(wwd)Profiling China's Luxury Consumer
Luxury brands better get to know the Chinese words er nai and xiao san. Those phrases mean mistress and third girlfriend, respectively, and are whispered on an almost daily basis by well-to-do Chinese. “With some fashion brands, we think that almost half of the sales are for mistresses,” said Rupert Hoogewerf, publisher and head researcher of the Huran Report, China’s rich list. “But this is difficult to ascertain.” Equally difficult is defining exactly who is the consumer driving China’s supercharged luxury consumption since specifics are so hard to come by. “That is the billion-dollar question,” said Charles de Brabant, an adjunct professor of luxury branding at China Europe International Business School in Shanghai, who said many luxury brands don’t fully understand Chinese consumers’ status-motivated shopping. “The brands often say: ‘These customers are not like me. They are bling-bling. They are overnight millionaires,’” de Brabant continued. “It’s a far more sophisticated game that goes beyond the Rolex, the dark sunglasses and the souped-up Porsche.” David Stewart, a partner in Jigsaw International, a lifestyle research agency in Shanghai, said the typical consumer profiles of other markets have no correlation in China. “The luxury consumers in China tend to be younger than in other parts of the world. Some of them are independently wealthy. It’s very unclear where their money comes from,” he said. Industry observers said there are several key consumer groups driving the country’s luxury goods market, which is estimated to come in at $9 billion this year, up more than 20 percent from 2009, according to China Market Research. The shoppers range from office worker women looking to snap up a branded handbag to entrepreneurs in polo shirts eager to please their mistresses. The white-collar “aspirational” shopper is the fastest-growing group in China, according to China Market Research. In their 20s, and often not making more than $400 a month, these individuals will nonetheless save to buy a luxury bag. Ben Cavender, a researcher at China Market Research in Shanghai, predicted that going forward, this group will make up 60 to 70 percent of the overall market. The superrich are another significant category of shoppers. Mainland China has 55,000 individuals with net assets of more than 100 million yuan, or $14.7 million, according to the Hurun Report. “This higher-wealth group tends to be slightly older men, age 44, and over 15 percent of these men live in Beijing. They have their own company, but have made their money from property and investments,” said Hoogewerf. Widening the net, there are 875,000 Chinese millionaires with personal assets of more than 10 million yuan, or $1.47 million. This figure includes the 55,000 superrich individuals mentioned earlier. read more
(wsj)A Fashion Identity Crisis at Wal-Mart
Wal-Mart Stores Inc. cannot seem to find the right fit when it comes to selling clothing. By quietly ousting its U.S. division apparel chief last week, the world's largest retailer acknowledged that its clothing strategy has been a dud. Again. Over the past decade, Wal-Mart has veered from one approach to clothing to another. The discount giant has even tried to emulate rival Target Corp. by stocking its own lines of trendy outfits. At other times the Bentonville, Ark., retailer has placed its bets on bulk packs of everyday wear, like tube socks and T-shirts. "Wal-Mart has suffered from not knowing who they want to be," said Allen Questrom, the former chief executive of J.C. Penney Co. who recently left Wal-Mart's board. "They're either trying to be too fashionable or too basic." Some critics have said Wal-Mart didn't listen to customers or suppliers. Company spokesman David Tovar said Wal-Mart thinks it finally has "the right team in place to lead the apparel business forward. He added that the retailer is "listening to what our customers want and speaking with all key suppliers and letting them know we're working in a collaborative way. The retailer said last month that it was going to focus more on basics like underwear, socks, T-shirts and jeans. Part of the issue for Wal-Mart is that it devotes a relatively smaller space to apparel than Target, where apparel represents about 20% of its revenue. At Wal-Mart clothing is only 10% of sales, so fashion items can crowd out basics but the company has been reluctant to give it more space. Clothing sales, which accounted for about 10% of the U.S. division's $258.2 billion in sales in the company's fiscal year ended Jan. 31, were down from about 11% in the previous year, according to Wal-Mart financial documents. Kelly Tackett, a retail analyst at Kantar Retail, a retail marketing and research consultancy in Columbus, Ohio, said that with so many shoppers trading down during the recession, Wal-Mart missed an important opportunity to grow its clothing business by giving its shoppers more fashionable everyday apparel. read more
(wwd)Buranis of MBFG Arrested in Milan
The opulent lifestyles of Walter Burani and his son Giovanni appear to have caught up with them. The former executives of Mariella Burani Fashion Group were arrested Thursday by the Guardia di Finanza of Reggio Emilia, Italy, a police force under the authority of the country’s Minister of Economy and Finance. The arrests, confirmed by a spokesman for the Guardia di Finanza, were requested by Milan prosecutors Luigi Orsi and Mauro Clerici, who have been investigating Burani Designer Holding for fraudulent bankruptcy. BDH is the parent company of Mariella Burani Fashion Group, which produces and distributes collections for La Perla and Vivienne Westwood, among others, and is under state-supported administration. Walter Burani, former chairman of MBFG, is under house arrest, while Giovanni, former chief executive officer, has been transferred to Milan’s San Vittore prison. The spokesman said the Buranis will now be interrogated by the judge for the preliminary investigations, Fabrizio D’Arcangelo. He added that Walter Burani was granted house arrest because of his age, 77, and “attenuated responsibilities.” Only two years ago, the Burani family seemed to have it all: a growing fashion conglomerate and a life in the fast lane. Tales of second-generation Giovanni Burani living in a Renaissance castle were outdone only by his father Walter’s weekends racing vintage Formula 1 cars. But the pendulum swung — and swung hard. The once high-flying Mariella Burani Fashion Group said earlier this year it was going to be liquidated, weighed down by debts of more than $600 million, and had to pledge 66.4 percent of the company to Italy’s Centrobanca (UBI Banca Group). read more
(wwd)Congress Passes Duty Relief Measure
Congress has sent a tariff suspension bill to President Obama, ending seven months of increased duties on imported textiles, footwear and apparel components and relieving some of the cost pressures the industry has been facing. The Senate passed the measure by voice vote Tuesday night, sending the measure to the president, who is expected to sign it. The House passed the bill last week on a vote of 378 to 43. Apparel, textile and footwear companies have been paying thousands of dollars in duties on imported components and some finished products since Jan. 1 because Congress let legislation expire that suspended tariffs on hundreds of imported products. The bill, known as the Miscellaneous Tariff Bill, must be renewed by Congress periodically and is meant to help domestic manufacturers compete by giving them tariff breaks on components such as yarns and fibers, or footwear, that are no longer made in the U.S. and must be imported. The 2006 duty suspension bill expired at the end of 2009 and the new bill would extend the tariff breaks through 2012. “This legislation will bring direct and measurable benefits to our economy through job creation and the continuation of well-priced quality products,” said Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, who called on the president to sign it quickly. “Along with our thousands of employees and our millions of consumers, the U.S. apparel and footwear industry stands to benefit from today’s Senate action and President Obama’s eventual signature.” A key component of the bill is a retroactive provision that will provide full or partial refunds to companies on duties paid on all covered products since January. Textile executives applauded the legislation because it would reinstate the majority of duty suspensions for rayon fiber imports and add several new duty breaks for acrylic fibers. “We’re terribly relieved that this has been done,” said David Trumbull, vice president of trade at the National Textile Association. “Companies took money from other things they might have invested in, like new equipment or worker training, and paid higher duties, while waiting for the government to make them whole, so they really lost the time value of that money.” Footwear executives had concerns about the new bill because some of the imports received higher duties than in the past. According to the law, duty breaks in each category cannot amount to a total loss in tariff revenue to the U.S. government of more than $500,000 a year. If trade grows in a given category, lawmakers increase the duties to bring the overall tariff revenue loss back under the cap. Several hiking boot and shoe imports will see an increase in the duties in the new bill because the volume of imports reached the cap. On the positive side, the measure would still provide many duty reductions on certain imported footwear categories. read more
(wsj)Fashion Nation: What Retailers Know About Us
Luxury-spending data can tell us a lot about the state of the nation—and our own neighborhoods. Take Detroit—not the city where one might expect to see the strongest recovery. Yet when American Express Co. looked at luxury spending in top and midsize cities around the country, Detroit led the list, with growth of 18% in the first quarter of 2010 from the year-earlier quarter. Lo and behold, Ford stock is up, too, suggesting that Detroit's local investors are feeling more optimistic than they were when auto executives were driving hybrids down to Washington to beg for bailouts. New York City, on the other hand, is still cutting back. Luxury spending was down 7.7% in the quarter. Atlanta was down the most at 18.2%. By tracking customers' spending habits, retailers get a bird's-eye view of tastes as they ebb and flow. Online retailers, in particular, see every click we make. They know which brands we've peeked at, how long we pondered, and what we actually purchased. They know the time of day and the days of the week that we shop. They know—and record—our color choices, sizes and tastes so that they can recommend clothes that are in tune with our yearnings. Our banks have nearly as much information about our purchasing habits. "We know where the customers live and we can track their behavior back to where they live," says Ed Jay, senior vice president of American Express's Business Insights unit, which mines its credit-card data for consumer trends and sells reports to clients. American Express says it doesn't provide data on individual consumers. This might seem slightly creepy to pre-Facebook generations who imagine their tastes and habits are private. But all this clicking amounts to a heap of insight into what people are spending on and even what they're thinking about. Some of the data confirm regional stereotypes. Southerners bought more white, green, and pink than other regions' residents, for instance, according to data from private-sale site Hautelook.com, which caters to young, urban professional women. Now I know, too, why I feel like such a loner wearing brown in Los Angeles, where black, white and gray are preferred. Retailers' data also bust a few commonly held beliefs. Though Dallas has a flashy, big-spending image, the average woman there spends less on fashion than one in notoriously frumpy Washington, D.C., according to fashion website ShopItToMe.com. The data also offer a window on populations moving among trendy neighborhoods. ShopItToMe, which notifies members of sales on their favorite brands, observed on its blog recently that New York's "most conservative" dressers reside on the Upper West Side, which has a reputation for being culturally liberal. Of the site's more than 600 brands, Upper West Side residents' favorite is Gap Inc.'s Banana Republic. Meanwhile, residents across town on the Upper East Side favor flashier, more expensive apparel, such as Jimmy Choo shoes. The Web site also looks at city-by-city data. The most popular brand in every ShopItToMe city, including Cleveland, St. Louis, Boston, New York and Los Angeles? Victoria's Secret. Everyone needs underwear. And despite the fashion press's obsession with J. Crew, the company is among the top five brands only in New York City and Boston. Other expectations for the nation only seemto be born out by fashion data—until one looks deeper. When ShopItToMe looked at clothing sizes, the results seemed to confirm what folks say—that women are thinner on the coasts. In New York and Los Angeles, 14% of women selected size 0 tops, compared with only 5% nationwide. ShopItToMe looked at a random sample of 86,225 women who registered between June 2009 and June 2010. But that's not necessarily because of a predominance of tall model types. Petite clothing and small shoe sizes were also popular on the coasts, raising the possibility that the women there are just smaller. Even boredom with fashion appears in demographic data. When the Affluence Collaborative, a research group, asked luxury shoppers to look at a list and choose brands they think are boring, they found that tastes differed by gender. Male luxury consumers with incomes between $75,000 and $199,000—the biggest group surveyed—said they were bored by Saks Fifth Avenue. Women in the category were bored by Best Buy. read more