RIO DE JANEIRO — An impeached president, the worst recession in 30 years, Zika fears, rampant corruption...oh, and what to do about the Summer Olympics?
Brazil’s crisis is serious and widespread, and the economy reflects that. GDP shrunk by 3.8 percent in 2015 to R$5.9 trillion ($1.6 trillion at current exchange), making it the largest dip since 1990, according to Brazilian statistics agency IBGE.
But optimism reigned on Saturday afternoon when, an hour outside of Rio de Janeiro at the Oscar Niemeyer-designed Niterói Contemporary Art Museum, some 500 guests gazed up at a red-painted ramp for the unveiling of Louis Vuitton artistic director Nicolas Ghesquière’s Cruise 2017 collection.
“We’re investing in Brazil because we know Brazil is a great country,” said Michael Burke, Louis Vuitton’s chief executive, in an interview with BoF prior to the event, which began just before sunset, providing optimal light as the models paraded down the catwalk, snaking through aisles arranged to mimic the curves of Niemeyer’s work. “We’re not surfers, we’re investors. We invest in fundamentals. We buy for the long term,” Burke continued.
We’re not surfers, we’re investors. We invest in fundamentals. We buy for the long term
Indeed, the country may be in disarray, but it remains an important market for luxury goods. Even in decline, Brazil accounts for more than 50 percent of South America’s wealth from high net worth individuals — $3.97 trillion — according to a 2015 report from Capgemini. As if to underscore the point, perched on seats constructed out of fused plywood and glass or perforated coloured steel were 220 of the brand's high-spending clients, about 60 percent of them from Brazil.
“We’ve always invested in our local clients,” Burke said. “We don’t sit here and go, ‘Whoa, whoa, next hot country is going to be X, Y, Z. Let’s go there.’ We don’t do that. We think by doing that you’re going to overpay, miss the wave and you’re not going to develop, most importantly, a fusional relationship with the local clients.”
Those clients — who posed in their Louis Vuitton best for photos overlooking the glittering water before and after the show, champagne glasses in hand — were joined by a host of international editors, as well as an eclectic mix of international celebrities, including Jaden Smith, Catherine Deneuve, South Korean actress Doona Bae, retired Japanese football player Hidetoshi Nakata and Zendaya, who, along with Smith, elicited hoots and hollers from a growing crowd of teenagers waiting in anticipation for them outside of the venue.
Burke, who sat next to Oscar-winning actress and Louis Vuitton campaign star Alicia Vikander during the show, seemed to have no qualms about its location, despite the fact that Rio is certainly a different place than it was even six months ago. “I feel safer in the streets of Rio than in the evening in Paris…I’m used to this. I’ve done things in places that are difficult,” he said. “We have to push the envelope, we have to be daring. Mr. Dior took his show to Moscow in 1955. Let’s not forget that we’re in a business where we thrive on audaciousness, thrive on mixing cultures, thrive on taking risks.”
Indeed, destination cruise shows have become par for the course for Europe’s biggest fashion houses, which are staging increasingly elaborate shows in off-piste locations, beyond the noise of traditional fashion weeks, to generate dedicated global media coverage and activate regional markets.
Because Louis Vuitton’s roots are in travel, hosting shows abroad is a more natural fit for this brand than any other. But these events have also allowed Ghesquière to more swiftly establish his vision for the brand, which he joined in late 2013. During LV’s previous incarnation, Cruise was overseen by (current Sonia Rykiel designer) Julie de Libran and had less of a link to Marc Jacobs’ runway shows.
“We had two aesthetics. Now we’re building one aesthetic. We’re in the middle of that right now,” Burke said. “Nicolas keeps developing and building on a certain silhouette, a certain woman. The result is that the runway collections are selling much more than they used to sell. Now, we’re building back the pre-collections and the icons. Three weeks later, we’ll show a pre-collection in Paris, informed by the runway. It will sit alongside the runway collection in the store.”
For his third cruise collection, Ghesquière's starting point was Brazilian artists Helio Oiticica and Aldemir Martins. Oiticica’s graphic modernism and Martins’ colorful take on the natural world fit nicely into the puzzle Ghesquière has pieced together during his time at Louis Vuitton. (As did the contrast between Niemeyer’s swirling structure and the natural setting.)
“This city and nature are really close to each other, and it’s quite inspiring,” the designer said, holding court on the ramp, with the area's mountainous landscape as his backdrop. “I tried to replicate that in the clothes.” After the show, guests were invited to preview an exhibition of Oiticica’s work in the newly renovated MAC Niterói. Fittingly, Louis Vuitton will link it all together by sponsoring the next four exhibitions at the museum.
But perhaps unsurprisingly, given Rio is less than 70 days away from hosting the Summer Olympics, it was sport — flyaway basketball shorts, the Damier check used in ways that recalled 1970s racing more than a prim set of luggage, and rubbery lace-up neoprene water sandals decorated with a strip of brown monogrammed leather up the back of the ankle — that gave the 47-look collection its zip.
There were lightweight jersey dresses colour blocked in swirls with streamer skirts and abstract cutouts, crunchy taffeta waistcoats and form fitting, halter-neckline boiler suits. The (functioning) boom boxes, designed in the likeness of the designer’s popular “Petite Malle” clutch, were flashy and fun and just the sort of fashion entertainment this audience was after.
Speaking of fashion entertainment, there were other products on offer at louisvuitton.com: A selection of seven pieces from the collection — including styles embossed with Martins’ football players print — were available to buy immediately online, the first effort by the house to deliver so-called “fashion immediacy." But while Burke conceded that “there will be instances where we do a little pop here and there” of in-season merchandise, there are also no plans to shift Louis Vuitton’s presentation calendar or to combine men’s and women’s collection shows as other major brands have done, a near impossibility at Vuitton, which has different men's (Kim Jones) and women's (Ghesquière) designers.
We don’t see any need to revolutionise how we show, but I understand how other houses do.
“We’re quite content where we are. We don’t see any need to revolutionise how we show, but I understand how other houses do,” Burke said. “Each house has its own past and we’re all writing our own destiny and we have to be true to that. Does that mean that there’s going to be different models? That’s probably what it means. It’s going to be less one size fits all”
Instead, Burke wants to remain focused on creating the kind of desire that is stirred up by anticipation. For instance, while valued private clients will be able to place orders for the rest of the collection this weekend, they won’t receive their goods until October. “Delayed gratification has always been the bedrock of luxury and it always will be,” the executive said.
But while charming such clients may have driven the company’s desire to host a resort show here — that, combined with the Summer Olympics, which shined a spotlight on Rio long before political unrest and mosquito-born viruses took centre stage — Brazil undoubtedly remains a challenging market. Many of Ghesquière’s Brazilian clients do not buy his wares at their local boutiques. Instead, they do their shopping abroad where prices are often 50 to 60 percent lower, largely due to high import taxes placed on luxury goods entering the country. For instance, in a recent study conducted by The Business of Fashion on pricing across regions, Brazil had the most expensive price for the monogramed “Speedy 30” bag in the world: R$4,650, or $1,286 at current exchange.
“We shouldn’t complain about tariffs, but we can complain about tariffs being too high for too long,” Burke said. “Maybe Brazil kept them too high for too long. If and when the tariffs go down, we’ll go from six stores to 12 stores.”
“Our job is to develop a relationship with the local client,” he continued. “When they come to Paris, they expect to pay less than wherever they come from. That’s a lost battle.”
But as the mega luxury brand model enters its third decade, luxury houses are finding continued growth more elusive than expected. Developing markets — notably the once-ballyhooed BRIC countries — no longer perform as they once did. Consulting firm Bain & Company expects the personal luxury goods market will grow no more than two to three percent over the next four years, reaching €280 billion to €295 billion in sales revenue in 2020.
However, as the sun sets on Rio, Burke is looking further ahead. “I have a problem with a number of these [reports]. They try to identify trends and people try to surf on them. If you look back at the successful houses, that’s not what we do,” he said. “We’re not momentum investors, if you want to use a Wall Street expression.”
Burke uses Vuitton’s strategy in China, where it has slowed store openings, as an example. “When everybody was saying, ‘The future is in China’ three or four years ago, we were already saying, ‘Wait a minute, with these price differentiations there’s going to be a little moment in China when things are going to be a little iffy.’ We put the brakes on our expansion brands there short term. The good news is that because we’ve always invested in Korea and Japan and Europe and the U.S. for our local clients, we were ready for that surge,” he continued.
“Last year, when the Chinese overran Japan with their shopping, we were ready,” Burke added. “We had the most beautiful flagship store in Ginza that we had built three or four years prior to that. But we hadn’t done it for the Chinese. The next thing you know, everyone is rushing into Japan. By the time they get to Japan and try to surf that wave, [the Chinese] are going to be some place else.”
Instead, Burke said the company will continue to strengthen its network globally in order to be best prepared for unexpected volatility, or perhaps, even growth.
“When you’re trying to do momentum investing, you’re going to miss the wave. We don’t do that,” he said. “We know that the Americans, the Japanese, the Chinese, the Koreans are going to be our top four customer bases for the next 10 years. We also know that there’s going to be growth markets like Indonesia and Brazil. We’re going to continue building our relationships there,” he continued.
“We also know that the English, the Italians, the Germans, and the Spanish are going to be a substantial part of the business. And we’re going to continue improving our networks there and generating great content and communication strategies and having good stores — we do that all over the world.”
Disclosure: LVMH, which owns Louis Vuitton, is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholder’s documentation guaranteeing BoF’s complete editorial independence. Lauren Sherman travelled to Rio de Janeiro as a guest of Louis Vuitton.