By: Emma Bazilian
May 4, 2014
Derek Lam remembers a time when it would take years before an apparel brand was established enough to spin off a secondary line aimed at catering to the masses.
But Lam, one of the hottest designers around, is not a man who likes to wait.
He is one of a breed of contemporary fashion stars—including Alexander Wang, Jason Wu and Prabal Gurung—for whom accessible luxury is not just an afterthought but part of their DNA.
“Traditionally, the plan would have been to just stick to high-end,” Lam explains one April afternoon at his company headquarters and studio near New York’s Madison Square Park. “But I went into it saying, ‘I want to do as many different levels as possible because I want to reach a wider audience.’ It used to be that designers could sit and wait for the audience to come to them—now, they have to go to the audience.”
Lam’s lower-priced 10 Crosby line bowed in 2011, eight years after his runway debut. Lam made sure to adhere to one of the crucial tenets of a successful diffusion line: maintaining a brand identity. “I think that before, designers would do secondary lines that were maybe more derivative of their main collections,” he says. “I recognized that 10 Crosby couldn’t be just a knockoff of what I was doing [at Derek Lam]. So when we started marketing the line, we built an ideal of this 10 Crosby woman, and that was really key.”
With dresses in the $400 to $700 range, 10 Crosby is not cheap. But compared to the $3,000 to $4,000 dresses in the core Derek Lam line, it’s practically a steal. As a result, 10 Crosby is growing considerably faster than its pricier parent, says Derek Lam International CEO Jan-Hendrik Schlottmann. The number of stores carrying 10 Crosby has increased 150 percent in the last year, and the brand recently expanded into footwear. “I think the overall potential is much larger because you can sell in places where you can’t really sell [the main] collection,” Schlottmann says. As sales of luxury goods have slowed for companies like Louis Vuitton and Gucci, business has been booming further down the price ladder.
Michael Kors, which launched in 1981 and has steadily grown its lower-priced offshoot Michael Michael Kors over the last decade, enjoyed a wildly popular IPO in 2011 and last year racked up $2.2 billion in sales. Kate Spade, which lost some of its luster following a sale to Liz Claiborne in 2006, underwent a major revamp as an aspirational lifestyle brand and is now looking at a near 70 percent year-over-year bump in its stock price, on top of $1.3 billion in sales for 2013. (Incidentally, Liz Claiborne sold its namesake brand and renamed itself Kate Spade & Co.) Meantime, Tory Burch, the decade-old brand rumored to be heading toward its own IPO, is valued at some $3.3 billion.
“A smart designer understands the importance of developing a business that’s profitable but without losing that creative spirit and losing that dream of what the runway is really about,” says Milton Pedraza, CEO of the Luxury Institute, a research and consulting firm. “They know that they need to often embrace the idea of the secondary lines to help fuel the financing of their main collection.” Consider Victoria Beckham. In 2011, the entertainer-turned-designer added a diffusion line, Victoria Victoria Beckham, to her then two-year-old main collection. Within a year, the success of the secondary label helped put her company in the black for the first time.
Of course, accessible luxury also continues to be an important enterprise for more established brands. Helmut Lang, Catherine Malandrino and Balmain have all launched diffusion lines in recent years, while Valentino has pushed its previously under-the-radar Red Valentino line. Another diffusion makeover is under way at Marc Jacobs. Last year, the designer left his post as creative director at Louis Vuitton to concentrate on both his high-end line and the more youthful Marc by Marc Jacobs, whose sales account for the majority of company revenue.
Another key factor in the growth of this space is the influence of millennials. “Young consumers are looking for quality and design, but they’re also looking for ‘new,’” says Pedraza. “They’re much more open to new and affordable brands than baby boomers.”
Considering their proximity to fashion, consumers are under more pressure to compete in the fashion space. “Even though we say we’re not a class-conscious society, this is a very status-conscious society, and these brands help elevate people who may not have a lot of money but want to show off these accessible luxury brands,” explains Pedraza. “They want that stature that comes with these products as well.”
There can be a downside to becoming too accessible, however. Flooding the market takes away from the feeling of exclusivity that makes luxury brands seem special in the first place. “Ubiquity does breed some backlash,” says Pedraza. “The problem with luxury retail is that you often don’t know where the line is until you’ve crossed it.”
See full article with quotes from Milton Pedraza, CEO of Luxury Institute: http://www.adweek.com/news/advertising-branding/derek-lam-believes-fashion-masses-157455