Vera Wang and her fellow designers are getting a reality check.
Wang, known for her US$9,500 wedding gowns, has cut the average retail prices for her bridal wear by almost a third as shoppers become increasingly cost-conscious in the recession. Coach is selling more handbags for less than US$300, and Saks dispatched managers to Europe to help suppliers come up with lower-priced products for its stores.
The moves are part of an industrywide push to expand a tier of luxury that uses simpler designs and less costly materials after years of ballooning prices. Sales of brands that cater to the wealthy may drop 10 percent this year after holding steady at US$240 billion in 2008, according to estimates from luxury adviser Bain & Co in Milan.
“The luxury consumer now wants to understand why the price is what it is,” said Michael Fink, a consultant in New York and former women’s fashion director for Saks. “It’s not going to return to the hype and the waiting lists” for designer goods.
Between 2005 and 2007, the average wholesale price of luxury goods increased 10 percent to 15 percent each year, Fink estimates. A shrinking global economy is reversing that trend. While some shoppers still will buy at the highest end of the luxury range, more consumers will balk at cocktail dresses that cost more than US$2,000 and shoes above US$1,000, he said.
WANG GOWNS
“It has definitely made us all reconsider what we’re doing, how we’re doing it, and who we are trying to reach as a customer,” designer Wang said at a May 20 event in New York. “In a way, it has been a reality check for all of us.”
The average price of a Vera Wang Spring 2010 wedding gown is US$3,800, with nine dresses under US$3,500. Previously, the average price of a gown was US$5,500, Elizabeth Musmanno, a spokeswoman, said in an e-mail.
Thakoon, the Thai-born couturier whose bold-print dresses are favored by Michelle Obama, started selling a less costly second line in stores in May. Liz Claiborne, based in New York, is bringing in lower-priced goods at Kate Spade and Juicy Couture, its most expensive brands.
“The luxury consumer wins,” Liz Claiborne Chief Executive Officer Bill McComb said in a May 21 interview.
Liz Claiborne has dropped 72 percent in New York Stock Exchange composite trading in the past 12 months, while Coach has fallen 22 percent. Liz shares rose US$0.31, or 6.9 percent, to US$4.81 at 4:15pm yesterday. Coach advanced US$2.09, or 8 percent, to US$28.36.
INTELLIGENT EXPERIMENT?
For the industry, the ideal scenario is that the new goods will encourage consumers to buy more, which would help the sellers hold on to market share, said Luca Solca, a luxury analyst. The danger is that they will cannibalize their own higher-priced sales, he said.
“It is an interesting and intelligent experiment worth trying,” said Solca, who is based in London with Sanford C. Bernstein & Co.
In the short term, the effort to generate demand has come at a cost to profit margins, Thakoon and Coach executives said.
Designer Zac Posen says he manages to avoid compromising both on quality and profitability by designing earlier to allow more time for better pricing of materials. He is sometimes using stock textiles instead of developing his own fabrics, and on one gown reduced the volume of the skirt, he said.
Posen has created more daywear, with dresses priced at US$990, while still making US$10,000 couture pieces.
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