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Industry: Weak dollar puts America outside luxury's "Golden Triangle"

Industry: Weak dollar puts America outside luxury's "Golden Triangle"

Write: Adonia [2011-05-20]
Ahunky DJ, wearing not much more than his multitude of tattoos, pounded out a toxic mix of house and rave music. Above his head, a gallery filled with scantily dressed couples, including women in tiny bikinis, gyrated to the music.

And on the runway, models, male and female, led by the Russian über-model Natalia Vodianova, were dressed in sexy, skin-tight clothes with a lot of attitude.

The Denis Simachev collection was a wild, colorful excursion through sex, "drugs" (the title of his show) and rock 'n' roll - mirroring the designer's vision of modern Moscow and its crazy party people. His Milan show came as an antidote to doom and gloom as world confidence in luxury expansion is shaky.

Yet the raucous Russian energy versus the cautious elegance of Western brands sums up a truism of modern fashion: The more global the reach, the more fragmented the attitudes of local customers and retailers.

While American buyers are keeping an uncharacteristically low profile, with a beady eye on the miserable dollar exchange rate, other parts of the world are rejoicing in burgeoning markets and have no thought of recession.

The result is a fractured market in which designers are being asked by one part of the world to tone down to whisper quiet luxury - and in another, to be bold and out there.

"It makes my job very interesting," said Robert Polet, chief executive of Gucci Group, on Sunday. "The world is contrasted - no longer as a year and a half ago, when everything was optimistic. In the Unites States, it is not business as usual. Europe is full of contrasts, with Germany quite optimistic, the U.K. doing well but Italy, more difficult. It's country by country; the Middle East roaring and Asia Pacific strong. Then there are contrasts between the different brands. It's all about segmentation."

But designers agree that it is definitely not, as it used to be, all about America setting the pace as the market for luxury, even if the weak dollar is saving retailers in America's tourist regions. The Middle East, stretching via the Mediterranean coastline to Turkey and Greece, is the most buzzy area. And Stefano Gabbana is brutal about Dolce & Gabbana's perspective.

"The problem with America is that it is no longer in the 'Golden Triangle,"' Gabbana said, pointing out that Dolce & Gabbana has three shops in Istanbul, with further energetic growth in Beijing and across China.

The figures speak for themselves. Gabriella Forte, a Dolce & Gabbana executive working in America, said that the United States now represents 14 to 15 percent of the company's retail market share, while Russia is up to 38 percent, if you count Russian travelers, who are the biggest spenders in Milan. But Forte said that comparison was difficult, as American sales have been built on wholesaling to department stores.

That very system is being called into question as sales stick or slump in America and designers find their goods discounted in stores before they are marked down in their own boutiques.

The current system for global expansion involves a thread of wholly owned flagship stores, bolstered by franchises. And it has led to rapid growth for many brands. For example, Salvatore Ferragamo, which was one of the first labels to spread across China, is now extending its Russian reach from Moscow through Saint Petersburg to Ekaterinburg, near the border with Kazakhstan. It is also opening three stores in India, another intriguing luxury destination.

It is the same story at Bottega Veneta, part of Gucci group, where the 147 global stores include only 21 in the United States, with growth focused on the Middle East: Dubai, Qatar, Bahrain, Kuwait, with Jeddah and Riad to come.

All this is music to the ears of Sheik Majed al-Sabah, who once had to cajole designers to consider selling to his Villa Moda boutique in Kuwait and now has them begging to become part of his spreading empire. He sees a series of reasons for the changing axis away from the United States and Europe.

"Look at oil prices," Sabah said. "We come out of a tax-free nation, where the government is trying to help the poorer people, and where 70 percent of the population is under the age of 30. That equals a lot of surplus cash in people's pockets. Business is booming and we are still underdeveloped as an emerging market."

And Sabah endorses a general view that the BRIC countries of Brazil, Russia, India and China - all in different stages of development - are being challenged by the MENA, or Middle East/North Africa area.

What about growth in America? Ferragamo's chief executive, Michele Norsa, is focusing on the East Coast, opening boutiques in Westchester and White Plains outside New York City, as well as in the Beverly Center in Los Angeles.

But when brands are faced with a choice between America and Azerbaijan, it seems that the Unites States comes a dollar-poor second.

Milan menswear and a visit with Valentino

Suzy Menkes talks about the summer 2009 collections with Domenico Dolce and Stefano Gabbana (a runway style, right) and with Tomas Maier of Bottega Veneta. She also interviews Valentino during a visit to his retrospective at the Musée des Arts Décoratifs in Paris.