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What's in a name?
Is a bag still a luxury without a designer name? Venture capitalists are betting on it. Matthew Hague reports on the rise of retailers focused on off-label goods
Special to The Globe and Mail

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Saturday, May 18, 2019 – Page P16

Regina Gerbeaux loves luxury purses. Not just for their brand cachet, but because of their craftsmanship. She adores Louis Vuitton in particular; "I own several," she says. The leather is more supple than Sam Smith's voice, yet durable enough to withstand Gerbeaux's hectic lifestyle as the on-the-go founder and CEO of Efficax, a Californiabased company that outsources administrative office work.

What Gerbeaux doesn't appreciate, however, is spending a mortgage payment or more on each new bag. "It doesn't make sense to me that the nice stuff costs $2,000 plus, while anything cheaper breaks," she says. So, when an ad for a new startup called Italic popped up on her Instagram feed, she was intrigued.

The online business claims to source luxury-quality purses, as well as clothing and homewares, from the same factories (mainly in Europe, some in China) used by top design houses such as Prada and Fendi. But because the merchandise doesn't come with any identifiable labels and ships directly from the manufacturers as opposed to high-end retailers, the prices are reduced by as much as 90 per cent.

The idea is attracting both consumers and startup cash. Italic raised more than US$13-million in venture-capital (VC) financing and amassed a mailing list of 100,000 prospective customers before it officially launched in January. And it isn't the only antilogo purveyor in ascendance.

Brandless, which offers housewares, has attracted more than US$240-million in VC money since launching in 2017.

And in 2018, Yanxuan, a Chinese e-commerce site that sells off-label goods from Burberry and Gucci's factories, had estimated revenues of US$3-billion. All of which might suggest that the future is trademark free, with luxury-quality goods widely available at a fraction of the price.

Not everyone believes in the virtues of no logos, though. According to British design critic Stephen Bayley, eschewing brands is a perilous idea. "A war against branding is a war against people," he writes in his 2017 book Signs of Life: Why Brands Matter. "They are culture, art, design, value, belief. And they make a lot of money."

His final point is undeniably true. The global $399-billion market for personal luxury goods is growing at a robust 5-per-cent rate year. Louis Vuitton and Chanel alone have a combined brand value of US$48.6-billion.

Italic founder Jeremy Cai points out, however, the luxury market isn't necessarily fair in the way it distributes its wealth, disproportionately benefiting big labels and not the factories that produce the products. "Brands might sell a private-label for five to 15 times as much as they pay for it," he says. "With our model of connecting customers to the manufacturers directly, the factories can double or triple their profits." (Italic makes money by taking a portion of each sale.)

For Gerbeaux, Italic worked on a certain level. She "got many compliments" on the purse she bought - a white lambskin crossbody with a gold chain. "Many people think it's a Chanel," she says. "It's fun telling people it's not, that I only paid $150 versus $2,000, and that it's still super soft."

But, similar to many traditional luxury shoppers, she expects more than just a quality product.

She wants a standout customer experience and notes that Italic's delivery and packaging could be improved. "The purse came in a dust bag that felt cheap," she says.

"And there were clear typos on the information card that came with the purse."

Companies such as Italic also raise concerns around intellectual property. Cai says the merchandise is original to the manufacturers. "It's what they produce each season anyway, to try and sell to the fashion houses." Prada might not pick up a style, leaving it available for Italic consumers.

But according to Paul Filek, cofounder of Toronto-based interior design studio Burdifilek, that over simplifies the relationship between labels and their manufacturers in a way that unfairly diminishes the role of the designer.

"A company like Prada doesn't simply let a manufacturer design their bag then put their label on it," says Filek, who's worked with many top fashion and retail companies - Holt Refrew, Neiman Marcus and Mackage included - over his 30 year career. "They reconsider the bag and add their own unique design values to it" even if they're building on an existing prototype, he says. "That's why knock-offs never replace originals, because there won't ever be the same investment in design."

This might explain why Gerbeaux's bag "sat a little bit more boxy than the classic Chanel design," she says. The look was right, but the proportions, scale and details were less refined.

And there are other issues for the factories to consider. For one thing, they assume risk because, unlike when they sell an order to a brand, they create their no-label items on spec without a guarantee that anyone will buy them. Also, in skirting their traditional sales channels, the factories might alienate the very clients whose brands, perhaps ironically, are giving them the cachet to sell directly to customers.

Joseph Jeup, a Michigan-based furniture maker who produces his own eponymous line of luxury wood and metal pieces and manufactures for private labels says "it's incredibly difficult to be both a manufacturer and a design company." That's because the two sides of his enterprise have to remain very separate.

He explains the reason he set up a two-prong business is that the steadier income from the manufacturing helps fund the riskier business of running his own line. But, he says, the designers he works with have to be able to trust him.

"They know that I'll execute their projects with a great deal of care. I'm like a partner to them.

They also know that my own designs will never, ever look as though it's morphing into a version of their work. ... If anyone ever asked me to make a cheaper version of someone else's product, I'd say no instantly. It's taken me a long time to build my reputation, to build that trust. It wouldn't take very long to lose it."

The role of trust is a fundamental reason why some companies succeed, becoming big, Chanellevel names in the process and others don't. "The best brands live and die by fulfilling the expectations of their customers," Filek says. "There's always a conversation with clients about whether it's worth paying for design originals. But if a customer ever goes with a knock-off, it's the same experience: Something falls apart."

Not that price always aligns perfectly with quality. Jeup recognizes that designers with bigger names than himself command higher prices just because of branding, even though the quality is the same. But that's not necessarily a bad thing, as it allows him to appeal to more price-sensitive shoppers, at least until he's better known.

"There's always a combination of brand reputation, craftsmanship and customer experience when it comes to what determining price," says Richard Bertrand, director of marketing at South Hill Home, Jeup's Canadian retailer.

"Christian Liagre is like furniture's Chanel," Bertrand says. "As such, Liagre's pieces are extremely expensive. People may not know who Joseph Jeup is. But if they start studying his finishes and his craftsmanship, they are going to be blown away." And what could be better for his brand than that?

Associated Graphic

Italic offers a bucket bag made at a factory used by Givenchy. ITALIC

Joseph Jeup, a Michigan-based furniture maker, produces work for his own eponymous line, pictured here, and manufactures work for private labels. JOSEPH JEUP

These black retro sunglasses, US$75, are made in the same factory used by EssilorLuxottica; these men's cashmere scarves, US$95, are from a factory used by Burberry; these zip card casee, US$40, are from a factory used by Prada.


Wednesday, May 22, 2019
Huh? How did I get here?
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