TOKYO — Taking a different tack with the Japanese market, Fendi last week hosted the hottest hip-hop-flavored fashion party in town, with Japanese streetwear ringleader Nigo — not Karl Lagerfeld or Silvia Venturini Fendi — calling the creative shots for the night.
The immediate occasion was the global launch of a range of leather goods by Venturini Fendi called B. Mix. But the overarching goal was to start speaking to Japanese customers in a new way and keep fanning Fendi's global momentum as the LVMH Moët Hennessy Louis Vuitton-owned brand surges toward $500 million in sales next year, with accelerating profitability.
Michael Burke, Fendi's chief executive officer, disclosed the financial results to WWD while discussing how the Rome-based fashion house is charting a new approach in Japan at a time when many European luxury brands are facing slower growth in a nation vital to the luxury sector.
"It's about a different way of seeing Western fashion," Burke said in an interview just before the event, which featured performances by Kanye West and the Teriyaki Boys in a giant tent in Tokyo's National Stadium, which Nigo chose as a wink to the Coliseum in Rome. "The formula used to be: Duplicate your Milanese runway and they'll be happy."
But in Burke's estimation, it's time to take notice of how Japanese consumers are changing: diversifying their spending and paying more attention to local fashion heroes. "The street is very vibrant here. They are inventing their own culture, their own way of living," he explained. "If we don't start doing something, they're going to start substituting old luxury with new luxury."
Burke noted foreign luxury brands have had a strong run in Japan since the Sixties, and many continue to thrive by importing their products and brand messages literally from Europe.
In his estimation, however, "that has seen its best days and the future is going to be a little different....I think we're going to have to be much more in tune with the customer....The solution is to stay relevant with these consumers rather than screaming one monolithic message."
And how. At last Thursday's event, trendy young Tokyoites came out in force, with many male — and some female — guests aping Nigo's quirky look: floppy knit toque, oversized plastic sunglasses and a cool, if studied, mélange of street and luxury labels.There was free-flowing Moët & Chandon and fois gras canapés, but this was hardly your typical LVMH fete. Waiters also circulated espresso shots and rice in takeaway containers, and the crowd, egged on by West during one number, waved their hands in the air and shouted back on cue, "Get down girl, go ahead, get down."
In an interview, Nigo, the man behind the cult Bathing Ape label, said he appreciated Fendi's initiative, which allowed him to give the event a local flavor, from the mix of the 1,000 guests he assembled to the red makeup slashed across the eyes of the female string quartet that backed up West.
Annihilating any lingering perceptions that Japanese consumers only like things pink and girly, Nigo — a DJ-turned-designer — gave the Fendi event Olympian proportions, from the yellow flags ringing the stadium's rim to the sleek, all-black party tent by interior designer Masamichi Katayama.
Nigo also curated an installation blending Fendi's spring runway looks with the B. Mix handbags, displayed amid piles of transparent trunks built to his exact specifications. The accessories, mixing two versions of the F logo, are slated to arrive at Fendi stores worldwide this month and will be promoted in Japan exclusively online via networking sites.
Speaking via an interpreter and dressed in a purple leather blouson and jeans of his own design, Nigo said he detects some fatigue in Japan with imported luxury brands, and growing interest in homegrown labels, especially as they gain credibility abroad.
To be sure, Nigo's brand of Tokyo cool is gaining a global audience. Having recently opened outposts in Hong Kong and New York's SoHo district, the designer said a Melrose location in Los Angeles is slated to open next summer, and a Paris flagship is on his wish list as well. On his home turf, the designer just opened a Tokyo branch dedicated to his children's wear, complete with a large sandbox for children to play in — only his is filled with foam bananas in assorted candy colors.
An early adopter of bling — even his teeth are metallic and glittering — Nigo said the showy look is being replaced by what he called "more heavy-duty stuff," pulling back his coat sleeve to show off his chunky Girard-Perregaux marine watch. "It's good for up to 3,000 meters," he said with a chuckle. The designer also forecasts a trend to a more "mono-color" look.Burke said he considers Nigo one of the chief gurus of "modern Japan," where hip-hop and all its accoutrements has become a "fundamental movement."
Unlike the U.S. market, however, where so-called urban brands went mass very quickly, the Japanese approach streetwear as a luxury product.
Although Bathing Ape is associated mostly with young Japanese men, who have passionately embraced trendy fashions, Nigo said about 40 percent of his business is women's wear. He also moonlights as a collaborator at Billionaire Boys Club and Ice Cream, two streetwear brands fronted by Pharrell Williams.
According to market sources, Nigo recently has been in talks with Louis Vuitton about a possible leather goods collaboration. Asked about that prospect, he replied: "Since we did the sunglasses, no new plans yet," adding with a smile, "I'm looking forward to [Vuitton creative director] Marc Jacobs calling on me."
"He's very modern," Venturini Fendi said of Nigo, likening his multifaceted interests and vast knowledge, from contemporary art to architecture, to Lagerfeld's. "He has an attraction to luxury that is relaxed, not ostentatious."
Gaining insights from Nigo about Japan's changing market is vital for the Fendi brand, since the country represents about 25 percent of its global revenues. Burke is orchestrating a transition from a master franchisee arrangement to direct control. Since taking over the business in 2002 and initiating the repositioning, Fendi has trimmed its distribution in Japan to about 34 stores from 47 locations, and "we'll close another four or five. We're downsizing the network but still growing low-single digits," Burke said.
Elsewhere, Fendi's growth has been "explosive," Burke said, pegging gains in 2006 at 30 percent.
Last year, efforts concentrated on improving full-price sales and achieving higher margins in Fendi's retail network. Burke reported that sales per square foot are on track to reach $2,300 this year, versus $1,300 in 2005.
Wholesale growth has been a key impetus in 2006, helping sales of ready-to-wear to triple and making the category profitable for the first time in the company's 81-year history, Burke said. This year saw wholesale distribution blossom, particularly in Italy and the U.S., where the brand is carried at stores including Bergdorf Goodman, Saks Fifth Avenue, Neiman Marcus and select Bloomingdale's. Burke also disclosed that Fendi's business at Saks has been converted to leased departments, reaching a compliment of 14 by the end of 2007.The company's retail expansion has also gained momentum, with 24 locations added this year for a year-end total of 136. Nineteen stores will be opened in 2007, including in Istanbul and Marbella, Spain. Fendi also will relocate its Paris flagship to Avenue Montaigne in July, which it plans to fete with its first fur-only fashion show during couture week, Burke revealed.
Approximately 30 percent of the network already reflects architect Peter Marino's "palazzo" design, which replaced an unsuccessful "dark store" concept. Fendi plans to complete the overhaul of its entire network by 2009.
Now that it's on track to cross the $500 million threshold one year ahead of schedule, Fendi is gunning to become a $1 billion player as early as 2010. Burke cited men's wear as a key opportunity, particularly in Japan, and said Fendi would enter the fine jewelry category within 18 months.
Next year will also see the launch of a new women's perfume, the first to be produced and marketed under the LVMH umbrella. The scent will be unveiled to the trade in July and land on store counters in September, Burke said, declining to reveal the name of the perfume.
Licensed products continue to power ahead. Burke said eyewear (licensed to Marchon) is approaching $100 million at wholesale, and Fendi's home partner, Clubhouse Italia, has been signed on for a number of condominium and luxury hotel projects in America and Europe. Looking ahead, Burke said wellness could be an area of expansion for 2008 or 2009. "A Fendi spa is something that could happen," he said.
For 2007, the company is forecasting a sales gain of 25 percent and accelerating profitability. While Burke declined to give exact figures, he said operating profits this year would be double-digit. "We're confident that by 2008, we'll be above 20 percent EBIT," he said. "That would put us right where we would expect a star brand to be."
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