By  on June 11, 2007

Mini fashionistas toting Coach and Chanel handbags can be found in malls around the country.

Aspiring to celebrity status, these teens and tweens are keenly aware of name brands and are shelling out their allowance — and money straight from their parents' pockets — to "fit in" and be fashion-right.

But while this heightened interest could boost profits for high-end suppliers and retailers, the trend threatens to damage the exclusive image of luxury brands, sources said.

Designer labels account for about 15.3 percent of U.S. clothing purchases by 13- to 17-year-olds, compared with 9.6 percent five years ago, according to The NPD Group.

This teen obsession with luxury is driven by celebrity media that closely follow what pop idols are wearing and carrying in their swag bags.

"The message is sent out that this is what's hot and they must have it, and parents of these kids are indulging them with luxury items. Parents are willing to sacrifice their own needs and purchases so their kids are not left out," explained J. Elias Portnoy, chief brand strategist at The Portnoy Group.

The high-end brands attracting teen shoppers could either not be reached for comment or declined comment.

However, several luxury brands, including Coach, say they do not directly market to teens, they are benefiting from publicity in intermediary sources, such as magazines and television shows, which constantly name-drop.

At Coach, 5 percent of North American sales last year were to customers age 18 or younger, estimates Dorothy S. Lakner, executive director of equity research at CIBC World Markets.

By reeling in teens with entry-level items such as wallets and wristlets, luxury brands have an opportunity to "grow up" with their customers, said Dana Telsey, retail analyst with Telsey Advisory group.

"It's like cigarette smoking. [Luxury brands] are getting them hooked at a young age and have them as customers for a lifetime," Portnoy said. "Luxury retailers are welcoming these young, fairly mature, mini fashion icons because they have learned that these young girls coming in with their friends could already have a credit card in their wallet."Denim also has evolved into a big-ticket purchase as teens snatch up jeans costing more than $150.

"No longer is denim just a $50 item. Many teens are buying jeans at $200 and $300 a pop," Lakner said.

During a teen panel at Piper Jaffray's Annual Consumer Conference, a group of 17- and 18-year-olds from Ramapo High School in Franklin, N.J., said True Religion and Seven Jeans were among their favorite name brands in denim.

Many of these teens also said they purchased their jeans predominantly at high-end department stores like Nordstrom, Bloomingdale's and Saks, because these stores offer a variety of styles and labels.

Department stores such as Nordstrom also have been cashing in on the juniors luxury market, carrying Burberry and Prada merchandise in the children's department.

"I have heard of some brands making products designed solely for teens and tweens, but I don't think these young shoppers wanted to be isolated or buy products designed only for kids. They like the idea that they are running around as mini adults and buying the products they think they will have when they are 25," Portnoy said. "The question is, When they get to be 25, what happens next? Will they still want the brands they were wearing when they were 14 or 15, or will they want items that are even more exclusive?"

As more designer labels attract tiers of customers by offering products for different income levels and styles, they must learn how to balance being both wide and exclusive without losing their status, Telsey said.

Most luxury retailers have retooled their goods and price points enough to grab the middle-market customers, forming branches of product lines to appeal to a more diverse group. "This could eventually become a danger for Coach, Chanel and Prada. If they become overexposed, they will not be as desirable," Portnoy predicted.

As these companies expand, they risk overexposure and devaluation, and if the economy shifts, these brands could be hurt. "What was once luxury may soon become mere luxury," Portnoy said. "Customers may start to think, 'Everyone has a Coach bag. I want something different.'"This may already be happening. When asked what brands filled their closets five years ago that are now "uncool," the teens on the panel said Coach and Juicy Couture were "washed up."

One 18-year-old said she established a collection of these small handbags when she was 13 or 14, but now that she has "better things" to spend her money on, she no longer makes such big purchases.

"Coach, which is slightly less expensive, is the most at-risk if the economy sours since they are targeting the aspirational customer, not the superluxury customer, who may not have the money to spend on these items," Portnoy said.

He predicted that there would be a rise in smaller, lesser-known brands that evolve into "superluxury." And he said customers would look to small stores in Italy and Milan, and new, undiscovered brands, to differentiate themselves and regain their exclusivity.

To combat overexposure, Tiffany has raised prices on silver in recent years, in part to cut back on the "teenage traffic" in stores, Lakner said.

"They don't want to lose [the teen] customers, but they want to strike a balance between teens who are buying a silver heart bracelet and customers looking at $50,000 bracelets," she said.

But Telsey said the risk of overexposure depended on the way the brand is managed, and that Coach, which is starting to offer higher-end merchandise to the superluxury customers, should be able to prevail.

"What these brands are doing is, they will have items for the teens, but are building on the super-high-priced bags and merchandise teens can't afford," said Jane Hali, consultant with Coleman Research Group. "What we see is teens going after the affordable luxury. Superluxury is just getting more expensive. We are talking about hundreds of dollars for teens, not thousands or hundreds of thousands."

But, while designer brands may be able to avoid overexposure through strong management, they may not be able to combat the proliferation of their designs through counterfeit merchandise.

"Marijuana is called a gateway drug; that is what counterfeiting can be looked at as," said Nils Montan, president of the International Anti-Counterfeiting Coalition.Counterfeit bags are available in most major cities on the street, and on the Internet.

Currently, purchasers of these fake goods in the U.S. are not targeted, making it difficult to determine which demographic contributes most to the sale of counterfeits.

"Kids, especially, are under the radar, but my gut reaction is that counterfeits are an entry point for teens to luxury brands," Montan said.

What makes luxury merchandise so valuable and highly sought after is its exclusivity. Counterfeits cheapen the brand and its image.

"Luxury items cost so much, partially because they are intricately designed and manufactured, but really because they are exclusive, and they cost so much because that is what luxury is — it's specifically designed so not as many people can have them," Montan said.

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