by Dana Thomas
DELUXE
DELUXE
How Luxury Lost Its Luster
DANA THOMAS
THE PENGUIN PRESS
New York
2007
THE PENGUIN PRESS
Published by the Penguin Group
Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A. •Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of Pearson Penguin Canada Inc.) • Penguin Books Ltd, 80 Strand, London WC2R 0RL, England • Penguin Ireland, 25 St. Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd) • Penguin Books Australia Ltd, 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty Ltd) • Penguin Books India Pvt Ltd, 11 Community Centre, Panchsheel Park, New Delhi—110 017, India • Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore 0745, Auckland, New Zealand (a division of Pearson New Zealand Ltd.) • Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa
Penguin Books Ltd, Registered Offices:
80 Strand, London WC2R 0RL, England
Copyright © Dana Thomas, 2007
All rights reserved
Photograph credits appears at the end of this book.
Thomas, Dana, 1964–
Deluxe: how luxury lost its luster/Dana Thomas.
p. cm.
Includes bibliographical references and index.
ISBN: 978-1-1012-1807-5
1. Luxury goods industry. I. Title
HD9999.L852T46 2007
338.4'7—dc22 2007006166
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For my grandparents,
O.R. and Anne Strackbein
CONTENTS
INTRODUCTION
PART ONE
ONE: An Industry Is Born
TWO: Group Mentality
THREE: Going Global
PART TWO
FOUR: Stars Get in Your Eyes
FIVE: The Sweet Smell of Success
SIX: It’s in the Bag
SEVEN: The Needle and the Damage Done
PART THREE
EIGHT: Going Mass
NINE: Faux Amis
TEN: What Now?
ELEVEN: New Luxury
ACKNOWLEDGMENTS
NOTES
BIBLIOGRAPHY
INDEX
INTRODUCTION
DOWN THE DUSTY ROADS of Xi’an the motor scooters zoom, weaving around potholes and rickety bicycles, bip-bip-bipping their horns as they circle the city’s sixteenth-century bell tower. Xi’an, pronounced Shee-ahn, is one of China’s oldest cities, settled by humans since prehistoric times. From 221 BC to AD 907, Xi’an served on and off as the capital of the vast Chinese empire. The famed Silk Road, the trade route that linked the Far East to Europe, started there in the second century BC and turned the city, then known as Chang’an, into a throbbing metropolis of nearly two million and an epicenter for culture and politics. Painting, poetry, dance, and music thrived in Xi’an, and l’art de vivre—the refined art of living—was an essential component of everyday existence. Xi’an was so beautiful—with its elaborate Buddhist temples, mosques, bustling souks, and eighth-century walled imperial city—that Japan’s emperors used it as a model for their imperial capitals of Kyoto and Nara. It was said that Xi’an was as cosmopolitan and influential as Baghdad, Constantinople, and Rome. Many considered it the greatest city in the world.
It is hard to imagine today. With a population of 8 million, Xi’an is a small city by Chinese standards, compared to Shanghai (17.8 million), Beijing (15 million), and Chongqing (12 million). Unlike Beijing and Shanghai, which, thanks to China’s market reforms, have become vibrant international capitals, Xi’an suffers from the blight of communism. The people, many dressed in faded Mao suits, seem downtrodden. Nothing has been painted in decades; scooters are held together with string, tape, and hope; and everything is covered in dust and soot. The new wealth of China has not trickled down to Xi’an—at least not yet. It has some local industry—cotton textiles, chemicals, and high tech—but its most important business is tourism. Half an hour away by car is the site of the Terracotta Warriors, the eight thousand life-size soldiers and horses that were buried in the tomb of Shi Huang Ti (259–210 BC), the first emperor of Qin (or China), for more than two thousand years and discovered in 1974 by a farmer digging a well. Each year, more than twenty million tourists—primarily Chinese—travel to Xi’an to see the warriors, making the site one of the country’s most popular tourist destinations.
In April 2004, my husband and I traveled to China for the first time. I was there to cover the opening of Giorgio Armani’s new retail complex on the Bund, the waterfront promenade in Shanghai. Afterward, we went to Xi’an to see the Terracotta Warriors. We arrived in the spanking-new airport on the outskirts of the city and took a beat-up cab down the factory-lined highway and tenement-lined streets to the historic center. We checked in to the Hyatt Regency, one of the two “Western” business hotels at the time, and as we stood there in the polished marble lobby and plant-filled atrium, I remembered that the word Xi’an means “western peace”: the Hyatt seemed transplanted directly from any American urban center.
On the way to breakfast the first morning, we came across a couple of Chinese vendors selling clothes in a small conference room on the mezzanine. Not just any clothes: spread out across a half dozen folding tables were Gucci and Versace men’s loafers, Givenchy men’s shirts and socks, Versace sweaters, Calvin Klein underwear, Gucci sweaters with tags in them that read “Designed in Italy,” and hanging on a garment rack in the corner, a couple of Burberry men’s trench coats. Some of the items were obviously fake—several of the Versace shirts were labeled “Verla” in the same font—and I knew that Chinese factories turned out counterfeit goods of every sort. But some looked suspiciously authentic. I picked up the Gucci loafers. They were made of good-quality leather, well stitched, with a slight mod design to them, just like the shoes you find in Gucci stores on Rodeo Drive or Madison Avenue. My husband tried on one of the alleged Burberry trenches. It, too, was well made and with all the Burberry details just right. We asked the price. No one in the room spoke English, but a thin twentysomething Chinese girl pulled out a calculator and tapped out the price: $120. The regular retail price for a Burberry men’s classic trench is $850. My husband said he’d think about it. We stopped by the concierge desk to ask about the provenance of the goods. Most were legitimate, the concierge told us, and had slight defects, were from an overrun, or simply didn’t fit into the shipping container.
The next morning we went by the room to buy the trench. The entire operation had disappeared.
What, I wondered, was this all about?
THE LUXURY GOODS INDUSTRY, as it is known today, is a $157 billion business that produces and sells clothes, leather goods, shoes, silk scarves and neckties, watches, jewelry, perfume, and cosmetics that convey status and a pampered life—a luxurious life. Thirty-five major brands control 60 percent of the business, and dozens of smaller companies account for the rest. Several, including Louis Vuitton, Gucci, Prada,
Giorgio Armani, Hermès, and Chanel, have annual revenues in excess of $1 billion. Most luxury goods companies that we know today were started a century or more ago as simple one-man or one-woman shops that sold beautiful handcrafted pieces. Today those companies still carry the founders’ names but are, for the most part, owned and run by tycoons who in the last two decades have turned them into multibillion-dollar corporations and omnipresent global brands. They cluster their stores on main city avenues, in airports, in outlet malls. Their advertisements fill magazines and blanket billboards. Their primary customers are upper-income women between thirty and fifty years old. In Asia, the customer base veers younger, starting at twenty-five.
Walk up to a luxury brand store and a dark-suited man with a listening device tucked in his ear will silently pull open the heavy glass door. Inside there is a hush as slim, demurely dressed sales assistants await you in a posh minimalist space in neutral tones with chrome accents. The first thing you’ll encounter are shelves full of the brand’s latest fashion handbags as well as its classic designs, displayed like sculptures, each lighted with its own tiny spotlight. Glass cases are filled with monogram-covered wallets, billfolds, and business card holders: the lower-priced, entry-level items aimed at aspirational middle-market customers. Chances are, the slim assistants will make the sale right there in the very first room. Through calculated marketing strategies and with the support of fashion magazines, luxury companies in the last ten years have created the phenomenon of the handbag of the season—the must-have around the world that will catapult sales and stock prices. Louis Vuitton’s sales of Japanese artist Takashi Murakami–designed smiling cherry purses were almost single-handedly responsible for double-digit growth for Louis Vuitton in the first quarter of 2005. The average markup on a handbag is ten to twelve times production cost. At Vuitton, it’s up to thirteen times. And Vuitton prices are never marked down.
Many luxury stores end right there: handbags and accessories. If it is a “flagship”—the industry word for a store that carries the complete range of products—then there will be a gleaming counter offering perfume and cosmetics. Perfume has, for more than seventy years, served as an introduction to a luxury brand. It has allowed folks who couldn’t afford the more expensive things in the shop to own a small piece of the brand’s dream. It also provides luxury brands with substantial profits. Cosmetics serve the same purpose but, like handbags, are more showy: pulling a Chanel lipstick from a handbag gives the instant impression of wealth and savoir faire.
In the next room—often upstairs or down in a converted basement—you’ll find a small selection of ready-to-wear clothes and shoes. Back in the old days, when luxury was still an intimate, elegant business for an elite clientele, shopping for clothes, be it couture or ready-to-wear, was a pleasurable affair. You chose what you liked, often during a fashion show or a personal viewing, retired to a spacious, comfortable dressing room, tried on the garments leisurely, and had the seamstress on hand to do whatever retouching was necessary. Couture and high-end department-store saleswomen were counselors and confidantes. They knew who was wearing what to which event, they knew what suited you, and they advised you accordingly. Today, by contrast, shopping for luxury brand clothing is an exercise in patience. Usually there are only a few pieces of clothing and only in the smallest sizes. This is where the slim sales assistants come in: they scurry into the back storeroom for ten, fifteen, twenty minutes to find your size, or perhaps another style that isn’t on the floor, or even a dress that no one else has seen. If it doesn’t please you, they scurry off again for another ten or twenty minutes. And so on. This, in the minds of luxury executives, is attentive, specialized service.
Whatever the purchase, you’ll walk out with a rope-handled paper bag in the brand’s signature color and with the brand’s logo emblazoned on the side. The product will be wrapped in tissue paper and, if it’s a handbag, wallet, or other leather item, stuffed into a soft felt pouch, also in the brand’s signature color.
And what will you have gotten?
THE WAY WE DRESS reflects not only our personality but also our economic, political, and social standing and our self-worth. Luxury adornment has always been at the top of the pyramid, setting apart the haves from the have-nots. Its defining elements—silk, gold and silver, precious and semiprecious stones, fur—have been culturally recognized and sought after for millennia. In prehistory, humans set themselves apart by decorating their furs with bits of bone and feathers. The Chinese enriched their appearance with silk embroidery as long as twelve thousand years ago, as did the Persians and the Egyptians in the second century BC.
The display of luxury signified one’s power and achievements and brought on both scorn and envy. “‘Is it a waste or not?’ was argued as far back as 700 BC,” Kenneth Lapatin, an antiquities curator at the J. Paul Getty Museum in Los Angeles, California, told me. The Etruscans wore gold and imported amber from the Baltics and had beautiful engraved gemstones like jasper and carnelian. But it was this love of luxury that led to their downfall, according to social conservatives of the era.
The Greek aristocrats, Lapatin explained, “were flashy. They’d wear their gold and their fancy clothing out and would be aped by the masses.” This drove the rich to live more opulently, simply “to stand out” from the ordinary folk. Rulers passed sumptuary laws—social restrictions that dictated what you could display in terms of wealth, usually clothing, jewelry, and other luxury items—thus preventing commoners from imitating nobles and reining in conspicuous consumption. “In some places, if you brought gold and jewelry to a sanctuary, you had to leave it as an offering,” Lapatin said. “You dedicated your luxury to the gods and often indicated your name through an inscription or label. And when people would go into the temple and see it, they would say, ‘What good taste and generosity he has.’” Faking luxury was considered the ultimate disgrace. According to one ancient tradition, the sculptor Phidias offered to build the statue of Athena in the Parthenon in Athens out of cheap materials—gold-gilded marble—but the proposal was vetoed by the Athenian assembly. “Shame! Shame!” its members cried, and insisted on gold and ivory. “They didn’t want to save their money,” Lapatin said. “They wanted to show it off.”
It was during the reign of the Bourbons and the Bonapartes in France that luxury as we know it today was born. Many of the luxury brands we patronize, such as Louis Vuitton, Hermès, and Cartier, were founded in the eighteenth or nineteenth century by humble artisans who created the most beautiful wares imaginable for the royal court. With the fall of monarchy and the rise of industrial fortunes in the late nineteenth century, luxury became the domain of old-moneyed European aristocrats and elite American families—such as the Vanderbilts, the Astors, and the Whitneys—who moved in closed social circles. Luxury wasn’t simply a product. It denoted a history of tradition, superior quality, and often a pampered buying experience. Luxury was a natural and expected element of upper-class life, like belonging to the right clubs or having the right surname. And it was produced in small quantities—often made to order—for an extremely limited and truly elite clientele. As Diana Vreeland noted in her memoir, D.V., “Very few people had ever breathed the pantry air of a house of a woman who wore the kind of dress Vogue used to show when I was young.”
When Christian Dior, considered by many to be the father of modern fashion, was interviewed by Time magazine in 1957, he pondered the importance of luxury in contemporary society. “I’m no philosopher,” he said, “but it seems to me that women—and men too—instinctively yearn to exhibit themselves. In this machine age, which esteems convention and uniformity, fashion is the ultimate refuge of the human, the personal and the inimitable. Even the most outrageous innovations should be welcomed, if only because they shield us against the shabby and the humdrum. Of course fashion is a transient, egotistical indulgence, yet in an era as somber as ours, luxury must be defended centimeter by centimeter.”
Dior believed that Europe was still the epicenter
of luxury creation and production because of its steady stream of megalomaniacal kings and popes who, over the centuries, commissioned the construction of sumptuous palaces and cathedrals. “[We] inherited a tradition of craftsmanship rooted in the anonymous artisans who…expressed their genius in chiseled stone gargoyles and cherubs,” he said. “Their descendents—skilled automobile mechanics, cabinet makers, masons, plumbers, handymen—are proud of their métiers. They feel humiliated if they’ve done a shoddy job. Similarly, my tailors [and] seamstresses constantly strive for perfection.”
And there luxury stayed, a domain of the wealthy and the famous that the hoi polloi dared not enter, until the Youthquake of the 1960s. The political revolutions throughout the Western world at that time pulled down social barriers, including those that separated the rich from the rest. Luxury went out of fashion, and it stayed out of fashion until a new and financially powerful demographic—the unmarried female executive—emerged in the 1980s. The American meritocracy came into full bloom. Anyone and everyone could move up the economic and social ladder and indulge in the trappings of luxury that came with this newfound success. Disposable income has risen significantly in industrialized nations in the last thirty years. Both men and women in have put off getting married until later in life, freeing them to spend more on themselves. The average consumer is also far more educated and well traveled than a generation ago and has developed a taste for the finer things in life.
Corporate tycoons and financiers saw the potential. They bought—or took over—luxury companies from elderly founders or incompetent heirs, turned the houses into brands, and homogenized everything: the stores, the uniforms, the products, even the coffee cups in the meetings. Then they turned their sights on a new target audience: the middle market, that broad socioeconomic demographic that includes everyone from teachers and sales executives to high-tech entrepreneurs, McMansion suburbanites, the ghetto fabulous, even the criminally wealthy. The idea, luxury executives explained, was to “democratize” luxury, to make luxury “accessible.” It all sounded so noble. Heck, it sounded almost communist. But it wasn’t. It was as capitalist as could be: the goal, plain and simple, was to make as much money as heavenly possible.