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N.Z. Retail Rides America’s Cup Wave

AUCKLAND, New Zealand — It’s not only the sailing teams gearing up for action here.<br><br>With the 31st America’s Cup Season kicking off today, New Zealand’s 49,000 retailers are crossing their fingers for a sails-driven...

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AUCKLAND, New Zealand — It’s not only the sailing teams gearing up for action here.

This story first appeared in the October 1, 2002 issue of WWD.  Subscribe Today.

With the 31st America’s Cup Season kicking off today, New Zealand’s 49,000 retailers are crossing their fingers for a sails-driven bonanza — along the lines of the one they experienced in the summer of 1999-2000, during which Team New Zealand retained the Cup.

According to a McDermott Fairgray Group/Ernst & Young economic impact report, the last America’s Cup regatta gave a $300.5 million injection to the New Zealand economy, $222 million of it to capital city Auckland alone. (All U.S. dollar figures are converted from New Zealand dollars at the current exchange rate.)

That doesn’t include a complete facelift of Auckland Harbour’s Viaduct Basin after 1995, when The Royal New Zealand Yacht Squadron wrenched the Cup away from the New York Yacht Club. The makeover transformed a neglected, toxic fishing port into the sparkling America’s Cup Village, now officially called the American Express Viaduct Harbour. It’s now buzzing with yacht groups, superyachts, restaurants, bars, luxury apartments, hotels and shops. According to Harbour management firm America’s Cup Village Ltd., it drew 4.2 million people during the last regatta. That’s more than the entire population of New Zealand — 3.9 million — a third of which is in Auckland.

According to the economic impact report, retail was the sixth-highest Cup beneficiary after the marine, transport, construction, accommodation and restaurant-hospitality sectors, with a $26.7 million injection. But industry insiders say that figure is, well, a drop in the ocean compared to the real business done. Auckland retail industry lobby group Heart of The City calculates retailers in the central business district alone — about a 3.7-mile radius around the Viaduct Harbour — had an average 15 percent or $37.5 million retail sales boost during the last regatta. And although not quite the 60 percent sales spikes experienced by some retailers in the Sydney CBD during the Olympics (according to a New South Wales State Chamber of Commerce report), several Auckland apparel retailers said they had increases of 30 to 50 percent. Noted HOT City managing director, Alex Swney: “The closer you were to the water, the better you did, basically.”

New Zealand leisure brand Line 7 —the exclusive supplier of Team New Zealand and America’s Cup apparel for 2000 and 2003 — said it turned over $37.5 million at retail during the last regatta, 90 percent of it on home turf through its 150 wholesale accounts and eight Line 7 and America’s Cup stores.

The harborfront Line 7 America’s Cup store turned over $47,000 a day during the peak period of February through March, which coincides with the Louis Vuitton Cup finals and America’s Cup.

Line 7 managing director Ross Munro said that although there’s no novelty factor driving local business in the lead-up to this regatta, as with the last, Line 7’s online sales are nevertheless tracking 700 percent ahead of last time and Munro is confident the company will eclipse its 2000 America’s Cup business.

“Last time, there was no product in the market, it was all new” said Munro. “But our merchandising program has been going very well. Obviously, it will ramp up towards the climax of the event in February-March. So the [duration] is fantastic.”

Munro added: “It’s going to be a buzz, it’s going to be constant and it’s going to be great for business — it is already good for business. And the good thing about it is that if you win [the cup], you keep it. So unlike the Olympics, which travel, winning it has certain financial benefits to the holding country.”

Although Trans-Tasman neighbor Australia failed to defend the America’s Cup in Fremantle in 1983 and had to wait 44 years between hosting Summer Olympics — Melbourne 1956 to Sydney 2000 — Auckland and New Zealand have had an eight-year dream run with the America’s Cup. Should Team New Zealand win again, that will make 11 years.

Straddling two harbors, Auckland boasts what it claims is the world’s highest boat ownership — one vessel per 16 people, or 80,000 pleasure crafts — and a 6,950 square-mile marine park called the Hauraki Gulf dotted with over 50 islands.

The gulf is where the superyacht teams have been training and where, starting this week, they compete in the Louis Vuitton Cup Challenger Series to determine who gets to race Team New Zealand in the America’s Cup match beginning Feb. 15.

“It’s the most beautiful place on earth” said Laurent Esquier, Team Prada’s operations manager for the 2000 and 2003 regattas, whose 100-strong crew has called Auckland home for six months of the year since 1997 [and whose 25-stockkeeping-unit Prada uniform is the most highly coveted in the country; it’s also the only one not for sale]. Prada has spent over $140 million on the two campaigns — at least 10 percent of it in Auckland.

Team Prada isn’t the only syndicate spending big here. Another key difference between the America’s Cup and the Olympics or World Cup: not only does the winner keep the trophy and event, but with it, a very attractive caliber of visitor. Call them luxury tourists — or as the Stars and Stripes Americas’ Cup 2003 syndicate head Dennis Connor has dubbed them, “the Bees.” They include the likes of Oracle Corp. founder and chief executive officer Larry Ellison, Seattle wireless pioneer Craig McCaw, Microsoft co-founder Paul Allen and Switzerland-based Italian pharmaceuticals baron Ernesto Berterelli.

Over and above the nine competing teams, a constellation of luxury superyachts is also expected to descend on Auckland. Organizers of the world’s largest superyacht regatta, the New Zealand Millennium Cup, expect more than 75 competitors in their event from Feb. 10-13. America’s Cup Village Ltd. reports a 25 percent increase in bookings for superyacht berths from October through March. “We’ve booked in 94 vessels, but we will berth 150,” said Grant Davidson, facilities manager for America’s Cup Village, which has built another 22 berths in preparation.

And it’s not only the ship chandlers who are angling for the luxury trade. To connect the tourists to the retailers, HOT City has put together an Auckland Privilege Handbook retail guide.

“Does a billionaire care that he’s getting 25 percent off? Probably not, but he does need to know where to go” said HOT City’s Swney.

DFS Galleria is in the handbook, touting its four New Zealand stores, notably the 323,000-square-foot, four-story downtown Auckland store. That unit racked up a double-digit sales increase in its boutique, fine watches and luxury leather categories during the last regatta, according to DFS New Zealand managing director Craig McKenna, fueled by spending from the race teams, the superyachts and all the commensurate corporate schmoozing. “The syndicates are bigger, the superyachts are bigger and because of that, you’ve got more incentive group and corporate activity coming out of the U.S. in particular. We’re definitely expecting it to be bigger,” predicted McKenna.

Although Auckland’s only upscale department store, Smith & Caughey, isn’t expecting a huge run on upscale apparel, according to managing director Andrew Caughey, the store did manage to secure Armani Collezioni last November after three years of negotiations. Caughey believes the America’s Cup played a large factor in Armani’s decision to launch at that time. Armani’s office declined to comment.

Overall, Smith & Caughey’s business had a 10 to 12 percent increase over 1999-2000, said Caughey, with the biggest demand coming somewhat unexpectedly from the home goods arena.

“The America’s Cup business is quite a closed shop, it’s quite hard to break into,” said Caughey. “But some people want total outfitting. They want crockery, cutlery, perfumes, towels, sheets. Literally, you’ll get a phone call and they’ll want something and they’ll want it now, so you need to be able to react quickly at any time of the day or night, seven days a week. It was not unusual to get orders of $14,000 to $19,000. That’s not the sort of thing we normally see in New Zealand.”

Louis Vuitton will celebrate the 20th anniversary of its sponsorship of the America’s Cup Challenger Series next year, and the company is making sure everything’s ship-shape for the regatta — after experiencing a 50 percent sales surge during the last one, according to Sydney-based LVMH Oceania chief executive François Kress.

Established in this market in 1991, Vuitton’s New Zealand operations were cranked up in the wake of New Zealand’s first America’s Cup victory in 1995. The company now operates five New Zealand stores between Auckland, Christchurch and the alpine resort town of Queenstown in the south island.

The country’s flagship is the 1,600-square-foot Louis Vuitton Cup store that opened in February 2001, right on the Viaduct Harbour. The first and, to date, only freestanding LV Cup store in the world, it carries the complete range of Louis Vuitton Cup luggage, clothing, footwear and accessories, in addition to selected Louis Vuitton fashion, accessory and leather goods.

The interior boasts a unique boat-like design with nautical interiors and facade to match, courtesy of Vuitton’s in-house architects: a teak floor laid like the deck of a yacht, brass and steel merchandising units and 15-foot-high yacht graphics on the windows.

Originally solely a tourist market for Vuitton, local consumption has now reached 18 percent and is growing by about 20 to 30 percent a year, Kress said. Unusual buying patterns include a high percentage of American customers and an unprecedented demand for shoes — 20 percent of sales in the Queen Street store, here.

“It’s as if they never saw shoes before. It’s totally unusual at Louis Vuitton,” said Kress, noting that out of all the countries in which Vuitton is sold, this has the highest percentage of volume in shoes.

Kress is quietly confident it won’t just be shoes walking out the door starting this week. He said the pace has been brisk for six months before the Cup period, and, if the same pattern is followed as last time, business should be up 50 percent during the Cup period and remain like that for months afterward.

“Plus this time we have a proper store in the heart of the Cup, really on the wharf. I expect it to explode,” he said. The mood of the local fashion trade is similarly buoyant. The New Zealand retail market is widely regarded as being less price-conscious than its Australian equivalent and it is characterized by an unusually high concentration of boutiques. According to Statistics New Zealand, a designer fashion industry study prepared for the New Zealand Government reported designer fashion accounted for $116.3 million at retail in the 12 months to March 2002. That’s about 14 percent of the total clothing and soft goods retail sales figures for the same period, $800 million, an increase of 9.1 percent over the previous year.

New Zealand’s highest-profile designers, including Karen Walker, Zambesi, Kate Sylvester, World, Blanchet, Helen Cherry, Nom D and Trelise Cooper, all operate their own stores throughout the country. Many are concentrated in what has emerged as Auckland’s high-fashion precinct of High Street-Chancery Lane-Vulcan Lane, behind the Viaduct Harbour and within a five-minute walk of the major hotels.

Numerous High Street stores experienced 30 to 50 percent sales increases during the last regatta, some closing doors for select internationals to peruse at their leisure. All are free to open and close their doors at will: there are no penalties or trading-hour restrictions in New Zealand.

According to Sylvester, Miuccia Prada was a frequent visitor — and customer — at her High Street boutique. Karen Walker’s monied clientele included 1992 America’ s Cup winner Bill Koch and his companion.

“January-February was when it was really pumping,” said Walker. “It was a slow burn before that, and then we found that in December, and particularly January and February, it just went nuts. We’re hoping for a repeat.

“So much money came into the city. And that’s going to have a residual effect to Aucklanders. They have more money in their pockets because there’s more money floating around. There aren’t as many people coming in as for the Olympics, but they’re loaded.”

Given the timing of the second annual L’Oréal New Zealand Fashion Week (LNZFW) — Oct. 21-25 — some are also hoping all the billionaire bonhomie may similarly stimulate New Zealand’s designer export sales [$19 million wholesale sales in the 12 months to March 2002, according to the designer study].

After the unfortunate post-Sept. 11 timing of the inaugural event in October 2001, LNZFW managing director Pieter Stewart is hoping not only to lure more internationals this time around, but tap into some of the hundreds of media representatives already in town for the sailing.

Stewart said, last year’s event attracted 140 international media and buyers from Australia, Japan and London, 360 local industry-media delegates and 6,000 guests. Buyers from Saks Fifth Avenue, Paris’ L’Eclaireur and Kuwait’s Villa Moda told WWD in Sydney in May that they were interested in attending the Auckland event at some stage, as well as the Mercedes Australian Fashion Week (MAFW) fall shows in Melbourne — running Nov. 10-13 — but would have to choose one over the other, given the long stretch between the two events. With the world’s number-one yachting meet in town, New Zealand may well have one over Australia on this occasion.

“There’s such a great vibe” added Karen Walker, who did not participate in the first LNZFW — or in fact in MAFW since 2000 — but might show in Auckland in November. “Auckland is a very small city, very intimate and almost villagey. When the America’s Cup was on, it was just so buoyant and exciting and it felt, just for that couple of months, like being in a big city.”

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