Full episode of "Bloomberg Surveillance." Guests include Belus Capital Advisors Chief Equities Strategist Brian Sozzi, Bugaboo Chief Marketing Officer Madeleen Klaasen and Robert Burke Associates Chairman and CEO Robert Burke.
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Full episode of "Bloomberg Surveillance." Guests include Belus Capital Advisors Chief Equities Strategist Brian Sozzi, Bugaboo Chief Marketing Officer Madeleen Klaasen and Robert Burke Associates Chairman and CEO Robert Burke.
For fifteen years, Tamara Mellon was the muse, face, and legs of Jimmy Choo, the luxury shoe company she co-founded in London with her parents’ money in 1996. The stilettos regularly appeared on Sex and the City and quickly became an object of desire; wearing them suggested a life of carefree glamour. Eventually, she says, Jimmy Choo became a $900 million business. Mellon had an extravagant clothing allowance, and a make-up artist and hair stylist on call, too. She was photographed at store openings and celebrity-filled parties, on the red carpet, on vacation in St. Bart’s, in her closet, in the nude. Her 2000 wedding to Matthew Mellon, an heir to the banking fortune, was photographed for British Vogue
It turns out, though, that for much of this time, Mellon felt aggrieved. She says she was unappreciated by executives at the company and exploited by the private equity investors who funded its expansion. She was betrayed by those close to her. She had night sweats and panic attacks and was always exhausted. She left Jimmy Choo in 2011 with a reported $135 million and enough resentment to fill a book. It’s called In My Shoes and went on sale Tuesday. “To me the truth is always the best way,” she says.
This autumn, Mellon, who’s 46, is launching her own line of clothes and shoes. It’s called Tamara Mellon. On an afternoon in late September, she sits amid racks of sleek dresses, skirts and jackets in her Manhattan office as her staff prepare for fashion week in Paris. Louis Vuitton suitcases are open on the floor. Mellon is calm, almost still, and sits very straight with her hands in her lap. Her hair is pulled back into a tight pony tail. She’s wearing a deep blue wool skirt and vest with a black cashmere turtleneck from her label. Her black suede boots are thigh-high and, like all of the shoes in her collection, are made in the same Italian factories as Jimmy Choo stilettos. She named the boots Sweet Revenge; they will sell for $1,995.
Mellon says the idea for her new line had been percolating while she was at Jimmy Choo: she will introduce new items every month, instead of a new collection every season. Most luxury brands still sell only four collections a year; they’re shown months before they’re in stores. The knockoffs, of course, arrive much sooner. “I guess you could say this is fast fashion for luxury. That’s where we are. We want new things and we want them in season,” she says. “What she wants to do is hard. But I think it has real potential,” says Howard Davidowitz, the chairman of Davidowitz & Associates, a retail consulting and investing firm. “In the fashion business, speed is life.”
That her memoir often comes off as the rant someone might write to an ex-boyfriend or boss—and then never send—would seem to complicate the prospects for her new project. That’s not the case, she says. “I have the luxury now to choose who I have in my business. I’ve chosen people with good ethics and values. It’s very different.” One of them is Ronald Perelman, the billionaire investor who is friends with Mellon and has taken a small stake in her company. “I trust her implicitly, her judgment and loyalty and on top of it I think she’s a fun girl, a great girl.”
Notably, the targets in her book do not include the people she now depends on: her new investors; Fritz Winans, her chief executive; the stores that will carry her line. “You never want to make enemies when you’re starting a company,” says Milton Pedraza, the head of the Luxury Institute, a research and consulting firm. “The fact that she expresses a hard-edge point of view might give her the notoriety she needs to get a brand going. Look at Donald Trump: He’s negative about almost everyone and he still seems to have a thriving business.”
Mellon met Jimmy Choo in the early 1990s. She, the daughter of privilege who had gone to finishing school in Switzerland, was an accessories editor at British Vogue who often needed custom-made shoes for photo shoots on short notice. He was a young Malaysian shoemaker living in London’s East End, a technical master with uncompromising work habits. Soon discerning Vogue readers were tracking down Choo and placing orders of their own. Mellon, meanwhile, was using drugs and staying out all night with London’s other “It girls.” After she was fired from the magazine, she entered rehab. Six weeks later she emerged with a business plan: a Jimmy Choo line of ready-to-wear shoes.
“I had my share of demons. One of them was, of course, my mother and the enigma of why she’d always despised me so,” Mellon writes. “But the other force at play was a demonic drive for the financial security I hoped would keep me out of her clutches.” Elsewhere, Mellon describes her mother, Ann Yeardye, as a narcissist, a sociopath, and an alcoholic who’s responsible for Mellon’s adolescent depression, adult addictions, and sense of victimization. Yeardye, through her son Gregory, declined to comment on Mellon’s depiction of her or their family. Gregory, a real estate agent and developer in Beverly Hills, is three years younger than Tamara. “I don’t recall my mother being a raging lunatic,” he says. “It’s hard for me to understand where Tamara is coming from. I think a lot of it is sensationalism to sell the book.”
Jimmy Choo started as a family business. Mellon’s father, Tom Yeardye, had been the money man behind the Vidal Sassoon empire and turned out to be the only investor Mellon could find who believed starting a luxury brand from scratch made sense. The Yeardyes took a 50 percent stake in the company; Jimmy Choo owned the other half. Trouble soon emerged. Mellon says that Choo was incapable of putting together a collection; she and Sandra Choi, the shoemaker’s niece and apprentice, were the real designers. “I had set up a business with a ‘creative head’ who, in fact, had no creativity,” Mellon writes. “The few times Jimmy had anything to say about design, it was with a complaint that I was making the heels too high.”
Five years after starting the company, Mellon and her father offered to buy Choo’s half, but he wouldn’t sell, she says. They turned to a private equity firm, Phoenix Equity Partners, that bought out Choo for $13 million and claimed a 51 percent stake. Choo also had to agree to never speak publicly about the company without permission—a deal the current owners likely wish they were able to extract from Mellon.
Phoenix turned out to be the first of three private equity firms that would own and flip Jimmy Choo over the course of a decade. During that time, the company grew from four stores to 110 and its valuation increased from about $29 million in 2001 to nearly $900 million in 2011. Yet it was certainly disruptive, and stressful, for the company to be sold every three or four years. For Mellon, it seemed worse: twice, she was almost pushed out. “Private equity will use you, suck every ounce of blood, and then kick you to the curb when they exit,” she says. “They are the sociopaths of investment banking.”
During those ten years, Robert Bensoussan served first as chief executive, then as a board member. He had run Christian Lacroix and Gianfranco Ferrè and he built the managerial and strategic infrastructure that made Jimmy Choo’s rapid growth possible. Mellon, though, resented what she considered interference in the creative side and questioned many of his business decisions. When conflicts arose, it was Mellon’s father who helped resolve them. But he died suddenly in 2004, leaving the company without a mediator and Mellon without a confidante. “Robert was very effective at opening stores and in bringing in partners, but that skill set was replicable,” Mellon writes in one of the less emotional passages about Bensoussan. Elsewhere, she describes him as insecure, small-minded, and stingy. Also: “an obstructive, pain-in-the-ass employee who could be replaced.”
Bensoussan calls this “rubbish,” and says he feels more sadness than anger toward Mellon. He also says he hasn’t read the whole book yet. “She always wanted something bigger for herself, she wants to be a celebrity, another Tom Ford,” he says. “But she’s starting by tarnishing the Jimmy Choo story. And I wonder if she’s tarnishing herself, too… It’s not very elegant.”
Lyndon Lea, a partner at Lion Capital, the second firm to own Jimmy Choo, says that the company’s performance speaks for itself. “The results were due to the strong leadership of Robert Bensoussan and the hard work of many people in the organization,” he wrote in an email. Towerbrook Partners, which owned Jimmy Choo from 2007 to 2011, offered similar praise for Bensoussan, noting his outstanding reputation in the industry. Phoenix didn’t respond to requests for comment.
Mellon’s home life was often tumultuous, too. She met Matthew at a London Narcotics Anonymous meeting in 1998; six months later they were engaged. She says he was bipolar; soon after their wedding he began taking drugs again and disappearing for days. Becoming a father didn’t change his behavior. “We had a board meeting at my house a week after I gave birth and all the while I was worried my husband might be freebasing in the kitchen,” she writes. Their divorce in 2005 received as much press as their wedding did. The Mellons are on friendly terms now; Matthew didn’t respond to a request for comment.
Around that same time, the Yeardye family began feuding. Tom’s death had precipitated the sale of their stake to Lion Capital. That led to confusion among everyone but Mellon about some of the money they received. The fight between Mellon and her mother, over some $7 million, eventually ended up in court, in the Isle of Jersey, in 2009. During the trial, which Mellon attended with her therapist, her mother withdrew the case.
Jimmy Choo was sold to its current owners, the private equity firm Labelux, in May of 2011 for almost $900 million. Three months later, Mellon resigned as chief creative officer. She says Labelux refused to allow some designers and marketers to move to New York, where she had relocated with her daughter. Nor was it paying her enough. The final insult: No one tried to stop her from leaving. The company issued a statement about Mellon that says in part: “We note comments made by Tamara in conjunction with the promotion of her autobiography. We remain ever grateful for the start she gave to Jimmy Choo and confirm that her legacy lives on.”
“Me and Francesco, the most amazing last shoe maker. Back in the factories!” Mellon tweeted from Italy on May 15. She says she’s using the same factories Jimmy Choo uses and the same quality fabrics as other designers, but she’ll reduce her margins to keep prices down: Dresses will sell for $800 or so; a cashmere T-shirt goes for $295; a pony skin leopard-print trench coat is $4,500.
“Tamara is the customer. That’s what she’s always based her business on,” says Robert Burke, the founder of consulting firm Robert Burke Associates.
“It will be interesting to see how she differentiates her shoes from Jimmy Choo,” says Jane Kellock, a senior vice president at Stylus.com, a research and advisory firm. “She claims she was Jimmy Choo. Now she’ll have to reinvent that.”
Mellon has gathered a cozy group around her. Her investors are all friends: in addition to Perelman, Tory Burch has a stake. Mellon raised $22 million in total, she says, and put in some of her own money. She has a majority stake in the company and will be the creative director. Mellon has known her artistic director, Charlotte Pilcher, for decades. Winans, her chief executive, came recommended by friends. (He also came from Hudson Bay.) “It’s not necessarily that I can trust them because I know them. It’s that we want the same things,” she says. Should they worry about providing material for her second book? “I don’t think they have anything to worry about,” she laughs. “I expect to have a much easier working relationship with them.” Perelman says he won’t be involved in the company. “I’m a small investor. Even if I were a big investor I have such confidence in her that I would just close my eyes and let her do whatever she wants to do.”
The line will be sold in Bergdorf Goodman, where the one Jimmy Choo executive she got along with, Joshua Schulman, is president. It will be in Neiman Marcus, which owns Bergdorf, and Harrods. It will also be available on Net-a-Porter, the website that sells luxury designer clothes. Back in 2000, Jimmy Choo was the first brand to agree to sell on the site. Mellon hopes to introduce her own website, as well as boutiques in London and New York, next year. “If she’s successful, she’ll get more money when she needs it,” says Davidowitz. “All is forgiven if you make money, nothing is forgiven if you lose money.”
Now, in a defensive move as upstarts such as Michael Kors Holdings Ltd. (KORS) and Tory Burch LLC challenge its dominance of that market, New York-based Coach is trying to become a full lifestyle brand that outfits customers from head to toe.
It’s starting with shoes, a business that is more competitive and growing more slowly than handbags, while also presenting challenges Coach hasn’t faced much before. Where bags will always fit over a woman’s arm, Coach runs the risk of having too many or too few shoe sizes in stock. Shoes also don’t lend themselves to the gallery-like presentation of Coach’s bags. Analysts say the whole idea could put the company’s legendary profitability at risk.
“Coach’s shoe strategy is an uphill battle,” Brian Pitera, a Chicago-based principal at the consulting firm A.T. Kearney, said in an interview.
In an e-mail response to questions, Andrea Resnick, a Coach spokeswoman, said footwear is “a significant opportunity.”
“We are in the early stages,” Resnick said. “We will move purposefully.”
While Coach isn’t the first company to try to extend its brand into new areas, it is trying to do so from a position of weakness, said Robert Burke, founder of a namesake luxury research firm in New York. Companies typically expand this way when they’ve grown so strong in their initial market that customers demand the brand on other items, Burke said.
Successful lifestyle brands usually start in apparel and enjoy the halo that comes from a celebrity designer sending fashion down runways, Burke said. Ralph Lauren began selling men’s ties four decades ago and diligently built his English country life and American West brand imagery, methodically applying it to more and more categories from men’s to women’s to kids’ to home goods, layering in labels in different price ranges. Tory Burch started out in 2004 with apparel.
Accessories-driven brands such as Prada SpA (1913) have turned themselves into successful lifestyle brands by moving quickly to stage fashion shows and add categories, Burke said.
In recent years, Michael Kors, Ralph Lauren Corp. (RL), Tory Burch, and Fifth & Pacific Cos.’ (FNP) Kate Spade brand moved more aggressively into Coach’s territory, chasing handbags’ lucrative margins. Coach for the first time lost North American handbag market share in the quarter ended in December. In January, Coach responded by saying it would work harder to become more of a lifestyle brand after spending years content to dominate the handbag market.
Coach has offered some shoes before, such as $98 casual “C” logo sneakers. Its new line, introduced in more than 170 North American stores in March, is larger, more fashionable and higher-priced, with styles including “Nala” faux python pumps for $248 and “Dalia” ballet flats at $138. The company has installed shoe salons in some flagship locations and made shoes the feature of its windows in more than 75 locations.
The shoes will be added globally in the second half of this year, and Coach also plans to work on boosting sales at the department stores that carry its wares. The retailer will consider developing men’s shoes in the quarters ahead and may add footwear to its factory outlets, executives have said.
“We see ourselves growing a very substantial footwear business,” Victor Luis, who becomes chief executive officer next year, said at an investors conference last month.
The new shoes are being produced by Jimlar Corp., the Great Neck, New York-based company Coach has had a licensing deal with since 1999.
Coach said footwear sales at retail would be about $250 million in the fiscal year ending in June, while declining to provide the previous year’s footwear sales or provide targets. In the previous year, Coach got about 7 percent of its revenue, or about $333.4 million, from products other than accessories and handbags, a category that also includes scarves, jewelry and sunglasses.
Investors and analysts have so far been skeptical of Coach’s plans. The shares rose 4.9 percent this year through yesterday, trailing the 20 percent gain for the Standard & Poor’s 500 Consumer Discretionary Index and Michael Kors’s 25 percent increase. Coach traded at a 22 percent discount to the index on a price-to-earnings basis and a 52 percent discount to Michael Kors yesterday. About 55 percent of the analysts tracking Coach recommend buying the shares, compared with 84 percent for Michael Kors. Coach was little changed at $58.25 at 9:31 a.m. in New York today.
Part of the caution is due to the business Coach is pushing into. Total U.S. sales of women’s shoes climbed 3.5 percent to $23.5 billion in the 12 months ended in March, slower than the handbag category’s 5 percent advance to $7.24 billion, according to NPD Group Inc., a Port Washington, New York-based market-research firm.
Stores also have to carry lots of sizes, and markdowns to clear inventory could eat into margins, said Faye Landes, an analyst with Cowen & Co., who is based in New York, said in a phone interview.
Coach’s gross margin -- the portion of sales left after subtracting the cost of goods -- was 72.8 percent in its most recent fiscal year. Ralph Lauren posted 59.8 percent while shoe-focusedDeckers Outdoor Corp. (DECK)’s was 44.7 percent.
Coach Chairman Lew Frankfort said last month that footwear will help boost sales and profitability and won’t materially affect the company’s overall operating margin.
The early read on the shoe strategy has been positive, Coach said. Shoes as a percentage of sales at the Coach stores where they were reintroduced grew to almost 12 percent in the first five weeks from 3 percent, according to the company.
Coach is making “a very good move” because shoes are a hot category and the company has a “powerhouse” brand that can sell a lot of footwear along with its handbags globally, said Mortimer Singer, president of New York retail consulting firm Marvin Traub Associates.
While the early shoe sales results are encouraging, the boost occurred in a limited number of stores and was helped by national ads, Landes said.
The gain also may not last because the shoes look like “a me-too product,” with some being discounted down to $69 a pair Pitera said.
Cowen’s Landes, who rates the shares neutral, the equivalent of hold, sees another reason for caution, the same one that drew Coach to expand beyond handbags.
“There is more competition,” she said. “The competition has greater momentum.”
BLOOMBERG | Robert Burke, chairman & CEO at Robert Burke Associates, takes us inside New York fashion week and highlights the importance of the internet in spreading the new fashions around the world. He speaks on Bloomberg Television's "Bloomberg Surveillance."
Bespoke, long the province of Savile Row, has come to the lingerie department at Nordstrom Inc. (JWN)
Last month, shoppers at the upscale department store chain’s White Plains, New York, location were invited to add a message in sparkly text to their Hanky Panky panties. Samples: “Wow!” and “You & Me.”
Personalized merchandise is proliferating as the likes of Nordstrom, Williams-Sonoma Inc. (WSM) and Burberry Group Plc (BRBY) try to differentiate themselves -- and persuade discount-addicted shoppers to pay full price. By allowing customers to monogram merchandise and “build” garments from a range of styles and colors, stores are catering to shoppers’ yen to put an individual stamp on what they wear and put in their homes.
“There is a new kind of importance placed on self- expression and on items that are made just to be identified with an owner,” Robert Burke, who runs a namesake luxury consulting firm in New York, said in a phone interview. “It is very popular currently, and will probably have long staying power.”
Retailers are pulling out the stops to win market share amid disappointing sales as American consumers wrestle with stubborn joblessness and higher taxes. Holiday sales grew 3 percent in November and December from a year earlier, far short of the 4.1 percent forecast by the National Retail Federation, a Washington-based trade group.
Nordstrom’s profit in the three months through January may gain 20 percent, according to the average of analysts’ estimates compiled by Bloomberg. Williams-Sonoma’s earnings in the period ending Jan. 31 are projected to gain 10 percent. Nordstrom shares advanced 1 percent to $55.95 at the close in New York. They climbed 7.6 percent last year. Williams-Sonoma retreated 0.4 percent to $47.13 at today’s close. The company rose 14 percent last year, compared with a 25 percent gain in the Standard & Poor’s 500 Retailing Index.
In centuries past, royalty monogrammed their gear to herald higher status. More recently housewives looking for a touch of class monogrammed silver flatware, linens and towels. Preppies began applying their initials to canvas totes in the 70s, and, in the following decade, Wall Streeters monogrammed the cuffs of their white-collar, striped shirts.
Maison Goyard, the Paris-based trunk maker, helped kick off the latest obsession with personalization when it began letting customers choose colored stripes and letter combinations on its $1,000-plus totes and other bags.
“We went through a period in the ’90s when it was all about designers’ initials,” Burke said. “Then it became about the individuals’ initials.”
Customization has also been spurred by the explosion in small consumer electronics, which has created demand for such personalized accessories as cases for Apple Inc.’s iPad tablet, said Steven Dennis, founder of SageBerry Consulting LLC, a Dallas-based luxury consulting firm.
Williams-Sonoma’s bet on personalization is Mark & Graham, a monogramming service on steroids for a range of gifts, including jewelry and leather goods.
Tapping into shoppers’ surging interest in typography and design, the San Francisco-based home goods chain is offering a wide range of typefaces -- modern and ancient -- and letting customers splash their initials and slogans on everything from throw pillows to glassware. In a modern twist on an old theme, Mark & Graham will monogram items with e-mail addresses and twitter handles.
The website features a $199 Peruvian alpaca wrap with initials in, say, an “undisputed classic” Gothic font designed in 1948 by the late American typeface designer Jackson Burke.
“There’s a lot of pressure on branded goods that are everywhere,” said Marta Benson, Williams-Sonoma’s senior vice president for strategy and business development. “At some point, it becomes a race to the bottom.”
Burberry, meanwhile, is dabbling in mass-customization, which allows shoppers to choose from a range of options. The British company’s online bespoke service lets customers build their own trench coat. They can choose silhouettes of varying length, types of fabric or leather and such colors as honey and navy. The list of options extends to sleeves, lining, collar, buttons and belt. Naturally, a monogram is part of the package. One randomly selected trench cost $2,490, and its delivery was promised in six to seven weeks.
Burberry, the U.K.’s largest luxury-goods maker, reported third-quarter revenue yesterday that beat analysts’ estimates. Sales rose 7 percent to 613 million pounds ($985 million), exceeding the 601.4 million-pound average of nine analysts’ estimates compiled by Bloomberg.
The service at Stubbs & Wootton, which started out as a Palm Beach boutique in 1993 and has helped turn $900 slippers into stylish street wear, works similarly, though requires fewer steps. Gothic crown monogram? Maybe a cheeky motif instead, say, a skull? Shoppers can view multiple combinations.
Seattle-based Nordstrom hasn’t confined itself to Hanky Panky. The chain holds events at which artisans paint $50 Toms canvas slip-on shoes. It also offers a Joseph Abboud line of made-to-measure men’s clothing; the customer uses an iPad app to choose the style and silhouette that best fits his body type as well as select lapels, pockets and jacket vents.
Burke, the luxury consultant, is sold on personalization. He owns a yellow-and-red striped and monogrammed duffel made by Louis Vuitton, which offers a service similar to Burberry’s.
“When it comes around on the conveyor belt, you can certainly identify your luggage,” said the frequent traveler. “And it stands out above the rest.”
As Neiman Marcus Group Inc. prepares to start selling its wares in China, the U.S. luxury retailer isn’t opening stores. It’s setting up shop on the Web.
Neiman Marcus, Macy’s Inc. and Milly, the women’s clothier, are all tiptoeing into China -- striking partnerships with local Web entrepreneurs because opening stores there is expensive and complicated.
The moves coincide with slowing economic growth in China that has prompted shoppers there to pull back. Still, Neiman Marcus is making a long-term bet on the world’s most populous consumer market, Chief Executive Officer Karen Katz said in an interview.
“We believe the Chinese economy, like every economy, is going to have ups and downs,” Katz said. “We know that long-term the potential of the luxury consumer is tremendous. There is still quite a big opportunity there.”
Even with the slowdown, online sales will triple to more than $360 billion by 2015, predicts Boston Consulting Group. The number of Internet users will grow to 700 million from 500 million, it said. China’s luxury market will grow by as much as 22 percent this year, by far the fastest rate of any region, according to Bain & Co., also a consulting company.
The deals with local companies mean Macy’s and Neiman Marcus can learn more about Chinese shoppers’ buying habits before deciding whether and how to scale up. The strategy is also cost effective. Macy’s is spending about $15 million on its China Web venture; by contrast it is lavishing $400 million on a renovation of its New York flagship store.
“It’s a very clever way of dipping their toe in the water,” said ROBERT BURKE, whose namesake consulting firm is based in New York. “What’s driving it is the sheer numbers. The number of consumers and their appetite to spend is going to be highly attractive to retailers and brands.”
In its first international foray, Neiman Marcus, owned by Warburg Pincus LLC and TPG Capital, is developing a new namesake e-commerce website with a Hong Kong-based partner. Neiman Marcus plans to start the site in China with Glamour Sales Holding before the Chinese New Year in January, CEO Katz said. The Dallas-based retailer has invested $28 million in the closely held Chinese company. Macy’s, the second-largest U.S. department-store chain, will begin selling an assortment of its moderately priced I.N.C. apparel on www.omei.com next spring. It made a $15 million equity investment in the parent VIPStore Co.
“International expansion is of long-term interest to us,” Jim Sluzewski, a spokesman for Cincinnati-based Macy’s, said in an e-mail. “But we want to learn as much as we can before making substantive decisions about the future.”
Shangpin.com, a website that says it sells authorized, current-season international designer and contemporary goods at full price, debuted this month. Milly and Tracy Reese, whose fashions are worn by Michelle Obama, are among 80 brands selling their goods through the site, whose Mandarin name means “fashion” and “quality.”
Sensing opportunity, private-equity firms are investing in Chinese e-commerce. Shangpin has attracted $60 million in capital from international investors including Walt Disney Co.- backed Steamboat Ventures. Warburg Pincus and KPCB China invested $120 million in fashion e-tailer www.xiu.com last year.
These Web-only ventures face several barriers. Brand recognition remains low in China, while shoppers prefer to see the actual products and are leery of receiving counterfeit goods, Burke said. They also are reluctant to spend large sums online, said Claire Chung, a vice president for global business development for Shangpin. The country’s average online transaction size is the equivalent of $31, she said.
“We are going to have a lot of work to do to educate the consumer about Neiman Marcus,” said Katz, 55. “What is important is this message of history, heritage and authenticity because they don’t know our brand.”
To that end, the Neiman Marcus site will work to be a kind of personal shopping guide.
Milly NY CEO Andy Oshrin said he had been reluctant to enter the Chinese market before he found the right partner in Shangpin. The e-commerce approach is a better alternative to building the Milly brand in China himself with expensive stores and marketing, he said. Online sales of Milly’s colorful, print dresses already tend to outperform those in stores, he said.
“It was a way to enter China strategically,” Oshrin said.
China has its own tastes and quirks. Shoppers prefer washable clothing because dry cleaning is less available, said Winnie Foon, a Shangpin vice president for global merchandising.
There is greater demand for medium sizes in the northern part of the country, and for small and extra-small in the south. Chinese women love dresses because they don’t require the mixing and matching skills that separate skirts, blouses and slacks do. They traditionally have worn fine jewelry, and are just discovering how to wear fashion jewelry, Foon said.
Www.neimanmarcus.cn will offer full-price, current-season fashions specifically pitched to the Chinese luxury customer by a Shanghai-based chief merchant, Katz said. Because Chinese men are avid luxury consumers, Neiman Marcus’s Chinese Web store will carry a larger assortment of men’s merchandise than the U.S. site. Ditto for shoes and handbags.
While Chinese consumers have been interested in merchandise from well-known brands with logos, they’re learning to be more sophisticated, more “in-the-know,” Katz said.
“That shift really plays into where our strengths are,” she said. “We are great editors of product.”
Shangpin, which is hiring stylists who can provide fashion advice on the phone, is offering free shipping within two days. In major locations, a courier will wait for the customer to try on the items and will take them back if they don’t suit.
“We now have a new generation of Chinese women, of professional women,” Foon said. They are “looking for clothes for the office, for the weekend.”
Designer labels Jimmy Choo, Alexander McQueen and Brunello Cucinelli have signed on to the Neiman Marcus site. They’ll ship their merchandise directly to a warehouse in Shanghai, which will then distribute it to the online customer, Katz said.
It will be difficult for Chinese e-commerce ventures to replicate the customer service that American online shoppers enjoy, including quick delivery to remote locations, and easy returns, said Michael Appel, a director at AlixPartners LLP, a consulting company in New York.
“There is the whole logistical issue,” Appel said.
“China is a very big place.”
Still, the Web ventures may benefit from the cooling economy, Appel said. Shoppers who’ve developed a taste for luxury goods may be less likely to go on shopping sprees to foreign or Chinese cities and will shop online instead, he said.
Macy’s Inc. (M) is opening what it calls the world’s largest women’s shoe department at its New York flagship store beginning this month. Barneys New York Inc. just opened a unisex shoe floor, and Saks Inc. (SKS) is expanding its 10022-SHOE concept at its main store and rolling it out to more branches.
Retailers are expanding and enhancing their shoe departments because the footwear business has become so lucrative, with sales per square foot and profit margins that top other categories.
A new generation of designers such as Tabitha Simmons is driving demand, following predecessors including Christian Louboutin, who made designing shoes cool, said Saks President Ronald Frasch. High fashion is coming into ladies’ shoes at prices as low as $100, and the most extreme designs are being adapted for mass consumption by reducing heels to 2 1/2-inches from 5 inches, said Deborah Rudinsky, a footwear-market analyst for Doneger Group, a New York-based trend forecasting firm.
“The shoe can take the center stage and lead the outfit,” said Robert Burke, founder of a namesake luxury-goods consulting firm in New York. “The interest level has continued to grow. I would say it is here to stay.”
The trend was born in the late 1990s and early 2000s, whenHBO’s “Sex and the City” made designers Louboutin, Manolo Blahnik and Jimmy Choo household names. Blahnik’s open-toed Sedaraby d’Orsay pumps and the red soles on Louboutin’s covered platform shoes became icons beyond the New York fashion world.
“It became visually apparent from 50 feet that someone was wearing Louboutin,” Burke said in a telephone interview. “It was a detail recognizable not just to the fashionistas, but the husband of the fashionista and the general public.”
Designers Roger Vivier, Walter Steiger and Giuseppe Zanotti helped stretch notions of how to marry form and function, paving the way for new designer names, including Simmons, Alexandre Birman and Nicholas Kirkwood. Jeffrey Campbell and Sam Edelman, who sell fashion shoes at $100 to $200, have helped make the trend more affordable.
Sales of women’s fashion footwear grew 1.1 percent to $21.9 billion in the 12 months ended in June, according to Port Washington, New York-based market research firm NPD Group Inc. While that lags behind the recent growth rates of 4.2 percent for apparel and 7 percent for handbags and luggage, shoes perform well in terms of store productivity and profitability.
“There is no question that shoes are the most productive in terms of sales per square foot,” Muriel Gonzalez, a Macy’s executive vice president, said in an interview, while declining to provide figures. The Saks flagship’s shoe floor in New York is surpassed in productivity only by the main floor, Frasch said in a telephone interview.
Shoes and handbags have gross margins as wide as 50 percent at luxury department stores, while women’s apparel has a maximum of 45 percent, according to Kurt Salmon, a New York-based retail consulting firm.
Improving the chains’ profitability through shoe sales may boost their shares’ relative values. Macy’s shares trade at a 40 percent discount to the 32-company Standard & Poor’s 500 Retailing Index on a price-to-earnings basis, according to data compiled by Bloomberg. Saks’s premium to the index has shrunk to 32 percent from this year’s high of 72 percent in January.
The retailers are pulling out the stops to make the shoe shopping experience what Frasch calls more “emotional.”
Macy’s is adding a Champagne and chocolate bar in the shoe department at its Herald Square flagship and is hiring runners to bring shoes to sales associates wielding handheld devices. Saks is adding a camera that will be pointed at shoppers’ shoes and display the images on a screen. Barneys New York has added more obscure designers who appeal to shoe fetishists.
Macy’s 63,000 square-foot selling and stock space on the store’s second floor will carry 300,000 pairs of shoes, feature a designer shoe salon, bigger shop-in-shops for brands such as Coach and Michael Kors and include shoe closets inspired by New York neighborhoods such as the Upper East Side and SoHo. Women’s shoes had commanded 54,000 square feet on the fourth and fifth floors.
“We see a high degree of passion among our customers for shoes,” said the Cincinnati-based chain’s Gonzalez. “We wanted an opportunity to pull it all together in one cohesive statement.”
Saks, based in New York, is adding 7,000 square feet of selling space to its Fifth Avenue flagship’s 8th floor women’s shoe area and has created such 10022-SHOE departments at 11 of its stores with a plan to expand that to 15.
Women’s shoes accounted for 12 percent of Saks’s sales last year, compared with a combined 8.5 percent for men’s and women’s footwear in 2006, the year before the retailer opened its first 10022-SHOE department, named after the special New York zip code Saks obtained for it.
Barneys New York in mid-July opened its new combined 22,000 square-foot, fifth-floor designer shoe department, adding 350 styles and increasing women’s space by almost 60 percent and men’s by almost 40 percent.
Shoes are less prone to markdowns because footwear is increasingly season-less -- women now even wear boots in the summer -- and ageless, with styles appealing to teenagers and older customers alike, Rudinsky said. Shoes also are easier to fit than clothes and can be worn more often.
Shoes are so prominent now that women increasingly are buying outfits to go with their shoes, rather than vice versa, Frasch said. Fashionistas, for example, have been pairing neutral clothes with currently popular neon shoes.
Designers are expressing themselves with bows and other embellishments, animal faces, signature heels, exotic skins and unusual combinations of materials, Burke said.
“It’s not just the stores that are a lot more open- minded,” said Simmons, the 39-year-old New York-based, U.K.- born designer whose shoes are known for corset-inspired lace-up backs. “The consumer wants to try new things.”
After several years of hauling around back-achingly large bags, women are getting some relief. Small bags are back in style.
“The fashion consumer doesn’t want to look like she’s lugging around her entire office anymore,” said Robert Burke, who runs an eponymous New York luxury consulting firm. “There is a desire to look more carefree.”
The trend parallels a general shift toward more ladylike fashion, and may help generate additional sales in the U.S. handbag market, which grew 10 percent to about $10.3 billion in the year ending in June, according to Coach Inc. (COH) Luxury sales will rise 7.5 percent this holiday season, faster than the 6.7 percent increase a year earlier, according to the International Council of Shopping Centers.
Saks Inc. (SKS) Chief Executive Officer Steve Sadove is sufficiently bullish on bags to put more on shelves this fall, and is sticking to his forecast of a same-store sales increase of as much as 9 percent in the second half of 2011. Coach sees small and crossbody bags as a “significant opportunity.”
Fashion houses including Prada, Dior and Gucci ran ads touting smaller bags in Vogue’s September issue. Louis Vuitton’s Fifth Avenue flagship this month displayed a top-handled $1,560 “Lockit BB” -- for “Bebe” -- which at 9.4 inches (24 centimeters) is more than a third smaller than the iconic Lockit.
At New York Fashion Week this month, Ken Downing, fashion director of Dallas-based luxury retailer Neiman Marcus Group Inc., spotted plenty of medium-sized, rectangular, hand-held purses, many accented with the neon colors that dominated the spring 2012 collections.
That shape goes well with the current “polished looks” that are a nod to the “Mad Men” TV series and the 1950s and 1960s, he said.
Lisa Pak, who co-owns a Tribeca boutique, carried a boxy, 8-inch, yellow patent leather Louis Vuitton shoulder bag to the Vera Wang show -- leaving her oversized bags at home.
“I wanted to wear something special,” said Pak, 45. “This is all I need.”
The return of smaller bags may put limits on an oversize trend that began about 10 years ago and by the mid-aughts had “hit the major leagues,” says Roseanne Morrison, fashion director of Doneger Group, a New York fashion trend forecaster. Women liked big bags in part because they could stuff in everything from their laptops to extra shoes.
They also found pleasing the contrast of a big bag with skinny jeans, Morrison says. “It” bags included the 15-inch “Giant” Balenciaga City, priced at $1,945, and the Fendi Spy, a $2,250 17-inch bag.
Over time, however, the bags began to, ahem, weigh on their owners. On fashion blogs women complained that the bags had become so large and heavy that it was like carrying around a boulder. The gripes have prompted handbag wholesaler Rioni to defend big bags; a post this month was illustrated with a perspiring, quivering cartoon figure trying to lift a barbell.
Designer Rebecca Minkoff, who once sold a leather tote that weighed 2 pounds (0.9 kilograms) empty, says just half of her bags are large, compared with about two-thirds before. She defines a large bag as one whose width or height is 2 feet (0.6 meters) or more.
Smaller bags are easier to carry and look better with “statement” high heels than do oversized bags, which make wearers lean over and “waddle,” she says. Minkoff’s bags are also more affordable -- $195 to $295 compared with $495 -- and are selling briskly, she says.
Small doesn’t always equal cheap. Louis Vuitton’s 13.8-inch “petit modele” version of the Lockit, in anthracite crocodile with a chained handcuff, sells for $14,760.
The advent of smaller bags “will be good for business because it shows a new handbag shape and proportion that the consumer doesn’t have in her closet today,” said consultant Burke. “It gives the consumer something new to buy.”
Big bags won’t disappear, of course. Women still need totes to haul around their iPads and other gear, which means retailers will gain two sales instead of one, Burke says.
Nordstrom Inc. (JWN), the Seattle-based retailer, has a solution: a matching envelope clutch and a tote in red and black leather with leopard-print calf hair, at $128 and $248, respectively.
It used to be so simple at fashion shows. When stocks were soaring, skirts rose with them to mini length. When the markets headed down, hemlines dropped to more modest levels.
This year, it’s not so straightforward. Three days into New York’s Mercedes-Benz Fashion Week, luxury retail consultant Robert Burke was scratching his head trying to find anycorrelation between the runway’s different styles and the economy.
“Hemlines are all over the place, very much like the stock market,” Burke, president of Robert Burke Associates in New York, said in an interview.
In the past month, the Standard & Poor’s 500 Index dropped from 1121.06 on Aug. 10 to 1047.22 on Aug. 26, climbing back to 1109.55 on Sept. 10 for its biggest two-week gain since June. The 97 designers presenting Spring 2011 collections this week feature similar ups and downs -- with everything from micro-mini skirts to floor-swooping maxi pieces made with transparent organza and chiffon.
“We are living in a universe where there’s no hemline edict,”Fern Mallis, a fashion industry consultant, said in an interview. “The old adage doesn’t apply any longer.”
Mallis was referring to a maxim known as the “hemline index,” a 1920s theory attributed to the economist George Taylor that suggested a correlation between hemlines and economic growth.
This time around, BCBG Max Azria had some dresses so short that they could have passed for tunics, and others that reached the ankle, clinging to the models’ long-limbed bodies like fancy nightgowns. Meanwhile, designer Prabal Gurungdropped his hemlines below the knee and, on occasion, even below mid-calf.
In the 20th century, dresses crept up for the first time around 1915, during World War I, said Daniel James Cole, a fashion historian. Around the same time, the U.S. economy expanded for 44 months, starting in December 1914, according to theNational Bureau of Economic Research.
“The hem went up to mid-calf,” said Cole, a professor at the Fashion Institute of Technology in New York. “That was radical, because the hemline of the 19th century was to the shoe.”
The prosperous “roaring twenties” saw the emergence of flappers, who provoked anger by bobbing their hair, smoking in public and wearing knee-length dresses.
The stock market’s crash of 1929 was a defining moment for the economy and skirt heights, Cole said. Both plummeted, with hemlines below mid-calf. The S&P Index dropped 86 percent from Sept. 6, 1929, through July 8, 1932, according to data compiled by Bloomberg News.
A decade later, on the eve of the World War II, the U.S. economy entered an 80-month expansion which lasted through February 1945, according to the National Bureau of Economic Research. During this time, knee-length skirts became ubiquitous, though the trend “had more to do with conserving fabric for the war effort than with the economy,” Cole said.
As a reaction against wartime’s austerity and fabric rations,Christian Dior’s first fashion collection in 1947 offered luxurious silhouettes with full skirts reaching below mid-calf.
“The hemlines dropped by 10 inches,” said Cole. The S&P fell 28 percent between May 29, 1946, and May 19, 1947.
During the 1960s, the U.S. economy grew for 106 months, making it the second-longest expansion between 1857 and today, according to the National Bureau of Economic Research. Hemlines reached their highest.
By 1966, miniskirts became a must in women’s wardrobes. British designer Mary Quant and teenage model Twiggy helped popularize the style.
“In 1966, you had to wear a skirt that was at the knee or higher, or you’d look ruefully out of fashion,” Cole said.
With the S&P dropping 36 percent from Nov. 29, 1968, to May 26, 1970, hemlines moved back to modesty. On March 13, 1970, Life magazine addressed the style transition with a cover story, “The Great Hemline Hassle.” On Aug. 21, 1970, the publication announced, “The Midi Muscles In.”
A clear correlation started breaking down during the 1980s, with designers offering a greater range of styles and lengths.
“It used to be that short was in and long was out. If you wore long, you’d be embarrassed,” Marshal Cohen, chief industry analyst at NPD Group, Inc. in Port Washington, New York, said in an interview. “Now you can wear long, you can wear short. You can wear your pajamas to work and no one would care.”
Yet, even now an occasional correlation can be spotted, Cole said. Last summer, after the S&P fell 57 percent between October 2007 and March 2009, he noticed floor-length sleeveless dresses appearing on the streets of New York.
“There’s a whole generation of young women who’ve never worn a maxi skirt in their lives,” he said.
“I was just trying to move away from the tight and short,” said Miller, in an interview after the presentation. “There’s no subliminal message there.”
The Guli collection designed by Gulnara Karimova, a daughter of the President of Uzbekistan Islam Karimov, included ethnic Uzbek fabrics, patterns and embellishments applied to floor-length dresses. Toward the end of the event, a group of models strutted out in traditional striped Uzbek robes. Untraditionally, the robes were untied, revealing bodices -- and no skirts at all.