Luxury cost cuts: The fashion set has never been known for parsimony. But dire times call for less caviar and champagne. So cost-cutting is the industry's new black - or should be. Those fashionistas that fail to follow risk not being around when the good times come slinking back.
The need for frugality is clear, even for operators less leveraged than PPR, owner of Gucci Group, and Richemont. The world’s two largest luxury markets are taking a hammering. Producers report sales declines in the US from 25 per cent to 50 per cent. In Japan, it is little better. Even China – the great white hope for branded exclusivity – can’t produce enough status-conscientious middle class shoppers to offset a rout that ugly.
What's more, contrary to the impression given by hungry-looking models, there’s fat to cut. The cost of staging a runway show – complete with celebrity-stuffed front rows and after-show parties – for example had ballooned to more than $1 million in some cases.
True, watching the pennies comes hard to people who feel at home with $30,000 alligator-skin handbags. Besides, what is luxury without excess? But business is business. Let Christian Lacroix be a salutary warning. The couture house's lavish spending led only to its bankruptcy.
Burberry, the UK retailer turned luxury brand is setting the new standard. Under American boss Angela Ahrendts, it is on track to reduce costs by £50 million by 2010 on top of around £30 million saved in the past couple of years from an IT restructuring.
Frugal luxury could earn more than kudos from being fashion-forward. Mere surviving will probably lead to market share gains whenever champagne and caviar days return.
