Balenciaga, Dior and Louis Vuitton are Taking America

Christian Dior, a mid-century fashion designer, might have been apprehensive about the 31-year old ERL designer creating a capsule for his luxurious fashion label. Eli Russell Linnetz, a 2022 designer, offers all the qualities European luxury brands look for in a designer. He is a young street shopper, a celebrity access, and an appeal to American appetites.

Last Thursday’s Dior capsule collection for men, featuring puffer bars jackets and quilted sneakers, was held in Venice, California. It followed the Louis Vuitton show in La Jolla last week, which celebrated its latest cruise collection. Balenciaga displayed its Spring 2023 collection this Sunday at the New York Stock Exchange. The event was promoted with images of cold, hard money.

This is a lot European attention that’s laser-focused on America. And it’s just the beginning. Hermes, Dior, and other luxury brands are opening new stores and renovating existing flagships all across the United States. They’re also venturing further afield to burgs like Topanga in California and Princeton in New Jersey. These are well outside the traditional gateway cities where luxury brands have settled for decades.

“Probably, the US has the greatest concentrations of wealth in the entire world… We are recruiting a younger culture. Just a few moments before the show, Pietro Beccari (Dior’s chief executive) says that tonight is part of this. He quickly recollects Dior’s fascination with America, both of its women’s and men’s creative directors Maria Grazia Chiuri. Beccari says, “There is this love for the US that goes backto Mr Dior.”

European luxury firms have been enjoying a hot market in the USA. Chanel reported Tuesday that the Americas grew 79.5 percent in its annual results, which was the main driver of a surge in overall profits. Hermes reported a 44% increase in US sales in the first quarter 2022. Kering, LVMH, and Prada also reported strong US earnings growth. It is making up for less optimistic outlooks in China. Bloomberg recently reported that the US will surpass China’s economy for the first time in its history since 1976. Bloomberg Economics predicts that the US gross domestic product will rise by 2.8% this year, while China’s is only 2 percent.

America’s top-spending customers, who are protected from rising inflation and pandemic-related strife, have been redecorating, shopping, and eating out at restaurants in a stunning display of consumer confidence. This contrasts with the luxury goods sales in other parts of the globe over the past 20 years. Russia’s war on Ukraine has led to brands leaving Russia. Covid-19 has caused massive disruptions in China. The buoyant US is looking good, with consumer confidence dropping to its lowest level ever in the UK.

However, the complete picture of the US economy shows gloomy prospects and inherent risk for luxury brand investors who believe that the US will compensate for slow growth elsewhere in the world. Rising US inflation is the main economic concern. This will be a driving factor in the November elections. It could also signal a shift in American policies if Republicans win control of the house or senate.

Janet Yellen, the US Treasury Secretary, recently warned that Russia’s invasion of Ukraine is threatening food supplies around the world and causing high energy prices. She also raised the possibility of “stagflation,” which is a combination of low economic growth and rising prices. America currently has a severe shortage in baby formula, a powerful metaphor for a rocky economy driven primarily by supply chain problems.

“This environment is filled with risk both in respect to inflation as well as potential slowdowns,” Yellen stated at a Bonn press conference, Germany, last week, before a meeting of Group of Seven finance ministers.

Tech stocks like Facebook have also been a part of a dramatic downturn in the Nasdaq and are now heading into bear-market territory. The crash of cryptocurrencies has also led to concerns about another technology that has made fashion houses salivate: NFTs’ potential value.

The US is not a solid foundation for economic growth. Even if luxury brands that are publicly traded must seek out the best opportunities in order to increase their quarterly returns.

European luxury brands need to be aware of another risk when venturing into new territories. It is the amazing thing about savoir faire. It is anchored in the incredible skills and knowledge of those brands and their employees, nurtured over decades and centuries. Brands may not be able to understand the culture and traditions of their destination when they are transported abroad. This was evident in our first forays into China. Luxury brands were initially too focused on producing products that conformed to Chinese stereotypes, such as handbags in deep reds and jackets with dragon embroidery.

Dior’s show notes from Venice, California this month were full of off-note references. They included “Tinsel Town” (that is Hollywood, not Venice) and “one Fresh Prince Down the Road in Bel-Air”, a reference to an American TV show reboot that starred Will Smith. Smith’s punch at Chris Rock, comedian, on the Oscars stage this year, has left Fresh Prince and him in shame. Louis Vuitton was unable to locate its stunningly beautiful cruise show. Although the Parisian brand claimed that it was San Diego, it was actually located in La Jolla. This is a more wealthy area than the city of Sea World tourists.

Beccari believes that luxury brands must now explore and take risks in new territories to grow their revenues, and therefore their consumer base. He says, “My job, Kim’s job, Maria Grazia’s job, is to encounter history and modernity.” “That’s our job — to find surprising moments and to bring it to the streets.”