Vuitton, Cartier, Chanel and Dior ... the temples of fashion are feeling the economic pinch. To retain sales, some luxury giants have made a beeline for the ultra-rich, while others are dressing down their wares to include more affordable products.
The luxury goods market is one sector that is unlikely to escape the ravages of the financial crisis. Or so the perceived wisdom goes…
All businesses hope to find a niche in the market so that their products can generate profits and allow them to stay afloat during the worst of the downturn.
Cash, after all, has not vanished completely, downturn or not.
Luxury goods writer Jean Castarède said: “Profit margins in this sector remain consistently high, between 20 and 30 percent.”
Different strategies exist for different product lines, be they top-of-the-range designer label clothing, or small accessories and fashionable knick-knacks - or products that retain their value and are therefore worth investing in.
Some rely on an extremely rich clientele, those who will always treat themselves to a spot of high-end retail therapy. Eric Dalbin, event manager for the big names of high fashion such as Vuitton, Cartier, Dior and Gaultier, said the very rich will not give up on their little luxuries.
“It will be these high-net-worth people who will sustain the luxury goods market through the current crisis,” he said.
This confidence in the luxury market spurred LVMH (Louis Vuitton - Moët Hennessy) last year to acquire Royal van Lent, manufacturer of mega-yachts sold under the Feadships brand.
But Jean-Castarède believes LVMH made a mistake: “Big houses, expensive cars and luxury yachts are not indispensible, and will be the first to suffer in the 2009 downturn.”
He claims less expensive luxury goods will remain affordable and will continue to sell, and that products such as handbags, perfumes and even high-end gastronomy should come through comfortably.
LVMH has hedged its bets, however, and as well as yachts, the company bought Montaudon Champagne in December. Speaking on FRANCE 24’s Haute Couture programme before the January Paris Fashion Week, LVMH CEO Bernard Arnault said his company was keeping a diverse portfolio in order to stay afloat, come what may.
For Arnault: “We are trying to predict how the market will look once this crisis has passed. And we want to stay on top of the important sectors, as we have always done in previous downturns. I am confident we will get through it.”
Individual strategies are defined by niches in the market. Jean-Paul Gaultier has created a range for children that he presented at the Paris Fashion Week. Louis Vuitton concentrated on handbags – and every single model at the January event in Paris was carrying at least one on the catwalk. The brand also worked on its environmental image by making very public donations to Al Gore’s “Climate Change Project”.
The Gaspard Yurkievich label is expecting to increase sales in South Korea by 30% this year. Damien Yurkievich told FRANCE 24’s Haute Couture programme: “Mid-range products, supported by high-end image, will even benefit from this crisis.”
Every penny counts
The crisis, however, is already here and it has started to bite. Companies are looking at the balance sheets and it is the employees who are suffering.
All temporary workers at Chanel were laid off on December 31, 2008.
Richemont announced on January 23 that some Cartier employees would be laid off.
Many fashion houses did not even take the risk of attending the Paris Fashion Week in January, an event that was considerably more downbeat than in previous years.
Every penny counts – even for the big labels that cannot ignore the call of the catwalk.
Chanel did not rent out the Grand Palais in Paris, as it had in previous years, settling instead for the smaller Rue Cambron venue in the city’s 1st arrondissement, and Karl Lagerfeld finished a much-vaunted “Chanel Mobile Art” world tour before its scheduled end to save on costs.
Date created : 2009-01-28