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Pay Manhattan rent or get a new handbag?
This story first appeared in the October 29, 2012 issue of WWD. Subscribe Today.
That seems to be the sentiment as designer handbag prices reach stratospheric levels.
Contemporary labels are fighting for market share in a category with too many players lacking standout product, and many consumers aren’t equipped to invest in designer handbags, many of which surpass $2,000. So what are consumers to do? The trend-conscious shopper still wants a high-quality handbag — one that retains the characteristics of its higher-end counterparts on the designer floor — but without the hefty price tag.
An oversaturation of contemporary lines, coupled with increasingly expensive designer handbags, has left the market with a gaping hole: the need for a modern luxury price point. But of the extreme offerings in the market, a handful of brands have managed to deliver accessories that fit somewhere on the high contemporary-to-entry designer spectrum, and their efforts have been met with great success.
“It’s literally just Phillip Lim and Alexander Wang,” said Lincoln Moore, vice president and divisional merchandise manager for women’s handbags at Saks Fifth Avenue. “You would be hard-pressed to find anything outside those two brands that are really at that level. Then you have everything beneath and above. There is such an opportunity here.”
He calls Lim and Wang ready-to-wear designers who have become lifestyle brands, and commends them for having a clear sensibility for accessories and for homing in on a couple of bag styles. Lim was picked up by the New York store and became available on saks.com for spring 2012, and will expand into additional top-performing doors by the end of the year.
“It would be great if more people at that level did the same thing. I can think of other designers who could really tap into accessories. I think some do OK — nominally at best — with handbags. A lot of designers dabble in accessories and they just fall short,” Moore said.
This fall, Harrods expanded its accessories department, doubling in space from 20,000 to 40,000 square feet in eight rooms, up from four. 3.1 Phillip Lim, which has its own in-store shop, is one of five new “luxury” brands that inhabit the increased space. The others are Stella McCartney, Pierre Hardy, Rochas and Coach.
“We posted double-digit growth within accessories over recent years, resulting in the vast expansion of our luxury and designer accessories offer,” said Simon Longland, general merchandise manager for accessories at Harrods. “This has enabled us to grow our business significantly, allowing the larger luxury brands to showcase their full product offer from dedicated, branded shop-in-shop concepts, and enabling us to diversify our range of brands by introducing new lines including 3.1 Phillip Lim, Reed Krakoff, Proenza Schouler, MCM, Coach and Jérôme Dreyfuss.
“The average luxury handbag retails significantly over 1,000 pounds [$1,600] with diffusion lines averaging at approximately 400 pounds [$640]. Consequently, there is a growing demand for contemporary luxury that [includes] collections at a retail price of 750 pounds [$1,200] and this is proving popular with the Harrods customer.”
Lim is in a unique position, as his handbag line has helped establish and define this new “modern luxury” accessory category. The company’s contemporary-designer hybrid accessories have performed better than 3.1 Phillip Lim chief executive officer Wen Zhou’s expectations. In just four seasons, handbags will have become roughly a third — or close to $40 million at retail — of the overall business.
“I feel like I’m starting this business all over again,” said Zhou. “When we started rtw in 2005, it was exactly the same positioning. There was nothing in between luxury and contemporary, something that women at our age want to wear and still can afford. I want to do this at our price point, I want to use Italian leather with beautiful hardware, and I want to give the consumer what she deserves — and not [have her] feel completely broke. We can’t pay $3,000 for a bag.”
From the fall 2011 season — the first time the brand rolled out a stand-alone footwear and handbag collection — to the current fall 2012 season, there was a 275 percent increase in sales, growing from $3 million at wholesale to $7.5 million — or about $20 million at retail — in just one year. For spring 2013, sales are already up 76 percent from fall 2012, and the season isn’t finished booking.
By the end of this year, Zhou projects accessories will bring in $45 million at retail for the brand, 85 percent of that from handbags. Accessories can comprise up to 35 percent of overall business for 2012.
Besides Saks and Harrods, Lim is carried at Barneys New York, Neiman Marcus, Bergdorf Goodman, Nordstrom, Shopbop, Net-a-porter, Lagarconne.com and Ssense.com. In-store shops for Lim’s accessories also launched this fall at Selfridges. Next year, in-store shops will bow at Brown Thomas and Le Bon Marché, adjacent to designer brands Celine and Givenchy.
Zhou maintains the category is growing organically and “not growing for the sake of growing our numbers.” She is careful not to flood the market (hence the waiting lists for the black Pashli satchel in stores and at 31philliplim.com).
Although she predicts a steady 20 to 30 percent increase per season — with the exception of the most recent one, which nearly tripled her estimates — she is firm that Lim is still a rtw firm and she doesn’t want accessories to generate more than half of the business. If the accessories business continues on the same trajectory, the breakdown will be 60 percent apparel and 40 percent accessories next year. On its digital flagship, which saw an e-commerce-enabled relaunch six months ago, handbags are responsible for 65 percent of sales.
“Our goal is to increase our ready-to-wear, and with more freestanding stores opening, our ready-to-wear will grow too. Forty percent is a nice ratio for a business that is so young and so new. And we like that ratio,” said Zhou.
Lim’s handbags are mostly produced in China, with the exception of novelty elements or exotics that are made in the U.S.
The focal points of Lim’s handbag offerings thus far have been two silhouettes, each with several spin-offs. The Pashli, a more structured satchel with zipper detailing at the front, and the 31 Hour bag, a softer version of the Pashli with less hardware, range from about $795 to just more than $1,000.
For the brand’s spring runway show held during New York Fashion Week, Lim introduced several new iterations of the Pashli and 31 Hour. They ranged from punky florals to liquid gold metallic, to functional day-sized clutches with hand slots to make for easy carrying. According to Zhou, new styles and offerings increased by 50 percent for spring. The company added two to four new bodies for the main Pashli and 31 Hour groups, but she maintained that each season will see the addition of a new group or groups.
“We wanted to get away [from] that ubiquitousness of having an ‘It’ bag,” said Lim. “Ours are quiet, simple and functional, but don’t forsake design. I just want a bag that will work with our consumer and let her get through the day….It’s not the most expensive, its not the least expensive, it’s not the most luxurious, but its luxurious enough. It’s a modern choice for that modern person. It should start that category and that dialogue.”
Like 3.1 Phillip Lim, a third of Wang’s business comes from his ever-growing handbag category, 95 percent of this from wholesale partners. He cites consistent growth — 21 percent from spring 2012 to spring 2013 — also fueled by the introduction of men’s accessories, small leather goods and moving production to Italy. While they start anywhere from about $500, the average handbag ranges from $795 to $895, with exotics costing nearly twice that.
Wang introduced two handbags for fall 2008, a year after the brand launched, and he called entering the accessories arena the “turning point” for the company. He credited accessories as impacting the overall direction and allowing the company to grow, as well as the area that’s experienced the most growth.
Wang cited megabrands like Louis Vuitton as prime examples of how integral accessories are for a firm. “It’s enabled us to do a lot more experimental things in other parts of the company because we’ve built such a strong accessories category.”
He anticipates handbags constituting 50 percent of the business in the next few years, and accessories-only stores are something he’s considering.
“We’ve never wanted to be categorized by price point,” said Wang. “It’s always been about a unique positioning that first has a point of view and originality of design. Second, we see where we can play with our resources.”
He noted that all materials come from Europe and hardware is custom developed. “The idea of approachability and accessibility of the bags was important, while maintaining quality,” he said.
Mary-Kate Olsen created a stir in 2009 when she was photographed wearing Wang’s Rocco textured black leather duffel with a studded bottom — which has since become a top seller and mainstay in the line. The designer said he’s made an effort to take the collection in new directions, including the Prisma group, which has cleaner, smoother leather and metal corners, and the more structured Pelican. The Pelican sling retails for $725 — and for holiday, individual, reversible covers in exotic skins will be sold separately for consumers to attach to studs on the body of the bag. The covers, which range from $150 to $175, will hit retail in November.
Kirna Zabête carries the above designers, and co-owner Beth Buccini has no qualms about merchandising Lim’s 31 Hour bag next to Celine or Proenza Schouler. She also cited two-year-old brand Reece Hudson’s handbags — especially the $695 oversize Bowery clutch and the structured $825 Siren satchel that will arrive early next year — as a “chic middle ground.”
“They are carving out this new niche of not super-high-end — but not low-end, either. People like to be surprised and have new names. It’s so much fashion and luxury, it doesn’t feel contemporary,” Buccini said of Hudson’s collection. The 13-year-old SoHo retailer picked up Hudson’s line, designed by Reece Soloman, upon its launch for fall 2010 and said she continues to do well with it.
Buccini’s customer buys designer bags that fall within this “chic middle ground,” or modern luxury category.
“Someone can buy a [Proenza Schouler] PS1, and they’ll also want the 31 Hour bag. I don’t think that people are as absolutely crazy focused on name brands anymore. They want something a little different and a little unexpected. That’s what you can find from these vendors — and the price isn’t exorbitant.”
Reece Hudson, currently carried at about 20 doors worldwide and on Shopbop.com, was just picked up by Barneys in seven doors including Madison Avenue, SoHo, Beverly Hills, The Grove, San Francisco, Miami and its Web site, barneys.com, for spring. Reece Hudson ceo Max Stein contends that the brand works well in multiple ways — from sitting alongside Alexander Wang at Barneys, to having a place at Kirna Zabête next to Givenchy or Pierre Hardy.
“When we started, Alexander Wang and Phillip Lim didn’t really have bags yet, and I love that they helped define the category. Without them, it would be much harder,” Stein said.
The oversize Bowery clutch that garnered major attention for the brand retails for $695, and the Siren remains the current best-selling silhouette for spring. Evening bags, especially minaudières like the $1,195 Bondage bag with a connected chain and cuff, serve as a point of differentiation for Hudson.
When Stein and Solomon founded the label, they observed that handbags were falling into two categories: designer brands attached to houses and then entry contemporary collections that “felt derivative of the houses.” It was paramount to Hudson to create an independent handbag line with a signature point of view — from hardware to high-quality production in Italy.
Similar to Reece Hudson (with the exception of belts), Jérôme Dreyfuss is another strictly accessories brand that falls within the parameters characterized by the above designers. In fact, Dreyfuss, who is married to Isabel Marant, might have helped define the category when he founded his own line in 1998. But unlike Wang and Lim, Dreyfuss wants handbags to remain at the heart of the company. He has expanded within the category with the launch of his Monsieur Dreyfuss men’s line this year.
Dreyfuss noted he started his business with apparel, but after a few seasons changed directions. At the time, most of the handbags out there were from “big houses with big logos” and the women he knew weren’t gravitating toward this.
“I wanted to make a different proposition. I started doing it for my friends because I couldn’t find something that I felt was fitting for my friends. It’s always the way I work,” Dreyfuss said.
The brand has seen steady growth of 30 percent each season, with the bulk of the collections retailing from about $700 to $1,000 (exotics can exceed $2,000, however). Besides five freestanding doors — three in Paris, and one in each of New York and Taipei, Taiwan — and plans to open two additional stores in Tokyo and Seoul, the bags are carried in about 350 doors worldwide at stores including Neiman’s, Net-a-porter, Lane Crawford, Printemps, Le Bon Marché and Barneys.
Tomoko Ogura, senior fashion director at Barneys, said the store is trying to elevate the space. She credited Lim, Wang, Dreyfuss and Hudson with providing “collections with strong, different points of view” with “really strong price-to-value relationships.”
Elevate is also a key word for Saks, and Moore said the store has addressed the oversaturation of the contemporary handbag category by working with select brands to create exclusive products.
Such is the case with Rebecca Minkoff, which worked with the retailer to create a handmade, higher-end collection, retailing from about $500 to $995 (exotics range from $1,200 to $1,995), more than double or even triple the price of its main collection. The Rebecca Minkoff collection launched exclusively with Saks in spring 2010 and is available in about six locations, including the New York store, where it sits alongside designer bags. Distribution for her collection handbags has since widened to include Lane Crawford and Intermix.
“We saw there was a need for an elevated handbag,” Minkoff said. “For the girl who had graduated from buying contemporary handbags and wanted to have accessible luxury with a young designer look.”