WWD/DNR We Have to Ask Ourselves: Are“ We Fools to Buy Now Or Fools to Sell? One Thing Is Clear: Where There Is a Will, There Is a Price

“We have the duty to bring beauty to the world, to make women feel better, to make women feel good, to uplift them.” — Alber Elbaz

The people issue in any company is the most “important thing you’ve got to protect. People [ask] Stores are going to be me, how do I value my priorities? Always, my number- magazines“ and magazines one priority is my people. The second is my customer. are going to be stores. The third is my shareholder. Because if I can take care Spring-summer and fall- of the fi rst two, then the third will fall into place. winter seasons are probably ” completely irrelevant. People — Allen I. Questrom just want great product There is a growing sense of individuality in consumers when they can get it. “who are more confi dent in their own taste and less reliant — Natalie Massenet, Net-a-Porter” on the brand name. There is also the growing resistance to owning the same product as everyone else, as a reaction to This time gives brands luxury brands having become too accessible. — Patrizio di Marco,” Bottega Veneta an“ opportunity to evaluate what’s working, what’s not and to turn the brands on their ear, inside out. If we do that, we can survive. — Josie Natori” WWD/DNR We have to ask ourselves: Are“ we fools to buy now or fools to sell? One thing is clear: Where there is a will, there is a price. ” SECTION II A SPECIAL REPORT — Vittorio Radice, La Rinascente CEO You can have all the ideas“ in the world you want, but if you don’t have the balance sheet or the cash fl ow to reinvest, you SUMMIT really can’t go anywhere. — Roger Farah,” Polo Ralph Lauren Corp. Playing it safe is probably the most unsafe thing you can“ do. Change and change alone is the only thing In the spirit of being that’s eternal….There is no sense of discovery when authentic,“ be vulnerable, you’re comfortable. It’s often the things that we fear in admit your mistakes, organizations that are the primary sources of creativity. apologize, concede defeat. — Glen Senk, Urban Outfi” tters When people see that, it buys permission to operate and make risky, tough decisions “The more pure the message, the more compelling it is to in the way the invulnerable consumers. The more consistently it is communicated across leader never gets. all mediums, the greater the brand equity created. — Angela Ahrendts,” Burberry — William” L. McComb, Liz Claiborne Inc. [Russians] are alive right now. We still have the urge. People want to shop….People“ still like to spend money. They can spend their last dollar. That’s good. They don’t worry that much about tomorrow.” — Alla Verber, Mercury Distribution 2 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II WWD.COM WWD/DNR CEO SUMMIT WWD ®The retailers’ daily newspaper. Published by Fairchild Fashion Group, a division of Advance Magazine Publishers Inc., 750 Third Avenue, New York, NY 10017

PATRICK MCCARTHY, Chairman and Editorial Director EDWARD NARDOZA, Editor in Chief PETE BORN, Executive Editor, Beauty BRIDGET FOLEY, Executive Editor JAMES FALLON, Editor RICHARD ROSEN, Managing Editor DIANNE M. POGODA, Managing Editor, Fashion/Special Reports MILES SOCHA, European Editor LISA LOCKWOOD, News Director DAVID MOIN, Senior Editor, Retail ARTHUR FRIEDMAN, Senior Editor, Markets ARNOLD J. KARR, Senior Editor, Financial LORNA KOSKI, Associate Editor GABE DOPPELT, Entertainment Editor SAMANTHA CONTI, Bureau Chief, London ALESSANDRA ILARI, Bureau Chief, Milan MARCY MEDINA, Bureau Chief, Los Angeles AMANDA KAISER, Asian Editor BOBBI QUEEN, Senior Fashion Editor 4 THE BIG FIX JENNY B. FINE, Associate Editor Allen I. Questrom’s recipe for survival in turbulent times. EMILY HOLT, Eye Editor inside DICK SILVERMAN, Associate Editor VALERIE SECKLER, Marketing Editor, Statistics 6 REDEFINING THE VISION SHARON EDELSON, Senior Editor, Specialty Retail Angela Ahrendts guides the iconic Burberry brand into tomorrow. JULIE NAUGHTON, Senior Prestige Market Beauty Editor ANDREA NAGEL, Mass Market Beauty Editor BETH KWON, Senior Fashion Features Editor 8 AN EMOTIONAL PITCH MARC KARIMZADEH, Designer Sportswear Editor Alber Elbaz of Lanvin discusses the creative process and fashion in the modern world. ROXANNE ROBINSON-ESCRIOUT, Senior Accessories Editor KIM FRIDAY, Senior Fashion Editor, Sportswear ANTONIA SARDONE, Senior Market Editor 10 RISKY BUSINESS ELISA LIPSKY-KARASZ, Deputy Eye Editor Glen Senk asserts there’s no “playing it safe” at Urban Outfitters. JACOB BERNSTEIN, Features Writer, Eye/Media VANESSA LAWRENCE, Associate Eye Editor CECILY HALL, List and Statistics Editor 11 FORGET THE POLITICS MICHAEL AGOSTA, Special Sections Editor Liz Claiborne’s William L. McComb says managing a turnaround starts with attitude. ETTA FROIO, Contributing Senior Executive Editor 12 CLEAR CHANNELS JOHN B. FAIRCHILD, Contributing Editor at Large Roger Farah, Matthew Rubel and Josh Bekenstein emphasize effective communication. WWD.COM AMY DITULLIO, Managing Editor 14 FAMILY MATTERS Bruno Navarro (News Editor); Véronique Hyland (Associate Editor, Fashion); With help and advice of her father, husband and son, Josie Natori keeps her lifestyle brand focused. Lauren Benet Stephenson (Associate Editor, Beauty/Lifestyle) MARKET EDITORS 15 ON TAP Accessories: Sophia Chabbott, Caroline Tell (News), Shoshanna Fischhoff (Fashion); Beauty: Matthew W. Evans, Molly Prior, Michelle Edgar; Furs: Bobbi Queen; Innerwear/Bodywear: Karyn Monget; Ready-to-Wear and Sportswear News: Execs talk economy over cocktails. Whitney Beckett, Rosemary Feitelberg, Julee Kaplan, Ross Tucker; Ready-to-Wear and Sportswear Fashion: Mayte Allende, Court Williams; Media: Irin Carmon, Stephanie D. Smith, Amy Wicks; Technology: Cate T. Corcoran; Textiles: 16 GO YOUR OWN WAY Ross Tucker (News), Court Williams (Fashion) Bottega Veneta’s Patrizio di Marco urges companies to find their own voice. CORRESPONDENTS Atlanta: Georgia Lee (Bureau Chief), Elizabeth Thurman (Assistant Editor); Dallas: Holly Haber (Bureau Chief), Rusty 17 COMPUTER CHIC Williamson (Associate Bureau Chief); Milan: Luisa Zargani, Andrew Roberts, Vanessa Silva; London: Nina Jones, Louise Bartlett, Brid Costello; Los Angeles: Leila Baboi, Hellin Kay (Fashion) Rachel Brown, Anne Riley-Katz, Khanh Natalie Massenet and Net-a-porter bring the store to the customer. T.L. Tran (News); New York: William Cotto; Vicki M. Young (Associate Financial Editor), Evan Clark (Associate Editor, Financial), Matthew Lynch, Alexandra Steigard (Financial Reporters); Amanda FitzSimons (Eye); Cinnamon St. John 18 ITALIAN REINVENTOR (Bookings Editor); Sarah Haight, Jessica Iredale, Venessa Lau (Fashion); Paris: Robert Murphy (Retail and Fashion Vittorio Radice is on a mission to restore La Rinascente to the world of high fashion. News Editor), Jennifer Weil (Beauty), Ellen Groves (Sportswear), Laurent Folcher, Katya Foreman, Chantal Goupil, Emilie Marsh, Natasha Camilla Montrose (Web Reporter/Editor); Boston: Katherine Bowers; Washington: Kristi Ellis (Bureau Chief), Liza Casabona, Susan Watters; Hubert Innocent (Director of Fairchild News Services); Tara Bonet- 20 A FASHIONABLE IMPRESSION Black, Priya Rao, Nick Axelrod (Editorial Assistants) Alla Verber of Mercury Distribution says Russians’ brand awareness has vaulted in recent years. LAYOUT/COPYDESK PETER SADERA, Copy Chief 22 REARRANGING PRIORITIES MAUREEN MORRISON, Deputy Copy Chief WSL’S Wendy Liebmann says focusing on customers is key. LISA KELLY, Senior Copy Editor Adam Perkowsky, Kim Romagnuolo (Copy Editors)

PHOTOS IN THIS SECTION BY KYLE ERICKSEN AND ROBERT MITRA ART DEPARTMENT ANDREW FLYNN, Group Art Director SHARON BER, AMY LOMACCHIO, Associate Art Directors COURTNEY MITCHELL, Designer Eric Perry, Junior Designer; Tyler Resty, Art Assistant

PHOTO/IMAGING ANITA BETHEL, Photo and Imaging Director CARRIE PROVENZANO, Photo Editor CARTER LOVE, Photo Coordinator

PHOTOGRAPHERS New York: John Aquino, Talaya Centeno, George Chinsee, Steve Eichner, Kyle Ericksen, Thomas Iannaccone, Robert Mitra

BUSINESS JOHN COSCIA, Editorial Business Director

CHRISTINE GUILFOYLE, Publisher ED HECHT, Associate Publisher JOEL FERTEL, Associate Publisher, Innerwear/Legwear/Textiles DALE REICH, Associate Publisher, Media & Trade Shows VANESSA MAHLAB, Associate Publisher, Sportswear TIA POTTER, Associate Publisher, Technology DEBRA GOLDBERG, Associate Publisher, Beauty LISA ENGERT, Executive Director, Fine Jewelry JENNIFER FISHMAN, Executive Fashion Director JANINE MARKS, Account Director JENNIFER MARDER, Associate Publisher, Accessories ELIZABEETH DETMER, Beauty Director TRACY HADEL, Account Director DEBORAH LEVY, Senior Account Manager, West Coast RON TROXELL, West Coast Director SUSAN SMITH ELIZABETH HAYNES, European Advertising Director, Paris ODILE EDA-PIERRE, Account Manager, Paris GUGLIELMO BAVA, Advertising Director, Italy OLGA KOUZNETSOVA, Account Manager, Italy RALPH ERARDY, Executive Director of Sales, Fairchild Fashion Group GREGORY REMILLARD, General Manager, Fairchild Online DREW DIX, Executive Sales Director, Classified, Fairchild Fashion Group RICHARD CHERICHELLA, Business Director, Fairchild Fashion Group KAREN CHIU, Business Manager, Fairchild Fashion Group JANET JANOFF, General Manager, WWD RON WILSON, Director of European Operations JODI MARCHISOTTA, Associate Publisher, Marketing and Promotions DANIELLE MCMURRAY, Creative Services Director GENA KELLY, Executive Director, Manufacturing & Distribution CHRIS WENGIEL, Group Production Director PROVIDENCE RAO, Production Manager VICTOR KIM, Production Coordinator COLLEEN COMPSTON, Executive Assistant to the President

TO DIAL DEPTS. DIRECT AREA CODE 212 News: 630-3500 Fashion: 630-3520 Display Advertising: 630-4600 Classified Advertising: 630-4610 Editorial Re prints: SCOOP Reprint Source, 949-453-4680; Individual Subscriptions: 800-289-0273; Group Subscriptions: 790-4457; Subscription orders can be faxed to 790-1868; Production: 630-4475 FAIRCHILD OFFICES ATLANTA 30305: 3500 Piedmont Rd., N.E., Suite 505, (404) 926-3535. CHICAGO 60611: 875 N. Michigan Ave., Suite 1410, (312) 649-6539. DALLAS 75207: 2730 Stemmons Fwy., Suite 211, (214) 630-5461. LONDON WC2: 20 Shorts Gardens, WC2H 9AU, (44207) 240-0420. LOS ANGELES 90048: 6300 Wilshire Blvd., Suite 720 (323) 965-7280. MILAN 20121: Piazza Cavour 2, (011) 39-02-6558-4201. PARIS 75008: 9 Rue Royale, (331) 4-451-1300. WASHINGTON 20036: 1050 17th St., N.W., Suite 600 (202) 496-4975.

FAIRCHILD FASHION GROUP DANIEL LAGANI, President © 2007 Fruit of the Loom, Inc. We’re expanding to ﬁ ll up all kinds of space. Innovative fabrics, styles, and designs in the many Plus, our retail are proﬁ partners ting from increased market basket a rings, Fruit of the Loom intimates andnew sleepwear collections continue to create loyal customers. award-winning customer service. It’s more proof that you really can’t have too much of agoodthing. An ever-growing numberofcollections. Never quiteenoughroom. Dozens ofstyles. ractive margins, and and margins, ractive 4 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II

WWD/DNR CEO SUMMIT The Big Fix Allen I. Questrom’s recipe for survival in turbulent times.

By David Moin and companies in South America that were more dis- tractions than contributions. IF YOU HAVEN’T ALREADY BEEN HUMBLED BY “Penney’s had the most moving parts and really the economic downturn, just listen to Allen I. Questrom. was almost 30 years behind the times,” Questrom said. Retail’s turnaround king has an outlook that’s as “It was a company that had not dealt with where the sobering as any and a prescription for getting through world had gone.” It offered good value but had lost the years ahead that calls for major alterations. track of the competition and what was needed to com- He’s not big on making predictions and hasn’t much pete. Questrom and his team centralized the business, faith in those who do: “One thing you should be clear built distribution centers, reorganized and cleaned up on — all the experts, and all the prognosticators, have the presentation in the stores, installed new technol- been totally inaccurate on what is actually happening. ogy and elevated the stock price dramatically in the They tell you one thing and three months later some- process — 147 percent in his fi rst year on the job. He thing else happens.” stayed at Penney’s until December 2004. Nevertheless, his presentation at the WWD/DNR It was an ordeal for sure, bigger than other assign- CEO Summit, in the form of a Q&A, stirred up the ments, but not without similarities in his approach. “I soothsayer in him. “We are going to go through some look at a company and ask, ‘What’s its history? Does it very tough times and if you think and hope it’s going to have a reason for being, and most importantly, what is be get better in three months or six months, you’re in the makeup of the people. Who have been the leaders of for disappointment,” stated Questrom. that company?’ In all companies, the number-one issue As Questrom sees it, the nation is not confronting is the people. Most companies, if they’ve maintained the a typical recession. “This is a real transformation — a same organization, probably have very good people. transformational shift that all retailers and all business “Saying that, you need to understand the cash fl ow. people have to think about,” he said. Boards generally don’t realize they are in For the months and years ahead, trouble until the company is almost ready here’s the Questrom spectrum of sur- The number- to go bankrupt or is bankrupt. You must un- vival tactics: First, provide greater value “ derstand that when you walk into this com- — and not merely through sales; second, one role of the pany you may or may not win. You’ve got to it’s better to be underinventoried than understand you are going to have on your overinventoried, and third, leaders must boss or the merit badge some losers along the way. But “overcommunicate” to the team on cor- you have to be able to think at least that if porate strategy and changes including leader is to there is not money, you have a way to get layoffs and other drastic measures. money.” Penney’s was very close to bank- Questrom’s 40-plus years in retail- manage your ruptcy when he joined the chain but it sold ing and his career trademark — ratio- off an insurance company. “If we didn’t nalizing troubled chains — make his people in a way have that to sell, we would have had a dif- views particularly relevant. He’s seen ferent story to tell.” up cycles and down cycles, lifted chains that it’s their In each turnaround situation, the com- from the depths of bankruptcy or near panies were not focused. “If you look at bankruptcy, taken tough and aggressive company. their priorities, they got 27 pages of dif- actions impacting staffers and vendors, ” ferent things….What are the fi ve things I and tackled major mergers to build up — Allen I. Questrom, am going to focus on? What are the two businesses. As much as he’s taken the Lee Equity Partners LLC things I am going to do today? Do the two big picture point of view, with some things I am going to do today tie into the megamergers and remaking companies fi ve things I think are going to change my with broad strokes, Questrom is known to be deep into company? Everyone in that company has to think it is the merchandise and disposed to challenging his buy- their company. The number-one role of the boss or the ers on the nitty-gritty of the individual stockkeeping leader is to manage your people in a way that it’s their unit, whether it’s the color, the silhouette or where it’s company. I see company after company after company placed on the selling fl oor. where the boss does not understand that he or she is But he’s not all business. He’s well traveled, geo- one of thousands. If they don’t like you, or if they think graphically, as well as through fashion, fi nancial and re- that you’re a nutcase, you’re going to be dead. tail circles. And when he’s not having a power breakfast “So you to have to think, how do you get on the same at the Regency, he’s likely to be bicycling through the wavelength, how do you get into the culture of that com- French countryside, skiing in Aspen, Colo., walking his pany? When I go into a company, I spend six months and tempting to buy, but prices could stay depressed dogs or checking out contemporary art. Currently, he is trying to understand the culture of that company. What for a long, long time, he warned. As far as your own a senior adviser at Lee Equity Partners LLC and a mem- is the history? How do the people think? Because the company’s stock price, don’t be overly concerned. “I ber of the boards of Sotheby’s and Wal-Mart Stores Inc. only way you can be successful in the company is not would worry about running a good business and really Questrom began his career in 1964 as a management fi nancial — that’s the short-term fi x. You’ve got to get being a more effi cient business.” trainee at Federated Department Stores, which is now the people to believe so much in the company that they At the companies he’s run, Questrom said he tries called Macy’s. He worked at Abraham & Straus, went wake up in the morning and think that it’s their com- to surround himself with talented people who are on to run Rich’s and Bullock’s in the Eighties and from pany — and what am I going to do about it? That means team players. Then it’s his style to delegate and chal- 1988 to 1990 ran Neiman Marcus Inc., which at the time everybody who works in that company. If you go to a lenge the team on their decisions and actions, without was surviving on thin margins. He boosted profi tability store, that salesperson is as important as a gm.” necessarily telling them how to do things. He said his signifi cantly, but left abruptly in 1990 to join the then- Mervyns exemplifi es losing focus. “Mervyns could best decisions and worst decisions were about people, bankrupt Federated Department Stores Inc., as chair- have been saved a long time ago.…They didn’t execute and sometimes keeping them too long in positions that man and ceo and pull it together with the help of his that business. Target did a bad job in my opinion, as weren’t right for them. second-in-command, James Zimmerman. Subsequently, they did in the department store business,” operating “The people issue in any company is the most Questrom led the company’s dramatic $4 billion take- Dayton Hudson. “They do a very good job in the dis- important thing you’ve got to protect,” Questrom over of then-bankrupt Macy’s, creating the largest tra- count business.” Mervyns, which Questrom said was said. “People [ask] me, how do I value my priorities? ditional department store chain in the country. the idea behind Kohl’s and the former Main Street Always, my number-one priority is my people. The After leaving Federated in 1997, Questrom was division of Federated, is being liquidated. “Mervyns second is my customer. The third is my shareholder. chairman and ceo of Barneys New York just after it did not get the proper leadership and sold to a buy- Because if I can take care of the fi rst two, then the emerged from bankruptcy. While there, he instilled out company, which took the real estate and re-rented third will fall into place.” some fi nancial disciplines and launched Barneys’ the properties back to Mervyns. “The problem was the He stressed the need to keep the strategy focused Co-op chain. store was operating at a different market rate.” and the mission clear, and that a ceo must be a leader Barneys was small potatoes for Questrom, so it The usually upbeat and optimistic “Mr. Q,” as some who lets people in on the agenda. “You’ve got to over- wasn’t surprising he cut his stint there short, leaving call him, suggested staying positive in the current eco- communicate to your people,” he said. “You’ve got to after about 18 months to tackle a tired and ailing J.C. nomic environment, and to take a break from television make sure they know exactly what you are doing. Why Penney Co. Inc., which he cited as his toughest turn- and all the gloomy macro news that emanates. “It’s al- you are doing it, even if you are making job cuts. You around assignment. most impossible to get up in the morning and not feel have got to explain to them the totality of that deci- When he joined Penney’s in 2000, it was a decen- depressed if you turn the TV on. I would almost suggest sion. You have got to be with them on the selling fl oor. tralized company where the store managers were king. don’t put it on. Don’t read the newspaper. Kind of oper- You have to be with them in the offi ces. You have got to Each store bought individually. There was no central ate without [them] because all they do is make you feel create a positive spirit in this turmoil. distribution center and no information technology. It bad and there’s nothing you can do about it.” “I really make sure we have a written strategy that also had peripheral businesses, like an insurance fi rm Don’t fi xate on Wall Street either. Stock is cheap talks about where we want to go and I make sure that WWD, WEDNESDAY, NOVEMBER 12, 2008 5

WWD.COM

One of the great things“ America has is entrepreneurship…. We are going to come up with new businesses, new formats that will bring this economy back again.”

everybody understands that strategy. And then we com- With the dismal economy and inventory manage- but in the world. Unfortunately, we haven’t got leader- municate about how we are doing — all the time. We ment skills being tested like never before, Questrom ship that will really talk to the people and try to calm walk down the mall to all of the stores and talk about recounted what one retailer conveyed just the night them down. how does their strategy compare to ours, and why before his summit presentation. The retailer said that “When you have panic in the streets, it’s important would you want to shop at our store versus theirs. If planned receipts would be adjusted 4 or 5 percent, that you fl oor that, and the government is the only one you can’t say the reasons, then they are not going to leading Questrom to think, “Are we are kidding our- who can do that. I am very much against government shop at your store. selves here? It’s going to be a lot worse than 5 percent. involvement but I do not think individuals can solve “It’s really not micromanaging because once you mi- You have got to [realize] if you project 10 percent down the problem by themselves. This is when governments cromanage, you are saying I don’t believe in you. So I and it ends up being 5 percent, it’s money in the bank. have to come together and develop packages that sta- think you have to have a lot of people around you who I have never seen anybody go out of business because bilize the economy and more than the economy, stabi- you can believe in, and they can feel that. You can chal- they didn’t have enough inventory. I have seen a lot of lize the panic.” lenge them. You can pick on them for things that they’re them go out of business because they had too much. I The U.S. will not be the world’s growth leader in doing. It’s ‘why are we not doing that,’ but not how to do would rather grow a little slower during this period of the next 10 to 20 years, Questrom said. “Reserve that it. It’s not something you can read in a management time until I know how thick the ice was. status to China, India and South America,” he said. book. These are things you have to develop yourself. “What we experienced since the Reagan era is a However, “I believe one of the great things America Again, it’s a people business. You have to realize that.” real euphoric economy. That’s over….I am hoping has is entrepreneurship. We have some very, very Questrom’s mantra is providing value to the cus- that [I’m] wrong and that we fi nd out it’s going to get smart people that live here from all over the world…. tomer. “I don’t mean a sale price. I mean great value better in the next year. It’s not going to get better for We will come up with new ideas. We are going to on whether you are a brand, a status brand or a middle Christmas. You will do more business in Christmas come up with new businesses, new formats that will market brand. I think we have gotten [away] from that than you did in July and August, but I don’t think it bring this economy back again. We will go through a over the last 20 years.” will be anywhere near what you had last year. If one is very diffi cult time. It could be two, three years, let’s It’s no easy feat fi nding the value equation. It re- smart, plan for the worst and restructure the company hope it’s not going to be more than that. It could be quires working with less margin, Questrom said, and that way and if it doesn’t happen and it gets better, you 10, but there will be new industries and new ideas, “fi guring out how to get your expense structures down will probably be better off for it. maybe even new specialty stores that will revive this totally different from the way you have thought about “The people who have traditionally bought upscale economy. This is a country that is 200 years old. We in the last 20 years.” Questrom cited Wal-Mart for product, they are not going to trade down, but they are have a $14 trillion economy. Put it into perspective to being a powerful company that provides compelling going to buy less. Status is going to get hit.” As for the China, which is 2,000 years old. It’s one-ninth the size value, as well as J. Crew’s Millard “Mickey” Drexler aspirational rung just below designer prices, “I don’t of the United States. So this is a country that you can’t for creating and transforming businesses, and Limited think we are going to see the end of aspirational mer- give up on. This is a great country. Hopefully, we have Brands’ Leslie Wexner as the master of recognizing op- chandise, but I think we are going to see the business the leadership in businesses that appreciate the great portunities. The Buckle, he added, maintains a unique get a lot softer,” Questrom said. strengths that we have and that we don’t focus only on position in the mall. “You have a panic going on, not only in this room the negatives.” 6 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II WWD.COM

WWD/DNR CEO SUMMIT Redefining the Vision Angela Ahrendts guides the iconic Burberry brand into tomorrow.

By Marc Karimzadeh ing-market age, we believe that the best brands are “Did we really owe it to the consumer to have it on pure,” she said. “The more pure the message, the dog collars and coffee cups and a lot of ancillary prod- WHEN ANGELA AHRENDTS BECAME BURBERRY more compelling it is to consumers. The more con- ucts?” she elaborated while taking questions. “We Group plc’s chief executive officer in 2006, she had sistently it is communicated across all mediums, the basically said that if we are a billion [British] pound some big shoes to fill. greater the brand equity created. Anything that did company, anything that couldn’t be a certain size over Her predecessor, Rose Marie Bravo, had revital- not fi t the brand vision would be left behind. This a certain time would just need to go away. We had a ized the once-dusty British outerwear brand and, in was a fundamental change for Burberry.” certain vision of who the customer was and who we tandem with creative director Christopher Bailey, One of her fi rst moves was to elevate Bailey’s role, were serving, and if it wasn’t something that was going turned it into one of the hottest names in fashion. In essentially making him the “brand tsar,” she said. to add signifi cant luxury value to their lives, it made the process, Bravo set a gold standard for a ceo, and “We shifted all design and product underneath the decision easy. We initially canceled about 35 prod- surely one that was daunting to follow. him, and we kept it simple and told the teams that uct categories that at one time carried the check.” Two years later, however, the Liz Claiborne and anything the consumer sees, Christopher and his Beyond the design, Ahrendts also set out to rein- Donna Karan International alum has proven she is team would control centrally,” Ahrendts said. vigorate the company culture, creating a fl exible, dy- up to the task. Since her arrival, Burberry has con- “Equally important, we set them free to create the namic, responsive and accountable environment. tinued to grow, expanding categories such as ac- new modern brand for Burberry, the freedom to “We openly shared the vision and strategy with the cessories and children’s wear, further tapping into achieve a more coherent, consistent and compelling entire organization — no secrets, full transparency,” emerging markets and breaking through the $1 bil- message that would touch all constituencies.” she explained. “Individuals could themselves see the lion barrier in the fi rst half of this year. Bailey set out to bring the British attitude that defi nes need for working in totally new ways. To further de- It took a clearly defi ned strategy by Ahrendts to Burberry to all categories that bear the label, honing in fi ne, engage and solidify our culture, we also set up pave the way for such successes. on the aristocrat-with-the-street-edge aesthetic across the Burberry Foundation. The aim of the foundation “The fi rst choice we made was to create and clar- the runway to weekday and weekend lifestyle divisions. is to empower young people to use their intellectual ify our vision for Burberry the brand, and Burberry “These large segments have been operating large- creativity, which will help them to imagine and now the company,” Ahrendts said. ly autonomously almost as separate businesses, often achieve their life goals.” Just 10 years ago, the 152-year old brand was competing against one another,” Ahrendts said. “In Other initiatives include roundtable discussions largely a licensed business, driven by distributors putting the brand fi rst, these segments were crated with senior employees in each region to hear their worldwide. The product focus was men’s trenchcoats, together, becoming distinct expressions of the same thoughts, issues and concerns twice a year, and an and industry veteran Bravo transformed Burberry brand rather than their own individual lines. By em- annual Icon award dinner that recognizes top em- into a global business, with half the company’s sales coming from freestanding stores and the other half from wholesale partners; licensing, and a diversifi ed business that’s equally divided among men’s wear, women’s wear and accessories. But that’s not to say Ahrendts wasn’t facing challenges when she joined. The luxury industry was trending upward, leaving Burberry in a more accessible positioning. Companies were aggressively going We said that Burberry’s “vision is to be a global, high-growth, modern classic, democratic luxury brand with a British sensibility. — Angela Ahrendts,” Burberry Group plc

after the handbag business, which was not one of the brand’s core competencies. And the iconic check, and versions of it, were fl ooding the market, creating the danger the pattern would lose its desirability. As a result, Ahrendts said that the industry growth was outpacing Burberry’s, and she had to act fast to minimize any potentially damaging impact. powering and trusting the creative director to ex- ployees. Ahrendts said that, as ceo, one of her most “While the business had been reassembled, it had press that brand vision, Burberry is much clearer in important jobs is to motivate, develop and retain the not been fully integrated,” Ahrendts recalled. “In the eyes of consumers and employees today, contrib- teams, and ensure they are challenged continuously some ways, we were a bit like a $2 billion start-up. uting greatly to the recent momentum and consistent with projects “that interest and inspire them.” This allowed many versions of the Burberry brand results these past two years.” “Through it all, I constantly recall the advice of and company. [Two years ago] the brand lacked clar- In the process, Ahrendts made outerwear and the my father, and one of his favorite quotes,” she added. ity and unity. We were not truly focused on our great- check — two defi ning factors of the Burberry DNA — “‘Hear everything, overlook a great deal and correct est asset. We were merchandising rather than design- key areas of focus for the brand. a little.’ The point is that you have to give entrepre- driven and concentrating on the front of the business, “As our heritage [the outerwear] needs to wow, neurial executives plenty of room to operate within versus being operationally oriented.” and exceed every consumer’s expectation,” she said. the context of the big business drivers.” It’s something Ahrendts knew a thing or two about. “It simply must be the best thing that we do, so we Asked how she would position the outlet business, Before Burberry, she was executive vice president of made this a key priority throughout the company. Ahrendts said, “In these economic times, you thank Liz Claiborne Inc., where she is credited with bringing Christopher enhanced the outerwear presence on the yourself that you have an outlet business, and we have in the Lucky Jeans and Juicy Couture deals. Prior to runway, both in terms of quantity and design. a very solid business around the world. We have a very that, she was executive vice president of Henri Bendel, “In sourcing, we dedicated a team exclusively simple motto that for every 10 mainline stores, it’s ap- and before that, president of Donna Karan Collection. to outerwear. Marketing and in-store visual teams propriate to open up one to two [outlet] stores to be a Within three months of her arrival, she had a clear brought a new intensity and excitement to the cat- natural service center for the excess inventory in main- vision for Burberry. “We said that Burberry’s vision is egory [and] the store,” she added. line [stores]. It’s been interesting to watch the traffi c to be a global, high-growth, modern classic, democrat- Bailey has also been reengineering the check. “I fl ow these last three to four months. The consumer still ic luxury brand with a British sensibility,” she said. tell the teams we have the honor as well as the chal- wants to buy, but I think he and she just want to say “‘Global’ reminds us of how broad we need to play; lenge of working with this iconic check,” she said. they maybe got a better deal on it. [Outlets] are not part ‘high growth’ means double-digit gains annually; ‘mod- “Upon my arrival two-and-a-half years ago, it was of the overarching strategy but I will say it’s a safer way ern’ in that we had to let go of many old legacy prod- in some ways, I think, very overexposed, but it was to clear through our own inventory in a way that we can ucts; ‘democratic luxury’ defi ned our approach and also underappreciated and therefore undervalued. control it, more so than going through a third party.” positioning in the luxury arena. ‘British’ was the key But it was also the highest volume, most recognized Through it all, Ahrendts is hopeful that the weath- differentiating attribute we wanted to leverage with a brand icon we had. Everybody had an opinion about er continues to be as it was on the day of her presen- new energy and attitude, and ‘brand’ the new way we it, but we needed a pure laser vision to authenticate, tation — dull and rainy. wanted to focus, unite and drive the business.” elevate and further innovate this icon.” “We call this Burberry weather, whenever it rains To do that, she sought to create a unifi ed message It also meant eliminating the check from catego- around the world,” she said. “For those of you who across all sectors of the company. ries where it served little or no purpose to the image forgot their coats, there is a lovely little store up on “As a purist in this cluttered Internet and emerg- or the bottom line of the business. 57th Street.” ;854BCH;450<8;H

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A Condé Nast Publication t 4 Times Square, New York, NY 10036-6561 8 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II

WWD/DNR CEO SUMMIT An Emotional Pitch Alber Elbaz discusses the creative process and fashion in the modern world.

By Marc Karimzadeh a bridal fi rm, landed at Geoffrey Beene, working as his senior assistant for seven years. In 1996, Elbaz moved to Paris to become head designer for Guy Laroche, EMOTION — IT’S A KEY WORD FOR ALBER ELBAZ, AND ONE TO WHICH where he quickly caught the attention of the fashion press and of Pierre Bergé the designer refers when describing his aesthetic and the secret of his success at and Yves Saint Laurent, who tapped him to take over the design for Rive Gauche. Lanvin, where he is the creative director. The notion also comes up frequently in Though hailed by the fashion community, he was ousted after Gucci Group acquired his career, from his roller-coaster creative process before each collection to the the brand and installed Tom Ford in the top job. kinds of dresses he designs. In 2001, after a stint at Krizia, he returned to Paris and Lanvin, which L’Oréal At Lanvin, Elbaz did not just resurrect a sleeping beauty and transform it into had just sold to a new holding company known as Harmonie SA, led by majority one of the most desirable fashion brands in Paris today, but with his designs, he has shareholder Shaw-Lan Wang. Lanvin came with a fabled history — milliner Jeanne helped up the allure of French fashion overall. Lanvin founded the house in Paris in 1890 — but over the years, it had become a During his keynote address, Elbaz showed many facets, both personally and pro- sleeping beauty, with limited distribution in the U.S. beyond fragrance, eyewear fessionally. He offered his view of fashion, its global nature and the importance of and neckties, and main markets in Europe, the Far East and the Mideast. team collaboration, and at times became fi ercely critical of the industry. Elbaz quickly managed to turn around Lanvin’s fortunes with beautiful, romantic Setting the tone for the evening, Elbaz recalled attending a luxury conference collections that updated the notion of French chic, and, with a few other Paris con- in Asia several years ago. With most of his speech written, he was still struggling to temporaries, gave the City of Light a renewed allure after years of Italians dominat- fi nd the perfect introduction. ing fashion palates. “I remember sitting in that little restaurant in the hotel trying to think about The designer likened his work at Lanvin to a French recipe. “It’s like wonder- an opening, and I remember asking for some dim sum, and I asked for red spicy ful food, but with too much butter,” he said. “I cut the butter from the recipe, and sauce,” Elbaz said. “The waitress told me, ‘We have ketchup now.’” what I am trying to do with the clothes is taking all the know-how, the tradition, the The notion scared him, even if he loves ketchup. “It was about globalization,” he secret of French couture but trying to update it. said. “It was about losing identity. It was about going forward and forgetting, maybe, “The biggest question is, what is modernity to us?” he added. “I have only one the past. How much of our identity do we have to lose when we have to go forward? defi nition of modern — emotional. Today I want to have an emotional dinner. I I understand we are in a world of business and it’s all about globalization, but for don’t want to speak about the weather. I know what it’s going to be like for the me, the world is also universal. Men and women, black and white, blonde and bru- next 10 days. We have the Internet. I don’t want to go to a movie and see people nette, are all alike. jumping. For that I have the Olympics. I want to cry and I want to laugh, but I “Since I worked here and am now living in Paris, I was asked many times, ‘Is don’t just want to see people jumping. With clothes, it’s the same thing. I think it’s there any difference between French and American women?’ he added. “I said, all about emotion.” ‘Yes, lipstick.’ [In France] it’s Chanel, [in the U.S.] it may be Estée Lauder, but its Sculpting his summit speech, Elbaz also received a different kind of advice. “My always red. Every woman loves lipstick.” boyfriend told me, ‘Alber, don’t be very nervous, because you are not a ceo, so you Elbaz knows the global marketplace. Born in Morocco and raised and educated don’t have to sound smart,’” he said. “I thought that this may be the biggest problem in Israel, the designer moved to New York in the mid-Eighties, and, after a stint at of our industry, that we don’t have to sound smart. Times like today, when every WWD, WEDNESDAY, NOVEMBER 12, 2008 9

WWD.COM

other night we are listening to CNN and Fox News and see the market is crashing Fox News and I hear all these disasters around the world in 30 minutes, and it feels and another bank is out of business and mortgages are diffi cult to get and people so wonderful being in Paris, and that’s when everything starts.” are losing their jobs, the biggest question I ask myself is, what does it make us de- By the end of his stay, he typically has some 300 sketches, each representing signers do or think or go for, and what does it mean for the luxury business, and is a different type of woman. “It’s taking those 300 women in a bag to the offi ce and fashion important for a time like today?” starting the work,” he said. “Those nights that I am at the hotel, most of the time I Throughout his career, he has asked the question several times, especially after am feeling sick,” he added. “I am having temperatures, my nose runs and it’s almost he was ousted at Saint Laurent. At the time, he contemplated leaving fashion and like I am fainting.” becoming a doctor, because, he admitted, he loved hospitals, loved the food there Elbaz stressed that his work is about evolution, not revolution. and loved nurses. Then, one night, Elbaz came across an Israeli article about a “Revolution scares me, because revolution is all about destroying the past in mother whose son had lost both his legs in a terror attack, and who left her husband order to go forward,” he said. “I don’t believe in destroying, I believe in building. I and four other children to move into a little room next to the hospital to devote her don’t believe in monologue. I believe in dialogue.” life to her recovering son. How does a bona fi de designer like Elbaz source his ideas? Happenstance. “When I was reading the article I thought again, is fashion important?” he said. “One night I was having dinner with a friend of mine in a restaurant in Paris,” “My conclusion today is that fashion is very important, today maybe more than ever, he recalled. “He was talking to me about the Bolsheviks in Russia. He told me, ‘You because we fashion designers maybe have a role. We have the duty to bring beauty know, Alber, when the Bolsheviks went to the palaces in Russia, they were trying to to the world, to make women feel better, to make women feel good, to uplift them. kill all the royal family — the men collapsed immediately, but the women survived.’ Today, I was at Barneys for a couple of hours — we had a trunk show. There was this I was really surprised. They said they took all their jewelry, all their diamonds and woman I was helping, and she told me at the end of this little rendezvous we had, ‘I their pearls and they had sewn them into their corsets. I thought, how beautiful. So am going to be broke, but I am happy.’ I think this is the whole idea of what fashion jewelry didn’t really serve as a decoration, but in a way as protection. I did a jew- is going to do today, and I am saying that, when everything is crashing, maybe it’s elry collection when I took jewelry and stitched fabrics, and I created jewelry and not a bad idea to invest in a good dress.” fabrics as one piece.” His idea of fashion is far more democrat- Teamwork is key to the creative process, ic than one would assume — and he some- particularly when it comes to the collaboration times even thinks about “Wheel of Fortune” with the so-called suits in a fashion house. contestants. “I know the worst enemy of many design- “People who know me know how much I ers is the ceo,” Elbaz said. “I think that, in a love television,” he said. “I used to absolutely way, the most frustrating ceo will tell me that love ‘Wheel of Fortune’ when I was here in we cannot control the designer. I didn’t think America. I used to run home at 7:30 and used it’s about controlling the designers, and it’s not to tell everybody that I had a class. Watching about enemies, because we are not in a war. ‘Wheel of Fortune,’ I discovered America. It’s peace. I believe it’s all about collaboration. Most of the time, we fashion people live in a It’s all about dialogue. And this is what this in- bubble and think this is what life is all about. dustry is looking for. And all of a sudden, you meet a teacher from “I am in many business meetings, and by the Omaha and a policeman from Idaho and a color of the ties, I know if the people have good mother from Brooklyn. You realize there is news or bad news,” he added. “Light blue and another part to America that we sometimes light green are always amazing news. If it’s red, lose, because we are not introduced to it and be careful. If they come with a black tie, you’re also because we don’t have the time to be part out. These are exactly those kinds of formulas of it. But these are the people that we fashion that I think it’s time to change. designers are working for and these are the “Every time I meet today with business women we are dressing.” people, I see them looking down. I am always Elbaz also noted his disdain for other parts afraid that they are sad or maybe stressed of the fashion industry. These days, in Paris, he with everything that is happening with the tends to rush home to watch “Project Runway.” economy. I realize it’s not that. I realize that “Heidi Klum has a line, ‘In fashion, one day there is a BlackBerry and instead of looking you’re in and then the next day you are out,’” he straight they are looking down. And I am tell- said. “Every time I hear that, I am dying. I am ing all you ceo’s: Look up. Look into my eyes. asking myself, how indecisive is our industry? Let’s work together.” How unloyal can we be? How come today some- Asked what parts of the fashion system he one is being loved by everyone and the day after deemed particularly broken, Elbaz pointed is not? What is it that we do wrong in between? to the vast number of collections resulting in “People will tell me, ‘You are a genius… lengthy buying cycles. now,’ and ‘I really like what you do…now,’” he “Some of the buyers I know start to buy at continued. “I always say to everybody, ‘I am not the end of March, and in July they didn’t see Miss America. I am not the girl of the moment. all the pre-collections,” he said. “I think there I worked from a very young age. I was an as- is a problem right there. Those buyers don’t sistant and thought I would be an assistant for- have the time to go down to the fl oor. They ever. I thought I would die an assistant because don’t have the time to digest. They don’t have it took forever for me to get a job.’ We have this the time to see, and to actually go and speak to fear and anxiety from the future. But this is the the sales people.” story of our life because every collection ends Like many of his contemporaries, Elbaz is and then we have a new future, that we have to also puzzled by the delivery cycle and the rush think and to bring birth to. That fear is the one to get merchandise into stores earlier. thing that actually makes me not want to stay in “Why is it we sell a fur coat in June and a fashion for many years because I know I cannot bathing suit in January?” he said. “I don’t un- take it, because it is very heavy to carry.” derstand that. This is something that is part of He likened the pressure to running a mara- the system, I know, but I would like to go and thon, except, he pointed out, one where you buy a fur coat in January, when it’s really cold, don’t lose calories. “It’s those runners that run The biggest question I ask myself is…is and then I will not buy it on sale. I am looking and run and run, and everybody around gets “ for a bathing suit in May, in June and in July. tired and goes on vacation, but you have to keep fashion important for a time like today? Why is it so diffi cult to fi nd by that time, and going,” Elbaz said. — Alber Elbaz, ”Lanvin why is it on sale? There is some disability in Despite all the stress, Lanvin owner Wong’s my brain to understand it.” explanation of his role continuously inspires Asked if he thought there was a different him not to give up. “She said, ‘You kind of look and maybe work mostly like some- paradigm for luxury shoppers, he shrugged, but said business has to be done one that is working in agriculture. You plant a seed, you take care of them, you differently, and fashion, he added, should take more cues from other fi elds of water them, you protect them until those seeds become trees.’ And I thought this innovation. was one of the most beautiful things she told me. Because most of the time, she tells “In computers, in cars, everybody talks about smart design,” he said. “It’s kind me, ‘I love you,’ she brings me peanuts from China and here, she kind of framed, of user friendly, and it’s kind of wonderful and very high tech. When it comes to a little bit, my work, as being someone who plants a seed and makes sure that the fashion, we are still stuck in two words: sexy and glamour. And I ask whether sexy trees will be green and healthy and big.” can be smart. Can we introduce smart design to fashion? I know there is nothing During his presentation, Elbaz also gave the audience a glimpse into his life as intellectual about a red dress, just like there is nothing intellectual about roasted a designer. During the early stages of creating a collection, he often only sleeps an chicken, but can we make it differently? Can we make it so women can wear it hour a night. more than one time? Can we do maybe clothes that you can wear both ways? Can “Your body works on pure adrenaline, because you have to start a collection and we maybe make clothes that crease less? Can we make clothes that you can wear in you have to come up with ideas,” Elbaz said. “And you don’t know what it is that winter and summer?” you’re going to do, and you don’t know what it is that you’re going to tell. And it’s One of his most recent solutions was to create an off-the-rack bridal collection very scary, those nights. Then I wake up, it’s three in the morning, I go to my kitch- retailing from about $800 to $3,000, “so you don’t have to order them and by the time en, I make a triple espresso and I go to my workroom and I start working. There is you receive them you are divorced.” And whether it’s bridal or not, he always tries nothing more scary than just a blank page.” to instill that sense of emotion into his clothes. Once he has done his research and refi ned his ideas, Elbaz checks into the Hôtel “I was working here with Geoffrey Beene when I came to America,” he recalled. de Crillon for several nights, which he doesn’t leave until the collection is done. “I didn’t speak English very well. I remember one day I told Mr. Beene in a fi tting, “When I do sketch, I try to sketch with music,” he added. “When I put on classic ‘Mr. Beene, that dress is so commercial.’ Mr. Beene turned orange, and told me, music, it always goes into pink and fl owers, and when I go with metal, it ends up ‘Alber, don’t ever use the word commercial. Say desirable.’ This is the time that I being leather and black. I decided to just shut off the music and I put on CNN or knew I was introduced to the world of desire.” 10 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II

WWD/DNR CEO SUMMIT Risky Business Glen Senk asserts there’s no ‘playing it safe’ at Urban Outﬁ tters.

By Sharon Edelson person. It’s about the group.” is thirtysomething shoppers who lean more toward Some of the company’s most important employees young contemporary than misses’. Anthropologie is a IN PERIODS OF ECONOMIC UNCERTAINTY, MANY are the sales associates who interact with the custom- known quantity in Europe, Senk said. chief executive offi cers cleave to convention, seeking ers, providing feedback to headquarters about what “The world is a much smaller place today than 10 to avoid risk and rely on the tried and true. women love and what they aren’t responding to. years ago, when Urban fi rst opened,” he said. “We For Glen Senk, ceo of the $2 billion Urban Outfi tters The company’s success has been its ability to create started shipping internationally at the end of last year Inc., that constitutes a recipe for disaster. unique shopping experiences for the fl agship Urban and we’re doing well. We have a lot of European traffi c “Creativity is the foundation of our company,” Senk Outfi tters, Anthropologie and Free People. There’s in our American stores. The English as a culture are a said. “Playing it safe is probably the most unsafe thing also Terrain, the newest retail concept, a high-end very curious people. They read a lot and want to know you can do. Change and change alone is the only thing garden center. Senk explained that Terrain grew out what’s new.” that’s eternal. I live in a continual state of terror that of founder Richard Hayne’s frustration with shop- Senk hopes to eventually cross-pollinate the other shoe’s about to drop. In order to be a good ping for plants and garden supplies at Home Depot Anthropologie’s U.S. and European teams. “The merchant and run a retail business, you have to live and local mom-and-pop shops. The company’s other word ‘anthropology’ means the study of people and like that. There is no sense of discovery when you’re comfortable. It’s often the things that we fear in organizations that are the primary sources of creativity.” Senk sees continued demand for Urban Outfi tters, Anthropologie and Free People, despite the economic Nothing is more boring than crisis, even though consumers are shopping selective- ly. “Women shop to feel good,” he said. “They shop to last“ year’s bestseller. look beautiful.” Anthropologie’s success comes from its ability to en- — Glen Senk, Urban ”Outfi tters Inc. tice shoppers of a broad age range. With a sweet spot in the 25- to 40-year-old demographic, the business ca- ters to a wealthier customer, who is slightly more im- mune to economic downturns. A former Bloomingdale’s executive, Senk joined Anthropologie in 1994 when it was a single store in Wayne, Pa., with sales of less than $2 million. Senk spoke of his time at Bloomingdale’s under the tute- lage of former chairman Marvin Traub as a time of creativity and personal growth. He recalled the elabo- rate events staged by the retailer, comparing them to Broadway openings. He was appointed ceo of Urban Outfi tters Inc. in May 2007. Urban has delivered strong results this year. Sales for the third quarter ended Oct. 31 rose 26 percent to $478 million, from $379 million in the same period last year, and same-store sales advanced 10 percent. Earnings shot up 79 percent and same-store sales rose 13 percent in the second quarter ended July 31. Urban’s earnings jumped 45 percent and same-store sales increased 10 percent in the fi rst quarter ended April 30. The company operates 140 Urban Outfi tters stores, 118 Anthropologie units and 27 Free People locations. Retail analysts have said the company could eventually have 750 stores in the U.S. With less than 400 units for the three concepts, Urban still has a long way to go. Six months ago, Senk said he couldn’t have imag- ined the current state of the economy. But there were rumblings of trouble in the retailing industry long be- brands were born in the same organic way. Urban cultures, so being international really plays into fore the downturn. “We were already in the midst of Outfi tters was founded by Hayne when he was still what Anthropologie is about,” he said. our own crisis before this economic upheaval began,” in college. His wife, Meg, developed Free People and Richly layered and nuanced brands are the goal he said. “A crisis of too much retail development, too Senk said evidence of his own hand can be found all at Urban. many stores, too little differentiation and not enough over Anthropologie. “Don’t get me wrong, we use a lot of analytics in our talent. I have concerns about malls and lifestyle cen- “It’s critical to avoid a dogmatic view,” Senk said. company, but we are not ruled by them,” he said. “I’d ters. There are some very sick patients out there.” “We tend to see things through the industry’s eyes and even go so far as to say we believe complexity enriches Urban is experimenting with new concepts such that’s bad. You need to see things through your cus- our business and effi ciency detracts from it. Customers as its own mini-mall, Space 1520, a 26,000-square-foot tomers’ eyes. Of course, we compete with Nordstrom appreciate complexity. Who wants to have the same building in West Hollywood. Space 1520 may bear some and Banana Republic on a garment-for-garment basis, monotone experience that nine gazillion other people similarities to The Lab, in Costa Mesa, Calif., which but that’s not who we’re [really] competing with. We’re have. We all want to be treated as individuals, and in bills itself as the antimall with its collection of trendy competing with the restaurants, with travel destina- order to accomplish that, you have to have complexity shops, eateries and art galleries. At Space 1520, Urban tions, with spas and hotels. Those are our customers’ in an organization.” Outfi tters will occupy 11,000 square feet and act as the reference points. You have to get out of your comfort Senk said he’s been tempted at times to save money landlord to other retailers it selects. Food, entertain- zone and look at your business through your custom- by producing a garment more inexpensively or making ment, beauty and art are complementary businesses ers’ eyes. Creativity requires that you let go of uncer- a cheaper shopping bag, but when he considers the ef- being considered. “Space 1520 is very experiential and tainties and embrace calculated risks.” fect on customers, Senk always decides to keep things tied to culture, commerce and community,” Senk said. Senk cited Anthropologie’s new Leifsdottir col- as they are. Senk spoke about Urban Outfi tters’ employees as lection as a risk that has paid off. The ambitious “We talk about exceeding the customer’s expecta- if they are a breed apart. He sees hiring as part skill, collection is rife with interesting details. The com- tions,” he said. “That’s who we work for. When you’re part art and part science, and has a checklist of attri- pany developed more than 100 prints for the line really clear that the customer comes fi rst, every deci- butes that includes intelligence, sensitivity, empathy, and every garment has unique buttons and differ- sion is easy. In the 15 years that I’ve served this or- curiosity, creativity, passion and honesty. ent labels. Leifsdottir is sold at Bergdorf Goodman, ganization, I’ve never been asked to meet a goal for a Although Urban celebrates individual achievement, Bloomingdale’s, Neiman Marcus and Nordstrom, and quarter. We don’t spend a lot of time talking about fi - it values teamwork and the collaborative spirit even select items are available in Anthropologie stores. nancial results. It’s easy to fall into a trap of effi ciency more. “I want people who appreciate the strength in To encourage creativity, Senk teaches his staff “to of leverage. At Urban, this isn’t where we look to save others,” he said. “Our company has never been about fear last year’s best-selling product. Nothing is more money. If you focus on the customer, your profi ts will creating hero products, nor is it about the marquee boring than last year’s bestseller. You have to create come in spades. Our sales per square foot across all designer or the marquee merchant. It’s about putting security around failure.” three brands — Urban, Anthropologie and Free People the needs of the organization fi rst and committing to One of Senk’s recent initiatives has been building — exclusive of Terrain — was $800 [in 2008]. We get the belief that a collective and shared vision is supe- a team to launch Anthropologie in Europe. It will be productivity, and margins, by the way, when we take rior to an individual effort. It’s not about any single similar to its profi le in the U.S., where the sweet spot care of the customer.” WWD, WEDNESDAY, NOVEMBER 12, 2008 11

WWD.COM Forget the Politics Liz Claiborne’s William L. McComb says managing a turnaround starts with attitude.

By Whitney Beckett 40-plus brands up for sale. Unfortunately for McComb, our leaders. Tough thing, but by being absolutely crys- the restructuring has coincided with the macroeco- tal clear and honest and answering questions along the WILLIAM L. MCCOMB INADVERTENTLY TUMBLED nomic downturn, offsetting the potential positive im- way, you give the organization belief that what they are into being a “turnaround leader” at Liz Claiborne Inc. pact of major moves, such as hiring Isaac Mizrahi as hearing and what they can expect is real.” Two years after joining the apparel industry from creative director to relaunch the troubled fl agship Liz McComb has prided himself in that transparency, Johnson & Johnson, McComb addressed his peers not Claiborne brand. making himself readily available to the press and in- about the $4 billion vendor’s painful repositioning, but “When you’re turning around a company, you’re vestor community. “In the spirit of being authentic, be rather the industry’s need for servant leadership. forced at maybe a pace you would not have set alone vulnerable, admit your mistakes, apologize, concede “I was defi nitely thrust into an incredible turn- to rethink the priorities, the portfolio, to take a com- defeat,” he said. “When people see that, it buys per- around at Liz Claiborne, and while I could be the cir- pletely different look at the expenses of your company,” mission to operate and make risky tough decisions in cus freak here in the fashion industry by standing up McComb said. “In times of a turnaround, we are forced the way the invulnerable leader never gets.” and telling lots of stories about that turnaround, that’s to look at every element of the cost line and profi t pools. McComb rated his company’s adoption of the ser- not what I think I’ve been called here to do today,” said McComb. “I’m not going to postulate that you all are going to end up doing what I’m doing, standing in a position that can feel lonely at times, turning around a great company with great assets and great long-term potential, but as you brave into the waters ahead and think about what I’ve gone through turning around a company, you might fi nd some paral- lels.…The tools of a turnaround leader might apply to those of you who are running successful businesses that in and of themselves have been chugging along at a successful clip and appear- ing to be in great shape.” The University of Chicago MBA graduate said he wished he could increase the fashion industry’s familiar- ity with “servant leadership” and its axioms of authenticity, vulnerability and usefulness. “I’ve been very surprised that the concept of servant leadership is foreign to big chunks of this industry, given what should be an emotion- ally intelligent group of people,” said McComb. He built his experience as a turnaround leader — a term he said he doesn’t like — while at Johnson & Johnson, and is now honing it as he tries to reshape Liz Claiborne from a 46-brand portfolio based in the mainstream wholesale market to a company focused on its higher-potential direct-to-consumer brands. “I’ve found that what happens with companies that have a great, great record of success, like Liz Claiborne, one of the most admired companies historically in the industry, is that you get very proud,” said McComb. “Pride can make a company very political. Servant leadership is about depoliticizing your company, getting the ego Pride can make a company very political. Servant leadership is about and the politics out.” “ When McComb joined Claiborne depoliticizing your company, getting the ego and the politics out. two years ago, the company had en- ” joyed a decade of consistent growth, — William L. McComb, Liz Claiborne Inc. acquiring brands and positioning itself as a market leader with Paul Charron at the helm. But the tide turned almost as The one I know everyone in this room has to grapple vant leadership philosophy: “If the ceo sets a tone of soon as McComb arrived, and he spent his fi rst eight with is the cultural side, and it starts with the very dif- authenticity, vulnerability, and usefulness, you will be months on the job plotting a restructuring. fi cult task of actually creating a case for change.” shocked by how quickly an organization grafts to that “I know with us for Liz, I didn’t walk in the door Part of the change has involved eliminating a num- DNA.…On a scale of 1 to 10 [on servant leadership], with the mandate from the board to tear the place ber of senior executives, several of whom fi lled the we’ve doubled to a 4 from a 2, but we still have a ways apart,” said McComb. “That wasn’t the goal. This was a audience at the Oct. 28 summit, creating at times an to go.…I’m positive we’re going to get to an 8 or 9.” great company that had a great history. It was a signifi - awkward tension. But even business school lessons may not prove suf- cant earnings miss at the end of my fi rst quarter that “Our turnaround — which seems to be more legend- fi cient for these challenging economic times. put us on a path of an accelerated set of actions.” ary by the hour — is incredibly more complex than “These are times when our willingness and abil- On July 11, 2007, McComb hosted “Investor Day” what’s been reported: We went from a legitimate and ity to lead will be tested like never before,” McComb to present his plan of radical change, which included successful strategy based on centralization and centers said. “The playbooks of how to run our businesses breaking the company in two between direct and part- of excellence, to a strategy of a narrower portfolio built seem to be increasingly less relevant, and many who nered brands — where direct brands Juicy Couture, on brands,” McComb said. “It’s no secret that some of are running big companies are fi nding themselves in Lucky Brand, Mexx and Kate Spade were labeled as the most talented people in the industry have moved on such uncertain and revolutionary times when it’s re- having higher growth potential and thus given more to other positions as we’ve restructured, looking, frank- ally hard for some leaders to characterize what they funding and attention — putting 16 of the portfolio’s ly, for different competencies and skill sets in some of should be doing next.” 12 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II WWD.COM

WWD/DNR CEO SUMMIT Clear Channels Farah, Rubel, Bekenstein: Effective communication enhances the organization.

By Evan Clark Matthew Rubel, Roger Farah and Joshua Bekenstein. BOB DYLAN MIGHT HAVE WARNED AGAINST following leaders, but the iconoclastic troubadour wasn’t trying to navigate a fashion company though the worst economy in a generation. Leaders are important. And the success or failure of fashion companies might now rest more squarely on the shoulders of their top executives than ever before. A steady hand on the purse strings, a clear strategy and the ability to communicate successfully with directors, employees and suppliers makes all the difference in the world. Given volatility in stock markets and the shrink- ing economy, it was little surprise that making every penny count was a recurring theme in the panel discussion on leadership, moderated by Susan Hart, co- leader of Spencer Stuart’s global retail, apparel and luxury goods practice. “You can have all the ideas in the world you want, but if you don’t have the balance sheet or the cash fl ow to reinvest, you really can’t go anywhere,” Roger Farah, president and chief operating offi cer of Polo Ralph Lauren Corp., said. In addition to penny-pinching tips, Farah and Matthew Rubel, chairman and chief executive offi cer at footwear fi rm Collective Brands Inc., each offered glimpses of their own management philosophy and described how they helped reinvent their respective took over the Lauren by Ralph Lauren women’s better Rubel set out to understand who Payless’ custom- companies. And Joshua Bekenstein, managing direc- sportswear license from Jones Apparel Group Inc. er was and what the company was really good at and tor at Bain Capital, offered up the private equity view Beginning in June 2003, the company put together then focus the fi rm’s energies. on how to spot leadership stars. a staff of 180 that had enough hustle to bring the line Payless had 4,000 U.S. stores, some international Both Farah and Rubel stressed the importance of to market in three months and deliver to stores in an- growth opportunities and cash fl ow. Rubel evaluated being able to effectively articulate ideas and goals in other three months. the company, kept in close contact with his board to steering large companies with thousands of employees. In addition to boosting wholesale sales by $500 avoid any surprises and ultimately decided the com- “One of the hallmarks of great leadership is com- million, the dramatic Lauren move was a confi - pany should continue to expand beyond the U.S. and munication and the ability to make complicated dence builder. do it with brands. subjects easy to understand depending on the audi- “When we did that, our company developed a certain “We didn’t want to go after being a reseller in the ence,” Farah said. sense of pride that we could do almost anything, because United States of other people’s goods,” he said. “We Employees, directors, bondholders and other peo- most people were betting against us,” Farah said. wanted to capture full margin, take the competencies ple involved in the business each need to be spoken Now the company is using its balance sheet and con- of footwear and build it out into a global footprint.” to in their own language. fi dence to diversify further through the massive launch With that end in mind, the fi rm moved quickly last “Your ability to adjust the level of detail and com- this year of 50 merchandise categories of American year and snatched up Stride Rite, which includes plexity for the audience is critical,” Farah said. “At Living in J.C. Penney Co. Inc., via the new Polo sub- the Stride Rite, Keds, Saucony, Sperry and Robeez sidiary Global Brand Concepts, and brands, for $800 million, and Collective Licensing aspirations of continuing global ex- International for $91 million. One of the hallmarks of great leadership pansion. Payless was then renamed Collective Brands, American Living had the misfor- which now operates in 81 countries and does 16 per- “is communication and the ability to make tune of launching into one of the cent of its business internationally. toughest consumer economies in Stalwart leadership need not only show itself via complicated subjects easy to understand. years, but both Penney’s and Polo dramatic corporate reinvention, however. are standing behind the brand. For Bekenstein, spotting corner offi ce talent is — Roger Farah, Polo Ralph Lauren Corp.” Farah’s hope is to one day see a matter of serious consideration. Bain has more Polo’s business divided evenly be- than $80 billion in assets under management and tween the U.S., Europe and Asia. Bekenstein serves as a director at Toys ‘R’ Us and the board level, it’s particularly important in today’s But that doesn’t mean it will be easy. Burlington Coat Factory, among other companies. world because you may only see your board offi cially “The customer has accepted the product,” Farah When a ceo is truly setting the direction at a four to six times a year.” said. “We just have to fi gure out how to market and company, everybody knows what they’re doing, If the success of Polo is any guide, Farah can both message ourselves, and we have to fi gure out how Bekenstein said. talk the talk and walk the walk. to build up the infrastructure and supply chain to It sounds simple, but can be a key difference in But that’s not to say it was easy. manufacture in 45 countries and deliver to 42 other an organization. Farah helped transform Polo from primarily a countries within a one-week window.” The quality of other executives at a company can men’s wear manufacturer to a vendor-retailer hybrid Polo’s development over the last eight years is a also refl ect back on their leader. that sells everything from women’s wear and kids case study on how management decisions can build “If you interview the second layer of man- fashions to accessories. up certain strengths and lead to opportunities down agement, you’ll find out how good the ceo is,” The job took a to-do list of about 100 items and the line. Had Farah and ceo Ralph Lauren taken Bekenstein said. “Great ceo’s typically have great Farah said he simply worked his way down the list other paths, turning Polo in to a portfolio company à la people who work for them.” taking three or four on at once. Jones or Liz Claiborne Inc., for instance, the company Ceo’s of retailers need to have a particularly even- One of the fi rst items was the business’ fi nancial could be in a radically different place right now. handed approach. Retail ceo’s have to be closer to underpinning, which in 2000 had a lot of debt and When Rubel became ceo of Payless ShoeSource the business and spend time in their stores, while little free cash fl ow. in 2005, he faced a very different management chal- still being able to delegate, Bekenstein said. To focus on fi scal effi ciency, Farah zeroed in on lenge from Farah’s. Although not on the panel, Saks Inc. chairman and the cash-to-cash cycle — how long it took the money Payless’ strategy had been developed by consul- chief executive offi cer Stephen I. Sadove couldn’t Polo invested in the products to come back to the tants and didn’t refl ect the thoughts and experience help but to jump into the fray and asked during the company in the form of cash from the customer. of the employees carrying through the effort. Q&A session, “How do you plan for ’09?” “Nine years later, we’ve cut the cash-to-cash Employees didn’t have confi dence in the business Given the shifting market, that’s just the kind of cycle in half,” Farah said. “Our free cash fl ow has model. “Reinvestment in the company was $1 billion impossible questions ceo’s are forced to ask, even if become enormous.” in share buybacks and yet they had 15-year-old carpet answers are not so forthcoming. In turn, that cash fl ow was used to fund reinvest- in 30 percent of the stores,” Rubel said. “Long-term planning in times like these, it really ment into Polo’s operations. “We have not borrowed “It was a very male-oriented company,” he contin- takes a back seat to short-term contingency plan- one penny,” Farah said. ued. “Their version of communicating to one another ning,” Bekenstein said. “How can we do things that A solid fi nancial base is especially important when was dropping a memo on somebody’s desk or sending are not going to effect the customer…yet be ready for taking on new challenges and came in handy when Polo an e-mail — no cross-functional team work.” what could be a really rough time.”

14 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II

WWD/DNR CEO SUMMIT Family Matters With advice and help from her father, husband and son, Josie Natori keeps her lifestyle brand focused.

By Karyn Monget peasant-inspired blouses embroidered in her native Philippines with handmade appliqués, and went cold calling at Bloomingdale’s, where she landed her fi rst sale JOSIE NATORI, CHIEF EXECUTIVE OFFICER OF NATORI CO. INC., HAS HER with the late Lee Fabris, who later became the fl agship’s fashion director. Her cre- own approach to keeping her 31-year-old lingerie company viable during tough ative tops were also an instant hit with other top merchants, including Sally Frame times: Stay focused on creativity and innovative product, be ready to adapt 24/7 and Kasaks, who was at Saks Fifth Avenue and is now chief executive offi cer of Pacifi c keep the faith. Sunwear of California Inc. “Designing for an innerwear company, there’s an opportunity there right now,” “At Bloomingdale’s, a blouse buyer asked me if I could turn the blouses into Natori said. “You have to make the most of it, and you just have to believe that God nightshirts,” Natori recalled. “I didn’t even know what a nightshirt was. I entered is on your side. This [diffi cult economic] time gives brands an opportunity to evalu- the category through the back door. Both Saks Fifth Avenue and Neiman Marcus ate what’s working, what’s not, and turn the brands on their ear, inside out. If we do bought my fi rst collection. The fi rst season I discovered I was in a category that that, we can survive.” got very little attention. Then, Saks bought a In her presentation, “Envisioning Success full-page ad in The New York Times. But it From the Inside Out,” Natori described how she was the fi rst and last ad I ever got for free. I cofounded her $80 million company in 1977 with remember asking, ‘What is markdown money?’ her husband, Ken Natori, a former managing di- And then came the answer: ‘Honey, you don’t rector of Shearson Lehman. He joined his wife want to know.’” as a business partner in 1985 and oversees the Since then, Natori has pushed, nudged, cam- company’s fi nance, licensing and partnerships. paigned and charmed her way into American Despite the economic squeeze, the company proj- boudoirs, and has received the largesse of ects sales increases of 30 to 40 percent by 2012. major merchants, including four top retailers The couple’s only child, Kenneth Cruz who were sitting at her table on Oct. 28: Burt Natori, 32, joined the family business in April Tansky, Neiman Marcus Group chairman and 2007 as vice president of fi nance, and among ceo; Stephen I. Sadove, chairman and ceo of other responsibilities, created and launched Saks Inc.; Saks Inc.’s president and chief mar- the natori.com e-commerce site last May. He keting offi cer, Ron Frasch, and Lord & Taylor’s was previously an associate in international new ceo, Brendan Hoffman. equities at Lehman Brothers. Addressing her innerwear-outerwear credo, “Our son, Kenneth, had the brilliant idea to Natori said: “Our retail partners have been leave Lehman Bros. last year,” Josie Natori said. invaluable, and as we grew, I kept pushing “We don’t even have an exit strategy. There’s no the envelope. My bustiers were in lingerie de- end in sight , and that’s how I like it.” partments long before Madonna [during her Natori, who admits to wearing stilettos even Blonde Ambition tour in 1990] made bustiers in the snow, had a wealth of experience in the fashionable. By the mid-Eighties, I realized the fi nancial fi eld where she served as the fi rst importance of branding and headed to Paris, woman vice president at Merrill Lynch & Co. where there is the most beautiful lingerie in Despite her success as an investment banker, the world, and opened a Natori boutique on she said she wanted to branch out into an en- the Place Vendôme. I wanted retailers to see trepreneurial business, and even considered the world of Natori. It lost money for 12 years.” “a chain of car wash businesses or Big Mac The boutique closed in 1998. franchises as an option.” Refl ecting on the Nineties, Natori stated: “I “But I really didn’t want to go to Queens,” couldn’t do anything right. We used an evening- quipped Natori. “When I left Wall Street 31 wear aesthetic with embroideries, embellish- years ago to go into the rag trade, people told ments, prints and colors. We had no such thing me I was crazy, because I left a six-fi gure sal- as a basic. But nothing was right. I did eve- ary. But given what’s happened over the past ningwear at Bergdorf Goodman, private label two months on Wall Street, maybe I wasn’t too for Victoria’s Secret, fragrance at Avon. But crazy after all. It’s been rewarding to me in ‘Dynasty’ was out and minimalism was in. ways that have nothing to do with money. It was “But timing is everything and I was dis- about building a brand that lives beyond me. heartened,” continued Natori. “I think it was Back then, all there was were granny gowns or Burt Tansky who told me, ‘Josie, focus, focus… Frederick’s of Hollywood. The idea of lifestyle and today, our portfolio includes four [branded] brands did not exist at all.” collections: Josie Natori Collection, Josie, Cruz Natori added, “I got into the schmatta busi- and Josie Natori Couture, all with viewpoints ness with no business plan — I don’t even have and price points diverse enough for Bergdorf a lingerie fetish. But I love business, and when Goodman or Dillard’s. I’ve been careful all I got my foot in the door, I saw the potential along to not dilute the brand.” of Natori becoming a lifestyle brand. My fa- I got into the schmatta business with no The company has weathered the ups and ther [Felipe Francisco Cruz] would always say, “ downs of consolidations at retail and within the ‘Look at it as a tragedy or an opportunity.” business plan — I don’t even have a lingerie industry. Despite obstacles, whether a recession, Her resilience, tenacity and expertise a dismal retail climate, or changing trends and in closing a deal didn’t just come from Wall fetish. But I love business, and when I got consumer buying patterns, Natori has created Street, it was ingrained during her childhood. a winning formula that is refl ected in the com- “It’s in my blood. My father, who is 89 and my foot in the door, I saw the potential of pany’s name — Natori in Japanese means the works 18-hour days, is a self-made man. My highest form of art. In addition to the launch of grandmother [Josefa Almeda] was called the Natori becoming a lifestyle brand. Natori’s luxe Josie Natori Couture collection of supreme commander in chief, and my mother ” one-of-a-kind silk caftans and kimonos last year, [Angelita Almeda Cruz] is the commander in — Josie Natori, Natori Co. Inc. the house of Natori extended its reach as a life- chief. But I could not have done this without style brand with several ambitious initiatives: Ken. He left Wall Street and he prefers to stay in the background.” • A lifestyle-oriented line of home accessories licensed to JLA Home in 2006. Natori followed her father’s pragmatic advice, saying that, as a concert pianist • A licensing deal with Dana-co to produce a collection of bras and coordinat- [she performed a solo at Carnegie Hall in 1997 for an audience of 2,800], she ap- ing undies bearing the Josie name for spring 2008, a further extension of Natori’s proaches business in the same disciplined manner as playing a concerto. licensing pact with Dana-co to produce and merchandise bras by Natori and Josie “Thank God for the piano. On one level, there’s a discipline, patience and per- Natori. Dana-co also does the Natori Underneath seamless line of underwear. severance,” said Natori. “It’s a creative process. I play by ear. I even memorize my • The introduction in January of Natori’s fi rst full ready-to-wear collection pieces backwards, starting with the fi nish.” produced in-house, Natorious. Regarding how business is conducted at Natori Co., she said: “There’s no need • Natori’s fi rst book, ‘The Art of Natori” (Glitterati), in October. to have a board meeting. We have a board meeting in bed.” • The opening of the fi rst Josie Natori in-store shop at the Saks fl agship in June. Natori, whose closets are fi lled with couture pieces by Christian Dior, Jean Paul • The launch of Natori fragrance with licensor Parlux next year. Gaultier, Chanel and other top fashion names, said the cachet and allure of linge- • Two licenses bearing the Natori name next year: Towels with Loffex, and opti- rie seduced her into a new career, even though she said she was “clueless” about cal eyewear and sunglasses with Zyloware. intimate apparel. She started her family-owned company in her living room with a So, how does Natori feel about her accomplishments? “After countless years of couple of lingerie-looking blouses. being infl uenced by lifestyle brands such as Ralph Lauren and Armani, I dare to True to her take-charge, energetic manner, Natori developed a collection of dream that big. It’s how we evolve the brand and make some noise,” she said. WWD, WEDNESDAY, NOVEMBER 12, 2008 15

WWD.COM

Bonnie Michael Tor y Burt Stephen I. BrooksBrocks Gould Burch Tansky Sadove and Marvin Traub

On Tap

Execs talk economy 17B1=;;3@17/:A3@D713A at cocktail event.

THE ECONOMIC CRISIS, which tops the agendas of poli- ticians, business executives and consumers, dominated conver- sation at the cocktail party to kick off this year’s WWD/DNR Apparel CEO Summit. The summit’s theme, “Leadership + Vision” seemed particularly relevant because of worldwide ﬁ nancial turmoil, 4/A67=@=B31B7=< 230B @3AB@C1BC@7<5 7;>=@B3F>=@B477B/: this, are you merging?,” quipped &17B5`]c^7\Q17BbVS17BZ]U]O\R1O^WbOZ@SRSTW\SRO`S`SUWabS`SRaS`dWQS[O`Ya]T17B5`]c^7\Q Collective Brands’ Matthew Rubel. “Yes, we are,” joked Tansky.

Untitled-24 1 10/10/08 12:53:58 PM 16 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II

WWD/DNR CEO SUMMIT Go Your Own Way Bottega Veneta’s Patrizio di Marco urges companies to find their own voice.

By David Lipke women’s ready-to-wear, shoes, fashion jewelry, fi ne jewelry and more. “The clarity of the vision and its disciplined execution has paid off,” said di Marco, CALL PATRIZIO DI MARCO THE DESIGNATED OPTIMIST OF THE LUXURY noting that the Luxury Institute in New York has named Bottega Veneta the fi rst or goods world. second most prestigious brand in the U.S. for the past three years. “The brand that we In the face of the current banking and housing crises, weakening retail sales have now is the highest expression of timeless elegance and discreet luxury.” and ebbing consumer confi dence, the Bottega Veneta president and chief execu- With the benefi t of hindsight, di Marco’s strategy for Bottega Veneta seems tive offi cer has a confi dently sunny forecast for the Gucci Group-owned brand. hard to quibble with, but he pointed out that many of his decisions could have “I’m not concerned at all, honestly,” he said of the outlook for 2009, noting been risky when he made them. “To me, vision is fi rst and foremost the ability to Bottega Veneta has been healthy in the U.S. and growing in Japan, despite the see with absolute clarity where you want to go, and understand the values you can contracting luxury market there. count on to build or rebuild the soul of a brand,” he explained. “Vision is about Di Marco’s optimistic attitude is bolstered by the success he’s achieved over being brave and sticking to your long-term view. And go, if necessary, without ever the past seven years, during which he’s transformed the Bottega Veneta brand. compromising your integrity, against the prevailing trends in the market, no mat- That track record has earned him a new gig: president and ceo of Gucci Group’s ter how diffi cult the environment is.” crown jewel, Gucci, which di Marco will join on Jan. 1, succeeding Mark Lee, who For example, while Bottega Veneta chose to forgo logos and let its product speak is leaving the company. for itself, the prevailing trend in 2001 and years following was to have a logo. What’s Di Marco’s formula for success at Bottega Veneta? A clear vision for the brand, more, the brand emphasized limited edition, timeless products during an era when along with leadership that allowed his team to seamlessly execute that vision. Di competing brands were pushing “It” bags that went in and out of fashion in a single Marco emphasized the two themes of vision and leadership during his presen- season. Also, while the dominant trend was to offer heavily merchandised collec- tation, using Bottega Veneta’s turnaround as a case tions at different price points, Bottega Veneta instead study to highlight his points. offered collections of items that were unique. And “Broadly speaking, the challenges the luxury industry while the trend was toward industrial production, has experienced in the past year have been important Bottega Veneta focused on handmade pieces. All of lessons to everyone,” noted di Marco. “Companies are this, moreover, was done without heavy ad spending, learning that they can achieve improvements in every with di Marco instead relying on word of mouth and the fi eld. Thus, I believe that today, in general, the luxury growing network of stores to relay the brand message. industry is better prepared to deal with challenges than “Vision is also about having the right intuition and in the past. I do not want to be overconfi dent or bullish, understanding of how consumer behavior may change. but at Bottega we already had to face a great deal of chal- A great deal of Bottega’s success is based on under- lenges back in 2001. The future will be tough, but we be- standing the importance of individuality to our con- lieve that in the past seven years, we have laid down a sumers,” noted di Marco. “There is a growing sense strong foundation for brand growth and profi tability.” of individuality in consumers who are more confi dent Since 2001, Bottega Veneta sales have grown in their own taste and less reliant on the brand name. more than tenfold — from 35.2 million euros, or There is also the growing resistance to owning the $31.6 million, in the year Gucci Group acquired the same product as everyone else, as a reaction to luxury brand, to 366.1 million euros, or $499 million, in brands having become too accessible.” 2007. (Currency conversions are at average exchange This is true even in Japan, pointed out di Marco, rates; the growth multiple is higher in U.S. dollars explaining the stereotype of the logo-mad Japanese since the euro gained strength during this period.) betrays an ignorance of the market. “Yes, the logo has Perhaps even more impressive has been the growth played a fundamental role in the luxury industry in of earnings before interest and taxes — from 14 mil- Japan because — it may sound like a paradox — it was lion euros, or $12.6 million, and an operating margin something that could identify you as a unique person, of 9 percent in 2001 to 92 million euros, or $125.4 mil- but also something that could make you belong to a lion, and an operating margin of 25 percent in 2007. group. That was fundamentally behind the huge suc- In February 2001, Gucci Group acquired Bottega cess of Vuitton and Gucci and Chanel. But Japan and Veneta, a company founded by two artisans in 1966 and Japanese society has changed. You had this horrible known for its signature “intrecciato” leather bags. In term for ‘parasite singles,’ or girls in their early- and May of that year, di Marco was recruited from Celine, mid-20s living at home, with no rent or bills, spend- where he was president of U.S. operations, to join ing all their money on luxury brands and logos. But Bottega Veneta as chief operating offi cer. The follow- they’ve grown up and got married and they have other ing month, he was promoted to ceo, while at the same things in mind. In this context, Bottega was the new time, Tomas Maier was tapped as the brand’s creative kid on the block and speaking a language that none of director, thereby setting up Bottega Veneta the other brands was speaking, and explains for its reinvention. the success of the company there.” “Seven years ago, we were given the mis- Vision is also about having the right intuition Di Marco added that reports of Japan’s sion to bring Bottega Veneta back into the lux- deteriorating luxury market are overblown. ury world,” recalled di Marco. “It was a brand “and understanding of how consumer behavior “I understand why we all keep talking about that had achieved success in the Sixties and China because we need to have the next Seventies as an expression of high qual- star, but we are all talking like Japan is a ity, discreet elegance and craftsmanship. A may change. A great deal of Bottega’s success quasi-dead market,” he noted. “I think this brand that had opened its fi rst store in 1972 is a capital mistake. Japan is and will stay a on Madison Avenue in New York. That brand is based on understanding the importance of fashion leader in the region.” had to become synonymous with exclusivity Still, one of di Marco’s PowerPoint slides and quality and position itself at the top of individuality to our consumers. emphasized that during a challenging time the luxury market. That was a tough call.” — Patrizio di Marco,” Bottega Veneta for luxury brands in today’s economy, emerg- Why tough? Because when di Marco as- ing markets are expected to drive growth in sumed leadership of the company, Bottega the global marketplace, particularly the BRIC Veneta had strayed from its roots and diluted its brand DNA by embracing a fl ash- countries — Brazil, Russia, India and China. In 2007, China’s luxury goods market ier, less luxurious identity. “By 2001, Bottega Veneta was a discouraging expres- was 4.5 billion euros, or $6.13 billion, (2.7 percent of the worldwide market); over sion of logos all over; the opposite of the discreet elegance it used to stand for,” the next fi ve years, the luxury goods market there is expected to post a 30 percent he explained. “A total lack of class. Somewhat fashionable, but absolutely vulgar. compound annual growth rate. Russia’s luxury goods market was 3.6 billion euros, Back in 2001 we had very little to work on. Nothing was left of the old archives. or $4.91 billion, in 2007 (2.1 percent of the worldwide market); over the next fi ve The brand was seriously compromised and the company virtually bankrupt.” years its CAGR is pegged at 20 percent. Brazil’s luxury goods market was 1.3 billion Di Marco and Maier set out to create a “clear vision on how to reposition euros, or $1.77 billion, in 2007 (0.8 percent of the worldwide market); its CAGR for Bottega” and “take it to the top of the craftsmanship axis.” The duo emphasized the next fi ve years is estimated at 35 percent. India’s luxury market was 600 million the highest quality production values, product innovation and no logos in Bottega euros, or $817.9 million, in 2007 (0.4 percent of the worldwide market); its fi ve-year Veneta’s collections. The execution of the new vision focused on leather goods, and CAGR should be 25 percent. the company pumped resources and life into the headquarters in Vicenca, Italy, Beyond conjuring up a clear vision for a company, a ceo has to execute that after years of neglect. “We created the conditions to let creative talent fl ourish vision via his employees. To paraphrase Barbra Streisand, ceo’s are people who throughout the organization, sustained by a solid business model,” said di Marco. need people, was what di Marco seemed to be driving home. “Bottega would not Apart from product, the ceo decided that focusing on owned retail was the represent a success story if Tomas had not been there and if this talent had not best way to convey the values of the brand and offer the highest level of service been given the freedom to express itself,” he said. “Bottega would not have rep- to customers. Since 2001, Bottega Veneta has expanded its network of freestand- resented success if the artisans had not been challenged to express the wonders ing stores from 21 to 127 expected by the end of this year. Leather goods remain and magic they are capable of. Ultimately, Bottega is the story of its people, of the core of the business, but the brand has expanded to encompass men’s and their work ethic and integrity, and their courage to go against the mainstream.” WWD, WEDNESDAY, NOVEMBER 12, 2008 17

WWD.COM Computer Chic Natalie Massenet and Net-a-porter bring the store to the customer.

By Cate T. Corcoran “IN 1999, I FELL IN LOVE WITH MY COMPUTER,” SAID NATALIE MASSENET, founder and chairman of Net-a-porter.com. “I thought maybe we should be moving the store to where the customer is, which is right in front of her. Women’s lives have changed quite a bit.” The Net-a-porter customer no longer has time to spend all day getting her hair done and shopping on the high street, she said. Massenet had been an editor at Tatler, W and WWD. “I realized there was an amazing disconnect between media and retailers,” she said. “Fashion magazines are the marketing arm of stores” in the sense that they create excitement and desire for the products the stores sell. But often, women can’t fi nd what they see in magazines because the stores don’t buy the items. They’re conservative or they buy based on what sold last year rather than what’s new or in the magazines, she said. So Massenet decided she wanted to start an online store with hard-to-fi nd, must-have items. “If we could make our Web site as exciting as a page in a magazine, we’d probably be a good chunk of the way there,” she said. “Women have a special relationship with their magazines.” The business started with $1 million in funding, took items on consignment from partners such as Jimmy Choo and bought merchandise on poor terms because it had no credit. “Our recipe for success is to launch at the worst possible time,” Massenet said. “Why have amazing funding when you can do it with no money?” “No money helped us in the long run because it made us roll up our sleeves and be scrappy and come up with something,” she said. Shortly after the site launched, the dot-com bubble burst, starting with the failure of Boo.com, an online fashion retailer that spent more than $100 million. “Nobody wanted to invest in e-commerce; they all wanted to invest six months before,” Massenet said. “The lesson for investors is don’t follow the market. Sometimes a good idea remains a good idea.” Net-a-porter drew traffi c to its site with mentions in online media. An article in the July 2000 issue of Vogue called it a “chic” new boutique. It was “an amazing lift and great endorsement,” Massenet said. Brands also helped raise awareness for the fl edgling retailer, and Net-a-porter, in turn, helped drive sales for brands online and off. Jimmy Choo launched around the same time as Net-a-porter. Every time someone did a search on the brand, they would end up on Net-a-porter, since Jimmy Choo wasn’t yet widely available online. “The brands have defi nitely helped with our awareness,” Massenet said. “And we’d like to think that, now that we’re a little better known, we can go out and raise awareness.” Early on, when selling online was still considered a novelty and risky, Net- a-porter started selling Burberry Prorsum. Unknown to Net-a-porter at the time, Burberry had instructed its established brick-and-mortar accounts to let the company know if there were any complaints. Net-a-porter sold out of a pink trenchcoat within two hours. It turned out that the same coat had also sold out in Burberry’s New York and London stores after it had appeared on the Net-a- porter site. As a result, Massenet met Burberry’s then chief executive offi cer, Rose Marie Bravo, who suggested the two create items to drive sales for both businesses. “We love fashion, we love technology and, at the base of it, we love working with our partners and driving business,” Massenet said. It’s important to train customers to act quickly or they’ll lose out on a sale, she said. From the very beginning, Massenet wanted to be a full-price, full-service store rather than offer the discounts some saw as synonymous with the Web. The company developed software that would automatically compute the sales tax and duties in every country and include them in the price so the customer wouldn’t be surprised. It introduced same-day shipping in London and New York, overnight shipping to Europe and two-day service to Hong Kong. Now the company has grown to $100 million in sales. It has more than 200,000 customers and gains 7,000 new customers a month. Editorial content is updated Nobody wanted to invest in e-commerce; they weekly and is viewed by more than 2 million readers each month. “ “The editorial was a very elegant way to invite people back to our site and cre- all wanted to invest six months before. ate a destination,” she said. ” Net-a-porter has moved into new territory by offering video of runway shows — Natalie Massenet, Net-a-porter.com and select items for sale the same day from Roland Mouret, Alexander McQueen and Halston. forming ahead of budget, but it doesn’t mean we’re not worried about what could “What was once a trade event is now a consumer event, but there’s an extraor- come next,” Massenet said. “We are growing from a low base, fi rst of all; we are dinary lag between putting the shows on and the desire in front of the customer acquiring new customers at a rate much faster than we would be losing custom- base and actually getting the product to her,” Massenet said. “Why don’t we let the ers, and we are a discreet shopping destination,” which could work in Net-a- girls around the world see the new Halston and get it to her the same day? It does porter’s favor in diffi cult times. mean the buyers have to work a bit in advance.” “When neighbors don’t have money and times are tough and people are criti- The company is “pushing the envelope just a little bit and trying to show cized about shopping, and Mrs. Obama is saying she’s shopping at J. Crew, it’s very our designers and our brands there are new ways of marketing to a consumer cool to say you’re not spending money now,” she said. “They are still buying very base,” she said. “We’d like to get everyone collectively thinking about how we can expensive items, but maybe they’re not talking about it the way they used to.” change selling.” “We’ve never been through this before, we don’t know if it’s going to trickle Net-a-porter is branching into mobile commerce and developing an off-price down and hit us,” Massenet said. “Actually, it could turn out to be an oppor- site. A shopping application optimized for the iPhone could be available as soon tunity. Maybe everyone’s spending will migrate to dot-coms and we will have as February, Massenet said. underplanned for next year. We’re conservative in our plans for next year, so “The Internet is a very effi cient sales tool for previous-season stock,” she said. we’ll see.” “It’s a different customer, a more aspirational customer. We call it the Outnet, Massenet predicted that e-commerce will be “huge.” which is the outlet for Net-a-porter.” “Stores are going to be magazines and magazines are going to be stores,” she Despite global economic troubles, the company is still ahead of plan. said. “Spring-summer and fall-winter seasons are probably completely irrelevant. Nonetheless, it is buying cautiously. “In terms of online trading, we’re still per- People just want great product when they can get it.” 18 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II

WWD/DNR CEO SUMMIT Italian Reinventor Vittorio Radice is on a mission to restore La Rinascente to the world of high fashion.

By Jean E. Palmeri VITTORIO RADICE HOPES TO WORK THE SAME MAGIC HE USED IN THE reinvention of Selfridges to once again make La Rinascente Italy’s premier department store chain. Radice, the company’s chief executive ofﬁ cer since 2005, helms one of the country’s oldest and most revered retail institutions, with 14 stores and sales of about 420 million euros, or $532 million. However, in recent years, the business that was founded in the 1860s had grown a bit musty. Radice recalled that during his tenure at the London-based Selfridges between 1996 and 2003, he broke all the rules of traditional retailing. “We worked to move the perception of the company from a retail company to a place of aggregation where almost everything was allowed,” he said. “It was about creating moments of different nature,” Radice said. “From architecture to music, from product to movement, even anti-foie gras demonstrations helped make Selfridges a public venue full of real and contrasting life.” Radice has described his vision of department stores as “places where the noise is louder, the colors are brighter and where there is always the new and unexpected — places that innovate and excite.” And it is this vision that he hopes to bring to La Rinascente. As he works to update the business, Radice is motivated not only by his success at Selfridges, but by other trendsetting retail companies as well. He pointed to Tsum in Moscow as one example. “In 2003, Mercury [Distribution SA] bought this historic department store located next to the Bolshoi theater in the center of Moscow,” he said. The next year, Radice joined the advisory board and worked with management to increase sales. Recalling a discussion about the 2005 budget, Radice said that based on the plan that had been set in place, he expected same-store sales to increase about 25 percent. “For a store established 97 years earlier, I thought it was going to be an excellent performance,” he said. But Leonid Friedland, one of the owners of Mercury, said he had not bought the store just to achieve a 25 percent increase. “If we were not aiming at doubling the sales that year, he was going to dismiss everyone.” As a result, “Targets were lifted, marketing spend was increased, new brands were introduced and sales that year went from 56 million euros, or $72.7 million, to 106 million euros, or $137.7 million. “Moscow is a fantastic market, much more receptive than any other I have experienced, however, the budget story forced me to reconsider some established beliefs and to apply this lesson to the Rinascente turnaround program,” Radice said. In Italy, he said few department stores exist because of the “over-regulated retail sector and the lack of large surfaces in city centers.” Instead, “elegant independent boutiques” have developed in their place. “For years, the boutiques have been the only channel for the distribution of luxury brands,” Radice said. “Names like San Carlo in Turin, Antonia in Milan, Luisa in Florence are power- houses there. Most of the time these boutiques represent the ul- timate selection and service in the town, venerated by the locals and the tourists. These stores are designed by famous architects, have long-term successful relationships with the best brands, at- tract very loyal customers, achieve excellent sales and make their owners very rich.” Radice said these boutiques achieve sales of more than $5,000 a square foot. He wants a piece of that pie for La Rinascente, noting that “with 150 years of history, [it] should have been the natural channel for the distribution of luxury brands in Italy.” After World War II, Radice said La Rinascente was viewed as “one of the engines for reconstruction of the country. We had more shops than anyone else. We were seen as elegant, innovative, modern and accessible. We were the original sponsors of design in Italy employing the architects and the product and graphic designers that put Milan on the world map for years to come.” Giorgio Armani, Giò Ponti and Ettore Sottsass are among the names that were on the Rinascente payroll in the Sixties, he added. “The newly discovered successful combination of artisans’ ability and designers’ creativity was at the center of every initia- tive the company did.” In 1972, “as the timid initial steps of Italian fashion were beginning to be noticed internationally,” La Rinascente changed hands and was sold to the Agnelli family, Radice said. “Their empire was built on Fiat, the popular make of cheap cars available to everyone,” he said. “They applied the mass-market philosophy to everything they owned.” As a result, La Rinascente abandoned its original mission and got into the food, do-it-yourself and electronics businesses and embarked on an aggressive expansion plan. “Self-service became the name of the game even in our historic city center location,” he said. “These stores, once temples of fashion and design became temples of adjustable shelves; and with that the opportunity to dis- tribute the newly born Italian fashion brands was gone in favor of the boutiques that I mentioned before.” WWD, WEDNESDAY, NOVEMBER 12, 2008 19

WWD.COM

In 2005, the company was sold to a consortium of investors, including the Borletti “These days,” he said, “it’s impossible to determine the right price for anything, family, former owners who had sold La Rinascente to the Agnellis. The new man- let alone Shoppers Stop shares.” agement had a “clear intention of bringing back that old philosophy of design and During a recent lunch with a friend, Radice said he mentioned that he was buy- innovation that characterized Rinascente after the war,” he said. ing a house for one of his children and had made an offer. His friend cautioned him By the end of the repositioning program in 2012, Radice said he expects sales to wait because prices were expected to continue to drop and in a few months could to hit 850 euros a square foot, or more than $1,000, with earnings before interest, be 30 percent lower. taxes, depreciation and amortization, or EBITDA, of 20 percent. “‘Wow, maybe he’s right,’ I thought,” Radice said. “I then called the seller to ask To achieve these results, Radice said he set out to transform the company from for a discount, and before I was able to say anything he announced to me that the “top to bottom” — a strategy that is “not without” challenges. house was off the market because he thought he would be able to sell it for a higher New brands are being introduced, stores are being refurbished, and the compa- price in a few months when the market recovered. ny is “bringing back integrity and presence to our locations and adding some spice “We have to ask ourselves: ‘Are we fools to buy now or fools to sell? to our communication,” he said. “One thing is clear: Where there is a will, there is a price. Who would have The company closed fi ve poorly performing units and is focusing on new doors in thought that, in times like this, this Damien Hirst’s Golden Calf would reach 10.3 top locations around the country, such as Bologna, Venice and Verona, and relocat- million pounds [or $16.4 million] at ing the unit in Palermo. Sotheby’s auction last month? Who would “We are totally modernizing our business processes,” he added, including updat- have thought that, in times like this, the ing its systems and opening a new distribution center. Employees are also being So far, the results Birkin bag would still have a waiting list retrained to “move from a self-service model to a full-service” one. at a price tag of over $10,000?” “This is a work in progress,” Radice acknowledged. “But so far, the results have have“ confi rmed our Acquiring something “is more and confi rmed our beliefs. The fl agship in Milan has doubled its sales in three years,” to more a subjective decision that de- about 200 million euros, or more than $251 million, almost half the company total. beliefs. The fl agship in pends on the moment,” Radice said. “It Plans also include opening a new “fl agship in Rome, the only capital city in could be a very short moment dictated the world that has never had a proper department store,” he said. “It will be Milan has doubled its by an impulse or a much longer one located in the historic city center; on the trail from the Spanish steps to the dictated by considerations. Moments Fontana di Trevi.” sales in three years. are what we need to…sustain our busi- Radice said the company is “adjusting and fi nding our way as we go along. We nesses today.” are continuing to invest as per our original business plan. We will continue to do so — Vittorio Radice, La Rinascente” He pointed to McArthur Glen, a design- even in diffi cult times. er outlet developer in Europe. Radice, “As an old Chinese proverb says: ‘One cannot refuse to eat just because there is who has been on the company’s board a chance of being choked.’” since 2004, said one of its assets is its Like many U.S. retailers, Radice said La Rinascente has experienced “much ability to “adjust its format depending on the place they operate. They have been chaos” because of the worldwide pullback in consumer spending. Many of the rules incredibly successful in Italy, where shopping has remained in the Middle Ages, have changed. He pointed to Shoppers Stop in India as an example. “It is the fi rst dominated by mamas and papas stores, in an underinvested extremely regulated department store in India, a wonderful company, great people. It’s got fantastic sys- and protected environment.” tems and procedures for the country they operate in. It has a huge expansion pro- McArthur Glen operates four designer outlets in Italy with two more under con- gram and there’s a potential customer [base] numbering one billion. It’s a company struction. In Serravalle, outside Milan, its development has transformed the city operating in a market where everything still needs to be done.” center with open-air cafes, the fi nest brands and easy access for customers. “Going Shoppers Stop has grown about 40 percent every year in the last 10 years, but its to the village is a moment of celebration, the return to a quality of life long gone,” share price has gone in the other direction. “The company was listed in 2005 at 300 Radice said. “The new village has become the old village as the real village did not rupees per share [about $6.20]. It is now 170 [$3.51],” he said. “It is crazy. It is probably keep up with the times.” an extreme example, but there is no justifi cation anymore between the performance And so with La Rinascente, as with McArthur Glen, keeping pace with the times of a company, the everyday management commitment and the value created. is the key to success. 20 WWD, WEDNESDAY, NOVEMBER 12, 2008

SECTION II

WWD/DNR CEO SUMMIT A Fashionable Impression Alla Verber of Mercury Distribution says Russians’ brand awareness has vaulted in recent years.

By David Moin milestone. “The new Russian woman [post-Communist] wanted to buy something and there was nothing else to buy but Versace,” Verber recalled. “Of course, who- ALLA VERBER, VICE PRESIDENT OF MERCURY DISTRIBUTION, WANTS TO ever had money would go to Versace and buy this style and when they would travel set the record straight about Russian women — they’re not fashion victims. from Russia, they always looked overdressed and colorful. These were the people “They are very stylish right now and are buying many beautiful things,” Verber said. who had money. Popular images of women in babushkas — or at the other extreme, glitzed out “The second brand we brought in was Gucci, and then Dolce & Gabbana, and in gold and fur — have lingered. But as Russia’s most powerful fashion buyer and then Kiton, Armani, Loro Piana, and many more followed. And the last brand we a native of the country, Verber has a point of view based on fi rst-hand experience. brought to Russia was Ralph Lauren.” She’s built a career on elevating the offerings in Russia and has been on a mission, Among the most popular fashion brands in Russia currently are Dolce & Gabbana, shopping leading design houses in Europe and the U.S. and convincing them to Gucci, Prada, Ralph Lauren, Louis Vuitton and Christian Dior, Verber said. open franchised stores with Mercury, or supply Mercury’s retail destinations. But she cited Dolce & Gabbana as a standout among the standouts, and a major Mercury operates about 50 franchised designer boutiques in Russia, owns the partner with Mercury. “We have three monogrammed, big, beautiful boutiques. iconic Tsum department store in Moscow and operates other retail destinations There are three corners in the department store. Russians love the look of these containing designer shops. The company also runs dealerships with fi rms such as clothes. Their clothes fi t the Russian woman and make her look beautiful. There is Ferrari and Harley-Davidson. The 15-year-old Mercury, which is based in Moscow, a joke, a Russian saying: ‘If you put on a Dolce & Gabbana dress, it’s like you went plans to open a DLT department store in Saint Petersburg and the Sochi Luxury to a plastic surgeon.’” Village in the Black Sea resort town, which will host the 2014 Winter Olympics. Russian women, she acknowledged, like to look sexy. “They like to show their Mercury is the luxury leader in a country where Communism once stifl ed any curves. The Russian woman likes to walk into a room and make an impression. I form of style and expression, but has now become one of the world’s most important don’t know why. Maybe it’s the history. Russia is a very beautiful, [culturally] rich markets for upscale goods. country. Until 1917, before the Revolution, all the books, Tolstoy, Dostoevsky — “In our country, for 70 years we really had nothing,” Verber said. “It was a women had to look like women.” Communist country and everybody had to be equal. Everybody had to be in gray. However, as far as being fl amboyant dressers, Verber doesn’t see it in her people. Everybody had to be the same. People were afraid to be different. If you are differ- “I am Russian-born, raised in Saint Petersburg. I don’t remember when I was grow- ent, you go cool off in jail for 10 years and then you come back.” ing up that the Russians wanted to be glitzy. The furs were [popular] because it is The fi rst designer store that opened in Russia was Versace, and it was a fashion cold in Russia. Saint Petersburg is freezing. People needed to wear fur. It was a matter of necessity more than style.” But brand awareness has been important to many Russians, Verber noted. She also sees an attitude shift in recent years. Your Business and Our Full-Service Factoring “People are looking for new brands. They are looking for something Programs: Perfect Together. young and new. They are looking for something not as expensive. F[h\[Yj At Sterling Factors, we understand our clients’ challenges and create They are looking to mix it up.” customized banking and financing solutions to help your company Verber has about 30 years experience in fashion, starting as grow. Best of all, you’ll be working with a senior decision-maker a buyer, and even opened a boutique in Toronto called Katia of Je][j^[h who can move as quickly as your business does. Italy. In 1991, she took an offer from a Canadian company to be Sterling offers a full suite of services, including: its representative in Russia. Two years later, the company opened s4RADITIONAL&ACTORING a fl agship called Trading House Moscow on Kutuzovsky Prospekt. s#REDIT0ROTECTION In 1994, the company was sold to Mercury, where Verber became s!CCOUNTS2ECEIVABLE-ANAGEMENT3ERVICE a buyer, then commercial director, and eventually vice president. s,ETTERSOF#REDIT Her biggest projects were a huge makeover of the 387,500-square- s)NVENTORY&INANCING foot Tsum department store in Moscow, bringing in St. John, Juicy We’re part of Sterling National Bank—The Business Bank— Couture, Theory, Gucci, Prada and Bottega Veneta, among other and our job is to help you grow. To learn more about how we labels. She also created the Barvikha Luxury Village, just outside can help your business succeed, please contact John La Lota, Moscow, which has architecture resembling a chic Swiss chalet and President, Sterling Factors, at (212) 575-4415 or via email at houses Tiffany, Armani, Gucci and Polo Ralph Lauren. [email protected]. “Russia is not an easy place” for foreign brands, Verber said. “You have to understand the mentality of the Russian people. It’s diffi cult to bring in merchandise. It takes a long time. There are A Subsidiary of Sterling National Bank – The Business Bank – www.SterlingNationalBank.com WWD, WEDNESDAY, NOVEMBER 12, 2008 21

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high taxes. There are [challenges] purchasing real estate. There are so many rea- is Ralph Lauren. Maybe because Ralph’s roots are Russian. I thought it would be sons why it is diffi cult [for designers and brands] to go on their own” in Russia. great to have this brand.” “Some big companies like Dior, Chanel and Louis Vuitton opened their own In May 2007, Lauren opened two stores simultaneously, one in downtown Moscow stores in our country, but it took them 12 years. We [owned] a Chanel for 12 years. and the other in the Barvikha luxury shopping village. “There was a big opening We showed them how much business can be done in Russia before they went on of Ralph Lauren [downtown]. People were trying to get into the store even a day their own.” before. We [bought] 18 Ricky bags, and I couldn’t sleep. I thought, who was going to At Mercury, the fi rst shop Verber opened was Ermenegildo Zegna. “I came to buy these bags? But I remember one woman said, ‘I need to have a couple before Ermenegildo himself in Italy and said, ‘We would like to have your wonderful brand my friends buy it.’ They sold out.” to sell in Moscow because we need to dress a man who wants to be a businessman Generally, Mercury’s experience is that apparel is the number-one selling cat- and make an impression on the world.’” egory, even in the brands like Gucci and Bottega Veneta, where accessory offerings Initially, such brands were deemed strange, but gradually, as the lifestyles of the play a greater role. Russians changed, post-Communism and post-perestroika, tastes changed, Verber “The Russians still buy ready-to-wear fi rst, then shoes, and then handbags,” said. The country opened up, and so did the attitudes of its people. Russians began Verber observed. “We sell from four to fi ve pairs of shoes to every one handbag. traveling, were exposed to new ideas and trends, adopted different tastes and be- Sunglasses are very important and cars are very important. I think cars are the pri- came increasingly receptive to outside infl uences. ority. Before they buy an apartment, they buy a car.” “If you go to the south of France, you hear more Russian As far as consumer spending amid the current global than French sometimes,” Verber said. “In New York, there economic turmoil, “We are alive right now,” she said. “We are a lot of Russian immigrants that came 20 or 30 years In our country, for still have the urge. People want to shop. We just started ago. Ten years ago, the fashion magazines came to Russia: “ getting people to give us their phone numbers and ad- Vogue, Harper’s Bazaar, In Style. There are a lot of new 70 years we really had dresses so we can send them information about what is magazines, big parties, many store openings. A lot of design- happening in our stores. We are lucky. People still like ers have been coming. There are a lot of activities. People nothing….Everybody had to to spend money. They can spend their last dollar. That’s have learned a lot. They are not as they were before. good. They don’t worry that much about tomorrow.” “A lot of the Russian people have been almost every- be in gray. Everybody had to However, inside Mercury, the mood is somewhat more where,” she said. “But now many also love to stay in Russia. cautious. “For the last couple of weeks, as a company we They love to go to Moscow. They love to go to Barvikha be the same. People were have been very worried,” Verber said. “At the same time, I Luxury Village to shop. We built a seven-star hotel with 60 don’t think our customers are going to stop shopping right rooms. All the Russians realize right now that we have very afraid to be different. now. They will be more careful. We will have to [scru- good service. We provide them with the best service; we ” tinize] what we buy, how we spend our money. I will be bring clothes to their houses. We know our customers. We — Alla Verber, Mercury Distribution more careful with the buyers. know who we are selling to. For Russians, service is very “Imagine, it was not that easy to build this [Mercury] important. They say the service they get in our country, empire. It took a lot of hard work — every day. It’s always they can’t get anywhere else. So a lot of them prefer today not to spend the holidays been diffi cult to introduce brands. It’s been diffi cult to work on brand awareness.” [in other countries] and go to their country houses.” It has also been a challenging process to prove to the brands and to the Russian It took awhile before Verber became bullish on bringing American brands to consumers that Mercury can be an effective purveyor of luxury goods and provide Russia. “Until we bought Tsum department store, until I became fashion director the right level of service, and the proper in-store presentations, Verber noted. “It of that store, there were not that many American brands. It seemed like America has been diffi cult to show that we know what we are doing. To give them service. To was too far. Basically, all the European brands are in Russia. So I started look- do everything.” ing for something new and because I am very Americanized and I love America, I There are more challenges ahead. “What happened in the last couple of weeks was building the young department, the fourth fl oor. I was thinking I have to go to is going to make [the brands] more careful,” Verber said, referring to the economic America and look for brands there. So I came to New York. I went to Los Angeles. I upheaval and how companies are scaling back as consumers retrench. “It’s not easy went to every department store and I thought to myself, the lifestyle we are missing anywhere in the world right now.”

The committee will meet next week vs. Yes!

Yes. It’s a word that helps businesses succeed. It’s a word we like to say and our clients like to hear. Since 1936, we’ve found ways to say yes to our clients’ changing financial needs. We don’t have committees that endlessly deliberate, procrastinate or delay. Our clients deal with the owners of our firm, who are expected to make fast decisions because that’s what our clients demand.

So if you want an entrepreneurial financial partner, someone who will help you assume the financial risks of your business, someone who will work as hard as you do to ensure the success of your business, call Milberg Factors. You’ll talk with a decision maker on the first call and every call after that. Yes. It’s the way we do business.

Milberg Factors, Inc. A Tradition of Creative Finance

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Call Dan Milberg, SVP, NY 212.697.4200 Dave Reza, SVP, LA 818.649.8662

SECTION II WWD.COM

WWD/DNR CEO SUMMIT Rearranging Priorities WSL’s Wendy Liebmann says focusing on customers is key.

Bargaining has become a way of “life for one-third of women shoppers. They’re damn proud of their savings. — Wendy Liebmann, WSL Strategic Retail”

By Evan Clark little things and they will reward you.” Shoppers are staying closer to home, trading down and cutting back in myr- FOR SHOPPERS, THE ECONOMY’S DESCENT INTO WHAT IS BY ALL iad ways. accounts a recession is nothing new. “Bargaining has become a way of life for one-third of women shoppers,” They’ve been in an “emotional recession” for eight years, said Wendy Liebmann said. “They’re damn proud of their savings.” Liebmann, founder and chief executive offi cer of WSL Strategic Retail, who de- Customers can shop for anything they want anywhere, she said, pointing to the scribed how Americans shop in times of crisis. $349 Comme des Garçons jacket that can be found in Hennes & Mauritz. “They have a whole set of values beyond value,” said Liebmann, who added This all amounts to a new challenge for brands and stores that have to do more that the “emotional recession” began with the dot-com bust and carried through than lean on corporate clichés that implore executives to “think outside the box.” terrorist attacks, natural disasters and product recalls. “There is no box, no net, no rules,” she said. The net result is a shopper who is on edge and needs to be handled with So what’s a store or brand to do? kid gloves. Adapting Bill Clinton’s successful strategy to win the White House, Liebmann’s Liebmann said shoppers are “very angry,” and one in fi ve women are so upset answer was simple: “It’s the consumer, stupid.” they’re actually staying out of stores. Liebmann offered suggestions on how to focus on shoppers. The fi rst was to They take an attitude of: “If I don’t need it, I’m staying home,” she said. develop a way to know your best shoppers, a sentiment that was an undercurrent Although gasoline prices have fallen recently, there are plenty of economic in her presentation. pressures bearing down on consumers. The credit crunch and stock panic in Fashion companies have to keep consumers keyed-in on their brands and they September and October took big chunks out of 401(k) plans and other investments, have to keep them in their stores, she said. housing prices are dropping and job losses are piling up. As a result, many shop- “Keep them now so you won’t lose them forever,” she said. pers don’t have the ability to spend as they did before. To do this, stores and brands need to be what consumers want them to be, In the face of these sweeping changes over which they have no control, consum- whether it’s selling secondhand goods or setting up a shopping site online. ers are turning their economic energies to things in their budgets they can impact. “Follow the shoppers, know your shoppers really well, even in times of crisis,” “They have to control the little things,” Liebmann said. “Help them control the Liebmann said. “Keep them in the store anyway they want to be kept.”

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