The Fallout From Louis Vuitton v. Canal Street Landlords

The fight is over. ICSC reports that Louis Vuitton's suit against Canal Street landlord Richard E. Carroll has resulted in a judgment where Carroll must post signs indicating the sale and purchase of counterfeit goods is illegal.

Louis Vuitton is moving fast against all kinds of piracy. The Sydney Morning Herald reports that LVMH shut down a house party where the hostess Jacqueline Sharon Feilich intended to sell fake luxury handbags.

Whether you're dealing with music or handbags, the counterfeit police are increasingly going down the foodchain to discourage piracy wherever it exists. Perhaps soon we'll be talking about the Long Tail of counterfeiting.

Craftblogging: The Backlash Against Mass Produced Fashion

RebootAs brands like Gucci attempt to grow their businesses by leaps and bounds, there will be consequences to flooding the market. Ulla-Maaria Mutanen, who manages the Hobbyprincess blog, had a provocative discussion about the trend against mass brands in Europe and Japan.

An increasing number of people prefer to buy their apparel from a designer someone has recommended, or one that they personally know. Ulla describes her concept of craftblogging - producing hand-made fashion items and publishing them on weblogs.

Ulla goes on to provide more concrete examples on her blog, showing how concepts like iLife could be modified to enable consumers to interact more frequently with their tailors; TypePad could be used to build a brand, self-promotion and begin selling items via PayPal and eBay; and last.fm coold be modified to provide a recommendation system for fashion.

The challenge is to capture real-time information about consumer desires, then act. I've written how this could work for newsrooms; the Economist has a great piece on how Zara is doing this for fashion in Europe. When Spain's Crown Prince Felipe and Letizia Ortiz Rocasolano announced their engagement in 2003, the bride-to-be wore a stylish white trouser suit - which caused a stir among those concerned with royal protocol. Zara took that look and made it available in its stores almost instantly. Instead of trying to create demand for new trends in the summer and winter seasons using the catwalks of fashion shows, Zara studies the demands of the customers in its stores and then tries to deliver an appropriate design at lightning speed.

A retail information network - a la StoreTrak - that could capture real time information on consumer desires, analyze it, and make that information available to a network of independent designers, who would then remix those designs, using their own sensibilities to do their own riffs, would be a very nice addition to couture.

The Luxe Experience: What We Can't Do Without

AirplaneperksWall Street Journal asked its readers what airplane perk they couldn't live without. Surprise - soft drinks came rated #1 by a large margin.

Coke, and to a lesser extent Pepsi, have long based their brand architecture around the notion of refreshment, as shown by the list of past Coke slogans that have used the word 'refreshment'. And what do airline passengers want to do, but be given an oasis from the outside world, for however long or short the flight time might be?

We have just begun to see a resurgence in studies of the importance of our sense of smell, taste and hearing in our overall experience of a brand. It just might be that the combined smell and taste of our favorite beverage is just what we need to relax.

Truly the pause that refreshes, indeed.

Link: WSJ Poll (subscription required)

The One and Only Robb Report

RobbreportbestJason Binn, move over. It's time for the annual "Best Of The Best" report from the Robb Report, who is also the publisher of Worth magazine.  It features premium-quality automobiles, yachts, jewelry, vacations, wines, spirits, cigars, fashion in 58 separate categories, providing a unique view of the international luxury market.

My programmer friend Jozsef Nagy never told me about the Four Seasons Gresham Palace Budapest, which was named as the best hotel. And I'm a little peeved at my friend Siriwan Sellers for not telling me about Trisara, in Phuket, Thailand, which offers an ocean-front four-bedroom villa for $3,960 a night from now to Halloween. With friends like those, no wonder I need a magazine like this to tell me how to spend my time.

A search on Google News reveals the top three ranked Robb Report reviews are all air travel providers: Skybridge (private charter jet brokers), Marquis Jet (private jet cards) and NetJets (fractional ownership). It looks like their SEOs, at least, are doing their work.   

Deconstructing Steve Heyer's Starwood XYZ

Sfxyz_1Reuters published Starwood's announcement that they were going to launch a new hotel brand, for now code-named "XYZ", presumably after their highly successful restaurant in San Francisco and the unique SOMA vibe.

Look to new Starwood prexy Steve Heyer - who at Coke fine-tuned the media instincts he demonstrated at Turner Networks - to make his move by creating a compelling experience that brings the cachet of staying at a W Hotel to local central social districts nationwide. He'll be able to use the cachet - or DNA - of the W hotel chain to tap the discretionary spending power of the so-called mingles, jingles and singles - with a rich experience that even media mogul Jason Binn might find hard to match.

I'd expect him to find ways to partner with Coke alumnus Todd Putman at Westfield - and indeed, the best mall locations across America, many of whom have already announced similar ambitions - to help him achieve his goal of 500 locations by 2015.

Link: AdAge Steve Heyer's Manifesto for a New Age of Marketing (Adobe Acrobat required)

Mastercard Raises Luxury Stakes

Hiltonmc_1As the middle market becomes saturated with Fannie Mae-fueled debit cards, credit cards have joined hotels and city magazines in their pursuit of the upscale consumer.

With this campaign, MasterCard is targeting consumers that make at least $100,000, who charge seven or eight times the annual $3,400 or so that the average customer spends with his card. The Nilson Report estimates these premium cards represent almost $270 billion, or 20 percent, of American credit card spending, from a base of only 1.5 percent of the total number of consumer credit cards issued.

The New York Times reports the card is going after the "Lifestyles of the Rich and Famous" set - and signals a new round of going after high end partners like Emirates Holidays or MLB's "Ultimate Baseball Experiences".

Just In Time for ICSC: Inside the Neiman Marcus Deal

Neimanmarcus_1Today Neiman Marcus Group announced that its board of directors has approved a sale of the company to an investment group consisting of Texas Pacific Group and Warburg Pincus. The price is $100 per share in cash, for a total of $5.1 billion. Each of the investors will own equal stakes in the company upon completion of the transaction.

"The play for us is a long-term play on the continued spending in the luxury segment. This is more a play on luxury than retail," Kewsong Lee, a Warburg Pincus partner, told The Wall Street Journal.
Texas Pacific representatives declined to comment.

People familiar with the private-equity groups' plans say the goal is to build between five and 15 new stores while expanding the company's Internet and catalog operations. The timing of this transaction precedes the major shopping center leasing conference in a few weeks, and will present owners of fortress malls with an alternative to Federated/May brinksmanship or the conversion of existing department store anchor space to Target's retail/grocer concepts, or worse.

By building out their Internet operations, especially its foreign language versions, Neiman Marcus will be able to combine their web server and shopping cart data to identify which emerging regions in China, India and Latin America have the greatest appetite for luxury goods, and therefore where to build and how to merchandise.

Cataloguing is also going through a renaissance with the popularity of luxury city magazines and custom publishing to niche audiences. Even Louis Vuitton has begun publishing local guides that cater to affluent, style-conscious travelers.

Texas Pacific already has retail experience after acquiring 85% of family-owned clothing retailer J.Crew in 1997, as well as less luxury-oriented brands like Pets.com and Burger King. After a major turnaround, J. Crew is expected to seek an initial public offering later this year.

Link: "Retailer Neiman Marcus Agrees to be Acquired" (WSJ subscription required)

Bidding for Neiman Marcus Draws to a Close

Neiman_marcus Three private equity partnerships are expected to submit bids today for Neiman Marcus, between an initial range of $95 to $105 a share. Business Week reports Neiman shares broke the $100 barrier for the first time ever.

The three groups are Bain Capital with Kohlberg, Kravis, Roberts; Blackstone and Thomas H. Lee; and Texas Pacific Group with Warburg Pincus. A fourth partnership of Apollo Management and Leonard Green & Partners pulled out earlier.

The deal is valued at around $4.6 billion to $5.1 billion, a premium of more than 25% to Neiman's closing price of $74.75 on March 15, the day before the company announced it was contemplating a sale. Neiman's credit card business is expected to be sold off separately, and has received four bids by itself. Neiman has been rated as the top luxury retailer and its $555 per square foot sales productivity (subscription required) outpaces all of its peers.

Goldman Sachs advised Neiman Marcus on the transaction (registration required).

With Spring, The Cerises Are In Bloom

Takashiripoffs_smallIt was bound to happen. As the New York Times reports, New York sidewalk vendors are well stocked with all kinds of variations of Takashi's Monogram Cerises handbag design.

The Santa Cruz Sentinel has some great advice for people who want the design without spending a fortune for it:

  1. First, steer completely clear of those manufacturers who avoid the law by making bags with different logos. You know, the interlocking G’s instead of C’s, random flowers and crosses instead of the LV print, etc. I’m serious. Run, don’t walk. Everyone will know, and you’ll look like a patsy.
  2. Study up on the real thing and find something with quality. It should have good leather and hardware, be sturdily put together and lined. If you wouldn’t buy it in plain black, don’t buy it in a famous print.
  3. A better solution to your cherry problem, however, would be to save up and get a wallet or coin purse that’s the real deal. The famous "pochette" bag is available on eLuxury.com for $355. Believe me, anyone who knows anything about designer bags will have more respect for a small, authentic piece than the largest and most convincing fake out there.

Great advice.

Broadband pundit Om Malik is shocked that some people will buy an MP3 player that is not an iPod, or buy a $400 PC when they can buy a $500 Mac Mini. Perhaps there are more creative ways to create entry points for a luxury brand.

Most Rated Luxury Brands, 2005

Luxuryinstitute_2Research organization Luxury Institute has published a list of the most prestigious retailers. The brands were rated based on superior quality, uniqueness, a measure of social status, and the ability of each retailer to make customers feel special throughout the entire customer experience. The highest rated retailers were 

  1. Neiman Marcus (score = 65)
  2. Bergdorf Goodman (64)
  3. Nordstrom's (63)

Seven brands were rated: Barney's, Bergdorf Goodman, Bloomingdale's, Brooks Brothers, Neiman Marcus, Nordstrom's, and Saks Fifth Avenue. Macy's was rated separately to measure the difference between mainstream and luxury brands.

The Luxury Institute franchise was built targeting the top 10% of the population that makes at least $270K a year. Meanwhile, local niche publications like Gotham and LA Confidential are going after the very tip of the pyramid, consumers that make $500K a year. Look to research into the luxury consumer to be inclusive of more retail brands as companies like WWD and Vogue build out their database strategy. In some ways this echoes the current war within Morgan Stanley (WSJ subscription required), which  essentially revolves around the question of whether the venerable bank will continue to stay elite or instead cater to the masses.

And maybe there's something more to that: like an investment banker, perhaps tomorrow's luxury brands will be more direct in helping consumers bridge the chasm between their life today and the life they would like to live.

Link: Behind Morgan Stanley Turmoil: Competing Visions of Its Future (WSJ subscription required)

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