America becomes absolutely fabulous

The US has a taste for European luxury goods, as Francois Henri Pinault tells Laura Chesters, and labels like Mulberry and Burberry are betting their shirts on it

Striding down Fifth Avenue clutching a monogrammed black Gucci leather satchel, François -Henri Pinault stands out among many of the trackpant-clad visitors to America’s most expensive shopping street.

Americans might still be better known for their casual fashions but Mr Pinault, the chief executive of Gucci’s owner, Kering, is betting that the millions of domestic and international tourists who descend on New York each year want to snap up European labels on their shopping sprees.

The Frenchman, who is married to the Mexican-American actress Salma Hayek  and whose family owns more than 40 per cent of the Paris-based luxury goods giant, says: “Over the last few years we have talked about the growth engine of luxury being in Asia – but it is important to remember the size and potential of America.”

According to market research from Bain/Alta­gamma on the luxury goods industry, the Americas actually passed China as the growth leader last year. The researchers estimate that the continent’s luxury goods market will grow 4 per cent, and the US alone is valued at €66bn (£52bn) this year.  Other European brands, including the UK’s Burberry and Mulberry, have also been steadily building up their presence across North America.

Mr Pinault is in the US to visit Kering’s American luxury division, which launched three years ago, and its flagship Gucci store in New York, the biggest in the world.

Kering, which owns 17 luxury brands including Saint Laurent and Christopher Kane, now plans to invest huge sums renovating some of its 180 US stores and expanding into new areas, as well as into Mexico and South America. Sales at it luxury division rose 8 per cent last year.

Mr Pinault is also betting that wealthy Americans are beginning to change their habits.  “The way of life here has been to not dress up, but the US shopper is becoming more sophisticated.”

On the arm of his film star wife, Salma Hayek, at least François-Henri Pinault gets recognised in Hollywood and business circles On the arm of his film star wife, Salma Hayek, at least François-Henri Pinault gets recognised in Hollywood and business circles Sarah Willlersdorf at ­Boston Consulting Group  agrees that the wealthy millionaires and billionaires in the States have traditionally spent their cash on cars and experiences rather than expensive clothes, but that now what BCG calls the “personal goods” sector is about to enter a boom period.

She says: “The aspirational masses here do want to spend on luxury – they want to spend on brands, and it is growing. There is a huge change in the desire to buy brands.”

BCG expects that by 2020 the US will have more than a third of the luxury market and  will still be bigger than China’s high-end sector. Japan will account for 7 per cent and the rest of Asia about 23 per cent of the global luxury market. Milton Pedraza, chief executive of the Luxury Institute, a consultancy, agrees: “There are big opportunities for European luxury brands in the US.”

America already makes up 18 per cent of Kering’s group sales, and Mr Pinault is keen to make sure its brands have the best stores in the best locations across the US – not just in New York, which has always had Sex and the City-style fans of European labels.

Ms Willlersdorf adds: “It is not just about East and West coast. The middle and south are very wealthy. European brands are under-represen-ted, particularly in second-tier cities.”

Miami: Battle for luxury

Kering will still open new stores such as in Miami, Seattle and California, but Laurent Claquin, head of Kering America, says: "Now we are opening new stores in new neighbourhoods in the cities we are already in."

Domestic tourism is also a big driver, but similar to Europe, the huge and growing international tourist market is where the real money can be made.

The US welcomes 70 million foreign tourists (see the panel on Miami, above right), who spend around $180bn (£105bn) a year. But even in the country’s biggest tourist destinations, such as New York, only around 20 per cent of the visitors are from overseas.

Experts expect a continued influx of wealthy visitors from Brazil, Mexico and Argentina, as well as Europeans and the fast-growing Chinese and Asian travellers.

European luxury brands may see plenty of growth opportunities in the US, but they are up against established US names such as Ralph Lauren, Calvin Klein and Donna Karen, as well as Michael Kors, Coach and Tory Burch. So is there really an appetite for fancy French, Italian or British labels?

In the eyes of Mr Pinault, many of the designer US names are not even luxury brands. This might be a case of French snobbery but Kering’s principles of quality and creativity mean a US company that makes most of its products in factories in China is merely a fashion brand not a luxury one. He says: “There are very few luxury brands from the US.”

He explains: “Contemporary brands such as Theory, Vince and Acne are very much developed in the US but these are not luxury – they are closer to fast fashion in their strategy.”

Rather than compete in this sector, Mr Pinault is doing the exact opposite. Amid concerns that big brands were becoming ubiquitous, the luxury giants have taken the decision to make their products even more expensive.

Mr Pinault says: “Gucci was the first brand that was challenged by getting to a certain size. We are taking the brand upscale. The challenge was to remain exclusive while being larger. We have raised the price of Gucci handbags by 30 per cent. We have left that price segment for the contemporary brands to fill the gap between mass market and luxury.

“The alternative was to stay and sell at the lower price points, but in the medium and long term it would kill the brand.”

The new strategy has not immediately helped sales but Mr Pinault insists “the strategy is starting to pay off”.

If he is wrong and the wealthy US shopper refuses to ditch their trainers and tracksuits for $5,000 handbags, Kering could still benefit; its sports and lifestyle division has five brands including Puma.

If Kering can’t sell middle Americans a Gucci or Saint Laurent handbag, a pair of Puma trainers and trackpants might go down well.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living