Business | Economy

Licensed to discount as fashion designers sell their names

Most designer fashion fanatics believe the integrity of their apparel has an unblemished affinity with its label. As a shop assistant hands back their credit card they smile in the knowledge that these clothes were hand-crafted in France or Italy.

  • By Jane Ferguson, Business Feature Writer
  • Published: 23:03 July 20, 2009
  • Gulf News

  • Image Credit: Francois Nel/Gulf News
  • A business model that offers consumers year-round bargains could hurt the 'brand equity' of leading fashion houses.

Dubai Most designer fashion fanatics believe the integrity of their apparel has an unblemished affinity with its label. As a shop assistant hands back their credit card they smile in the knowledge that these clothes were hand-crafted in France or Italy.

For some designer labels this is still the case, and it shows in their prices. For others, it's a fantasy.

Globalisation has seen franchising and licensing of luxury brands explode, evinced by some of Italy's and France's top fashion brands' strong presence in Arabian Gulf cities.

However, the difference between a franchisee of the European greats and a licensee is likely to startle the buyer as much as the labels' bosses back in Europe.

"It has nothing to do with Balmain," said chief spokesperson of the international luxury house, when informed of the Balmain stores in Dubai flogging men's suits at 75 per cent discounts almost year-round.

He was astonished to be informed of the bargain basement nature of the couture house's presence in the city.

When it comes to licensing out a fashion label in the Gulf, quality control and the original designers' involvement in the manufacturing process are set on a case-by-case basis, explained Joyceia Young, franchising specialist at legal consultants DLA Piper.

"The use of the trademarks in the UAE is ruled by UAE law," she said. "But it's all really agreed in the licensing agreement."

The main difference between a licensee and a franchisee is that the latter must buy their stock from the brand themselves, whereas a licensee can produce the clothes themselves, be it hand-crafted in a workshop in Paris or mass produced in a factory in China.

Most modern licensing agreements involve strict inspections by the "mother company" to ensure quality is maintained. However this is not always the case, especially when licences were sold many years earlier.

Balmain is one of a number of designer labels that were bought by a Dubai-based company called the Paris Group.

The Group has the licensing rights to Pierre Cardin, Balmain and Ted Lapidus, and their shops often sell the clothing at enormous discounts constantly - not typical behaviour of leading luxury fashion labels.

Industry insiders believe this is because they mass produce the apparel in factories cheaply, and the business model is one where they would never intend to sell the product at full price, attracting customers who believe they are saving money.

"All the shops are managed by the Paris Group," Ervi Duquosnuy, head of licensing at Pierre Cardin, said.

"We're providing sketches, patterns, colours and then the licensee will produce and sell to the boutiques."

Pierre Cardin however, could not comment much further as they said they were currently in a dispute with the Paris Group. When asked if the clothes bought in these shops in Dubai were the same as those made by franchisees in Paris, the answer was a stern no.

"It can't be the same because each producer has its own sourcing."

Paris Group also manages a number of successful franchises such as Versace, Hugo Boss and Canali. Versace stressed that all of their clothes remain true to their top-end Italian roots.

"All Versace clothes and accessories available in the Middle East and worldwide are manufactured in Versace factories and are made in Italy," Zeina Al Dana, managing director of Z7 Communications, who handle Versace's marketing in the UAE, said.

"Each Versace item has a tag that guarantees quality and that it is manufactured in Versace factories in Italy."

Repeated attempts to get a comment from the Paris Group were turned down.

Licensing, however, remains an unpopular route for many industry players.

Italian fashion brand LIST, which sells higher-end high street apparel modelled on the top designers' clothing, recently opened their first store in Dubai.

The store is operated by a franchisee, the Kamal Osman Jamjoon Group, and Barbara Somogyiova, director of foreign sales at LIST, said that franchising and licensing are worlds apart.

"It is a completely different type of relationship," Somogyiova said. "Licensees, very often become free agents of their market, whereas a franchisee is a daily relationship. The wellbeing of the other is in your vested interest."

She believes licensees offering discounts as heavily as 75 per cent on top end fashion labels is extremely damaging to the mother company.

"I would say that wreaks havoc on the brand equity. If it was my brand, I would not be happy.

"It makes you wonder what kind of additional costs they are running at," she said.

"If they are discounting at 60 [per cent] they are either running their business very poorly or they are marking up the product way too much. To me the message to customers is negative," Somogyiova added.

Some might be surprised to see luxury goods sold at such low prices and mistake them for fakes. However. licenced stores do not sell fake clothes.

The Paris Group advertises online the retail of Hackett clothing in Dubai and was to open a store in the city. Upon contacting Hackett, however, they said the deal was off.

"We were going to work with the Paris Group, but the deal never got off the ground so they have no rights to Hackett," Mark Owens, Hackett's marketing director, said.

"If they say they have the rights I am not sure on what basis; we have asked them to remove the Hackett part of their website. We don't sell anything in Dubai."

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