IN THE CLUTCH
FOR BROADCASTING EXTRAVAGANCE AND STYLE IN A HURRY, THE RIGHT BAG NEVER FAILS.
Byline: Janet Ozzard / With contributions from James Fallon, London
That little leather status symbol swinging from the arm of a style maven carries a lot more than its owner’s wallet, lipstick, car keys and cell phone. If that bag comes from one of a dozen or so luxury houses, it’s also carrying the burden of communicating the designer’s name and philosophy to the rest of the world, while sending a nice, fat profit margin back to the house whence it came.
Ever since Hermes made Grace Kelly the inspiration for its endlessly classic Kelly bag — and thereby seduced generations of women into forking out the cash for that model — the handbag has been a kind of designer shorthand. If a customer didn’t want, or couldn’t afford to get the designer’s whole look, a bag could get her at least partway there.
That became even more true in the early Nineties, when Prada redefined the accessories market with its black nylon backpack. Suddenly, ultrachic women were mimicking college students as they slung anonymous-looking black packs on their shoulders. A slight difference, though: The Prada backpack cost about $400.
“Prada gave women a reason to keep coming back into the store,” says Muriel Gonzales, general merchandise manager of accessories at Bergdorf Goodman. “There was always a new silhouette. They would buy the backpack, then the tote, then the day bag. It got women into the psychology of coming back.”
“Accessories are so important because they are the first luxury threshold for most consumers,” says Carlo Pambianco, owner of a luxury goods consultancy in Milan. “They are less expensive than a piece of clothing, so they allow you to access the brand without having to shell out a lot of money. For the companies, accessories offer higher sales margins, which means they can be a motor behind a company’s success — if you manage to sell enough units.”
And during fashion’s minimalist phase, accessories were a way to show some personality.
“Everything became so played down and unobtrusive,” says Dawn Mello, the former president of Bergdorf Goodman who is now consulting on a number of businesses, including Giorgio Armani’s accessories. “There was a longing to stand out. And while very few women are going to go out and get a whole new wardrobe every season, you can get a new bag.”
“Bags are a one-size-fits-all proposition,” adds Richard Lambertson, partner in the Lambertson Truex luxury accessories business and, like Mello, an alumnus of both Gucci and Bergdorf’s.
While accessories are key these days to reviving and maintaining a luxury brand, that’s not new. “It began even before today,” says Rose Marie Bravo, chief executive of the resurgent Burberry. “Think of the Kelly bag of Hermes, the bamboo-handled bag of Gucci in the Sixties, the Chanel bag in the Eighties. It’s really been going on since Coco Chanel did her first handbag.”
But Bravo admits accessories are more important than ever, driven by the fact that the clothes in the Nineties were so minimal. She pointed to Burberry’s success with its handbags, shoes, hats, jewelry and even bikini in the Burberry plaid.
“The Nineties have been more about luxury accessories — the right jewelry, bag or shoes get a message across immediately. If you see a woman with a Kelly bag, you immediately think she’s made it.”
The advantages of accessories to luxury brands are that the margins are generally higher, they have a wider aspirational appeal and they can express a brand’s values much more rapidly than ready-to-wear. From the consumers’ viewpoint, accessories are easier to buy because they don’t rely on sizing and they go in and out of fashion much less rapidly than apparel, Bravo says.
“It’s certainly been the moment of the handbag over the last few years,” she adds. “Women can never have enough handbags, so it’s a naturally important product for a brand.”
It’s also a dream product for retailers. Margins are at least 55 percent, and sometimes as high as 60; markdowns and returns are infrequent; inventory takes up less room.
Fortunes have risen and sunk on handbags. Chanel’s quilted bags are just as important to the bottom line as the perpetually popular Chanel No. 5. When the bags fall from favor or aren’t selling in Asia, the company suffers.
Most recently, there was the case of the Fendi baguette. The little number single-handedly set the house’s name on fire again and was largely credited with attracting the spectacular multiples — 33 times the bottom line, giving Fendi a value of close to $1 billion — that it was able to command when it sold a majority stake to Prada and LVMH Moet Hennessy Louis Vuitton.
In the past two years, several major European and American designers have reconfigured their accessories businesses in the hopes of hitting upon another baguette, or even a Kelly bag.
Giorgio Armani, who runs one of the most profitable businesses in Italy, hasn’t been particularly happy with his accessories business up to now. He’s been frustrated, according to observers, as competitors like Gucci and Prada report exploding accessories sales. “I think we’re probably the only fashion house around that generates money with clothing and not accessories,” he told WWD last June. Gucci reported that sales of leather goods and shoes generated more than half of the company’s $1.04 billion revenues in 1998. At Prada, footwear and leather goods generate more than 77 percent of its sales of $1 billion.
Last year, Armani even contemplated a joint venture with LVMH that would have, in part, addressed accessories. Why not? Louis Vuitton had 1998 sales of about $1 billion, all of which came from accessories. In contrast, Armani’s 1998 accessories sales — including watches and fragrances — made up 40 percent of the company’s overall wholesale revenue of $1.3 billion, and industry sources say the leather accessories accounted for well under half of that.
Armani is just one of the ready-to-wear designers putting more into accessories. Fellow Italian Valentino hired away two Fendi accessories designers last year as part of his campaign to beef up that area. Donna Karan has relaunched her designer accessories line for this fall after taking a two-year hiatus.
“I just wasn’t happy with the designs and felt it was better to halt the collection and come back to it later with a more focused eye,” Karan says of the relaunch. The new group, which will ship to all the freestanding Donna Karan stores and a limited number of specialty stores, is inspired by her earliest bag designs, including oversized, user-friendly bags ranging in shapes from messengers and totes to shoulder bags.
There is other new blood coming into the U.S. market, as well. Marc Jacobs is launching a line this fall, and Michael Kors’s first collection will launch in spring 2001. Both designers are using their LVMH connections. Jacobs’s line will be produced by an LVMH-owned factory and wholesale from $132 to $414. Kors’s deal is with Paris-based Le Tanneur & Cie, which is one-third owned by the luxury goods group, and his line will retail from $200 up to $3,500, with core items in the $300 to $600 range.
Designer accessories are also expected to carry the style message, but at the same time, they have to carry their own weight on the sales floor.
“We do merchandise designer handbags in the boutiques, but 90 percent of our business comes from the main floor area,” says Gonzales. “The styles have to stand on their own.”
The biggest handicap Americans face is they just don’t have the leather goods culture of the Italians, who put generations of tradition into every bucket bag.
In fact, retailers and executives say it’s a bit unfair to compare fashion houses to the likes of Fendi, Gucci, Prada and even Ferragamo. Those all started as leather goods houses and then went into fashion.
“Though Gucci, Ferragamo, Prada, Hermes, Vuitton and Fendi all have ready-to-wear lines now, they all started out as accessories companies,” Gail Pisano, executive vice president of Saks Fifth Avenue, said earlier this year. “Those companies mastered the craftsmanship long ago. They have extensive archives. It’s almost second nature now.”
“Our prime handbag resources — Fendi, Barry Kieselstein-Cord, Tod’s, Gucci, Lambertson Truex — are all accessories companies first,” says Bergdorf’s Gonzales.
Armani, Karan and others are doing the reverse. Even though it sounds simple, observers agree that accessories are a different business, like beauty or denim, and not an extension of apparel.
“It’s not so simple,” says Mello. “There are a lot of skills involved. You have to think about linings…and hardware+and the bag can’t dissolve in the rain. You have to be committed to it, and it’s an expensive proposition.”