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<nettime> futurefeedforward obviously "learning from Prada"
bruces {AT} well.com on Mon, 29 Jul 2002 21:12:49 +0200 (CEST)


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<nettime> futurefeedforward obviously "learning from Prada"





Original Message:
-----------------
From: futurefeedforward fff {AT} futurefeedforward.com
Date: Sun, 28 Jul 2002 21:41:13 -0600
To: bruces {AT} well.com
Subject: LVMH, Prada to Replace Luxury Goods with Warrants



April 6, 2014

LVMH, Prada to Replace Luxury Goods with Warrants

MILAN--In a move extending last season's alliance between design firms
Prada and LVMH, the two announced Monday that significant portions of each
of the major lines from the two houses would be replaced this season by
warrants for the purchase of designer outfits and furnishings.  "It has
always been among our deepest convictions that good design should be more
widely available," explains LVMH Chief of Initiatives Basil Sprout.  
"Good design is for the People, for all of the people, and this warrant
initiative ensures that great design is within the means of the masses."

The warrants--special certificates entitling the bearer to purchase a
specified product at a specified price during a specified season--will be
sold at a fraction of the cost of the underlying product, typically
between 3% and 7% of the retail price.  "The public may not be able to
afford to purchase outright a Bobois handbag or a Prada toe-sock," notes
Sprout.  "But, with our new line of warrants, they can enjoy designer
products without all the fuss and expense of owning the base material
object."

In addition to expanding the size of the market for high-end designer
goods, the warrants are also predicted to cut production costs at both
firms.  "The Street is bound to recognize the profoundly greater
opportunities for scalability in the warrants market," opines SSBPWC
analyst Trumpet Graine.  "Scale efficiencies are much greater in the
production of warrants.  While, in general, costs per unit decrease the
more handbags you produce, it literally costs almost nothing to produce a
new warrant, especially when that warrant isn't really designed to be
exercised and hence never requires production of the underlying asset."

Beyond anticipated savings in production costs, the two houses point to
the space-saving convenience of owning warrants rather than
storage-hogging pants suits and propylene couches.  "Besides budget
constraints, many of our clients, and potential clients, are space
constrained," explains LVMH's Sprout.  "You can only fit so many Diesel
armchairs in that loft apartment.  How many Sander suits can fit in that
closet?  Well, warrants don't take up any space!  They offer the leverage
to fit 10, 20, even 30 DK armoires into your bedroom!  Luxury!"

Experts point to the warrants as an ideal solution to two challenges
facing the industry:  "On the one hand increasing income disparities have
been eroding the market for elite luxury goods for years, forcing houses
to raise prices dramatically just to maintain brand exclusivity," explains
Graine.  "On the other hand, lowering prices and expanding production
dilutes the value of the brands.  If you see every Tom, Dick, and Harry
wearing that designer watch, it loses its cachet."

Because sale of the proposed warrants does not involve increased
production of the underlying goods, the firms expect to gain the revenue
benefits of a broader, near mass-market without the deleterious effects of
brand dilution.  "That's the genius of the warrants," exclaims Graine.  
"Market-saturating sales without market saturation!"

The initial run of warrants is to include $5,500 warrants for Fall '14
Prada loafers, and a series of subscriber warrants priced between $3,000
and $47,000 covering Fall reissues of classic Gucci bags and wallets.  
Offered through the firms' traditional outlets, including company stores,
independent boutiques, and specialty counters in select department stores,
the warrants will also be available on a trial basis in special
register-side displays at Circle K and Dean & Deluca convenience stores.

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