11/12/2008

By Astrid Wendlandt and Marie-Louise Gumuchian International Herald Tribune

PARIS: In fashion, cut is vital, but Marie Dupuis has found that it can also apply to price. Thanks to a little bargaining, she recently bought a Jean-Paul Gaultier dress at a 40 percent discount for New Year’s Eve.
Dupuis, 32-year-old Parisian, expressed surprise at paying €310, or about $400.
“I have never seen that,” she said. “It must be because of the crisis everybody is talking about.”

The high-fashion bargain is usually reserved for the superrich or celebrities who obtain designer clothing free from fashion houses seeking the publicity. But in the current economic downturn, less-expensive luxury items are becoming attainable to more ordinary, though still relatively well-off, shoppers.

With margins at mainstream retailers under pressure as they fight for a share of smaller customer budgets, the couture house created by Jean-Paul Gaultier is among the high- end brands that are jumping on the promotional bandwagon.

From Paris to Milan and New York to London, a strong increase in promotional sales in recent weeks has come to include luxury brands. In retail generally, the year-end holiday season can account for about 40 percent of annual sales, so the stakes are high.

But the high-end sales offerings are subtle. Instead of advertising discounts in shop windows — which can damage the brand by undermining the notion that quality comes at a price — they lure buyers with discreet “private sales,” some of them earlier this year than last.

For example, Sonia Rykiel, Jean-Paul Gaultier, Jimmy Choo, Prada, Armani, Gucci, Tod’s, Dolce & Gabbana, Alexander McQueen, Gianfranco Ferré and Alberta Ferretti have been offering discounts or holding private sales, but not at every store or in every country.

Tolerated by European regulators outside the traditional January and July discount seasons, private sales are usually exclusively reserved for loyal customers who receive an invitation by mail. The discounts typically apply to small selection of items.

This year, Reuters reporters found that one could buy a wide range of discounted products without an invitation at Jean-Paul Gaultier and Jimmy Choo in Paris and Prada in Milan.

“Some may say they don’t hold them, but they do,” said an assistant at a top designer boutique in Milan. “They just don’t want everyone to know about them. “A spokeswoman for Jean-Paul Gaultier said: “We do not have any comment to make about private sales. It’s down to individual shops to decide them.”

Other representatives for brands including Gucci and Armani declined to comment. A spokesman for Prada said private sales were usually held at this time of year but declined to provide further details.
A spokeswoman for Gucci Group, which also includes Bottega Veneta and Yves Saint Laurent, said, “Our policy is that we do not give information about our commercial activities.”

Altagamma, the Italian fashion industry association, said that it had noted an increase in the number of private sales this year because of the financial crisis but that they were a long standing tradition for many fashion houses.

On Old Bond Street in London, Avenue Montaigne in Paris and in the Quadrilatero d’Oro in Milan, not many customers could be seen at. the end of November and early December.

“I am more careful this year with my money,” said Jean-Michel Fouquet, 55, a French aerospace executive buying a €290 Hermes leather bracelet as a gift in Paris. “We are all worried about the economy and our job.”

In this downturn, when bonuses are expected to disappear for many highly paid executives, and fortunes are shrinking among the superwealthy from Russia to India, luxury customers’ behavior has changed.

The ostentatious, ephemeral or frivolous has been replaced by an urge for quality and strong brands, according to industry specialists.

As the collapse of financial markets has narrowed investment options, this is not all about consumption. Demand persists for custom-made goods, from tailored suits to specially commissioned fine jewels.

“There is a drive towards timeless, very high-end brands,” said Pierre Mallevays, a partner at Savigny Partners, an investment banking boutique in London. “If you buy a Louis Vuitton bag, you know that it will not lose much value. But if you buy a weaker brand, you are not so sure.”

Louis Vuitton and Hermes said they never conducted private sales, and business looked brisk on recent visits to their shops.
Analysts predict that luxury-goods revenue will drop in 2009 for the first time in over a decade at constant exchange rates.

Consultants at Bain say global luxury sales could drop as much as 7 percent in next year, while analysts at Bernstein are projecting a decline of 5 percent.

“Channel checks and industry interviews highlight an increasingly promotional environment,” Bernstein said in a note, “a clear sign of soft consumer demand.”

Analysts said independent shops were being more severely squeezed by the spending contraction than department stores. The French haute couture house of Jean-Louis Scherrer, for example, extended a 60 percent promotional sale this month on evening dresses that it started in mid-November. The fashion house even advertised the fact in the window of its shop off the Champs-Elysees.

“This is the first time I’ve seen such a sale,” a clerk said.