LUXE LABELS FIND SUCCESS IN UNUSUAL LOCATIONS
Capitol + Charlotte
Source: International Herald Tribune
Luxe labels find success in unusual U.S. spots
By Katie Weisman
Wednesday, September 12, 2007
NEW YORK: When the Paris-based designer Andrew Gn got a phone call this autumn asking him to stage a personal appearance trunk show from one of his accounts in Charlotte, North Carolina, he was confused.
"I think for the first two seconds I thought: 'Charlotte? Why would I go there?' " Gn recalled. "But then my business partner waved the store's invoices in front of me while I was still on the phone and I said: 'Well, O.K., let's go!' "
The store is Capitol, owned by Laura Vinroot Poole, and it sells an array of designer goods and apparel from upscale brands including Balenciaga, Lanvin and Valentino. Gn, whose clothes sell at $1,500 for a blouse up to $12,000 for an embellished coat or gown, said Capitol's orders to him have increased 15 to 20 percent each season since he started selling to the multi-brand shop three years ago.
Trunk shows featuring personal visits by designers used to be events reserved for big-name department stores like Neiman Marcus, Saks Fifth Avenue or Bloomingdale's in top shopping locales like New York or Beverly Hills. But recently, executives and designers from big and small luxury labels and fashion houses like Gn or Hermès realize there are sizable pockets of wealth dotted all over the United States and customers who need to be catered to locally.
"I have clients who have $50,000 wardrobes each season and can easily spend $20,000 on one dress," says Vinroot Poole, 35, who opened her store 10 years ago. She has the exclusive right to sell some brands, like Lanvin's ready-to-wear and bridal collection, even though there is a Neiman Marcus looming nearby. And business is so strong that Capitol is changing locations next spring from its current 1,800-square-foot, or 167 square-meter, shop to a 6,000-square-foot freestanding building complete with a courtyard garden designed by Patrick Blanc, the French botanist known for his "vegetal walls" like that at the new Musée du Quai Branly in Paris.
None of this should be surprising. Charlotte, about 400 miles southwest of Washington, is the largest U.S. financial center after New York City and home to two of the largest banks in the world, Wachovia and Bank of America. The projected 2007 median household income for Mecklenburg County, where Charlotte is located, is $65,741 and 6.7 percent of households will have income in excess of $200,000, according to the U.S. Census Bureau and projections from the Environmental Systems Research Institute.
Nearly 70 percent of Charlotte's working population has white-collar jobs and 10 percent of its approximately 855,100 residents has earned a master's, professional or doctorate degree.
Last year, 6.5 percent of households had a net worth in excess of $1 million, excluding the value of their primary residences, according to the marketing consultancy TNS and its 2006 Affluent Market Research Program. All of these numbers translate to high discretionary income and a highly educated consumer, observers say.
"Charlotte is growing very, very fast," explains Burt Tansky, chairman of the Neiman Marcus group, which operates Neiman Marcus stores, Bergdorf Goodman and the Neiman Marcus Direct e-commerce business. The demographics and the psychographics - the population's attitudes toward luxury goods purchases - "are very favorable," he notes.
Neiman Marcus opened roughly a year ago in the new luxury wing of Charlotte's South Park mall, a development from the Simon Property Group. When Simon bought the property in 2002, it featured middle-market retailers such as Sears, Dillard's, Hecht's and Belks. As more upscale stores joined South Park, more wanted in, said Richard Sokolov, Simon's chief operating officer. Hermès moved into the complex earlier this year and Louis Vuitton is also a recent arrival.
"Charlotte is a very good example of the trend you see, around the U.S.," says Sokolov. "First, there is wealth formation and then the desire to have more upscale goods."
The Hermès shop in South Park has roughly 2,000 square feet of selling space. Unlike some other luxury brands, which feature only leather goods or accessories in their mall stores, Hermès markets all of its 14 different "métiers," or lines, from silk twill scarves to custom-made saddles, explains Robert Chavez, the president and chief executive officer of Hermès of Paris, the U.S. subsidiary of the French luxury house.
Now, Hermès can provide local service to its Charlotte clients who often shopped in the company's Atlanta or Chicago stores, Chavez says. While Chavez says it is "too early" to make conclusions about local buying habits, he did note that Hermès porcelain is selling exceptionally well.
Many American cities are "driving cities" where one uses a car to go everywhere, unlike New York. In these markets, upscale malls are an ideal option for luxury brands because they create a concentrated range of choice for the consumer in one location, luxury executives say. But even if a segment of a city's population has high disposable incomes, there may not be a high-end shopping center like Charlotte's South Park. The city might not even have developed specific neighborhoods, streets or avenues for shopping, like Rodeo Drive in Beverly Hills or Madison Avenue in New York.
This is, ironically, the case in Seattle, home to Microsoft and Bill Gates, the wealthiest man in the world, according to Forbes magazine. Gates is not the only affluent guy in the area. According to TNS, 113,342 households in the metropolitan Seattle area last year had net worths exceeding $1 million and nearly 180,000 had net worths of more than $500,000, excluding the value of their primary residences. But there is no central shopping area for luxury goods or fashion.
"You have Tiffany and Cartier in one area and Louis Vuitton and St. John in another part of town," notes Chavez.
Two years from now, however, that will change and Hermès will open in 2009 in The Bravern, a new luxury commercial, retail and residential complex being built in Bellevue, a city of 117,000 that sits between Microsoft headquarters and downtown Seattle. The Bravern is being developed by Schnitzer Northwest, a Portland, Oregon-based real estate developer and management company, and will have Neiman Marcus as its anchor retail tenant.
While luxury companies and fashion houses can rely on income statistics to sniff out new markets, many also are learning about the dynamics of smaller cities thanks to their Internet sales.
"Five and a half years ago, we were one of the first luxury brands to launch a web site," says Hermès' Chavez. "At that time, we had a physical presence in 12 out of the 50 United States. Within one year of the Internet launch, we were in all 50 states. One of the first and most interesting things we saw were sales coming from North Carolina, specifically the city of Charlotte and that's what put the city on our radar screen."
But even if a company does get a lot of Web sales from a particular market, there still might not be enough consumers or disposable income to warrant the investment of a store opening.
Tansky of Neiman Marcus notes that the Neiman Marcus Direct e-commerce Web site, which is essentially the entire specialty store online rather than an abridged selection of goods, enjoys tremendous success from clients in and around Nashville, Tennessee, but "there is not enough of a concentration of wealth" to justify opening a Neiman's there.
However, Tansky said, the company recently was host to a 300-model fall fashion show in Nashville for current and potential customers - and it will consider staging future special events there.
Other cities on luxury executives's strategic maps include San Diego, which has 87,326 households boasting a net worth over $1 million and 141,902 with a net worth of more than $500,000, and the Scottsdale, Arizona, metropolitan area, where 120,366 households have a net worth of more than $1 million while nearly 200,000 have a net worth of more than $500,000, excluding the value of their primary residences, according to TNS. Hermès will open in these cities in 2008 and 2009, respectively.
But Hermès, like other savvy luxury concerns, does not plan to open stores everywhere.
"We are very patient and when we come to a community, it's for the long-term, not for a quick buck," says Chavez, who also said he is not worried about over-exposing the brand. "To me, the question really is how many stores you have in total. If you have 100 points of sale, it will be hard to stay small. We have 17 wholly owned stores in the U.S., mainly free-standing units, and six concessions. We clearly have room to grow without approaching saturation."
Executives at The Simon Property Group are keeping their eyes on cities like Indianapolis; Jacksonville, Florida; and Pittsburgh, "places where you never would have expected demand," says Sokolov.
And yet alongside luxury's expansion to smaller yet dynamic markets, executives say larger cities like New York, Chicago and Los Angeles will maintain their magnetic appeal for shopping.
"Fashion centers like Manhattan will never lose their primacy," Sokolov notes. But the fact that retailers and luxury brands are focusing on new centers of wealth "means that there will be more opportunities for shoppers to stay at home and satisfy their needs."
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Posted: November 15, 2007 - News | More News
