In tough times, accessories, most notably handbags, aren't just an easier way to look good, they're delivering profits for the companies that make them.Last month, British luxury fashion label Burberry reported accessories sales up 32% year-on-year, with plans to invest an estimated 10 million dollars over this year and next in developing and strengthening its accessories offer.
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Italy's Giorgio Armani has been working hard since the late 1990s to guide his customers toward accessories, but the big gains have come relatively recently. Armani registered an unprecedented accessories sales growth of over 30% in the year ending March 2008. Behind the numbers? Throughout the fashion business, the view is that consumers are rethinking their spending and indulging on relatively affordable luxury goods.Unlike most clothing, some handbags are on trend for multiple seasons, making then a worthy investment.
The $2,000 Louis Vuitton Speedy cube bag, for example, is an innovation of the classic speedy bag, an LV best seller. The Fall/ Winter 2008 version is a must have, merging trend with tradition, allowing for a useful and beautiful bag that will outlive seasonal trends."When times are tough, you spend more on accessories," says British fashion consultant and journalist Roger Tredre. "It's clothing that suffers."Behind The Bags Part of the secret is in the implementation of new logistics programs.
These treat accessories like ready to wear clothing, where the traditional two seasons have been scrapped in favor of smaller capsule collections. Now accessories, too, are produced in a number of flash collections, delivered at short intervals throughout the year. This kind of rethink is prompting increments in sales, with customers enticed to visit stores more regularly to browse for fresh designs. Of course retailers still have to work hard for their customers.
The key for design teams is to strike the right balance between innovation and tradition. "You've got to take forward the fashion element step by step without alienating your core--and potentially more conservative--customer," says Tredre.Prada's recently refurbished Florence store is an example of what strategic lengths retailers will go to in order to reinforce their accessories sales.
The new shop floor features accessories right at the front, next to the entrance. "This is a way for Prada to push their core and most profitable products," says Sandra Halliday, global managing editor for business reporting and analysis at Worth Global Style Network, a trend analysis company. What are you spending on? Weigh in. Post your thoughts in the Readers Comment section below. It shows.
Analysts say that Prada Group's results for 2007 should be in line with luxury market trends. The Prada label, the dominant brand within the group, is expected to report a double-digit growth year-on-year in its accessories segment. At Louis Vuitton, some 75% of profits are accounted for by accessories. Overall LV accounted for 50% of total LVMH group revenue of 3.226 billion euros in 2007.Rogerio Fumigori, analyst for Credit Suisse, ascribed the runaway performance of Louis Vuitton to the enduring popularity of the brand's traditional products, such as the timeless LV monogram collection.
There has been no cannibalization of the core products by the fashion-driven collection, he notes. The arrival of hip New York designer Marc Jacobs in the 1990s to design the ready to wear line and oversee the seasonal leather goods collections has proved a master stroke.
Thomas Chauvet, an analyst at Citigroup, says the "Marc Jacobs collections are a medium through which LV pushes [its] core categories." Jacobs himself, meanwhile, is keeping one step ahead, developing innovative new footwear and jewellery in addition to the best-selling handbags. And where LV's Jacobs goes, the market is sure to follow.Further investment in the accessory sector could prove to be a safety net for luxury goods companies in a climate where downturn is the ultimate trend.
While handbags have been leading the way in recent years, the fashion media are now eulogizing the allure of designer shoes. When movie star Gwyneth Paltrow was recently photographed in sky-high platforms, newspapers worldwide had a feeding frenzy. And big statement jewellery, as seen at the Oscars, is also on a roll.Still, during difficult times, says Claudia D'Arpizio, a partner at Bain, "bags are a commodity and will continue to drive the luxury market."
BY: Valentina Zannoni 06.26.08, 5:25 PM ET