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Dollar Drops. Jaws Drop. Prices? Well, You Know.
[size=-1]By ERIC WILSON [/size]
Published: March 22, 2005
he big news in fashion this year is volume, massively so in skirts the shape of parachutes, billowing Empire waistlines and oversized shawl collars. Yet another way that fashion is expanding is in the prices of high-end designs.
After years of relatively modest increases in luxury ready-to-wear, the prices of well-known items like a Chanel tweed jacket or a Giorgio Armani stretch wool pantsuit have spiked recently, largely because of the weakening dollar, which has declined about 30 percent against the euro since 2002.
That means that while European tourists are flocking to American department stores to take advantage of the exchange rate, American consumers of high-end fashion and leather goods from Europe may be in for sticker shock. Joan Stahl Israel, an independent personal shopper in New York, described looking at a price tag recently and thinking the number was so high, "it's just a telephone number." Prices of spring designs, including accessories like watches and handbags, are about 10 percent to 15 percent higher than a year ago, retail executives say; after returning from buying trips to Milan and Paris for fall they predict there will be even steeper prices ahead for clothing made in Europe or with European fabrics.
"Things are so expensive overall that it's really extraordinary," said Julie Gilhart, the fashion director at Barneys New York. "If you want a well-tailored suit, don't even think of anything less than $2,000. If you want an evening gown, you're talking close to couture prices. And if you want a well-made handbag for less than $1,000, you'll be hard-pressed to find it."
The price of that trademark Chanel tweed jacket, for example, was $2,900 at Bergdorf Goodman in Manhattan in 2002. It is now $4,100, and the store will carry versions for $4,800 this fall. Bergdorf's also has ordered one of the most extravagant pieces in the fall Chanel collection: a $27,000 shearling barn jacket.
Prada's "bowler" handbag - shaped like a bowling bag - was first introduced in 2000, when the leather version was $870. The next year similar models cost $940 and $990, and a basic bowler in stores now is $1,325. A model for fall is expected to cost $1,445.
While the high end of fashion is getting higher, most of the $173 billion American apparel industry has moved in the opposite direction for more than a decade, as manufacturers have found ways to lower production costs. The practice of aggressively marking down merchandise early has also taught shoppers to expect to pay less. Illustrating this downward price trend, Levi Strauss has introduced a signature version of its jeans at Wal-Mart at less than half the price of its original 501's.
A 2004 holiday retail and consumer products report from Ernst & Young noted that overall apparel prices in December dropped 0.2 percent for the year and 8.7 percent from five years earlier.
Yet retail analysts also point to widespread demand for luxury goods, with companies like Neiman Marcus and LVMH Moët Hennessy Louis Vuitton, which specialize in expensive fashions, reporting robust sales, which has helped to moderate the rate of price deflation. LVMH has raised prices in the United States and Japan for its fashion merchandise, as well as for wine and Champagne, by about 5 percent.
The soaring cost of European fashion is a sensitive issue for designers, who have been challenged by American retailers to help justify higher prices by improving their workmanship and styles. "Designers are offering a lot more construction, fur trims in many cases, because if the price points will be up, the clothes will have to be more special," said Ronald Frasch, the chief merchant at Saks Fifth Avenue.
Fashion companies have taken different approaches to the declining dollar. Some have lowered their profit margins rather than steeply increase prices, and large companies can hedge currencies to lock in lower exchange rates for 2005 and 2006.
But the prevailing response is to pass on the expense to consumers with small seasonal adjustments, which have added up to significantly higher prices over three years. Consumers may be growing accustomed to paying more for basics like health care, gas and wireless services, but there may be a wall in terms of what they will pay for fashion.
"Last year the prices were somewhat within reason, but now they've priced themselves out of the market for me," said Rudy Torrijos, an equity researcher in New York who spends about $4,000 a year on clothes. "I used to buy shirts from Etro and Dolce & Gabbana that were in the upper $200's, but now they are in the upper $300's. Some things are out of my price range."
Some companies have tried to hold on to customers like Mr. Torrijos by maintaining prices on classic pieces while marking up the trendier looks of the season. For example Loro Piana, the Italian cashmere company, is raising prices in the American market for fall by about 5 percent, with its staple V-neck sweaters priced at $550, and crew necks at $595, up $30.
"We have had much more modest increases than we should have, as the problem is compounded by the fact that cashmere raw materials from China have increased significantly over the past six months," said Pier Luigi Guerci, the president of Loro Piana's United States division.
Certain changes are modest enough that they may go unnoticed by the sort of affluent customers who are willing to spend on clothing what many Americans would consider exorbitant. Customers will pay $340, up from $310, for a ballet flat at Ferragamo's Fifth Avenue store this fall, and they also are likely to see the price of a man's tie go up $5, to $125.
A silk scarf from Hermès is currently $320, up about $25 from 2000. The company's chief executive, Robert Chavez, noted that Hermès had lowered its prices in 2001 to $250 to pass on to customers what was then a favorable exchange rate.
Other companies are bringing back some best sellers from seasons past and producing them with fewer bells and whistles to make them more competitive. Mr. Frasch noted that Dolce & Gabbana included an enormous amount of expensive astrakhan, a type of lambskin, in its fall runway show, but also offered a series of classic dresses in its showroom for less than $1,000.
"It seems like women's prices go up every year by 20 percent, but the make of the product tends to justify that," Mr. Frasch said. "In men's suits it's more of a challenge, where the customer walks in with a price zone in his mind."
Ms. Gilhart of Barneys also pointed to pants and knitwear from Balenciaga that have been modified from the originals designed by Nicolas Ghesquiere so that they could be sold at a lower retail price, of $400 to $500.
When comparing increases by some of Barneys' most popular labels, Ms. Gilhart pointed out that a Jil Sander wool stretch flannel jacket priced at $1,200 in 2003 had gone up to $2,010 this year, and that Armani wool suits rose to $3,450 for fall from $2,475 in 2003. But a Dolce & Gabbana suit had increased by only about $100, to $1,895, and Prada's classic boot-leg stretch pants had increased only to $495 from $450 in the same period.
"Prada has been clever to hold their prices on the more basic comparable things, even though their average price point has gotten more expensive," Ms. Gilhart said.
[size=-1]By ERIC WILSON [/size]
Published: March 22, 2005
After years of relatively modest increases in luxury ready-to-wear, the prices of well-known items like a Chanel tweed jacket or a Giorgio Armani stretch wool pantsuit have spiked recently, largely because of the weakening dollar, which has declined about 30 percent against the euro since 2002.
That means that while European tourists are flocking to American department stores to take advantage of the exchange rate, American consumers of high-end fashion and leather goods from Europe may be in for sticker shock. Joan Stahl Israel, an independent personal shopper in New York, described looking at a price tag recently and thinking the number was so high, "it's just a telephone number." Prices of spring designs, including accessories like watches and handbags, are about 10 percent to 15 percent higher than a year ago, retail executives say; after returning from buying trips to Milan and Paris for fall they predict there will be even steeper prices ahead for clothing made in Europe or with European fabrics.
"Things are so expensive overall that it's really extraordinary," said Julie Gilhart, the fashion director at Barneys New York. "If you want a well-tailored suit, don't even think of anything less than $2,000. If you want an evening gown, you're talking close to couture prices. And if you want a well-made handbag for less than $1,000, you'll be hard-pressed to find it."
The price of that trademark Chanel tweed jacket, for example, was $2,900 at Bergdorf Goodman in Manhattan in 2002. It is now $4,100, and the store will carry versions for $4,800 this fall. Bergdorf's also has ordered one of the most extravagant pieces in the fall Chanel collection: a $27,000 shearling barn jacket.
Prada's "bowler" handbag - shaped like a bowling bag - was first introduced in 2000, when the leather version was $870. The next year similar models cost $940 and $990, and a basic bowler in stores now is $1,325. A model for fall is expected to cost $1,445.
While the high end of fashion is getting higher, most of the $173 billion American apparel industry has moved in the opposite direction for more than a decade, as manufacturers have found ways to lower production costs. The practice of aggressively marking down merchandise early has also taught shoppers to expect to pay less. Illustrating this downward price trend, Levi Strauss has introduced a signature version of its jeans at Wal-Mart at less than half the price of its original 501's.
A 2004 holiday retail and consumer products report from Ernst & Young noted that overall apparel prices in December dropped 0.2 percent for the year and 8.7 percent from five years earlier.
Yet retail analysts also point to widespread demand for luxury goods, with companies like Neiman Marcus and LVMH Moët Hennessy Louis Vuitton, which specialize in expensive fashions, reporting robust sales, which has helped to moderate the rate of price deflation. LVMH has raised prices in the United States and Japan for its fashion merchandise, as well as for wine and Champagne, by about 5 percent.
The soaring cost of European fashion is a sensitive issue for designers, who have been challenged by American retailers to help justify higher prices by improving their workmanship and styles. "Designers are offering a lot more construction, fur trims in many cases, because if the price points will be up, the clothes will have to be more special," said Ronald Frasch, the chief merchant at Saks Fifth Avenue.
Fashion companies have taken different approaches to the declining dollar. Some have lowered their profit margins rather than steeply increase prices, and large companies can hedge currencies to lock in lower exchange rates for 2005 and 2006.
But the prevailing response is to pass on the expense to consumers with small seasonal adjustments, which have added up to significantly higher prices over three years. Consumers may be growing accustomed to paying more for basics like health care, gas and wireless services, but there may be a wall in terms of what they will pay for fashion.
"Last year the prices were somewhat within reason, but now they've priced themselves out of the market for me," said Rudy Torrijos, an equity researcher in New York who spends about $4,000 a year on clothes. "I used to buy shirts from Etro and Dolce & Gabbana that were in the upper $200's, but now they are in the upper $300's. Some things are out of my price range."
Some companies have tried to hold on to customers like Mr. Torrijos by maintaining prices on classic pieces while marking up the trendier looks of the season. For example Loro Piana, the Italian cashmere company, is raising prices in the American market for fall by about 5 percent, with its staple V-neck sweaters priced at $550, and crew necks at $595, up $30.
"We have had much more modest increases than we should have, as the problem is compounded by the fact that cashmere raw materials from China have increased significantly over the past six months," said Pier Luigi Guerci, the president of Loro Piana's United States division.
Certain changes are modest enough that they may go unnoticed by the sort of affluent customers who are willing to spend on clothing what many Americans would consider exorbitant. Customers will pay $340, up from $310, for a ballet flat at Ferragamo's Fifth Avenue store this fall, and they also are likely to see the price of a man's tie go up $5, to $125.
A silk scarf from Hermès is currently $320, up about $25 from 2000. The company's chief executive, Robert Chavez, noted that Hermès had lowered its prices in 2001 to $250 to pass on to customers what was then a favorable exchange rate.
Other companies are bringing back some best sellers from seasons past and producing them with fewer bells and whistles to make them more competitive. Mr. Frasch noted that Dolce & Gabbana included an enormous amount of expensive astrakhan, a type of lambskin, in its fall runway show, but also offered a series of classic dresses in its showroom for less than $1,000.
"It seems like women's prices go up every year by 20 percent, but the make of the product tends to justify that," Mr. Frasch said. "In men's suits it's more of a challenge, where the customer walks in with a price zone in his mind."
Ms. Gilhart of Barneys also pointed to pants and knitwear from Balenciaga that have been modified from the originals designed by Nicolas Ghesquiere so that they could be sold at a lower retail price, of $400 to $500.
When comparing increases by some of Barneys' most popular labels, Ms. Gilhart pointed out that a Jil Sander wool stretch flannel jacket priced at $1,200 in 2003 had gone up to $2,010 this year, and that Armani wool suits rose to $3,450 for fall from $2,475 in 2003. But a Dolce & Gabbana suit had increased by only about $100, to $1,895, and Prada's classic boot-leg stretch pants had increased only to $495 from $450 in the same period.
"Prada has been clever to hold their prices on the more basic comparable things, even though their average price point has gotten more expensive," Ms. Gilhart said.
Poor anyone who has enough money to buy those stuff........
