Thursday, January 29, 2009

Death Of The Luxury Brands?

CNN this weekend was showing a program about the rise of 'cheap chic'. It’s basically the death of luxury brands and the ascendency of the discount stores. Of course the glitterati brushed it off as recession worries and all would be back to normal after our current problems, but is this sign of something deeper?

I have a confession, before I go on. When I was a young man about the City I was a brand freak. I didn't think you could buy a decent shirt for less than £100, suits that were cheaper than £1000 were just off limits and buying shoes for less than £200 was just a false economy. My jeans were Armani or YSL my jumpers emblazoned with little badges of the latest designer and God forbid I went to the ski slopes in anything less than Salomon, I even flew to Barbados once, just to buy a watch.

Years later with a lovely wife and a great teenager, who grows a foot a week, eats like a Tyrannosaur and wants to go to MIT, the follies of youthful spending soon went out of the window.

Finding I could buy great looking shoes for £50 and that have lasted longer than the £200 Bally's I used to buy, that I could buy 3 different shirts for £100 and that suits costing £300 were, for all practical purposes, no different from a Hugo Boss, was quite a wake up.

On the slopes this year I have been adorned with Reebok, only because we came across a store closing down and I rented all my ski equipment for the entire season for less than £100.

This had lead me to believe that people are not just turning their backs on brands because of the economy. I believe that the brands have just been found out, that is certainly how I feel when shopping.

I dealt with a small luxury brand company that shall remain nameless. They were looking to introduce watches. I found that you could buy Swiss made watches in bulk for £100 up to whatever price you wanted, per watch. The idea was to simply add your brand name and double the price. You could get the watches for even cheaper if you had 'Swiss Assembled' on the back instead of 'Swiss Made'. Swiss Assembled simply meant it was made in China or somewhere and shipped to Switzerland to have the back put on. While doing research I found this was the same with some Italian labeled clothes. The clothes are made in China, or some other cheap labor country, and then shipped to Italy to have the arms sewn on, or the beads or, more likely, the designers label.

Now before I get a caning from some luxury brand somewhere I note some exceptions, of all the wasteful spending I gorged on I have three items left. A gold Tiffany watch that has not missed a beat in 15 years, a Gucci watch that is the same and YSL jumper that looks brand new. There is a certain quality to some items and for this you pay, but I could have had an awful lot of Jumpers for the £600 it cost me, the watches, however, I cannot complain about.

Lambos, Ferraris, Bentleys and Astons etc are built beautifully and are deserving of their price tags, but everyday items, especially clothing is, in my opinion a giant marketing trick. You and I both know that most of the labeled stuff we can by is just that, a label with, in some cases, a little better material used.

We are told it is the expense of advertising, the full page ads in every man's magazine that is what we are paying for. OK, just drop the ads. I don't need Brad Pitt in a shirt to tell me it’s nice, you could knock of £100 and I will come into your shop and have a look around, if I like it I will buy it. Right now, and I believe for evermore (no matter how much money I have) I will just walk past your shop and look at another shop whose prices are more realistic.

I am sure this is part of the reason that the drop off is occurring and the knock-on affects for magazines is there for all to see.

Ad pages at the top luxury magazines fell 22 percent year over year for the December 2008 issues, according to Media Industry Newsletter. Vogue, for example, dropped from 284 pages last December, to 221 pages this December, while Food & Wine went from 160 pages to 126, according to the newsletter.

That has meant cutbacks at publishers. In October, Condé Nast announced it would reduce Men’s Vogue from 10 issues a year to two, reduce the number of issues of Condé Nast Portfolio and cut magazine budgets by 5 percent. Niche Media, which publishes Gotham and Hamptons, laid off some employees and closed a shelter magazine. American Express Publishing, which owns Departures, Travel & Leisure and Food & Wine, is lying off 4 percent of its staff.

“It’s definitely an environment that most have never seen,” said Ed Ventimiglia, the publisher of Departures. “Everyone is very concerned and somewhat confused as to what they should do.”

I know what you should do Ed, tell your mates in the publishing world that paying lost of money for a mag that is full of adverts for stuff that is overpriced is a game that has run its course. Sit down, realize that the consumer has become wise to your game and start changing your business plan.

It is not just the fact that luxury spending is on the decline because of the economy and that consumers are realising the bait and switch of magazine advertising, it is also that some luxury brands are just..well... naff, because the pirates ripping off designs have made them so.

Louis Vuitton bag for your wife? My wife turned down the potential present with a 'no thanks' that made it sound like I had made a huge fashion faux pas. Dior, Gucci, Dolce and Gabbana forget about it. And I think I have discovered another reason why all these are becoming soooo 90's. Ever watch Top Gear on the BBC with Jeremy Clarkson? They have the 'Cool Wall' where various cars are sorted into their cool ratings. Some supercars are just not cool because footballers own them, or others because they are too technical and geeky.

This then forms the basis of part of my theory, you see its not the super rich that keep the big brands going, its everyday people wanting a bit of the good life. The problem now is that whenever a woman walks into her freinds with a spanking new branded bag, the first thing she will say is 'and its a real one'. Now, I don't know about you, but that is just not cool and women are beggining to think the same. That is why they are turning to more realistically priced things, without being overtly branded, sure they want their Calvin Klein perfume, their Jimmy Choo shoes etc but the main stream brands are becoming passe and cheap chic is in.

Years back cheap stuff was the worst incarnation of the word, poorly made, not stylish and not even worth the cheap price then. Now quality products are being made cheaper, big high street stores now sell these goods at very good prices, and people like it H&M for examples says they will create 7000 news jobs this year to cater for demand... in a recession!

Lots of people who have been forced to look at their budgets have now discovered that buying a label is, in many cases, just that, and that an item of the same style and quality can be bought elsewhere for less.

I think it will be hard for many of the brands to come back from that. So Clooney can keep his 'Nespresso' I will go instant, my homage to 'Cheap Chic'.

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