Deluxe: How Luxury Lost Its Luster (28 page)

Steve Wynn took notice, and when he and his wife Elaine designed Bellagio, their $
1
.
6
billion,
3
,
025
-room luxury resort on the Strip, they decided to include a one-hundred-thousand-square-foot corridor called Via Bellagio, dedicated exclusively to luxury retailing. “We wanted brands that were at Neiman Marcus but didn’t have a presence in Las Vegas like they did in Paris or Hong Kong,” Elaine Wynn told me. “We started with the big triumvirate—Chanel, Armani, and Gucci—then filled in the blanks, adding Prada, Yves Saint Laurent. Chanel resisted coming. We had to give them a very big pitch. I remember my husband told Arie Kopelman [then president of Chanel Inc.], ‘Arie, you think you are doing me a favor but, believe me, we are doing you a favor.’ Arie wasn’t familiar with the new Las Vegas. But he came to visit and he got it immediately. Armani was ready to go, but everybody was saying, ‘Who else is coming? If you get a commitment we’ll go.’ They didn’t want to be in a spotty neighborhood. Though they are competitive, they wanted to be together because that would assure a look. We didn’t believe that this was an experiment. Neiman Marcus was already doing a terrific business and we were sure that there was a market to explore. When the audience changes every two and a half days, [business] grows. It was sure bet.”

It sure was. For New York jeweler Fred Leighton, the Via Bellagio shop had its highest sales per square foot. “Bellagio kicked up the caliber of shopping in Las Vegas,” remembers veteran Las Vegas retailer Terri Monsour. And it proved that luxury retail was a bona fide flourishing business in Las Vegas. In
1999
came the $
1
.
5
billion Venetian hotel-casino with the five-hundred-thousand-square-foot Shoppes, where families glide down an indoor Grand Canal in genuine gondolas past palazzi that house not Casanova or Lord Byron but Burberry and Jimmy Choo. In
2003
, Fashion Show completed a $
1
billion renovation and expansion, and in
2004
, the Forum Shops opened a third, sleek, modern section for sixty luxury retailers, including Harry Winston, Baccarat, Pucci, Kate Spade, and a second Coach store.

In a matter of a few seasons, Las Vegas became the second city in which a brand opened a store, after New York. For some brands, it was first. Christian Lacroix opened its first American store in the Forum Shops in August
2006
. Juicy Couture, the California clothing brand that made its reputation by selling luxury velour sweat suits to Madonna and Gwyneth Paltrow, put its first freestanding boutique there, and Versace opened its only Home Collection store there. It was a wise move. With sales of $
1
,
500
per square foot, the Forum Shops did nearly four times more business than the average regional shopping center in
2005
, according to the International Council of Shopping Centers, making it one of the most successful in the country.

Since then construction of luxury shopping centers has not abated. The Wynns opened Esplanade with great fanfare on Elaine’s sixty-third birthday in April
2005
. Next door, Wynn is building Encore, a $
1
.
4
billion hotel-casino, with a ninety-thousand-square-foot shopping mall for luxury brands, including Hermès. Across the street, the Sands Corporation, owner of the Venetian, is constructing a $
1
.
8
billion, three-thousand-room resort called Palazzo, with three hundred thousand square feet of retail space that will include Christian Louboutin, Chloé, and Barneys New York, due to open in
2007
. And MGM Mirage is building the $
7
billion, sixty-six-acre Project City-Center to open in
2009
, with eighty-plus stores that will have “all the major luxury suspects,” said William Taubman, chief operating officer of Taubman Centers Inc. “We’ve come up with a plan that allows us to give the major international brands street frontage and brand identity similar to what they get on the Ginza in Tokyo and New York’s Fifth Avenue.” Though brands are sure to have several outlets along the Strip when the projects are completed, neither they nor the mall owners are worried about the idea of overexpansion. “People do not go up and down the Strip and comparatively shop,” Terri Monsour told me. “They tend to stay close to their hotel.”

Shopping in Las Vegas is, like gambling, a two-tiered world. There are hoi polloi, like Kris Stewart and Kathy Sorenson, the tourist sisters I met at the Esplanade, who play small stakes in the casino and cruise the luxury brand mall. For them, shopping in Las Vegas is a treat. The items for sale are far flashier than what they see back home, with lots of glitter and sparkle and not much hemline—all of which reinforce the idea of Las Vegas as a city of luxurious dreams. The stores themselves are much more inviting, with wide mall entrances and not a single menacing doorman to be seen. And the salesclerks are like the dealers in the casinos—they’re friendly, and they take the time to educate you about the products; they don’t assume that you know. “In New York I feel so uncomfortable walking in a store, like I don’t belong there,” Stewart explained. “Las Vegas is much more relaxed, casual.” In part, that’s because the staff can’t always size up who’s who. “You cannot be judgmental in Las Vegas,” says Monsour. “The person in cutoffs and a holey T-shirt can open up a money belt and pull out $
100
,
000
in cash. I’ve seen it many times.” But also there is the great chance that if you don’t buy this time, you might the next time you’re in town. In its first year, half the customers at Wynn’s Esplanade were repeat.

For Big Shoppers—the sorts, says Elaine Wynn, who fly in from far corners of the world and “buy thirteen pairs of Manolo Blahniks at a time”—it’s a different experience altogether. Like the high-rolling gamblers—the ones casinos fly in on private jets, house in villas, and cater to attentively—Las Vegas’s Big Shoppers get the royal treatment. Usually they call Justine Bach, head of Wynn’s Personal Shopping Service, to announce that they are on their way. Bach clears her schedule, then goes to the stores in the Esplanade to pull clothes, shoes, handbags, jewelry, watches—anything and everything the customer might like—that she will either set up in a plush private salon just off the mall or send up to the shopper’s room to try on. Sometimes the shopper visits the stores, too, with Bach in tow. There are two seamstresses and a tailor on staff to make immediate alterations because generally the customer wants to wear it
now.
Sometimes Big Shoppers ring down to Vuitton to order a new suitcase (or two or three) for their purchases. Monsour also ships worldwide. The hotel offers other perks to Big Shoppers, such as limousine service to and from the airport. “They are like the people who play baccarat,” says Elaine Wynn. “They don’t come often, but when they do it’s a strong, strong business. So you have to have something available to satisfy their needs.” In its first year of business, Esplanade did an astounding $
1
,
800
worth of sales per square foot.

T
HE EXPANSION
was racking up millions in sales and profits and making owners and shareholders extremely happy. But all these new stores created a new problem: unsold merchandise. When luxury brands sold their wares in their one flagship store and a handful of department stores, their inventory was limited. The little bit of ready-to-wear that went unsold was sent to discount chains like Loehmann’s, or was burned. Leather goods changed so little that they remained on the shelves season after season.

However, to sell more merchandise and meet the quarterly turnover projections, designers churned out increasingly trendy collections of clothes, handbags, and shoes each season to draw customers more often to the stores. The downside was that the products had a much shorter fashion life span—six months max—before they were displaced by the new collection. And with hundreds of new stores around the world, the volume of leftovers was immense. Executives knew it was bad business to sell the leftovers for a pittance to the discount chains, and watch the Loehmann’s and Syms of the world rake in the profits. Burning them and writing off the loss was out of the question; shareholders weren’t about to watch their profits go up in smoke.

The answer lay somewhere between Rodeo Drive and the Las Vegas Strip—literally as well as figuratively. Two hours due east of Los Angeles, in the heart of the California desert on the way to Palm Springs, is a shopping center called Desert Hills Premium Outlets, which houses many of the same names you’ll find in Beverly Hills—Dior, Prada, Ferragamo, Gucci, and Armani—but sell items at up to
75
percent less. It is part of Chelsea Property Group, a leading developer of more than forty upscale, fashion-oriented outlet centers around the world. When I visited Desert Hills in July
2005
, there was a decentsize crowd, considering the sweltering desert temperatures. During the high seasons—October to March—you can wait in a long backup on Interstate
10
just to get into the parking lot. Approximately seven million people shop at Desert Hills each year, a great many who have bought into luxury’s marketing of the dream but can’t afford luxury goods at full or sale price, as well as those who can but want to get more for their money. “People are so into bargain hunting, and everyone loves luxury brands,” Desert Hills general manager Kathy Frederiksen told me. “Customers sit down and look at the map and say, ‘Wow! You have that and that!’ They get so excited. ‘We can buy so much more here with our money.’ People leave with trunkfuls of merchandise. They make several trips to the car to load up the trunk.”

Outlet shopping is perhaps luxury’s greatest ploy to get its goods into the hands of anyone and everyone. “We have shoppers ranging from celebrities who can have it all but love the thrill of the hunt to value-conscious shoppers who aspire to wear these top brands,” Chelsea Premium Outlets spokeswoman Michele Horner explained.

But outlet shopping is the antithesis of the flagship, the antithesis, in fact, of luxury itself. “It was jolting to view pieces from Prada’s brilliant fall
2004
‘extreme romanticism’ collection withering on the vine,” wrote columnist Karen Heller in the
Philadelphia Inquirer
in
2006
after visiting Woodbury Common Premium Outlets in New York. “The clothes were marked down, picked over and repeatedly pawed, the opposite of how they were originally displayed. Their power to enchant seemed minimized, even at a third the price, smashed together like produce in a storage hold.”

Yet in today’s luxury industry, outlets make good business sense: they sell goods that the movie stars, the flagships, the ads, and the billboards flack to the masses, but at a price that the masses can actually afford, sometimes in bulk. “The
1980
s were all about status and how much you paid for something, but now it’s prestigious to say how much you’ve saved,” said Randy Marks, publisher for OutletBound.com, an online guide to outlet shopping. “Outlets are accessible. If you were to go to Rodeo Drive or Madison Avenue, you might be intimidated to walk into Michael Kors stores. But outlets are not as uppity. And retailers like that because they are opening their brands to people who might not get a chance or be willing to walk into a flagship store.”

Outlet shopping began in the late nineteenth century as small company stores in factories where employees could buy items—often rejects—at a discount. It remained that way until
1970
, when Vanity Fair clothing company opened the first factory outlet center in the United States in the old Berkshire Knitting Mill in Reading, Pennsylvania. It was a clever way to use the space that sat empty after manufacturing moved elsewhere. I remember my mother taking me there from our home outside of Philadelphia when I was a kid. We’d drive up early on Saturday morning, twice a year—spring and fall—to stock up on Vanity Fair brands such as Fruit of the Loom underwear and Lee jeans at a deep discount. The outlet was actually in the factory: mammoth hangar-like workrooms filled with busloads of frantic shoppers rummaging through giant bins of jeans, bras, T-shirts, tube socks, panty hose—the basics—all with defects, large and small. The labels were cut off roughly, leaving the seamed edges, inside and out. We always left with Hefty bags full of new clothes.

By the late
1970
s, the entire town had become a giant outlet center. Developers, like Chelsea, saw what happened in Reading, realized that outlet shopping was a burgeoning business and by the mid-
1980
s, were constructing outlet shopping centers outside of towns across America. Desert Hills Premium Outlets began humbly in
1990
as a strip mall where midrange brands could unload overruns and leftovers. “Though we are in the middle of nowhere,” says Kathy Frederiksen, “it was an instant success. It’s a day trip from L.A. and Orange Country, and we capture residents and tourists from Palm Springs.”

As outlet shopping became a legitimate segment of the retail industry, American luxury brands such as Ralph Lauren, Donna Karan, and Oscar de la Renta, and department stores such as Saks—companies that knew the American bargain-hunting mentality well—opened stores at these malls and started sending their leftovers from each season there instead of to discount chains. Several of the brands sold so well that they began to produce less expensive lines to be sold solely in their outlet stores. Their success gave luxury brands from Europe—where outlets were still a foreign concept—the courage to give it a try.

In
1995
, Desert Hills built a more highly designed addition. Gucci opened there in
1998
, Tod’s and Prada in
1999
, and Tag Heuer in
2001
. In
2002
, Desert Hills opened a twenty-five-thousand-square-foot addition with a fancy brick outdoor esplanade lined with handsome storefronts dedicated to what Frederiksen calls “high-end tenants,” bringing the total to
130
stores. Ferragamo, Bottega Veneta, Hugo Boss, and Sergio Rossi arrived in November
2002
. Yves Saint Laurent came in March
2003
, and Dolce & Gabbana in July. Dior opened in late
2004
. “We promote the outlets as
25
to
65
percent off full retail price,” says Frederiksen, “but a lot of these stores want to move the merchandise, and you can get it for a fraction of what it will cost in the store.” Indeed, when I went into the Dior store, I was surprised to see that everything was
25
to
50
percent off full retail price, some items with an additional
75
percent off the reduced price. That meant that sexy lace bustiers cost a mere $
25
instead of several hundred dollars. Desert Hills makes the shopping that much more interesting by selling coupon books for $
5
that offer further discounts in particular stores.