Luxury industry trends in 2011 – Fashion
2010 has been a year of gradual recovery for most of the major luxury fashion brands, especially those with a strong accessories product range. Louis Vuitton, Prada, Giorgio Armani, Gucci posted steady increases mostly due to the booming sales in China. The best performers of 2010 have been Burberry and Hermes, with exceptional sales growth across worldwide.
The headline of the year was undoubtedly LVMH‘s silent aquisition of a 20,2% in Hermes, which generated an all out war in the media between the two companies. While LVMH might further increase its stake in Hermes in 2011, a full take over is unlikely for many years to come.
I believe this ”war” will be very beneficial for Hermes, in further consolidating the core values of the brand and it will provide the management of the company with the green light for developing unique projects such as the new Hermes store in Paris’s St Germain which is more like a lifestyle concept store rather than a traditional fashion store, with books, flowers, tea shop etc. Hermes’s new fashion designer Christophe Lemaire who took over from Jean Paul Gautier is expected to bring major changes for the apparel collection of the brand. For his first collection at Hermes which will be presented in March 2011, he already announced a more intimate event, rather than the extravagant Jean Paul Gaultier runway shows. Lemaire said in a recent interview: ”I think I will be walking in the footsteps of Margiela more than Gaultier, even if I have a lot of respect for Jean Paul Gaultier and his virtuosity.” Also in 2010 Hermes announced it was pulling out of the yacht project developed with yacht builder Wally, with a message that the company intends to focus solely on its core operations.
Louis Vuitton also made headlines in 2010, with pieces of news such as the decision to close its stores in Paris an hour earlier in order to keep up with demand during the Christmas season as well as the fact that its ads were withdrawn in the U.K. by the advertising authority for misleading consumers to believe that its products are entirely manufactured by hand, while most of its production was automated. Late December, Louis Vuitton announced it will open its first ever airport store (Seoul airport), which marks a major change in the strategy of the company. The decision was motivated by the high traffic of Chinese travellers transiting through Seoul’s airport which is directly connected to 25 cities in China. In my opinion, the most important strategic decision of Louis Vuitton in 2010 was to convert some of its stores into maisons, a more luxurious space than the regular stores. The first such maison was the re-opened flagship store of the brand in London on New Bond Street. The strategy to convert other stores in major capital cities in maisons will continue in 2011, and these locations are likely to stand out from the all too familiar design of the majority of its stores worldwide, enhancing customer experience and providing a more exclusive environment.
In 2010, Gucci has made headlines with launching its couture line available for select VIPs and celebrities as well as launching for the first time in its history a children’s collection. In 2011, the company will continue to focus its investment strategy on Asia, particularly China, where it plans to open stores in cities with a population average of 3 million inhabitants and higher. The remarkable aspect of Gucci’s strategy in China is to employ mostly Chinese in all its operations in China. If product development and design have been very inspired in 2010, not the same thing can be said about the Gucci advertising and communications campaigns which have become rather dull and predictable.
Burberry has undoubtedly been the star luxury brand of the year, with record sales and an impressive number of new store openings in 2010 in Europe, Asia, Middle East, North Africa and South America. It has also acquired its distributor in China, thus being able to pursue a more aggressive expansion strategy in China. Burberry also impressed in 2010 with its strategic internet approach, being one of the leading luxury brands on Facebook and cutting edge marketing, broadcasting its fashion shows live in its stores. The company’s exceptional performance can also be attributed to the positioning of the brand ”democratic luxury” with a price point lower than the main luxury brands, thefore making its products more affordable. It remains to be seen whether Burberry will manage to maintain such an exceptional performance in the long term, despite its positioning. The biggest threat could come from its creative identity and its designs which could lose their appeal in time. The rumours regarding a change of ownership could very well materialize in 2011, yet we might see a surprise buyer such as a major Asian conglomerate rather than one of the major players of the luxury industry.
Prada have reduced their debt in 2010 registered a good increase in its sales worldwide, especially in Asia. The company has been in the news with many analysis regarding its much anticipated yet postponed IPO which eventually seems to be on the Hong Kong stock exchange. The company has continued its expansion, yet at a much slower pace than Gucci and Louis Vuitton, its direct competitors. The company has found itself rather unprepared operationally for developing mostly directly operated stores. Prada is expected to open directly in Moscow and Dubai in 2011. In Dubai, the brand has been absent for more than a year, having terminated a franchising agreement and seeking ways to open directly.
The Giorgio Armani Group has made headlines in 2010 with its first hotel opening in Dubai and Armani Casa developments, rather than with its fashion and accessories division. The company has embarked on a major restructuring and its top management structure was reorganized. However, in order to improve its performance and maintain the strong awareness of its brand as a luxury brand, Armani will have to rethink its multiple lines. Armani Group would therefore benefit from discountinuing gradually two of its lines such as Armani Collezioni which is mostly sold in department stores and the fast fashion line Armani Exchange. A more important emphasis on the Armani Prive line, the couture line of the house which is personally designed by Mr Armani would be an important support for the positioning of all the other lines and the Armani brand its.
E-commerce is one of the sectors which has seen important developments in 2010 with more and more luxury brands launching online offerings for their products – Marc Jacobs, Ermenegildo Zegna, Hugo Boss and Salvatore Ferragamo. Italian e-commerce leader Yoox has launched its operations in China with a service in Chinese. The company has almost doubled its turnover in 2010 and the trend will likely continue in 2011, while Yoox secures more exclusive deals with major luxury brands. Yoox already operates exclusively the online stores of Zegna and Emporio Armani. The acquisition of NET A PORTER, British leading e-commerce by Richemont, the second largest international luxury group will ensure its aggressive international expansion strategy.
Luxury fashion brands which are likely to continue their upward trend in 2011: Fendi, Lanvin, Ralph Lauren, Michael Kors, Balmain, Bottega Veneta, Tom Ford
Luxury fashion brands which will continue to face problems in 2011: Escada, Yves Saint Laurent, Iceberg, Hugo Boss, Versace, Kenzo, Gianfranco Ferre, Valentino