AMERICA’S holiday shopping season, is expected to yield sales 4 percent higher than last year. This growth is not likely to be seen at discount stores; their customers are feeling the credit crunch. But a big increase is predicted in sales of luxury-brand products like Burberry handbags, Prada scarves and Gucci ties, with prices high enough to make a difference.
Those prices are worth it, we are told, because these goods are handmade in Europe by artisans. In fact, that is not always the case — as we learned from the recent news reports on the activities of Norman Hsu, the Democratic political fund-raiser indicted on charges of investment fraud. Mr. Hsu told potential clients that he would use their money to finance the manufacturing of Gucci and Prada items in China — and promised a 40 percent return on the investment.
This was surprising, given that both brands have long maintained that they do not produce their wares there. A Prada spokesman reiterated it when the Hsu news broke, telling Women’s Wear Daily that Prada does not manufacture its products in China — though if you look inside one of Prada’s popular nylon toiletry cases, you’ll sometimes find a small tag that states otherwise.
For more than a century, the luxury fashion business was made up of small family companies that produced beautiful items of the finest materials. It was a niche business for a niche clientele. But in the late 1980s, business tycoons began to buy up these companies and turn them into billion-dollar global brands producing millions of logo-covered items for the middle market. The executives labeled this rollout the “democratization” of luxury, which is now a $157-billion-a-year industry.
To help these newly titanic brands retain an air of old-world luxury, marketing executives played up the companies’ heritage and claimed that the items were still made in Europe by hand — like Geppetto hammering in his workshop by candlelight. But this sort of labor is wildly expensive, the executives routinely explain, which is why the retail prices for luxury goods keep going up and up.
In fact, many luxury-brand items today are made on assembly lines in developing nations, where labor is vastly cheaper. I saw this firsthand when I visited a leather-goods factory in China, where women 18 to 26 years old earn $120 a month sewing and gluing together luxury-brand leather handbags, knapsacks, wallets and toiletry cases. One bag I watched them put together — for a brand whose owners insist is manufactured only in Italy — cost $120 apiece to produce. That evening, I saw the same bag at a Hong Kong department store with a price tag of $1,200 — a typical markup.
How do the brands get away with this? Some hide the “Made in China” label in the bottom of an inside pocket or stamped black on black on the back side of a tiny logo flap. Some bypass the “provenance” laws requiring labels that tell where goods are produced by having 90 percent of the bag, sweater, suit or shoes made in China and then attaching the final bits — the handle, the buttons, the lifts — in Italy, thus earning a “Made in Italy” label. Or some simply replace the original label with one stating it was made in Western Europe.
Not all luxury brands do the bait and switch. The chief executive of the French luxury brand Hermès readily told me that some of its silk scarves are hemmed by hand in Mauritius, where labor costs less. And Louis Vuitton, which boasts that it churns out its $3 billion worth of leather goods each year in its company-owned factories in France, Spain and Southern California, announced in September that it plans to build a factory in India to produce shoes.
But most brands aren’t so straightforward. To please customers looking for the “Made in Italy” label, several luxury companies now have their goods made in Italy by illegal Chinese laborers. Today, the Tuscan town of Prato, just outside of Florence and long the center for leather-goods production for brands like Gucci and Prada, has the second-largest population of Chinese in Europe, after Paris. More than half of the 4,200 factories in Prato are owned by Chinese entrepreneurs, some of whom pay their Chinese workers as little as two Euros ($3) an hour.
Luxury brand executives who declare that their items can be made only in Western Europe because Western European artisans are the only people who know what true luxury is are being not only hypocritical but also xenophobic. They are not selling “dreams,” as they like to suggest; they are hawking low-cost, high-profit items wrapped in logos. Consumers should keep in mind that luxury brands are capable of producing real quality at a reasonable price. They know better, and so should we.
By NY Times