Designer Separates

Ralph Lauren's flagship store on Madison Avenue exudes the luxuriousness of a country estate, with its carved ceiling, wood-burning fireplace and fine antiques.

Guests trying on the designer's pricey frocks in the more-than-ample dressing rooms are treated to a glass of wine or, if they prefer, a cup of tea.

Meanwhile, Giorgio Armani's flagship offers a more contemporary setting, with blond hardwood floors, sales assistants clad in the designer's suits and ample views of Madison Avenue.

Instead of relying on department stores to build their reputations, designers such as Lauren and Armani are increasingly playing dual roles as retailers, providing customers with something they believe retail giants cannot--a complete vision of their "lifestyles."

"Individual designers get a little lost at department stores," said Carrie DeMarte, retail director for Cynthia Rowley, whose funky, urban designs retail from $100 to $400 at department stores and at five U.S. boutiques. "One of the reasons we're moving forward with our own boutiques is to showcase Cynthia's talent and image with her full collection."


While designer boutiques have long been a part of the retail landscape, the trend has exploded recently, as designers increasingly find themselves at odds with department stores over everything from pricing to the growth of private labels. And because consumers now have more fashion choices than ever before, designers feel a more urgent need to showcase their images on their own.

"Before, designers were kings and queens at the department store," said Kurt Barnard, president of Barnard's Retail Trend Report. "But increasingly, designers are finding it difficult to be heard over the din of so many other voices at department stores. They see having their own stores as the only way to grow their companies and, to perhaps put it more boldly, ensure their survival."

This year, dozens of high-end designers are expanding their retail push. Prada is opening 17 stores internationally, adding to the 40 shops launched last year; Hugo Boss will add at least 20 franchised shops in major U.S. cities; Tom Ford of Gucci will open a 14,000-square-foot store in Beverly Hills this fall; and Tommy Hilfiger has flagship plans for Mexico City, London and Brazil, adding to the one on Rodeo Drive he opened last year. Donna Karan is constructing a U.S. flagship on Madison Avenue and plans to open her first domestic DKNY shop in Las Vegas this month.

Fashion designers are flocking to longtime upscale shopping districts such as Madison Avenue and its West Coast counterpart, Rodeo Drive. But they are also hitting other havens for the rich, such as Las Vegas, Houston and Bal Harbour, Fla.

Department stores are watching the trend closely, careful not to assail designers for their entrepreneurial ventures, but also fearful that fashion's elite will continue to foray on their turf.

"It really depends on the magnitude of the expansion," said Terry Lundgren, president of Federated Department Stores, which owns Bloomingdale's and Macy's. "If you're talking about one or two stores that are intended to enhance the image of a brand, I think that's a good thing.

"But when the concept gets carried out to hundreds of stores being placed right outside the doors of department stores, it becomes an issue of too much product availability."

Lundgren said it's difficult to tell whether, for instance, Ralph Lauren sales went down at Bloomingdale's when the designer opened his flagship within walking distance of the department store. But he said it is a bit worrisome to see designers increasingly bypassing traditional retail outlets.

Prada, for instance, has had so much success with its own stores that its department store business has become a lower priority.


"Seventy percent of our distribution is in our own stores," said Prada President Patrizio Di Marco. "Our expansion with outside stores will be by adding doors to existing accounts, but slowly and thoughtfully."

Designers have numerous reasons for wanting to go into retailing, many of which are financially oriented. But they also want to dazzle consumers by projecting the right ambience, music, sales staff and merchandise at their shops.

"It's an ego thing, their way of getting their name out," said Elena Hart, fashion marketing director at Fashion Assn. in New York. "It's a prestige thing to have their own stores, whether they make money or not."

Indeed, analysts say it's unlikely that some designers with flashy digs on Madison Avenue or Rodeo Drive make money at their stores because of high real estate costs. But in an era where brand building has become a must, designers believe having a showplace is one of the best forms of advertising.


Flagships for Calvin Klein, Ralph Lauren and Tommy Hilfiger sell clothing, accessories, shoes and home furnishings amid comfortable couches, spacious dressing rooms and other amenities department stores can't offer. Hilfiger's flagship, for instance, offers a VIP dressing room and a Wolfgang Puck Cafe so customers can fuel up between purchases.

"It was always a dream to have flagship stores in all the major fashion centers of the world," Hilfiger said. "Finding the right location is critical. As they say, it's all about location, location, location. But when you find the right spot, you have to do something creative with the space."

To finance their dream stores, some designers, such as Lauren and Hilfiger, have gone public to create sources of capital, said George King, an analyst with Credit Suisse First Boston. "It's a trend that's really taken off," he said.

But the retail formula doesn't work for all designers. Some fashion houses, such as the publicly traded Liz Claiborne, have had to close shops that were performing poorly.

"Liz Claiborne decided they didn't have to do their own retailing because they had a strong business in the department stores," Barnard said. "The big difference comes down to cost. Prada, for instance, needs to sell its very expensive merchandise under one roof to give it cache and identity."

In some cases, the shops allow designers to carry designs that may have been deemed too exotic or delicate by department stores.

"Department store merchandise needs to be sturdier and simpler, because it needs to be sold off the hanger," said Bud Konheim, chief executive of Nicole Miller Ltd., which operates 30 stores and plans to add at least 20 more by the end of 2000. "Department stores also serve a more mass consumer, so they tend to take the more conservative part of a line."


Konheim of Nicole Miller, which is known for evening dresses that range from $200 to $500, said vendors also are frustrated with department stores selling lower-priced goods under private labels that often resemble designer styles.

"It's made it very difficult to compete on price," he said. "So I think a lot of designers are saying, 'If department stores are manufacturing, we'll go into retailing.' "

Designers also resent the frequent markdowns that department stores take to move goods off the floor. Such markdowns cut into their profits.

"Department stores are just becoming too demanding," said Maggie Gilliam, a retail and apparel consultant in New York. "They mark down prices like crazy and expect suppliers to pay for the promotion."

But Lundgren said department stores do not mark down merchandise that's selling well.

"If something's not selling well at a regular price, we have to get rid of it to bring in new merchandise," he said.


Michael Gould, Bloomingdale's chief executive, said it's fair to call designers' retail stores "competition," but he doesn't see the trend as necessarily negative.

"It's forced us to look at our business differently and try to do things better," he said. "For instance, when Chanel opened on 57th Street, we looked at our staffing and refurbished our [Chanel] displays."

Department stores don't appear to be suffering financially from the designer retailing push. Upscale department stores such as Saks Fifth Avenue and Neiman Marcus are actually seeing higher sales of luxury goods and designer brands amid a strong economy.

But David Wolfe, a New York-based fashion trend forecaster, believes department stores should be concerned that shoppers will become more accustomed to purchasing designer duds outside their doors.

"Department stores have lost their individuality, while Calvin Klein, Armani and Ralph Lauren are offering us lifestyles, which is what department stores used to do," he said. "Designers are putting the joy back into shopping."

Times staff writer George White contributed to this report.

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