Luxury fashion betting tricky road ahead of designer reorganization

(Added to the March 20 story to remove irrelevant words from paragraph 2)

A luxury fashion group that appoints new designers

Brands need to be updated to restore demand

Designers shape brand identity, positioning and customers

Risks include too drastic changes in confusing shoppers – bain

By Mimosa Spencer, Elisa Anzolin, Tassilo Hummel

PARIS/MILAN, March 20 (Reuters) – The downturn in luxury fashion prompted designers to redecorate at Top Houses Gucci, Chanel and Dior to renovate their brand while avoiding an overly radical reset that could confuse wealthy shoppers.

The bet is high, as the global luxury market has the lowest sales rate of 363 billion euros ($395.09 billion) after China’s economy slows down and inflation rises, making high-end consumers even more reluctant to splash.

“Brands are under greater pressure than ever to balance creativity with business viability while staying relevant in a changing market,” said Lydia King, Group Purchase and Sales Director at Gupspale British Department Store Liberty.

Kering owns Gucci and Chanel are putting their bets on the rising stars on smaller labels, and LVMH’s Dior may soon follow suit. However, new designers face the tricky task of proposing a correct renewal dose, and investors give them little time to build themselves. Last week, Gucci announced the appointment of Balenciaga designer Demna, the leader in charge of its design team, to drop Kering stock by more than 10%, cutting about €3 billion in market value.

Jacques Roizen of DLG consulting firm DLG said that in the era of “superstar” creative directors, designers have shaped the identity of the brand and even obscured the brand’s legacy.

A two-year push-up upscale with more classic designs, many analysts lobbied bold fashion in Gucci, but 43-year-old investors fear the buzz of Kering’s smaller record label with high-end streetwear style may not be appropriate.

Royson said the creative director is redefining “not just the aesthetic direction, but the positioning and client of the house.”

As China remains soft, luxury brands will be looking to the U.S. market this year, despite signs of economic uncertainty.

Privately owned Chanel will bring 40-year-old Matthieu Blazy after successfully running for Bottega Veneta in Kering. He faced the daunting task of ushering in a new design approach, overseen by Karl Lagerfeld for decades before longtime collaborator Virginie Viard following the death of Lagerfeld in 2019.

Flavio Cereda, who manages Gam’s luxury brand investment strategy, said the importance of creative directors may vary by brand. Since Viard’s sudden departure last year, Chanel has emphasized the trademark, sending models down the runway in its interlocking-C-logo-shaped shape, or wearing clothes decorated with the iconic black bow – in the preferred venue of Lagerfeld, the Grand Palazzo in Paris.

LVMH’s industry-wide changes have not yet officially announced Dior’s new creative leadership after men’s clothing designer Kim Jones left in January, but it is likely to hire a new designer soon, expected to be Jonathan Anderson. He was announced on Monday to leave Loewe, but LVMH declined to comment on Anderson’s future role. Many smaller brands also have new faces, including LVMH’s Celine and Givenchy, while 69-year-old Donatella Versace gradually stepped on Versace after nearly three decades, replaced by Miu Miu’s Dario Vitale.

“Customers don’t know where all of these music hosts go,” said Yannis Ouzene, sales assistant for major European brands on the Blvd Montaigne, home to some of the most unique stylish homes.

“I don’t remember seeing such a big shift in creative leadership in the luxury industry,” said Achim Berg, fashion and luxury industry consultant.

He added that the change will sweep the studios, merchandise sales teams, marketing departments and design teams — but it will take time and it may not have a significant impact until next year.

Brands need clients who are confused about “too many changes in the aesthetic language of the brand,” said Federica Levato, senior partner at consulting firm Bain Consultancy Bain.

Royson said that for Chinese shoppers, the “now and now” of brand design is more important than its historical context, while Western shoppers “have important value for the continuity of brand identity.”

For some, designers are not trade champions.

“I don’t care who the designer is,” said Stephanie Gold, an American visitor in Paris, who recently bought a pair of outstanding Dior glasses. “I don’t like buying everyone’s stuff.”

Overall, the luxury goods industry has an annual growth rate of 10% in 2019 – 2023 – with sales accounting for more than a third of global growth, up 7%, while Chinese sales are 1% according to UBS estimates.

Brands must be careful not to wait too long to shake, said Olivier Abtan, a consultant at Alix Partners. Just as the market awaits news from Dior’s new design leader, LVMH’s fatigue struggle with shoppers, in the industry, some wonder if Dior’s design changes lag behind heavyweight Louis Vuitton, should have come early.

Abhatan said there is a need for “once brand perception growth slows,” Abhatan said.

($1 = 0.9188 euros) (Reported by Elisa Anzonlin, Tassilo Hummel and Mimosa Spencer; Other reports by Helen Reid in London; Editors of Susan Fenton)