Moderated by Hitha Herzog | August 25, 2015 | Culture
The Luxury Education Foundation’s board members and leaders of our favorite iconic brands—Dior, Graff, Chanel, Hermès, Salvatore Ferragamo, and Lalique—talk about new strategies, core values, and how new talent is driving success.
Moderator Hitha Herzog greets Maz Zouhairi as (from left) Barbara Cirkva, Vincent Ottomanelli, and Pamela Baxter look on.
Michigan Avenue recently sat down with the CEOs and presidents of top luxury brands to get their read on the new luxury economy, how millennials will impact this vital sector, and what’s hot in luxury across the US. The gathering dovetailed with the 10th anniversary of the Luxury Education Foundation (LEF), a public, not-for-profit organization that focuses on educational programs for design and business students at both the undergraduate (Parsons School of Design) and graduate (Columbia Business School) level. The programs, studying the creation and marketing of luxury goods, also allow students to learn about this highly competitive sector of retailing by interacting with senior executives from iconic firms. In turn, these firms benefit by gaining fresh perspectives about their brands from a new generation of talent.
Michigan Avenue: Tell us about your relationship to the Luxury Education Foundation and how your involvement has benefited your brand.
Robert Chavez, CEO and President, Hermès: It’s really great to get a new perspective from students. Sometimes when we’ve presented projects and they come back with their observations we think, Wow, we never looked at it that way. This fall we’ll ask them to focus on the traditional Hermès scarf and come up with new ideas to market and wear it, and to present the scarf digitally in unique and innovative ways.
Vincent Ottomanelli, President and Regional Director, Salvatore Ferragamo: We learn what the students’ perceptions of our brand are from the outside looking in, so we benefit from learning how we can communicate to different generations.
Barbara Cirkva, Division President of Fashion, Chanel: What’s so interesting with LEF is how the program has expanded. Obviously, we are famous for the Master Class [where luxury brands and their executives work on case studies involving current business situations] and now, over the last several years, we have added five or six different programs. Just 10 days ago, we hosted 25 students from Columbia Business School at Chanel. They spent the day with us so that, from their standpoint, they can understand what happens every day in the world of luxury. What was so rewarding for us on the Chanel side was having the opportunity to interact with the students and learn what was important to them.
MA: The maker culture has taken root strongly with millennials in this country. Are American students interested in developing craftsmanship skills? Or do you find that more likely to happen in Europe?
RC: When you visit the ateliers in France, you’ll be surprised at how youthful many of the new craftspeople are. There’s been this surge in interest of people wanting to do something with their hands, whether it’s making jewelry, working with silk, or stitching leather. With LEF we’re always looking for new programs to offer students, just like the craftsmanship program we launched this year, the 10th program in our 10th year.
Pamela Baxter, CEO and President, LVMH Perfumes and Cosmetics North America: Students need to be exposed to luxury from the very beginning. You can’t separate craftsmanship from the brand because it goes back to the beginning of the brand. If you take Dior, it goes back to Christian creating and designing for the brand, and you want students to understand that. Today, when you have Raf Simons designing, he’s very involved in the art world, so he collaborates with artists to create fabric for dresses—it modernizes and keeps it going in a very contemporary way.
MA: The 2008 financial crisis impacted all market sectors. How did your consumer change during the last five to seven years?
RC: I would say nothing changed for Hermès. We found that even during the crisis customers were willing to invest in certain items. The 2008 holiday season was a very interesting time because we saw loyal clients still wanting to purchase those investment pieces.
VO: We learned that we are not recession-proof. Customers weren’t shopping at the same level. But here’s the thing: for brands like ours—true luxury brands—you don’t start manipulating or changing your approach. So we took a little bit of a hit in 2008, but I think we rebounded very quickly because we didn’t change our formula.
Maz Zouhairi, CEO and President, Lalique North America: It was similar with us. In 2010 things turned around, and 2011 and 2012 were better years. I would say that the recession did remind us that we have to be relevant, exciting, and fresh to today’s world and time. Luxury is a dream, not a necessity.
MA: Millennials, the so-called frst cohort of “digital natives,” are projected to be the biggest generation of spenders since the boomers. However, millennials are dealing with economic issues boomers didn’t have to—a long-term slow-growth economy, which is postponing their arrival at certain levels of affuence. They have more debt and less spending power than other generations did at equivalent ages. How are you marketing to them versus how you market to boomers or their successors, Gen X?
PB: If you look at brands like Chanel and Dior, we are seeing new, young couture clients every day. There is always going to be that customer where there’s no price ceiling— they want something that’s exclusive to them.
RC: Maybe we’re not seeing as many millennials as we’d like to. And those we do see are at an entry price point. So it’s their first scarf, first tie, first watch. Regardless of age, there is one consistency: People are genuinely interested in quality and craftsmanship. They want something that is very well made, that’s going to last a long time. But, for example, in the case of ties, a younger customer wants a thinner tie—same quality, just thinner.
BC: I think it’s less a generational issue than a lifestyle issue. There are certain badges of honor you want to acquire at different stages in your life. For some individuals, it might be 10 days at an Aman resort. For other people, it’s going to be a Chanel haute couture dress, or handbag, or something from Dior or Lalique. But it’s much more individual than it was in the boomer years, where there was more consistency to “what’s your first badge, what’s your second badge?” Today, it’s based more on personality and lifestyle.
MZ: It’s also about having collaborations that are relevant to a younger audience. All brands are searching for ways to be relevant to the millennials.
Ottomanelli, Baxter, and Zouhairi.
MA: In terms of being more relevant, I recently visited a Graff store in Vegas and found Beats By Dre headphones with Graff diamonds on them!
Henri Barguirdjian, USA CEO and President, Graff: The idea of doing something with Beats By Dre was a cool way to show that we’re not old and stodgy, we can also be hip—so there you go. It was a fun collaboration.
VO: It’s interesting what you did with the Beats product. The heritage of our brands is about product. I don’t think it’s necessarily generational; it’s about the quality and the craftsmanship that each of our brands represent. We have been around for over 100 years and everything we do has to be product-focused, and then secondly, it is how can we communicate that to stimulate [interest from] different generations?
MA: What do you think are the priorities for luxury customers today? Have buying patterns changed? Lifestyles are more casual. Everything is global.
RC: People want to make a subtler statement. Society has become a bit over the top in terms of celebrity status. I’m just fascinated by this. It’s like, how much less can you wear to a black-tie affair today? And it’s getting crazier and crazier. So you know it’s reaching a tipping point with people starting to think, Wow, where does this all end? I think the real big change with millennials is the concept of less is more. They don’t want lots of anything; they just want a few very good things. And fortunately for us, it plays into who we are. If you’re just going to have one, let me have the best one that I can have.
MZ: It depends on the audience. Some of the younger consumers are attracted by celebrities, and that’s their way into a luxury brand like Graff or Lalique. Our classic, luxury consumer varies also. There are those who want the limited, one-of-a-kind product, and there are those who want something not limited but with the same levels of craftsmanship and effort behind the design.
HB: Our customers want pieces that are understated but with gems of extreme rarity and quality. Nothing ostentatious—I hate to use the word “bling.”
MA: What is the consumer buying in the luxury category? What are the hottest items to have this year?
BC: We are seeing growth in ready-to-wear and, more specifi cally, in knitwear. Additionally, shoes continue to be an area of growth for the brand, and the newest US Chanel boutiques feature dedicated shoe salons, which showcase the breadth of the shoe collection.
RC: Our single-best category this year is the home area. We are finding an exorbitant interest and increase in our home business—decorative items, accessories, furniture. It seems that people really want this Hermès lifestyle in their homes.
HB: There is such scarce supply to demand, and our customers are looking for pieces with great rarity and value. This year our Butterfly line [where gems for jewelry and timepieces are crafted in butterfly shapes] has done extremely well.
MZ: We’re investing signifi cantly in the Lalique Art Division. Collaborations with the Yves Klein Foundation, Anish Kapoor, Zaha Hadid, Rembrandt Bugatti, Elton John, and Damien Hirst have helped drive interest from a younger customer.
MA: What does the luxury customer want today, and how are you addressing these wants?
HB: I think that there are two things happening. Number one, new consumers have educated themselves very quickly, and their knowledge of our world and our product is very impressive. If anything, the whole new way of communicating with social media makes our lives easier because you get instant reaction whether you are doing something right or wrong. Usually you hear much more about the wrong than the right, but it doesn’t matter. It’s information that is thrown out there by the thousands, whereas before, you had no way of knowing. It becomes an important element of how we respond to our clients.
BC: When we survey customers after a shopping experience in our stores, one thing that’s always consistent, and I’m always amazed that it doesn’t change, is how hungry they are for more of the story. When you ask, “What would have made your experience better?” it’s always that they want to know more of the story. The story of the brand, or Coco Chanel, or that handbag...
MA: Today brands are global, but how do you market to customers differently from city to city? How does the product mix change from store to store?
PB: I think it’s a matter of lifestyle, so yes, we do merchandise the stores very differently. For example, in Miami, they like a lot more color.
VO: Believe it or not, we sell more shearling coats in South Beach than we do in New York City. So you have to be ready for surprises like that in every market.
BC: We all just have one brand collection, so we don’t create specifi c things for other markets, but we might tailor our assortments for them. But I have to say, if there’s something that’s really hot and key on the runway, it’s hot everywhere, everybody wants it. So if it’s very heavyweight, and you’re in California, you still have to have it.
HB: Jewelry moves much more slowly than fashion; we don’t have six collections a year. The trends in jewelry go from decade to decade. When you acquire a piece of high jewelry, there has to be a perennial aspect to it, that it’s going to work for years and eventually become a family heirloom. Having said that, yes, you sell much more conservative, understated jewelry in Chicago. The Beats By Dre items are fun in Vegas. You’ll sell more colorful jewelry in Florida than you do in other places.
MZ: In Miami, where there’s a more Latin influence, there are other aspects that depend on lifestyle. The Latin culture is much more about weddings.
Henri Barguirdjian discussing the current luxury market.
MA: When we talk about the New York market, who is the primary customer? The resident or the tourist?
RC: The majority, about 65 percent of our customers in New York, are local. They do travel a lot, so they purchase elsewhere. But the other 35 percent would be pied-à-terre New Yorkers or visitors who are here for one or two weeks at a time.
BC: Seventy percent local.
MZ: We have a very strong local and strong international consumer. I think that would apply to the major cities.
VO: For Ferragamo, it’s a little bit less, around 60 percent. But our stores in New York are the most signifi cant in terms of total revenue.
PB: In our Dior freestanding stores, it’s almost 80 percent local. If you go to a lease department like Saks or Bergdorf or Bloomingdale’s, it changes because they get more tourist traffic, so it varies from store to store. Beauty is a whole different situation; you don’t even know who your customer is a lot of the time.
MA: How has corporate sustainability factored into the marketing of your brand?
HB: It’s part of our DNA and part of what we do. The jewelry industry in particular has been, should we say, targeted, more than others. It forced the industry in general and then the individual companies to send out the message that this isn’t the way we do things.
PB: Younger generations and particularly the millennials are very interested in sustainable practices and ask a lot of questions about where you’re sourcing materials, or how you’re producing. All our companies that have been around for 50 to 100 years need to have responsibility, credibility, and followthrough on these topics, because they are going to get more and more important as the customer gets younger and younger.
BC: Another aspect of sustainability is an approach we started taking 10 years ago, of buying small artisan [businesses] where the craft itself was in danger of becoming extinct. I think many of you have done the same thing. Mr. Lagerfeld creates the Métiers d’art collection once a year—that only uses fve to six specialist houses. When we think about sustainability longterm, for all of us, the story of our brand is so much tied to what is unique and special, that giving these people a lifeline, if you will, to continue their craft is what it’s about as well.
illustrations by Jessica May Underwood.
photography by Tanya Malott
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