Summit Notebook

from Shop Talk:

Check Out Line: Luxury chains facing dilemmas

Check out the challenges before the luxury sector:

Many fancy European companies like Valentino have widened their entry-level offerings to lure more shoppers, given how edgy the global economy remains.  This could be shortsighted, experts said this week at the Reuters Global Luxury Summit in Paris, New York, Dubai and London.

For instance, Valentino's 300 euro T-shirts are dubbed "Couture T-shirts" a term some in the industry view as an oxymoron and could harm the cachet so essential to luxury's appeal.

But to be fair, how much choice do these purveyors of expensive watches, suits, cocktail dresses really have?  

There will always be mega-millionaires to boost the luxury industry and buy $50,000 diamond necklaces at Tiffany. But luxury got a big lift a few years ago from aspirational shoppers, or consumers pretending to be part of the jetset, if only for an hour or so while they buy a new suit at Barneys. And those shoppers could take years to come back, Reuters' guests said.

That shrunken shopper base has forced a number of top European brands to look elsewhere including the United States, where they are hoping shoppers' tastes are growing more refined. But China, and its emerging professional class are also top of mind, despite that country's difficult bureaucracy. 

Still the tentative recovery hasn't stopped the luxury industry's CEOs from splurging. One CEO bought himself a 4.5 million euro house in Ibiza.

from DealZone:

Markdown poster child: I’d do it again

With the luxury of hindsight, Saks Chief Executive Stephen Sadove said he wouldn't hesitate to repeat the big markdowns of the 2008 holiday season if faced with the same tough environment that made the retailer the poster child of recessionary sales.

"It was the right thing to do to generate the cash," Sadove said at the Reuters Global Luxury Summit in New York.

The sale slashed prices on high-fashion, designer merchandise by as much as 70 percent, prompting a flood of media coverage and a slew of shoppers.

"It took some months to clear out the inventory. All the  questions of vendor relationships --- every one understood very quickly it was the right thing for the business. I would have done it again," Sadove said.

"It was a function of supply and demand when you have an excess of supply over demand you have to clear out the product. It allowed us more quickly to get back to a normalized state -- healthy margins," he said.

Sadove declined to take credit for the decision, saying it was made by a large management at Saks.

"My career has been about building teams and teamwork  -- that was an example where all the right players had a seat at the table," he said.

from Shop Talk:

Check Out Line: Cautious notes hit by top luxury execs

Check out the cautious notes being sounded in the global luxury market.

Industry executives voiced concerns about everything from unemployment to Europe's brewing economic crisis, but are nonetheless banking on growth from China and a recovering U.S. market.

Leading officials speaking at the Reuters Global Luxury Summit said the debt crisis in Europe is threatening to halt luxury's rebound, but demand for fine merchandise was picking up in the United States while China's shoppers were venturing frequently into Tokyo for top brands.

"The euro zone is a sizable market, but today the growth reserve is in the emerging countries, and particularly in China, whose demand is pulling the entire sector," said Isabelle Ardon, head of Paris-based SG Gestion's luxury fund.

The debt crisis and depreciation of the euro have raised concerns of a double dip global recession that could knock luxury spending back down after a fragile recovery. Bulgari's CEO Francesco Trapani (pictured) said Europe would remain a difficult market.

Meanwhile, a top industry consultant warned a U.S. rebound remains fragile due to high unemployment and the specter of higher taxes.

"The aspirants will come back when unemployment comes down to 5 percent," said Milton Pedraza, chief executive of the Luxury Institute.

from Shop Talk:

The Uneducable American Male

Coach's Lew Frankfort has given up trying to teach American men about fashion, but he still sees opportunity for expanding sales to a male clientele.        "I believe the American male is largely uneducable," Coach Chairman and CEO Frankfort said at the Reuters Global Luxury Summit in New York.        "We need to focus on the segment of males that have real discerning taste. But I can also say that even the undiscerning American male is a smart consumer: that person is looking for a product that is durable, that is classic, that can stand the test of time and that's what our products do," Frankfort said.        Sales of Coach's man-bags, wallets and other accessories represent 5 percent of its total take, and that is one area where the company is trying to build growth. At a test store for men only, on Bleecker Street in Manhattan, it has seen sales results run at about triple its own expectations, Frankfort said.       "There's a lot of appetite among the discerning male for quality accessories made out of excellent materials that are stylish. ...  In North America, the male consumer remains heavily utilitarian-driven, replacement-oriented, value-based. There are discerning males in Boise, Idaho. I don't mean to suggest there aren't." 

(Photo of Frankfort/Reuters)

from Shop Talk:

A little more privacy at Barneys sale?

Bashful New York bargain hunters may finally be able to guard their modesty at one of the city's biggest annual retail events, as luxury chain Barney's is considering adding dressing rooms at its mobbed New York warehouse sale.   

While well-educated and well-heeled professionals don't think twice about unleashing their animal instincts to grab the best designer merchandise at 75 percent off, many are reticent about stripping down in public to make sure they have the right size before ringing up a final sale.

 San Francisco and Los Angeles shoppers have already enjoyed the relative privacy of dressing rooms at the Barneys events in their cities.    

"We're experimenting with it right now," Barney's director of stores Michael Celestino told the Reuters Global Luxury Summit. "We're a little space constrained right now in in New York, but it's something we're considering."

(Photo  of Celestino/Reuters)

from Shop Talk:

Noblesse oblige, but no service, for French luxury

From our apparel reporter Nivedita Bhattacharjee:

Luxury brands in the United States might still have a lot to learn from the entrenched design houses in Europe, but their commitment to pleasing the customer serves them well as the market returns from recession.      Milton Pedraza, Chief Executive of the Luxury Institute, told us during the Reuters Global Luxury Summit today that the commitment to customer service could even become a real point of differentiation for American brands.   "The American brands and even the Burberrys of the world tend to be better at customer-centricity, at service, and could make that a competitive advantage, because the Europeans are not as service-oriented, more product-oriented," he said.      "The Europeans are not as service-oriented, (they are) more product-oriented, and they will even tell you that."      If one is looking for an explanation behind the attitudes, Pedraza invoked a time well before Hermes opened its doors in 1837.      "A French executive told me that the word 'service' ... is equated with servility and (goes) back to the French revolution and is why the French don't like to serve anybody."  (Photo: Reuters)

from Shop Talk:

Check Out Line: Luxury goods execs discuss global demand

Check out what executives at luxury retailers around the world are saying about consumer demand.

Early feedback from the Reuters Global Luxury Summit, which gathered top executives from Asia, Europe and the United States, sounds positive. Some executives even predicted that the sector will rebound this year after suffering during the weak economy. 

Paris-based luxury fund SG Gestion, for instance, said watches and spirits are set for a solid comeback, with LVMH, Swatch and Richemont topping the list of companies with the biggest upside.

Meanwhile, sales at British luxury fashion brand Jaeger have grown strongly, helped by a booming online business that is set to double in size over three years. Italian fashion house Valentino is building up its business and Japanese upscale jeweler Mikimoto and Japanese cosmetics firm Shiseido are eyeing growth in China.

Luxury goods groups have been enjoying a strong rebound since January, but dark clouds remain as the European debt crisis is a threat to discretionary spending. Nevertheless, global luxury sales are expected to rise 4 percent this year after falling 8 percent last year, according to Bain & Co. For more stories from the United States, Europe and Asia, check out the summit web page.

This week also will provide another snapshot into the health of the U.S. economy as May retail same-store sales will be reported. The results are expected to be up, but spending is still seen as erratic.

China’s evolving role from producer to consumer

Hardly a day goes by now without some Chinese firm striking a deal to buy assets overseas, but the country’s best prospects for growth may be right in its own backyard. Vivi Lin in Beijing reports on how the world’s workshop is fast becoming one of the world’s top consumers.

The savvy shopper is here

Liz Claiborne CEO William McComb has noticed that certain shoppers are getting smarter.  Hear what he had to say at the Reuters Global Retail Summit about the new savvy shopper.

(Reuters photo)

Liz Claiborne says it’s adjusting to the “new normal”

Today I had the chance to sit down with the CEO of Liz Claiborne in our Times Square studios as part of the 2009 Reuters Global Retail Summit. Bill McComb says “the world has changed and it’s not going back to business as usual.” Click here to listen to what McComb described as the “new normal” and what the fashion company is doing to change the way it does business.

Liz Claiborne sees "new normal" from Reuters TV on Vimeo.