What Price Luxury? Brands Go High, Low To Spur Tough Market

Many of today’s biggest fashion houses have been fiddling with price tags, but it’s stirring a sharp debate in the luxury market.

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Gucci crocodile bag

Photo By WWD Staff

Dior toile ‘Saddle’ bag

Photo By WWD Staff

PARIS — If the designer fashion business were a game show, it would definitely be "The Price is Right."

That’s because many of today’s biggest players have been fiddling with their tags, with some introducing accessibly priced items for so-called "aspirational" customers and others raising the bar with exclusive, hyper-expensive baubles.

All the changes are stirring sharp debate among retailers, manufacturers and industry consultants at a time when no one wants to confound already skittish consumers with sticker shock — or cheapen brands at a delicate time for luxury. The sector’s already trying situation has been made even more delicate by the war in Iraq, which has further eaten into global travel and caused many consumers to rein in their spending on anything but essentials.

Nonetheless, who would be the first contestant in fashion’s new game show? Tom Ford, come on down!

You might accuse the dashing Gucci Group creative director of a tendency to overbid — and you would be right. He took the Gucci brand into new price stratospheres last fall by introducing made-to-order handbags that run from $1,900 up to about $16,000.

The move was the wrong answer for the company at the time, and analysts even suggest the strategy dented Gucci’s leather goods sales.

Yet Ford defended the move up the price list. "We had planned something strategically, which I still believe was the right thing for the long-term value of the Gucci brand," the designer argued. "But maybe given what’s happening in the short term, it was ill-timed. We were starting to lose the top-of-the-pyramid customer at Gucci and…we did something very calculated: We went back in with custom-made shoes, custom-made bags, things with more expensive skins, more expensive detailing, and we really lifted the price point of the collection."

Gucci Group chief executive Domenico De Sole agreed. "Maintaining and growing this image is clearly the correct long-term strategy for our brand," he said. "Unfortunately, we moved in this direction precisely when consumers’ disposable income and anxiety led them to cut back and focus on more economical and entry-level-priced products."

Not that high prices are necessarily a bad thing. High-end retailers interviewed during the latest round of collections said price is rarely a deterrent for luxury customers — as long as the product is right. "Customers only get upset with us if we don’t have the right fashion," said Ron Frasch, chairman and chief executive officer of Bergdorf Goodman. "It has to have innovation and distinctiveness."
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