A Marquee Fashion Brand Becomes the Ultimate Fashion Victim
The global downturn has claimed a high-profile brand in the fashion world. Christian Lacroix, a leading French fashion design house, has filed for protection from creditors citing a drastic drop in demand for luxury goods as the reason, according to the Financial Times.
Lacroix had been seeking a financial partner for support but was “directly hit by the conditions of the financial markets” before arrangements could be completed, said Nicolas Topiol, chief executive, in the FT’s report.
The move is another straw in the wind pointing towards worldwide economic conditions in which even the super-rich are focused on frugality, and luxury brands are groping for new ways to stay viable, as noted in a recent Knowledge@Wharton article “The New High-end Consumer: 'Please Put My Bottega Veneta Wallet in a Plain Bag.'”
Sales of luxury goods worldwide could fall by as much as 10% this year, global management consulting firm Bain predicted earlier this month. In the U.S., where about a third of all luxury goods are sold, sales are expected to drop by 15%.
At the same time, 62% of wealthy consumers report that economic conditions have altered their views on luxury purchases, according to a recent study by the New York-based Luxury Institute. Some are more budget conscious. Others said that flaunting luxury right now is insensitive, and they would rather help others than spend on themselves.
Discounting at luxury department stores, as the Knowledge@Wharton article notes, has made it tough for other designers, like Bottega Veneta. The luxury Italian leather house, a subsidiary of the Gucci Group, is known for woven leather accessories like shoes, wallets, handbags and luggage. The brand saw its sales drop 8.8% in the last quarter of 2008. Given that "the price of craftsmanship hasn't changed, our margins are already [very] small," said Roxanne Paschall, senior merchandising director at the firm. Her comments came at a recent Penn Fashion Week panel discussion titled, "Can Luxury Survive the Economy," hosted by Wharton.
Additional Reading from Knowledge@Wharton