by Dana Thomas
AS WITH LUXURY, Bernard Arnault changed the way duty-free business was done. Traditionally, duty-free stores had been in airports or at ports, on airborne planes, or on ships at sea—places where it was guaranteed that the goods would not be entering the local stream of commerce. Arnault had another idea: targeting tourists in town. You still need a boarding pass, and your purchases will be delivered to you as you board the plane. But you are shopping in town, just across the street from your hotel.
In Waikiki in 2001, Arnault opened on the site of the old Woolworth’s a $65 million, three-floor, gleaming white shopping-mall-like store on Kalakaua Avenue called the DFS Galleria to sell luxury goods at both duty-pay and duty-free prices. Compared to the usual stark, stock-laden duty-free stores in airports, the DFS Galleria was a veritable palace. To enter, you can either walk through a sixty-five-thousand-gallon aquarium filled with black tip reef sharks, spotted eagle rays, parrot fish, and other colorful Hawaiian reef fish or drift in through the sidewalk openings into an atrium loaded with Hawaiian floral perfumes, macadamia nut candies, and other Polynesian kitsch. The second floor is a regular duty-pay section that features hip fashion; logo-covered accessories from a few luxury brands, as well as more reasonably priced labels like Le Sport Sac; and the largest cosmetics section in the state. DFS doesn’t charge the state’s 4 percent sales tax in the duty-pay sections of the Galleria—the company pays it—to make their prices more competitive than those of the other retailers on Kalakaua Avenue. The third floor is exclusively duty-free—there you’ll find luxury brands as well as perfume, liquor, and cigarettes. Since you must possess a boarding pass to a foreign destination to shop in the duty-free section, there are very few Americans. And a great many Japanese.
DFS has always used crafty tactics to get the Japanese into its stores—way back when, Chuck Feeney learned Japanese to negotiate deals with Japanese tour operators so that they would steer their customers into the stores. But DFS under Bernard Arnault’s guidance has taken Feeney’s stratagems to another level altogether. Flights arrive from Japan early in the morning, long before the hotels are ready for check-in. If the Japanese come on a package tour—and 85 percent do—they already have their return boarding pass and a DFS shopping card, which allows them to enter the duty-free zone of the store. If they are traveling with a tour company that receives commissions from DFS, they are bused straight from the airport to the Galleria, where they are ushered into a conference room for a briefing on Hawaii and DFS. Following the discussion, they are guided to the duty-free floor, which is set up like Ikea: there is only one way out and you have to pass through every section of the store—luxury goods, jewelry, perfume, liquor, and tobacco—to get there.
Most of the top luxury brands are represented: Prada, Hermès, Dior, Céline, Fendi, Ferragamo, Bulgari, Burberry, Cartier, and Van Cleef & Arpels. On the duty-free floor, all the major luxury brands have miniature versions of their regular boutiques and primarily sell accessories such as handbags, wallets, jewelry, watches, and shoes or small fashion items like T-shirts and bathing suits—things that can be carried on an airplane. Many of the shops, as well as the tobacco and liquor sections, have signs announcing reduced prices written only in Japanese. Some brands have boutiques on both the duty-pay and duty-free floors but are careful not to carry identical items. The boutiques on the duty-free floor rarely carry shoes larger than size 71/2 for women, or clothes larger than size 8, because Japanese women are small. What they primarily sell, though, is leather goods. In 2003, 42 percent of Japanese travelers around the world purchased a high-end or branded handbag or leather good.
Generally, the Japanese only look during their maiden visit to the Galleria. They prefer to return in the evening, after dinner, to do their serious shopping. Because of this, the Galleria—and most luxury stores on Kalakaua Avenue—stay open until 11:00 p.m. DFS provides a free Trolley Express that cruises up and down Kalakaua Avenue, making stops at Louis Vuitton, Gucci, Cartier, Chanel, and the DFS Galleria. DFS will reimburse taxi fare for those who buy in the duty-free section. And the charter bus depot is directly behind the Galleria, giving Japanese tourists yet another chance to pass by the store. The goal of DFS is to get the Japanese into the store as much as possible.
Though the secret to duty-free sales success is moving product in volume, there are some exclusive items. In 2000, for example, Céline—an LVMH brand—created a line of handbags just for DFS, which is also an LVMH company. And on occasion Hermès gets one of its coveted Kelly or Birkin bags to sell—normally they are made to order and there’s a several-months-long waiting list. Not surprisingly, they sell almost immediately. In February 2005, Hermès received a small black crocodile Birkin with a diamond clasp and a price tag of $82,100. A Japanese customer bought it within a matter of days. Galleria Hawaii is DFS’s biggest retail outlet, and the Japanese are by far its—and DFS’s—biggest-spending clientele.
Today, of Hawaii’s 7 million visitors each year, 1.5 million are Japanese. They stay for four or five days or long weekends, and most come to shop; tourism is secondary. “The Japanese know what they are going to do from the time they land until they leave,” says Okano of Chanel. “They come with an agenda and know what they are going to buy in each store.”
The Japanese obsession with luxury goods—and the luxury companies’ obsession to satisfy it—has dramatically changed Waikiki’s landscape. When I went there in the mid-1980s—not long after Chanel arrived—Kalakaua Avenue was a party scene, with teenagers cruising in shiny low-riding Japanese pickups, a few working girls available for lonely conventioneers, five-and-dimes like Woolworth’s, local bars with cover bands playing Hawaiian-twanged pop, and a couple of old movie theaters. I went to catch Clint Eastwood’s Heartbreak Ridge at one.
When I returned in 2004, it was a different ambience altogether: there are no more local bars, no movie theaters at all; the one I went to in the mid-1980s was bricked up, ready for demolition. In their place were glistening luxury brand temples, Japanese travel agencies, and sushi bars. The only thing slightly Waikiki-ish left on the strip were ABC Stores—a chain of convenience shops that sell sunscreen, film, flip-flops, and Hawaiian souvenirs made in China. When I mentioned this to Kellyn Kubo, the director of Cartier’s Royal Hawaiian and Ala Moana boutiques, she sighed. “It’s true,” she admitted. “Waikiki doesn’t have much to offer locals anymore.”
THE SUCCESS with the Japanese emboldened and enriched luxury brands; they had the courage as well as the cash to expand globally. The plan was to roll out to the world’s cosmopolitan capitals—places such as Paris, London, New York, Rome, Milan, Beverly Hills, and Hong Kong, where there were both a rich local clientele and a steady flow of Japanese tourists. The stores would be flagships: big, flashy showcases that would sell the brand’s lines as well as its image. Put simply, brands had to “build a fantasy world for those clothes and accessories—create the life that your customers aspire to,” Tom Ford explained to me. Wildly extravagant displays of wealth and creativity that have nothing to do with everyday life, flagships not only evoke the dream of old cultured luxury but also embody the new opulent luxury of today. In essence, they feel unreal.
To achieve this, luxury companies called in architects to create their new stores. Gucci hired respected American interior designer Bill Sofield. Prada brought on Milan-based architect Roberto Baciocchi. And in 1996, Bernard Arnault placed a call to a New York–based architect named Peter Marino, best known for his work for Barneys.
Marino is quite a character. He stands about five feet nine, speaks with a “Noo Yawk” accent, dresses like a biker in black leather, has a nutty sense of humor, and is as chatty as your inconvenient neighbor. He studied at Cornell’s architecture school and began his career working for such traditional firms as Skidmore, Owings & Merrill and George Nelson & Associates. In the early 1970s, he hung out with Andy Warhol, and later redecorated Warhol’s uptown townhouse and his infamous Factory studio on Union Square—assignments that establishe
d Marino’s reputation among the fashionable set. “Andy was quite a good calling card,” Marino later admitted.
In 1978, Marino opened his own firm, now known as Peter Marino & Associates Architects, and started doing the homes of wealthy jet-set clients such as couturier Yves Saint Laurent, Chanel owner Alain Wertheimer, and Fiat chairman Gianni Agnelli. Marino’s style is deeply French, and he travels the world with his big-bucks clients to buy the finest antiques and art. For those who hire Marino, price is no object: the cost of redoing one client’s living room and library was $57 million. “Mine is very much a couture house,” he has said.
When Arnault called, Marino told me, “I wasn’t quite sure who he was at first.”
But when Arnault started talking about his companies, Louis Vuitton and Christian Dior, Marino clicked in.
“This is the beginning of something big,” Marino thought to himself.
“Well, can you come to Paris tomorrow?” Arnault asked.
“I don’t think so,” Marino said.
But he did go the day after that.
Marino’s first assignment was the renovation of Dior’s original avenue Montaigne store. I remember visiting the old boutique back in 1982, before Bernard Arnault had contemplated buying Dior. Still a teenager, I walked in to buy perfume for my mother and grandmother for Christmas. The place reminded me of the drawing room of an old-moneyed mansion. The walls were painted dove gray with snow white moldings. The carpeting was dark gray and cushy. Crystal chandeliers hung from the ceilings, and mannequins dressed in elegant gowns, dresses, and chapeaux dotted the salons. There was no music, no chatter. Customers talked in hushed tones. The salesclerks were middle-aged women in prim suits and heels, their hair pulled up in neat chignons: the epitome of chic Parisiennes, serving you while setting an example. The perfume room was off to the right and bathed in natural light, the classics displayed on an old-fashioned wood-and-glass sales counter. I chose Diorissimo and Miss Dior, which the salesclerk silently wrapped in sheets of matte gray paper without tape or glue and tied up with white ribbon. They were the most beautiful gifts I had ever purchased, and it was the most refined shopping experience I have ever experienced.
When Marino got done with the store, I barely recognized it. What was once a foyer had become a vast, two-story-high round emporium-like space for handbags and scarves—the items that tourists and middle-market customers buy en masse. To the right, where the demure perfume counter once was, Marino put the shoe department with tiger-stripe carpeting, mirrors draped in gray and cherry red taffeta and a zebra-legged console. That led to the women’s wear department: a mishmash of neo–Louis XVI and rococo Louis XV styles, tea rose satin chairs with silver raffia pompoms, ivory leopard damask poufs on grooved gold-leafed legs, fluted silver velvet armchairs, and two tea tables sheathed in snakeskin. There were sales tables in bronze with mica inlay, gray silk fitting rooms with black Chantilly lace trim, stone flooring with silver molten glass insets in Dior’s signature caning design, and Marino’s favorite item, a stool with bronze goat legs. The perfume and cosmetics room had been moved to the back left section of the store, and one passed through it, like a hallway. It was entirely fitted in silver-gray mirrors with black and gold arabesques and floral motifs painted on the silver foil lining. Marino said he wanted to evoke a jewelry box. To me, it was plain gaudy and light-years away from the refinement and quiet elegance of Dior pre-Arnault.
Dior executives were thrilled with Marino’s transformation of the space. Its nouveau riche extravagance lured tourists as well as shoppers from all economic classes, and Marino became luxury fashion’s favorite boutique designer. Along with Dior, he has produced opulent, highly designed stores for Chanel, Donna Karan, Calvin Klein, Fendi, and Louis Vuitton, as well as Valentino’s New York home and his 152-foot yacht, TM Blue One. While most businesses would shy away from having the same designer as nearly all their competitors, luxury fashion industry executives sees it as a validation of their impeccable taste. Luxury fashion is a clubby world—designers all know each other, many intimately so, support staff such as press attachés and assistant designers move freely from one company to another, everyone dines in the same restaurants and vacations in the same locales. They refer to themselves as “the fashion tribe.”
Back in the old days, when luxury companies were run by their owners or heirs, each house had its own distinctive style that reflected the founder’s creative vision, right down to the boutique, normally just below the designer’s studio. Now individualism has given way to homogenization, not only among stores within a brand but also among brands themselves. Like Hollywood studios hiring the same handful of bankable stars to lure middle-market audiences to see their blockbuster movies, luxury brands tend to hire the same architects and use the same design tricks to get crowds into the stores. Luxury brands used to be innovative: they were revolutionary in design, they’d come up with something new. Now, they try to avoid leading the way for fear of alienating customers.
Marino was the perfect compromise: he was crazy creative, but since they all hired him, the Marino look has become the standard. Though Marino claims that each brand’s team of designers never knows what the others are up to—“I’m the only link,” Marino told me—Marino-designed boutiques most definitely have a common look about them: shiny and clean, with lots of gold, silver, sparkle, and gloss. The year-long remodeling of Chanel’s original rue Cambon flagship, for example, included oxblood-hued epoxy-resin panels flecked in gold, mirrors wrapped in a mile’s worth of antique silver and gold ribbon, and faux-ivory marquetry that evokes piano keys. And Marino’s decors make handbags radiate like movie stars on the red carpet. “Rule No. 1 is: don’t ever let the merchandise be subservient to the architecture,” he says.
Though Marino-designed luxury brand boutiques cost a substantial fortune—$20 million to create or renovate a flagship is not unusual—the investment seems to be worth it. Sales at the Osaka and Hong Kong boutiques that Marino did for Fendi increased by 300 percent within months of their openings. After Marino renovated Vuitton’s store on the Champs-Élysées for a second time in 2005—for an estimated $20 million—it was expected to generate $90 million to $115 million (€75 to 95 million) a year in sales. “We saw a phenomenal difference in sales before and after Marino—a 20 to 40 percent increase,” Françoise Montenay, president of Chanel in Europe, told me. “And it takes us two years to recoup our investment.” By 2006, Marino had done all of Chanel’s European and most of its Asian hold stores.
LUXURY CONTINUED its global march, expanding in secondary cities such as Monte Carlo, Venice, Chicago, Miami, São Paolo, and Osaka, and the store decors echoed the opulent flagships. The idea—a central tenet of globalization—was to market a cohesive image throughout the world. Back in Japan, where luxury’s globalization began, its founding father, Louis Vuitton’s Kyojiro Hata, grew frustrated with this marketing policy. “All the stores were ‘consistent’ wherever you went in the world, which meant they looked the same, and it was getting boring,” he told me. He wanted to do something to shake luxury up and make it a voice in creativity again.
Hata has long been interested in architecture—his brother-in-law Masayoshi Yendo is former president of the Japan Institute of Architects—so Hata decided to host a competition to select an unknown architect to build something fantastic. “We wanted it to be a Vuitton store, not an architect’s monument,” he explained, and “if you commission a star you cannot argue.” Vuitton selected Jun Aoki’s proposal of a building with “fuzzy external walls, like air, mist, or mirage.” When completed in 1999, the store was “an oblong cube, resembling a transparent jewelry case placed in the middle of the city,” as Aoki described it, with a glass facade re-creating Vuitton’s Damier check pattern. In 2002, Aoki produced another architectural masterpiece for Vuitton in the pretty, tree-lined shopping district of Omotesando: a store of “randomly stacked Louis Vuitton trunks,” Aoki said, each “trunk” creating an airy, modern rectangular space to di
splay and sell Louis Vuitton products.
The Omotesando store set out to be the most glamorous shopping address in Japan. It offered a concierge who would help with store orientation as well as book restaurants or taxis and provide information about Tokyo. On the top floor, there is a VIP salon, which you access via private lift, for special customers to try on clothes or place custom orders for luggage and accessories out of view of the masses. To celebrate the opening, Vuitton threw a splashy party attended by movie stars, local celebrities, and important clients who sipped Veuve Clicquot—an LVMH brand—as they mingled among the glass display cases and posed for the paparazzi.
The strategy worked. For two days leading up to the Omotesando store’s opening, fourteen hundred Japanese Vuitton groupies camped out front, waiting to shop. On the first day of business, the store’s clerks rang up a staggering $1.04 million in sales. When I visited it in November 2005, a middle-aged Japanese woman was trying on a pair of LV monogram–covered blue jeans and a matching monogram denim shoulder bag with chinchilla trim as her husband sat in an armchair talking on his cell phone. His shirt cuffs were held together with Vuitton cufflinks. In a stroller next to them sat their dog, watching contentedly. On the fourth floor, a group of large, loud Russians checked out Vuitton suitcases as a posse of Japanese fashion guys with blond-streaked hair, tight shiny suits, wide-open shirts, and cowboy boots chatted up a pair of local girls in little jackets, microskirts, and stiletto boots. I got the feeling that trendy Japanese cruise the Vuitton store in Omotesando like young Americans hit happy hour.
The truly fashionable set, however, bypass all of that and go to Celux—pronounced “say luxe” like the French phrase “It’s luxury”—a private club tucked in the back upper corner of the building where trendy Japanese pay one-time membership of about $1,850 and annual dues of $215 for the privilege to buy modern art, vintage jewelry, luxury fashion, and leather goods not found anywhere else in Tokyo. Members enter through a discreet side door and take a private lift that they access with their Celux swipe card to the eighth-floor lounge with blood-red carpeting, exotic wood paneling, and hip jazz. LVMH brands are all around you: mod pink Pucci-print sofas by Cappellini, Kenzo aromatherapy products on the coffee table, a wet bar on top of an upright Vuitton trunk. There is an impressive collection of fashion books and modern art. Down a dramatic curving staircase, the double-height suite is done up with red velvet armchairs, colored crystal fruit chandeliers, and baroque gold-framed mirrors, displaying everything from vintage-inspired sunglasses by Oliver Goldsmith of the United Kingdom to filmy Lanvin blouses.