Trilby Takes NOLA

I spent last weekend in sunny New Orleans, eating and drinking way too much.  While I was trying to walk off my food coma, I noticed a commonality across NOLA tourists and locals alike…trilby hats.  There were a few Panama hats (much larger and a wider brim, all turned down) and a good number of porkpie hats (much smaller, with the brim all turned up), they were vastly outnumbered by the trilby.

I haven’t been to NOLA in several years so can someone tell me if this is recent or old hat?  Pun intended…

Me: "Can I take a picture of you?" Him: "You surely can!"

Trilby couple

John bought his right away

Jim got in on the action


Sneaky elevator shot

An entire carriage of them!

Street trilby

Poet trilby

Trilby enjoying some jazz

The trilby waiting for adoption

Growth in the Luxury Market – Friend or Faux?

The future of the luxury industry was very much in question during the recession, especially with the strategy of U.S. retailers who slashed luxury brand prices to move inventory.  However, sales for the first quarter of 2011 are just in and the luxury industry has officially surpassed pre-recession sales levels.  Consulting firm Bain & Co. raised their prediction for 2011 luxury sales growth to 8 percent: $262 billion in sales this year compared to $244 billion in 2010.  Bain referred to the recovery as a “return to normal luxury goods consumption” but this recovery does not reflect the same consumption patterns as pre-recession and is creating a potentially destructive pattern for the luxury industry overall.

Luxury firms would like us to believe that consumers are returning to high-quality luxury products after getting burned with bargain shopping during the recession.  The 2010 annual report for LVMH, the largest player in the luxury market, suggests as much, repeatedly referencing product quality and the strength of their brands as the reasons for its spectacular recovery. But the geographic revenue growth for LVMH shows that sales from China are the primary driver of the exceptional sales numbers (see graph below).  Bain confirmed this pattern across the luxury industry – Chinese consumers have become the largest luxury consumer with luxe sales in China outpacing the rest of the world.

It’s not necessarily a bad thing that most revenue is coming from China but it doesn’t support the theory that luxury companies are rebounding because of their great products. The Chinese market is a perfect storm of newly wealthy consumers who love luxury brands. Some of these consumers were created by owning or managing manufacturing facilities, but even lower-income Chinese spend whatever discretionary income they have on luxury goods.  Ironically, the Chinese market is also heavily employed making some of the same products they are buying. If this revenue stream is dependent on current outsourcing levels creating a mass of consumers with money to spend, label-driven companies could be in trouble when production moves to a less expensive country, leaving the Chinese without jobs.

That’s not to say sales in the U.S. are stagnant — consumers in the Americas are buying even more luxury goods than they were before the recession hit. But where is this money coming from? Possibly Brazil, touted as the new center for luxury consumption because of the high concentration of wealth. Some of it comes from ultra-wealthy Americans unaffected by the recession because their wealth is built on stable, recession-proof sources, who are unashamed to conspicuously consume now that the recession is over. But large chunks of luxury sales pre-recession were from the aspirational consumer — those who could not actually afford luxury items and were buying on credit. Those consumers have not come back after losing their jobs and homes and going bankrupt. So what or who is compensating for them? Perhaps the weak U.S. dollar is triggering enough tourism, and tourist spending, to compensate for the loss of aspirational consumers in the U.S.  The same thing happened in Europe last year.

In some ways, luxury consumption is the same as it was before the recession.  Although sales are coming from different countries, the consumer type is the similar – someone buying beyond their means.  As we have seen in the U.S. market, this consumer is temporary at best.  Courting this consumer means constantly circling the globe for new wealth, often tied to areas of the globe with the cheapest labor pools.

It is this strategy that could destroy the luxury market altogether.  At a recent fashion trends seminar held at the Academy of Art University, a representative from forecasting firm TrendUnion reiterated the concept that what the truly wealthy desire most is discretion and privacy.  It is the truly wealthy who are the stable consumer base for the luxury market and, to keep this consumer, luxury firms must ensure that their products reflect those values.  The more that luxury firms splash logos all over their products and make them readily accessible to the new money consumer, the more the truly wealthy will turn away from them.

Maybe “destroy” is too strong a term.  Perhaps this strategy will simply separate true luxury firms – those focused on a high quality product – from faux luxury firms – those focused on marketing products.

Look familiar?

I was flipping through pictures of the Costume Institute gala when I noticed this dress…look familiar? (see Kate Middleton dress post)

It appears Anna Wintour wanted the Chanel gown to be a bit more covered up and added dark sleeves.  Which version do you like better?

The only upside of the royal wedding…

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I don’t know about you, but I got sick of hearing about the royal wedding about three days after it was announced.  Enough already!  But I had a small class assignment the other day that was, to me, to the only interesting aspect of the upcoming nuptials – thinking about what Kate will wear.  Here are my recommendations…

1.  The Rehearsal Dinner – I want to see her wear something a bit more proper for this, so I really like this dress and jacket from Elie Saab…plus, it just looks beautiful!  I also like the how the creamy grey color references her status as the bride, without being so spot-on obvious.

2.  The Wedding – Ok, I know I am so predictable here and, apparently, completely in line with other fashion speculators, but I think Sarah Burton of Alexander McQueen should design the wedding gown.  I’m not saying this gown, per se, but this gives an idea of how Burton can combine historical references in a dramatic and flattering way…modern, but still beautiful.

3.  The Honeymoon – This Chanel gown seemed out-of-place with the rest of the Spring 2011 collection, but I think it would be perfect for the warm, relaxed evenings one has on their honeymoon.  It’s glamorous, but in a casual-luxe sort of way, plus I love the colors.

Reality Bites: Fashion Reality Shows Fail Designers

Three things happened in the last week:

Thing #1 – I saw a tweet this week that Project Runway is getting ready to audition designer hopefuls for their ninth season.

Thing #2 – Cathy Horyn recently wrote an incredibly depressing blog post about the next round, and next generation, of fashion-based reality television.  Of course, many of the shows will come from Bravo, but even NBC is getting in on the act and taking it to another level – selling the clothes that are spawned in their new competition series, “Fashion Star”.

Thing #3 – Today, I read an interview that summed up the myth and dilemma of the fashion reality star – in this case, a recent Fashion Show (the Isaac Mizrahi version of Project Runway that I hate) winner.  She seemed to be the most grounded of the candidates I’ve seen, and really understood what a fashion reality show can and cannot do.

There are some prior Project Runway winners, and even runner-ups, who still show at Fashion Week, but there is no evidence that their brands are growing.  Perhaps a sign of things to come, the very first winner of Project Runway, Jay McCarroll, essentially self-imploded after the show, and rejected the advice of Nina Garcia and his editorial spread opportunity.  The fashion world has not heard from him in a substantial way since then.  The winner of season three, Jeffrey Sebelia, did not destruct but seems to have stagnated in his career.  After the show, he returned to his line but had a hard time growing the business and managing the business debt.  In 2009, he shut down the original labels (Cosa Nostra and its spin-off, Good Vig) to launch the Jeffrey Sebelia collection.  Less than a year later, he accepted a job as head designer at Fluxus.  This suggests that none of the three labels – Cosa Nostra, Good Vig, and Jeffrey Sebelia – were successful.

Although one might argue that winning a contest is not a sustainable way to launch a career, I contend that the awards are what make or break their success.  Also launched in 2004, Vogue partnered with the Council for Fashion Designers of America (CFDA) to create the Fashion Fund – a contest to “support the next generation of American fashion designers”.  The first winners of the fund, Jack McCollough and Lazaro Hernandez of Proenza Schouler, have grown their business exponentially and receive very positive reviews for their collections.  In 2007, private equity group, Permira, saw enough potential in Proenza Schouler to invest (now owning about 45% of the firm) and recent rumors that Permira is looking to sell the line suggests that it is doing well and Permira is looking to cash in on their investment.  Other winners of the fund, such as Doo.Ri, Rodarte, and Alexander Wang have also done very well.

There are several key differences between these two contests that might explain the success of one set of winners and lackluster performance of the others.

Contestant Selection

Although many contestants on Project Runway are not formally trained designers, the difference between winners and losers is not really about skill level.  Project Runway is a television show and needs to pull in and keep an audience.  When screening contestants for the show, personality and “watchability” will be more important than pure design skill.  In contrast, contestants for the Fashion Fund are selected based on their potential for positively impacting the industry.

Prize Money

For the last nine years, the cash award on Project Runway has been $100,000.  In the world of entrepreneurial investing, this amount is barely enough to start a small-scale local business, much less launch a global fashion line.  In fact, since the prize amount has not been adjusted for inflation, the real dollar value of the award is around $85,000 today.  The Fashion Fund awarded three times that amount to the winner and, this year, increased the total award to $400,000.

Other Awards

For the first few years of Project Runway, the winner was offered a spread in Elle magazine, in addition to the cash and, by the second year in, a car. While these awards are certainly flashy, they do not help a new designer solve the biggest problems to a launching and sustaining a successful business – managing the finances and operations to profitability.  Originally, the show offered a mentorship and representation with an agency, but dropped that in 2007 for partnership opportunities.  This likely boosted revenues for the show as each partner was prominently featured, but doesn’t do much to support the winners.  The Fashion Fund ensures its winners are paired with successful executives in fashion who understand how to become profitable.  Proenza Schouler was paired with Angela Ahrendts from Burberry – the woman who turned the profitability of the company around and revived a failing business.  Her work at Burberry is lauded in the fashion world and she represents the ideal mentor for a startup design house.

Fashion Camps

It is hard to ignore the alliances of fashion journals with each endeavor.  Project Runway is affiliated with Nina Garcia, who started the show working at Elle and, later, moved to Marie Claire.  The Fashion Fund is managed by Vogue with active participation from Anna Wintour.  Does this say something about the power of each publication or editor?  Or does it say something about the credibility of Vogue over Elle or Marie Claire as a publication that recognizes “real” designers?  Even if it is a self-fulfilling prophecy – where the hand-picked winner becomes successful because Vogue ensures they receive positive press – the public is buying into it.

As I mentioned, Project Runway is now headed into its ninth season – another year of promising fame and fortune to another batch of aspiring designers.  For those willing to put themselves through the grueling process and, often, public humiliation, it seems there are better ways to utilize the show experience than to simply focus on “winning”.  For example, using the show as a multi-month job interview would be a great way to demonstrate their skills and work ethic and get their foot in the door with an established fashion house.  There, they could get the training and business management skills necessary to branch out on their own.  Or, if you are happy to keep your business small, Project Runway might provide enough brand power for you to make a living from your designs.  Better yet, apply for the Fashion Fund.

Observations from 2011 HBS Retail and Luxury Conference

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Last weekend, I attended the Retail and Luxury Goods Conference at Harvard Business School – first time for me but, apparently, this is their seventh year hosting the conference.  I’ve been looking for smart conversations about the fashion and luxury market, so I thought this would be a good place to start.  Of the almost 400 attendees, I would guess that 70% were MBA students from HBS or other business schools – this is based on squinting my eyes while in a panel session and getting a rough visual proportion of plain black suits with dress shirts, so admittedly unscientific.  The rest of the attendees were mainly industry professionals from apparel, accessories, and beauty companies as well as numerous consultants.

I’ve been to a lot of conferences in my career and I thought the HBS team did a great job organizing this one.  The size was right, the process was efficient and simple, and the venue worked well.  Each session was almost too short at 45 minutes, but it did keep the momentum up, which I thought was good.

In terms of content, I was divided on the quality of the speakers.  The panel discussions were rich with actionable advice and interesting data points.  The keynote speakers, on the other hand, didn’t say anything you wouldn’t expect the CEO of a large-scale global firm to say.  Let me guess…it will be some combination of people, strategy, culture, leadership, differentiation, etc. etc.  Stephen Sadove, CEO of Saks Incorporated summarized their strategy as, “Clarity of strategy.  Differentiated merchandise.  Local marketing.  Great service.”  How is that different than any other luxury retailer?  I was also disappointed that Sadove pitched Saks’ recovery from the recession as a success story, when it seems that they simply weathered it.  The stock price pattern for Saks and two of their (publicly-held) competitors, Macy’s and Nordstrom, look exactly the same, although Saks has the lowest price of the three.

But, as I said, I thought the panel discussions were great and was especially impressed with Gaurav Suri (Google), Mark Bonchek (Sears), Ari Bloom (Alternative Apparel), Charlie Graham (Shop It To Me), and Brian Spaly (Bonobos/Trunk Club).  Here are some tidbits I took from the sessions:

E-commerce panel

  1. We need to think beyond just e-commerce, how do all the commerce channels work together?  Social, mobile, etc.…
  2. Someone mentioned that it’s still clunky to purchase from your smartphone.  I realized that, for all my love of technology, I’ve never purchased anything from my phone.  Will this ever be solved or will it simply be used as an information and marketing channel?
  3. Google:  “We don’t care where you buy, but that we influenced your purchase.”
  4. There was a brief discussion of the democratization of fashion opinion and I wish we explored this further because it feels so overwhelming right now. Are we trapped from making purchase decisions because there are too many opinions?  Are we trapped in design ruts because this makes it hard to tell what consumers want?  Who and what will emerge as the new opinion leaders?

Entrepreneurship panel

Good reminders for all of us…

  1. Generally, you want to do the opposite of what everyone else is doing.
  2. Focus first on the product, not the business model (which is all too easy for MBA students and other business smarties to do).
  3. Make sure the product is fantastic and
  4. It may take many, MANY, iterations to get there.
  5. Think about nontraditional sources of funding – for example, seek funding from your supplier, perhaps in the form of free materials or even favorable production terms.  Ari Bloom: “This can be worth more than cash”.
  6. Make sure that “free” labor such as interns are getting some financial reward – even in non-cash form such as class credit.  They need to have skin in the game.
  7. If you’re going to fail, fail fast and cheaply.

As I said, I came to this conference looking for smart conversations about fashion and luxury.  I think the panels delivered, but the keynotes could have been better.  A few suggestions I would give for next year:

  1. Prep the keynote speakers to go beyond sound bites.  Tell us something we wouldn’t have known by reading the press releases from your company’s website.
  2. Make sure WiFi is readily available (and tell us how to get on it) – this will help those trying to live tweet the conference.
  3. Since there is only enough time for a few questions at the end of each panel, maybe solicit questions in advance.  Pick the best ones to pose to the speakers, so we don’t waste time on questions like, “What does it take to be a great leader?” and “So, is the retail industry hard?”

5 things I didn’t know about Balenciaga

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The DeYoung Museum here in San Francisco seems to be on a fashion streak, with several designer exhibitions now and in the coming months.  The current exhibition, Balenciaga and Spain, looks gorgeous and I can’t wait to check it out soon.  When it opened a few weeks ago, Hamish Bowles, renowned editor-at-large for Vogue and curator of the exhibit, gave a lecture along with Miren Arzalluz, Lourdes Font, and Pamela Golbin.  Try saying those names fast.  Most of the lecture and the exhibit compares Balenciaga’s work to Spanish works of art – illuminating the inspiration for his designs – but I also learned several interesting factoids about the designer.

First – a few of the basics…Balenciaga was a haute couture designer in the time of Chanel and Dior, working in Paris although he was Spanish by birth.  He is known as one of the few couturiers who actually knew how to sew, rather than just sketch designs and hand them off to seamstresses.  When he died, society women fainted or locked themselves in dark rooms (so dramatic) and declared that fashion was over.  One of my favorite stories about Balenciaga is that he did not pay attention to trends and, instead, designed each dress for the woman wearing it, focusing on her best features.

Ok, here’s the stuff I didn’t know…

  1. He was over 40 years old by the time he set up his first shop in Paris.
  2. When a gown was in production, a small piece of satin was sewn inside it to show the proper direction of the grain.
  3. Balenciaga was six years old when he made his first piece of clothing – and it was a coat for his cat.  Supposedly, he disliked how much the cat moved around and switched to humans.
  4. Although he was born to a middle class family in a small fishing village, as a child, Balenciaga hung out with the Spanish royal family.  His father would give them leisure rides while they summered in San Sebastian and his mother mended their clothes.   Without this exposure to the quality and craftsmanship of the royal family’s clothing, Balenciaga likely would not have become the designer he was.
  5. At the height of the post-war Paris couture industry, the house of Balenciaga was the most profitable of all the couturiers, even though competitors like Dior were six times larger (in terms of employees).

Here are a few of the pictures from the lecture…beautiful!



What is the value of haute couture clothing?

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A few months ago, I attended a lecture by Glady Perint Palmer where she spoke of the spring couture shows in Paris.  Although she discussed many designers, she was especially fond of the Gaultier show and shared some lovely photos and illustrations.  Admittedly, Gaultier has not been on my radar for some time and I was surprised by the genuinely pretty gowns from the designer known for cone bras and S&M apparel.  Maybe I should take another look…

And then, today, an announcement in WWD that Hermès is looking to sell its substantial stake (45%) in the Gaultier house, likely due to poor financial performance.  But there could have been artistic and management differences as well –  Hermès and Gaultier started a design collaboration in 2004 which Hermès ended prematurely last year.  When the Galliano scandal erupted a few weeks ago, Gaultier’s name was thrown in the mix of potential replacements at Dior.  But it seemed to me that he would not be the kind of designer to thrive under strong corporate management.  If he had challenges at Hermès, working at LVMH is a non-starter.

But the bigger issue for me is the viability of haute couture clothing. And by clothing, I mean CLOTHING – not the accompanying purses, shoes, perfumes, etc. that are the real money-makers for luxury brands.  It was mentioned several times in the WWD article that the Gaultier brand is losing money and sales and that the only profitable line of business for his brand is perfume. As I learn more and more about the fashion industry, it strikes me that fashion shows (and, now, fashion weeks) get a lot of attention by the fashion media but the clothes themselves are nothing more than a large-scale advertisement to sell accessories.  I’m still researching this issue, so I don’t have a definitive conclusion, but my theory is that it is no longer possible to create a sustainable business by making and selling haute couture quality clothing.  What do you think?  Any examples where it is working?

Fashion IP Infringement…or is it?

I just saw an article today in New York Magazine’s The Cut about new legislation which will provide copyright protection for fashion design. We’re not there yet, but we’re getting close. The Council of Fashion Designers of America (CFDA) is behind this and, on the surface, it seems like a good idea. IP and copyright protection is certainly necessary in innovation-centric industries (read, pharma, high tech, etc.) and many would argue that fashion is all about innovation – new designs, new colors.

A recent podcast on my beloved Planet Money gave me a new perspective on this issue. They argue that, in fashion, high-end and cutting-edge designers are incented to design precisely because of copycats. If they didn’t stay one step ahead, their designs would be the same as mass market offerings. If you take away that motivator, it is possible that new design and innovation would slow or diminish.

But the CFDA is behind this, aren’t they watching out for the interests of designers?  Possibly, but they also represent some of the largest labels and brands in the industry – Diane Von Furstenburg, Marc Jacobs, etc. These brands are companies, which must turn a profit and that is harder to do when your goods are copied and sold at lower prices.

My real fear with this legislation, and this was also mentioned in the Planet Money podcast, is the bureaucracy it will create as courts battle over whether a design is a knock-off or was simply inspired by another designer.  I disagree with the American Apparel and Footwear Association that knock-offs will be obviously different from inspiration and easy to spot.  In my experience, bureaucracy, not mimicry, is the biggest hurdle to innovation.