How Luxury Lost its Lustre
Paperback : 07 Aug 2008
Fashion may be fabulous, but what price true luxury? With incredible access to the glamorous world of the luxury brand, Deluxe goes deep inside the workings of today’s world of profit margins and market share to discover the fate of real luxury. From the importance of fashion owners, to red carpet stars and the seasonal ‘must-have’ handbags, Dana Thomas shows how far illustrious houses have moved from their roots.
Thomas witnesses how these ‘luxury’ handbags are no longer one in a million, discovers why luxury brand clothing doesn’t last as long, and finds out just who is making your perfume.
From terrifying raids on the Chinese sweat shops to the daunting chic of Paris workshops, from the handcrafting and economics of early-twentieth century designers to the violent truth behind the ‘harmless’ fakes, Deluxe goes deep into the world of extravagance, and asks: where can true luxury go now?
Interview with Dana Thomas author of Deluxe
You’ve covered the fashion and style beat for years. What made you decide to write Deluxe? And why now?
Twenty years ago, when I started writing about luxury fashion for The Washington Post, the business was still primarily a small family-run affair. Most companies did less than $50 million a year in sales, and most brands were owned and run by their founders or the founders’ heirs. During those 20 years, I wrote for The Washington Post, the New York Times Magazine and Newsweek about how luxury fashion evolved into a global industry that does more than $150 billion a year in sales. I realized I’d been a witness to this revolution, and I thought if I sewed it all together, so to speak, and added the back history, it would be quite a tale. I wrote Deluxe now because I believe that luxury fashion has reached the end of its transformation from small family businesses to global corporations. We know who the players are, and now brands and employees may be traded like pro athletes, and there may still be some expansion into new territories, but the business model is more or less set. The evolution and revolution are complete.
You talked to some of the biggest figures in the luxury industry from Bernard Arnault, the CEO of Louis Vuitton, to Miuccia Prada. How do you think they will react to your book? How about the fashion community at large?
I suspect that many of the major figures in luxury fashion will not be thrilled that I reveal their long-kept secrets but, as John Galliano told me when he took over the design helm of Givenchy, I’m not here to please them. Most publications that cover fashion write flattering pieces about luxury brands, and in return, get the brands’ advertising, which keeps them in business. Happily, this has never been an issue for me, either at The Washington Post or at Newsweek. I have always tried to cover the fashion business like a beat reporter covering politics, crime or local news: straight on, objectively, accurately and fairly. I’ve applied the same approach here. They may not like what I write, but I’m simply the messenger.
In your research for Deluxe, you traveled from Chinese factories, to upscale shopping malls in Hawaii and Las Vegas and everywhere in between. What were some of the most surprising discoveries you made during your travels?
Las Vegas was remarkable. I hadn’t been there since 1969, and, well, it had changed a lot. Of course I knew that the casinos were bigger, better, richer—beyond what you could ever imagine. But what I hadn’t realized was that luxury fashion had become an integral part of the Las Vegas experience as well as the local economy. The same with Hawaii: I knew the Japanese shopped there, and that luxury brands had a presence there, but I had no idea that it was to such a mammoth degree. Waikiki is all about luxury shopping now. The beach feels secondary. China, however, was the great discovery. Each time I went there, even if it was only a few months later, the changes were dramatic: there were more Chinese shopping, more luxury brand stores to shop in, and more people wearing luxury brand items. Luxury brands now are part of the culture. The manufacturing side was fascinating. The scale of factories is dizzying — they are like college campuses. The volume that they produce is extraordinary — all I could think was, “How can we consume so much?” And the workers disposition, at least at the factories I visited, was very cheerful, and they were very well treated. That said, the most heart-breaking moment was when I went a police raid on a clandestine counterfeit workshop in Guangzhou and discovered that the workers were children. It was truly like something out of “Oliver Twist.”
How does counterfeiting impact the luxury industry and the world at large?
Counterfeiting touches all of us today. There are counterfeit pharmaceuticals, counterfeit auto parts, such as brakes that fail and cause auto accidents, counterfeit baby formula that causes dehydration and starvation, counterfeit phone batteries that will blow-up your mobile phone. The International AntiCounterfeiting Coalition (IACC) in Washington estimates that up to seven percent of today’s global trade — $600 billion worth — is counterfeit. Fashion is one of the most popular sectors because it is easy and cheap to copy and even easier to sell. In 2000, the Global Anti-Counterfeiting Group reported that 11 percent of the world's clothing and footwear was fake, and the World Customs Organization believes the fashion industry loses up to $9.2 billion (7.5 billion euros) per year to counterfeiting. In 2002, the European Commission reported that trade in counterfeit clothing, footwear, perfume and toiletries reduces EU gross domestic product by more than $6 billion (5 billion euros) each year and costs 10,800 jobs. To understand the scope, consider the size of the busts: In June 2004, the U.S. Bureau of Immigration and Customs Enforcement — or ICE—arrested a dozen people and seized six shipping containers — five with bogus handbags, luggage and wallets, and the sixth with counterfeit cigarettes — coming into the United States from China, valued at $24 million. ICE agents also seized $174,000 in cash and 11 bank accounts. Officials said the suspects probably imported about two containers per week, each container earning $2 million to $4 million in profit.
The repercussions are far more sinister that most people can even imagine. The F.B.I. believes that terrorists financed the World Trade Center bombing in 1993 with sales of counterfeit T-shirts in a store on Broadway in New York City, according to the IACC. Interpol Secretary General Ronald K. Noble told the U.S. House Committee on International Relations in 2003 that profits from counterfeit goods sales have gone to groups associated with Hezbollah, the anti-Israel Shi’ite terrorist group, paramilitary groups in Northern Ireland and Colombia's main rebel army, FARC. One of the suspects in the Madrid train bombings in March 2004 is a known counterfeiter, according to the U.K.-based Anti-Counterfeiting Group. Investigators even believe that there may be a link between counterfeiting and the September 11 attacks on New York and Washington. The week after the attacks, 1,500 counterfeit vendor stalls — several purportedly owned and operated by Al Qaeda — at the Tri-Border Market in South America, where $80 million of business is done in cash every day, closed shop. And during a raid in early 2002 on a mid-town Manhattan luggage store that was run by a man of Middle Eastern descent and sold fake luxury handbags and watches, New York security expert Andrew Oberfeldt and intellectual property rights lawyer Heather McDonald found a flight simulator program and manual and copies of technical schematics of a bridge. They immediately called the Joint Terrorist Task Force (JTTF), who took over the case. "Profits from counterfeiting are one of the three main sources of income supporting international terrorism,” says Magnus Ranstorp, former director for the Centre for the Study of Terrorism and Political Violence at the University of St. Andrews in Scotland.
In Deluxe, you write that most luxury fashion houses have outsourced their production to China. What does that mean to the consumer and to the fashion industry?
Actually, I write that many luxury fashion companies outsource their production in China. (Not most.) But most do outsource some part of their production outside of Western Europe — even Hermès has the edges of its famed silk scarves sewed by hand in Mauritius, a small island off the coast of Madagascar. I think that outsourcing to a cheaper labor market doesn’t necessarily mean that the quality is inferior. On the contrary: if you take unskilled workers and train them to do exactly what you want in a brand new state-of-the-art factory, the quality could be superior. What it means for consumers, however, is that they are not paying for the cost of labor. They are paying for the cost of marketing, and for the owner’s mansions and yachts. In the old days, the retail price was four to six times the production cost: the manufacturer doubled it to sell to a wholesaler, and the wholesaler doubled it to sell to the retailer, and the retailer doubled it to sell to the consumer. Now there are no middlemen: the brands pay the manufacturer’s cost, and distribute it on their own in their own stores. Yet the retail price is about 12 times the production cost. That’s what has made Bernard Arnault, the head of Moet Hennessey Louis Vuitton-LVMH, the seventh richest man in the world. Outsourcing has also taken the personal touch out of luxury. When the goods are produced on an assembly line, half way around the world from the studio where they were designed, I think they lose a bit of their soul.
Between internet retailing, outlet malls, and franchising, we see luxury names everywhere and on everything from body lotion to dog collars. What are your thoughts on this?
By rolling out to the mass market and producing items on assembly lines by the millions, luxury brands have diluted their names, presence, prestige and message. The goal of luxury brands was to produce the best that money can buy. Today it’s about producing the most profit their shareholders. Luxury brand items are no longer special. They are common — the exact opposite of what luxury’s founders set out to achieve.
How has the luxury industry changed over the past few decades?
One of the greatest changes in the luxury businesses in the last twenty years is the practice of dressing celebrities to advertise brands. Back during the studio days, costume departments dressed celebrities in high glamour, both on and off screen. After the breakup of the studio system in the late 1950s and early 1960s, stars had to fend for themselves. Many shopped at Fred Hayman’s Giorgio of Beverly Hills, where they were swathed in luxury service as well as luxury wares. But by the late 1980s, stars needed help, and luxury brands stepped into to help. The trailblazer was Giorgio Armani — he dressed stars such as Michelle Pfeiffer, Jodie Foster and Denzel Washington for the Oscars - and his efforts were such a success soon all the major luxury brands had a staff in Los Angeles whose sole objective was to dress stars for red carpet events. Soon, reporters at red carpet events began to note not only the dress or suit brand the star was wearing but also the shoes, accessories and jewels. It was extraordinary free advertising for luxury brands. Over the years, however, the system has been corrupted. Freelance stylists have stepped in to dress stars and to get their clients to wear the brands, stylists have been known to ask for payola-like payments. Stars benefit too: at first, it was all-expenses paid trips to fashion shows, then it was payment to attend fashion shows and freebies, such as couture dresses and diamond cufflinks. Now celebrity agents negotiate contracts between stars and luxury brands: the stars are paid well—often into the six figures — by the brands to wear their goods. In return, the stars must flack them relentless. “If you are a contractor, and you hire one company over another because they paid you its called bribery — that’s illegal in the United States,” Carol Brodie, former spokeswoman for Harry Winston, told me. “So if you are a celebrity and somebody is paying you to wear their goods and you choose it because they are bribing you, is that illegal? It’s a tough ethical question. I think it’s all fine as long as you don’t deceive the public and fess up that you are under contract with the company to wear their goods. I think in a few years each brand will have a face associated with it, something where some money has been exchanged to use the likeness of a celebrity, and the stars will wear the product from shoes to their hats. Celebrity dressing will purely be product placement, openly and outwardly.”
Where is the future of the luxury industry?
I believe luxury today is at a crossroads. One direction is the big global corporations, which are getting even bigger, conquering the emerging markets such as Russia, China and India, and winning the game in terms of volume while forsaking their cachet. On the other the boutique brands: those that prefer to stay comparatively small, produce the best that money can buy in a limited quantity and maintain their integrity. As Tom Ford told me recently, the boutique luxury business is “a big niche today.” There are oodles of new super rich who, as he said, “want value for money and want something special, made just for them.” And I think it will continue in these two directions: mass-market luxury for the middle-market customer and exclusive luxury for the super rich.
What do you hope readers will take away after reading Deluxe?
I hope that readers will realize that today’s luxury brands have little to do with the past that the brands so play up. Sure, the items may be better made than what you find at GAP or some other middle-market chain, and they may have more style — luxury brands do still set trends, particularly for mass-market retailers like GAP — but a lot of it is, as Tom Ford recently told me, “junk.” Mostly what you are paying for is hype and marketing. You aren’t buying into the dream: you’re buying a fantasy dreamt up by advertising executives and you are making shareholders extremely wealthy. For me, there is no point in buying these goods at full price when they are available at 30 to 70 percent off at an outlet, often before the season is out. There is no such thing as democratic luxury: they are mass-produced goods that claim to be luxury. If you want real luxury — which for me means the best that money can buy — then you have to go to a place where the volume is small, the work is by hand, the materials are the finest, and the items are often made-to-order. That is not a $1,000 handbag. That’s a $10,000 one. To have real luxury, you have to pay.
What’s next for you?
I’m back at Newsweek, covering arts, culture and fashion in Paris. I’m noodling a couple of other book ideas. But mostly I’m going to play with my daughter.
Size : 129 x 198mm
Pages : 384
Published : 07 Aug 2008
Publisher : Penguin
How Luxury Lost its Lustre
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