, from Marais USA shoe designer Hayley Boyd to retailer Claire Distenfeld Olshan, were happy to buy themselves. No gifting required.

But with a flood of Instagram posts came the threat of ubiquity. “At the time, I had one product that I was pushing constantly,” said Larian, who started Cult Gaia as a range of flower crowns and turbans made from deadstock fabric. (She phased out those products as they lost their edge.) “Our entire Instagram was that bag.”

The fact that Cult Gaia’s initial success was predicated on a single hero product — the item that helps to define a brand — is not necessarily a bad thing. In an increasingly crowded market, a sharply executed, recognisable item can be a boon.

“The strategy of launching with a hero product can be an effective way of building a brand,” said Ari Bloom, founder of A2B Ventures. “You get famous for doing something well.”

And yet, a hit single doesn’t guarantee that the band — or in this case, the brand — will fare well in the long term. For every brand that is able to diversify past its first success, there are dozens more that putter out, becoming fashion’s version of a one-hit wonder. Cult Gaia, which derives nearly 80 percent of its sales from handbags, grapples with this every day. “It’s amazing we’ve gotten so many seasons out of this bag,” Larian said. “My paranoia and obsession with the idea that things aren’t going to go well means that I have forced myself and my team to work on creating a world beyond it.”

Even brands that were able to scale a single product into hundreds of millions of dollars in revenue have proven that it’s difficult to sustain that success over time.

Consider Toms, which launched with a “buy a pair, give a pair” model in 2006 and generated more than $400 million in sales last year, according to Moody's. However, growth has slowed in recent years and the company, which sold a 50 percent stake to Bain Capital in 2014, has about $350 million in total debt.

In December, the ratings agency Moody’s downgraded Toms to Caa3 — a junk rating that indicates the company is a high risk to default — citing a “weak liquidity profile in the next 12-18 months, including negative free cash flow."

While Bain and founder Blake Mycoskie provided an additional $18 million in cash at the end of last year, the rating also took into consideration the fact that Toms has a “high fashion risk” because it hasn’t diversified, as about half of its revenue comes from its classic slip-on “alpargata” style.

When asked about the Moody's rating, a Toms spokesperson wrote in an email to BoF that the alpargata shoe is what makes the brand "authentically unique." Regarding diversification, the company is "focusing on those brand identifiers and incorporating them into new silhouettes" like boots, sneakers and sandals. According to Toms, there has been "measurable growth in these styles," contributing to an increase in overall sales.

Whether a brand can expand beyond its first bona fide hit — be it Vetements’ patchworked jeans or Mansur Gavriel’s bucket bag — depends on how they execute what comes next.

As for Cult Gaia, sales of handbags are up 54 percent from last year in the wholesale channel, while ready-to-wear, a category Larian soft-launched in the fall of 2016, is up 400 percent. Still, 77 percent of the business is handbags, 13 percent is jewellery and 8 percent is clothing. A new category – shoes – is showing early traction.

Overall, Cult Gaia is on track to hit $15 million in sales in 2018. But Larian understands that the Ark’s appeal may dip at some point. (It has already been copied with great frequency, compelling her to sue trendy shoemaker Steve Madden for $15 million in damages.) For now, she has extended its life by offering it in different colours and materials. Interest in her other handbag styles is also growing.

So how can brands at every scale, from indie startups to high-concept labels, avoid being labelled a one-hit wonder?

Plan ahead. Even if a brand launches with a single product, the founders should be thinking about what the next few products could look like. That idea may change as you learn more about your customer, but there needs to be some planning.

“Some people get lucky with a single product,” Bloom said. “But any brand needs to be thinking three-or-four steps ahead. Long-term solutions and value is especially important with the space getting so crowded. ”

Don’t base a collection on the product, base it on a concept. If you become well-known for a super-soft v-neck t-shirt, focus on what makes that t-shirt special: its soft fabric. “Own your key characteristics,” said retail advisor Robert Burke. Alessandro Michele’s Gucci, for instance, had an early hit with the creative director’s interpretation of the Italian house’s classic loafer. However, Gucci’s success is not based on a single popular item, but a larger idea that is communicated through a variety of items: Michele's magpie, fancy-dress wardrobe is made up of dozens of novelty knits and odd-bird embellished logo bags.

Test new products in direct channels. Retailers often fear the new: if something’s working, they keep returning to it instead of taking a risk on the unknown. When introducing a new product or category, selling it direct first can allow you to build a proof of concept.

“Nobody picked up my first ready-to-wear collection, but I pushed it really hard [online],” Larian said. “We had to be successful on our own. If the buyer doesn’t get it, we’ll show them.”

Wholesale orders for Resort 2019 ready-to-wear were up 400 percent year-on-year, with major stores like Net-a-Porter and Saks Fifth Avenue signing on.

Limit distribution. Tight distribution — being mindful of where you sell your product and how much of it you sell — allows you to not only minimise excess inventory at the end of the season but also better control the narrative around the product. Waitlists can create a (positive) frenzy. However, overly conservative forecasting can also mean losing out on sales.

“It’s a bit of a dance,” Burke said.

Diversify when you have momentum. Many brands only start putting together a plan to move beyond the “it” item until after that item is already in decline. A brand should begin moving on — or expanding — when other brands and designers begin copying it en masse. For instance, jewellery designer Rebecca de Ravenel’s $275 “Les Bonbons” earrings are frequently knocked off by fast-fashion players and peers alike, and yet her collection maintains a certain freshness. She is playing offence through her launch of ready-to-wear.

Pull back before it’s too late. Sometimes brands raise money and hire new employees based on the success of one item without considering that sales will eventually slow.

“It’s very tempting to keep going,” Burke said. “You have to know when to pull back so that you don’t run the risk of overexposure.”

BoF: Inside the Luxury Personal Shopping Wars

BoF: Inside the Luxury Personal Shopping Wars

BUSINESS OF FASHION | VICTORIA BEREZHNA

LONDON, United Kingdom — In a high-rise skyscraper in Dubai, one very wealthy woman recently threw a dinner party for a few friends — and Net-a-Porter and Mr Porter president Alison Loehnis. Alongside elaborate table settings were rails filled with some of the site’s most exclusive gowns, the latest salvo in the battle to capture the wallets of the global elite.

Net-a-Porter is one of several e-commerce companies vying for the same set of ultra-high-net-worth customers. Consumers spent $262 billion on personal luxury goods worldwide last year, according to Bain. But for online retailers, just 1-to-3 percent of clients can make up anywhere from 20-to-40 percent of revenue.

That’s triggered an arms race between the biggest retailers in the space, including Net-a-Porter, MatchesFashion and Moda Operandi, to provide one-of-a-kind products, services and experiences. Where private shopping once meant a monthly trip to a department store, online retailers have teams of personal shoppers available to chat around the clock on WhatsApp, fly to clients' homes for last-minute couture appointments and make the buy for an entire holiday wardrobe. E-commerce sites are also opening physical spaces dedicated to personal services for their highest spending customers.

“How do you make sure you don’t become industrial about it?” said Ulric Jerome, chief executive of Matches. “The biggest challenge is to build and operate a private shopping team at scale that still has a very personal approach.”

At Net-a-Porter, a priority customer is called an EIP — short for “extremely important person.” An EIP spends an average of $64,000 annually on fashion — $18,000 at Net-a-Porter — and travels 11 times a year from cities like New York, London, Hong Kong and Dubai, according to Net-a-Porter. They might expect to have clothes flown in for a gala event or arrange for a wardrobe overhaul at their home.

EIPs receive private home appointments, invitation to industry events and front-row seats at fashion shows. Sometimes brands looking to boost online sales get in on the action. At Paris fashion week, some customers attended a private dinner hosted by Balmain’s Olivier Rousteing and Loehnis.

The goal is to provide one-of-a-kind experiences, since benefits like same-day shipping have become ubiquitous.

“Product is product, and buying items becomes the basic expectation,” said Robert Burke, chief executive at advisory firm Robert Burke Associates. “Being able to have a custom item no one else has — that raises the bar.”

Online, these sites are continually one-upping each other with digital innovations designed to give customers a more-intimate experience.

MatchesFashion created a chatbot that makes daily recommendations, and the site’s personal shoppers are available 24/7 to customers worldwide. They may adopt a casual tone, switching to Instagram or swapping screenshots or videos. The goal is to turn popular messaging services — WhatsApp in Western countries, WeChat in China and Line in Japan — into customised personal shopping apps as customers provide more data about their preferences, Jerome said.

The payoff can be huge: Net-a-Porter last year sold its most expensive single piece — a nearly $150,000 Panthère de Cartier watch — on WhatsApp.

A client of 24 Sèvres said the e-commerce site, launched by LVMH last year, is her favourite place to shop online because of the recommendations her private shopper sends by text and email. The customer, a 42-year-old mother of three in London, said she enjoyed the perks, ranging from a handwritten note from 24 Sèvres chief executive Eric Goguey at Christmas to being placed first in the queue for a new Céline skirt when the brand debuted on the site in March.

“Personalisation is essential,” Goguey said. “We see personal shopping as something that should remove the hassle out of shopping completely.”

24 Sèvres is one of several sites incorporating offline locations into their high-end service. At Parisian department store Le Bon Marché, private shopping customers can have their orders delivered to the ground floor, complete with private fitting rooms and a stylist at-hand.

At Moda’s by-appointment showrooms in New York and London, its personal shoppers, or “stylists,” account for 49 percent of revenue.

“When a customer walks into one of our showrooms, the space has been curated and transformed to reflect her tastes,” says Lauren Santo Domingo, one of the site’s co-founders. For example, Moda might throw a party designed around a customer’s taste or host a dinner with favourite designer. Moda plans to open a third showroom in Hong Kong.

MatchesFashion is set to open Carlos Place in London’s Mayfair neighbourhood on September 3. The ground floor will include a café, and rotate between events and brand takeovers, with two upper floors set aside for personal shopping clients.

“It’s a strategic space for us,” Jerome said.

Net-a-Porter has hosted pop-ups around the world to present seasonal edits, but has no plans to open a permanent location.

“We’re a digital business at heart, which is why one-to-one experiences happen on customer terms,” said Loehnis. “We’re not looking at a physical space and see it advantageous to be nimble and local.”