DELUXE

DELUXEHow Luxury Lost Its Luster

DANA THOMAS

THE PENGUIN PRESSNew York

2007

THE PENGUIN PRESSPublished by the Penguin GroupPenguin Group (USA) Inc., 375Hudson Street, New York, New

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Copyright © Dana Thomas, 2007All rights reserved

Photograph credits appear at theend of this book.

Thomas, Dana, 1964–Deluxe: how luxury lost its

luster/Dana Thomas.p. cm.

Includes bibliographical references

and index.ISBN: 1-4295-4765-0

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For my grandparents, O.R. and Anne Strackbein

CONTENTS

INTRODUCTION

PART ONE

ONE: AnIndustry IsBorn

TWO: GroupMentality

THREE: GoingGlobal

PART TWO

FOUR: Stars Getin Your Eyes

FIVE: The SweetSmell ofSuccess

SIX: It’s in theBag

SEVEN: TheNeedle and theDamage Done

PART THREE

EIGHT: GoingMass

NINE: FauxAmis

TEN: WhatNow?

ELEVEN: NewLuxury

ACKNOWLEDGMENTS

NOTES

BIBLIOGRAPHY

INDEX

INTRODUCTION

DOWN THE DUSTY ROADS of Xi’an themotor scooters zoom, weavingaround potholes and ricketybicycles, bip-bip-bipping their hornsas they circle the city’s sixteenth-century bell tower. Xi’an,pronounced Shee-ahn, is one ofChina’s oldest cities, settled byhumans since prehistoric times.From 221 BC to AD 907, Xi’an servedon and off as the capital of the vastChinese empire. The famed SilkRoad, the trade route that linked theFar East to Europe, started there inthe second century BC and turnedthe city, then known as Chang’an,into a throbbing metropolis of nearlytwo million and an epicenter forculture and politics. Painting, poetry,dance, and music thrived in Xi’an,and l’art de vivre—the refined art ofliving—was an essential componentof everyday existence. Xi’an was so

beautiful—with its elaborateBuddhist temples, mosques,bustling souks, and eighth-centurywalled imperial city—that Japan’semperors used it as a model fortheir imperial capitals of Kyoto andNara. It was said that Xi’an was ascosmopolitan and influential asBaghdad, Constantinople, andRome. Many considered it thegreatest city in the world.

It is hard to imaginetoday. With a population of 8 million,Xi’an is a small city by Chinesestandards, compared to Shanghai(17.8 million), Beijing (15 million),and Chongqing (12 million). UnlikeBeijing and Shanghai, which,thanks to China’s market reforms,have become vibrant internationalcapitals, Xi’an suffers from the blightof communism. The people, manydressed in faded Mao suits, seemdowntrodden. Nothing has beenpainted in decades; scooters areheld together with string, tape, and

hope; and everything is covered indust and soot. The new wealth ofChina has not trickled down to Xi’an—at least not yet. It has some localindustry—cotton textiles, chemicals,and high tech—but its mostimportant business is tourism. Halfan hour away by car is the site ofthe Terracotta Warriors, the eightthousand life-size soldiers andhorses that were buried in the tombof Shi Huang Ti (259–210 BC), thefirst emperor of Qin (or China), formore than two thousand years anddiscovered in 1974 by a farmerdigging a well. Each year, morethan twenty million tourists—primarily Chinese—travel to Xi’an tosee the warriors, making the siteone of the country’s most populartourist destinations.

In April 2004, myhusband and I traveled to China forthe first time. I was there to cover theopening of Giorgio Armani’s newretail complex on the Bund, the

waterfront promenade in Shanghai.Afterward, we went to Xi’an to seethe Terracotta Warriors. We arrivedin the spanking-new airport on theoutskirts of the city and took a beat-up cab down the factory-linedhighway and tenement-lined streetsto the historic center. We checked into the Hyatt Regency, one of the two“Western” business hotels at thetime, and as we stood there in thepolished marble lobby and plant-filled atrium, I remembered that theword Xi’an means “western peace”:the Hyatt seemed transplanteddirectly from any American urbancenter.

On the way to breakfastthe first morning, we came across acouple of Chinese vendors sellingclothes in a small conference roomon the mezzanine. Not just anyclothes: spread out across a halfdozen folding tables were Gucciand Versace men’s loafers,Givenchy men’s shirts and socks,

Versace sweaters, Calvin Kleinunderwear, Gucci sweaters withtags in them that read “Designed inItaly,” and hanging on a garmentrack in the corner, a couple ofBurberry men’s trench coats. Someof the items were obviously fake—several of the Versace shirts werelabeled “Verla” in the same font—and I knew that Chinese factoriesturned out counterfeit goods ofevery sort. But some lookedsuspiciously authentic. I picked upthe Gucci loafers. They were madeof good-quality leather, wellstitched, with a slight mod design tothem, just like the shoes you find inGucci stores on Rodeo Drive orMadison Avenue. My husband triedon one of the alleged Burberrytrenches. It, too, was well made andwith all the Burberry details justright. We asked the price. No one inthe room spoke English, but a thintwentysomething Chinese girlpulled out a calculator and tapped

out the price: $120. The regular retailprice for a Burberry men’s classictrench is $850. My husband saidhe’d think about it. We stopped bythe concierge desk to ask about theprovenance of the goods. Most werelegitimate, the concierge told us,and had slight defects, were from anoverrun, or simply didn’t fit into theshipping container.

The next morning wewent by the room to buy the trench.The entire operation haddisappeared.

What, I wondered, wasthis all about?

THE LUXURY GOODS INDUSTRY, as it isknown today, is a $157 billionbusiness that produces and sellsclothes, leather goods, shoes, silkscarves and neckties, watches,jewelry, perfume, and cosmeticsthat convey status and a pampered

life—a luxurious life. Thirty-fivemajor brands control 60 percent ofthe business, and dozens of smallercompanies account for the rest.Several, including Louis Vuitton,Gucci, Prada, Giorgio Armani,Hermès, and Chanel, have annualrevenues in excess of $1 billion.Most luxury goods companies thatwe know today were started acentury or more ago as simple one-man or one-woman shops that soldbeautiful handcrafted pieces. Todaythose companies still carry thefounders’ names but are, for themost part, owned and run bytycoons who in the last two decadeshave turned them into multibillion-dollar corporations and omnipresentglobal brands. They cluster theirstores on main city avenues, inairports, in outlet malls. Theiradvertisements fill magazines andblanket billboards. Their primarycustomers are upper-incomewomen between thirty and fifty

years old. In Asia, the customerbase veers younger, starting attwenty-five.

Walk up to a luxurybrand store and a dark-suited manwith a listening device tucked in hisear will silently pull open the heavyglass door. Inside there is a hush asslim, demurely dressed salesassistants await you in a poshminimalist space in neutral toneswith chrome accents. The first thingyou’ll encounter are shelves full ofthe brand’s latest fashion handbagsas well as its classic designs,displayed like sculptures, eachlighted with its own tiny spotlight.Glass cases are filled withmonogram-covered wallets,billfolds, and business card holders:the lower-priced, entry-level itemsaimed at aspirational middle-marketcustomers. Chances are, the slimassistants will make the sale rightthere in the very first room. Throughcalculated marketing strategies and

with the support of fashionmagazines, luxury companies in thelast ten years have created thephenomenon of the handbag of theseason—the must-have around theworld that will catapult sales andstock prices. Louis Vuitton’s sales ofJapanese artist Takashi Murakami–designed smiling cherry purseswere almost single-handedlyresponsible for double-digit growthfor Louis Vuitton in the first quartero f 2005. The average markup on ahandbag is ten to twelve timesproduction cost. At Vuitton, it’s up tothirteen times. And Vuitton pricesare never marked down.

Many luxury stores endright there: handbags andaccessories. If it is a “flagship”—theindustry word for a store that carriesthe complete range of products—then there will be a gleamingcounter offering perfume andcosmetics. Perfume has, for morethan seventy years, served as an

introduction to a luxury brand. It hasallowed folks who couldn’t affordthe more expensive things in theshop to own a small piece of thebrand’s dream. It also providesluxury brands with substantialprofits. Cosmetics serve the samepurpose but, like handbags, aremore showy: pulling a Chanellipstick from a handbag gives theinstant impression of wealth andsavoir faire.

In the next room—oftenupstairs or down in a convertedbasement—you’ll find a smallselection of ready-to-wear clothesand shoes. Back in the old days,when luxury was still an intimate,elegant business for an eliteclientele, shopping for clothes, be itcouture or ready-to-wear, was apleasurable affair. You chose whatyou liked, often during a fashionshow or a personal viewing, retiredto a spacious, comfortable dressingroom, tried on the garments

leisurely, and had the seamstresson hand to do whatever retouchingwas necessary. Couture and high-end department-store saleswomenwere counselors and confidantes.They knew who was wearing whatto which event, they knew whatsuited you, and they advised youaccordingly. Today, by contrast,shopping for luxury brand clothing isan exercise in patience. Usuallythere are only a few pieces ofclothing and only in the smallestsizes. This is where the slim salesassistants come in: they scurry intothe back storeroom for ten, fifteen,twenty minutes to find your size, orperhaps another style that isn’t onthe floor, or even a dress that noone else has seen. If it doesn’tplease you, they scurry off again foranother ten or twenty minutes. Andso on. This, in the minds of luxuryexecutives, is attentive, specializedservice.

Whatever the purchase,

you’ll walk out with a rope-handledpaper bag in the brand’s signaturecolor and with the brand’s logoemblazoned on the side. Theproduct will be wrapped in tissuepaper and, if it’s a handbag, wallet,or other leather item, stuffed into asoft felt pouch, also in the brand’ssignature color.

And what will you havegotten?

THE WAY WE DRESS reflects not onlyour personality but also oureconomic, political, and socialstanding and our self-worth. Luxuryadornment has always been at thetop of the pyramid, setting apart thehaves from the have-nots. Itsdefining elements—silk, gold andsilver, precious and semipreciousstones, fur—have been culturallyrecognized and sought after formillennia. In prehistory, humans set

themselves apart by decorating theirfurs with bits of bone and feathers.The Chinese enriched theirappearance with silk embroidery aslong as twelve thousand years ago,as did the Persians and theEgyptians in the second centuryBC.

The display of luxurysignified one’s power andachievements and brought on bothscorn and envy. “‘Is it a waste ornot?’ was argued as far back as 700BC,” Kenneth Lapatin, an antiquitiescurator at the J. Paul Getty Museumin Los Angeles, California, told me.The Etruscans wore gold andimported amber from the Baltics andhad beautiful engraved gemstoneslike jasper and carnelian. But it wasthis love of luxury that led to theirdownfall, according to socialconservatives of the era.

The Greek aristocrats,Lapatin explained, “were flashy.They’d wear their gold and their

fancy clothing out and would beaped by the masses.” This drove therich to live more opulently, simply“to stand out” from the ordinary folk.Rulers passed sumptuary laws—social restrictions that dictated whatyou could display in terms of wealth,usually clothing, jewelry, and otherluxury items—thus preventingcommoners from imitating noblesand reining in conspicuousconsumption. “In some places, ifyou brought gold and jewelry to asanctuary, you had to leave it as anoffering,” Lapatin said. “Youdedicated your luxury to the godsand often indicated your namethrough an inscription or label. Andwhen people would go into thetemple and see it, they would say,‘What good taste and generosity hehas.’” Faking luxury was consideredthe ultimate disgrace. According toone ancient tradition, the sculptorPhidias offered to build the statue ofAthena in the Parthenon in Athens

out of cheap materials—gold-gildedmarble—but the proposal wasvetoed by the Athenian assembly.“Shame! Shame!” its memberscried, and insisted on gold andivory. “They didn’t want to save theirmoney,” Lapatin said. “They wantedto show it off.”

It was during the reign ofthe Bourbons and the Bonapartes inFrance that luxury as we know ittoday was born. Many of the luxurybrands we patronize, such as LouisVuitton, Hermès, and Cartier, werefounded in the eighteenth ornineteenth century by humbleartisans who created the mostbeautiful wares imaginable for theroyal court. With the fall of monarchyand the rise of industrial fortunes inthe late nineteenth century, luxurybecame the domain of old-moneyedEuropean aristocrats and eliteAmerican families—such as theVanderbilts, the Astors, and theWhitneys—who moved in closed

social circles. Luxury wasn’t simplya product. It denoted a history oftradition, superior quality, and oftena pampered buying experience.Luxury was a natural and expectedelement of upper-class life, likebelonging to the right clubs orhaving the right surname. And itwas produced in small quantities—often made to order—for anextremely limited and truly eliteclientele. As Diana Vreeland notedin her memoir, D.V., “Very fewpeople had ever breathed the pantryair of a house of a woman who worethe kind of dress Vogue used toshow when I was young.”

When Christian Dior,considered by many to be the fatherof modern fashion, was interviewedb y Time magazine in 1957, hepondered the importance of luxuryin contemporary society. “I’m nophilosopher,” he said, “but it seemsto me that women—and men too—instinctively yearn to exhibit

themselves. In this machine age,which esteems convention anduniformity, fashion is the ultimaterefuge of the human, the personaland the inimitable. Even the mostoutrageous innovations should bewelcomed, if only because theyshield us against the shabby andthe humdrum. Of course fashion is atransient, egotistical indulgence, yetin an era as somber as ours, luxurymust be defended centimeter bycentimeter.”

Dior believed thatEurope was still the epicenter ofluxury creation and productionbecause of its steady stream ofmegalomaniacal kings and popeswho, over the centuries,commissioned the construction ofsumptuous palaces and cathedrals.“[We] inherited a tradition ofcraftsmanship rooted in theanonymous artisans who…expressed their genius in chiseledstone gargoyles and cherubs,” he

said. “Their descendents—skilledautomobile mechanics, cabinetmakers, masons, plumbers,handymen—are proud of theirmétiers. They feel humiliated ifthey’ve done a shoddy job.Similarly, my tailors [and]seamstresses constantly strive forperfection.”

And there luxury stayed,a domain of the wealthy and thefamous that the hoi polloi dared notenter, until the Youthquake of the1960s. The political revolutionsthroughout the Western world at thattime pulled down social barriers,including those that separated therich from the rest. Luxury went out offashion, and it stayed out of fashionuntil a new and financially powerfuldemographic—the unmarriedfemale executive—emerged in the1980s. The American meritocracycame into full bloom. Anyone andeveryone could move up theeconomic and social ladder and

indulge in the trappings of luxurythat came with this newfoundsuccess. Disposable income hasrisen significantly in industrializednations in the last thirty years. Bothmen and women in have put offgetting married until later in life,freeing them to spend more onthemselves. The average consumeris also far more educated and welltraveled than a generation ago andhas developed a taste for the finerthings in life.

Corporate tycoons andfinanciers saw the potential. Theybought—or took over—luxurycompanies from elderly founders orincompetent heirs, turned thehouses into brands, andhomogenized everything: the stores,the uniforms, the products, even thecoffee cups in the meetings. Thenthey turned their sights on a newtarget audience: the middle market,that broad socioeconomicdemographic that includes

everyone from teachers and salesexecutives to high-techentrepreneurs, McMansionsuburbanites, the ghetto fabulous,even the criminally wealthy. Theidea, luxury executives explained,was to “democratize” luxury, tomake luxury “accessible.” It allsounded so noble. Heck, it soundedalmost communist. But it wasn’t. Itwas as capitalist as could be: thegoal, plain and simple, was to makeas much money as heavenlypossible.

To realize this“democratization,” the tycoonslaunched a two-pronged attack.First they hyped their brandsmercilessly. They trumpeted thebrand’s historical legacy and thetradition of handcraftsmanship togive the products an air of luxurylegitimacy. They encouraged theirdesigners to stage extravagant orprovocative fashion shows—at amillion dollars a pop—to drum up

controversy and make headlines.They spent billions of dollars ondeliberately shocking advertisingcampaigns—Dior’s grease-smudged lesbian ads to sell purses,Yves Saint Laurent’s full-frontalmale nudity shot to sell perfume—that made their brands asrecognizable and common as Nikeand Ford. They dressed celebrities,who in return told every reporterlining the red carpet which companyhad provided their gown, jewels,handbag, tuxedo, or shoes. Theybegan to sponsor high-profilesporting and entertainment eventssuch as Louis Vuitton at theAmerica’s Cup and Chopard at theCannes Film Festival. The messagewas clear: buy our brand and you,too, will live a luxury life.

Then the tycoons madetheir products more available,economically and physically. Theyintroduced fashionable lower-pricedaccessories that most anyone could

afford. They expanded their retailreach from the original polished-oak-paneled family shop and a fewoverseas franchises to a vast globalnetwork, rolling out thousands ofstores that are as ubiquitous andapproachable as Benetton or Gap.They opened outlets to sell leftoversat bargain prices, launched e-commerce sites on the Internet, andramped up their share of duty-freeretailing. In 2005, travelerspurchased $9.7 billion worth ofluxury goods, accounting for one-third of all global travel retail sales.And travel experts say it’s onlygoing to increase: according to theInternational Civil AviationOrganization, annual global airtraffic is expected to reach 2.8 billionpassengers by 2015, up from 2.1billion today.

Luxury companiesfunded the expansion of their reachby listing themselves on the world’sstock exchanges. Going public

brings many advantages to a luxurycompany: it raises capital, elevatesthe brand’s status, createsmanagement incentives such asstock options, and makes thecompany more transparent, thusattracting a higher caliber ofexecutive management. But it alsomakes the company beholden tostockholders who demandincreases in profits every threemonths. “Going public does forceyou to change the way you dobusiness,” former Gucci designerTom Ford told me. “It forces you tobe aware of how you are spendingand where it’s going, to make someshort-term decisions because that’swhat shareholders respond to, andto juggle the long-term benefits withthe short-term.” To meet those profitforecasts, the luxury companieshave cut corners. Some use inferiormaterials, and many have quietlyoutsourced production todeveloping nations. Most have

replaced individualhandcraftsmanship with assembly-line production, much of it done onmachines. Simultaneously, mostluxury companies have raised theirbrands’ prices exponentially, andmany justify the move by falselyclaiming that their goods are madein Western Europe, where labor isexpensive. To further pump up theirnumbers, luxury companies haveintroduced cheaply made, lower-priced accessories—such as logo-covered T-shirts, nylon toiletrycases, and denim handbags—andexpanded their range of perfumeand cosmetics, all of which bring insubstantial profits when sold ingreat volume. The averageconsumer certainly can’t afford a$200,000 made-to-order couturegown, but she can drop $25 on atube of lipstick or $65 on a bottle ofeau de parfum spray to have apiece of the luxury dream.

All this hyped-up

marketing of dreams has madeluxury companies wildly successfuland their shareholders extremelyhappy. In their best year—1999—luxury indexes rose a remarkable144 percent, according to theinvestment banking firm BearStearns. And analysts predict thatluxury sales will soon surpass thoserecord pre–September 11, 2001,levels. There have never been somany wealthy in the world. In 2005,there were 8.3 million millionaires—an increase of 7.3 percent over2004—who possessed $30.8 trillionin assets, according to the 2006“World Wealth Report” (publishedannually by Merrill Lynch andCapgemini). The Swiss bank UBS’swealth-management division hadan influx of $76 billion in new moneyin 2005, an increase of 57 percent inone year. NetJets, the private jet-share company, saw a businessincrease of 1,000 percent from 2001 to2006. The private security firm Kroll

reported that its business fromclients with at least $500 million inassets increased by 67 percent injust two years. And the “WorldWealth Report” added that there hasbeen a rise in “middle marketmillionaires” with assets of $5million to $30 million.

But for some on thewrong side of this growth, thosedreams are nightmares. Luxurybrands are among the mostcounterfeited products today—theWorld Customs Organization statesthat the fashion industry loses up to$9.7 billion (€7.5 billion) per year tocounterfeiting—and most of thecounterfeiters’ profits fund illicitactivities such as drug trafficking,human trafficking, and terrorism.Luxury incites other illegal activities,too. Japanese girls work asprostitutes in order to buy luxurybrand handbags. Chinese“hostesses” accept shopping visitswith their clients at luxury brand

stores, which stay open untilmidnight, as payment for servicesrendered. The next morning, thehostess returns the purchase forcash, less a 10 percent “transactionfee,” thus inflating luxury brands’sales figures in China and washingaway any illegal cash transactionsbetween the woman and her client.A true story, told to me over asummer lunch on the FrenchRiviera in 2004: A rich, hip New Yorkbanker met a pretty Russian girl inthe bar of the Hôtel Byblos in Saint-Tropez late one night and took herhome with him. The next morning,she told him pointedly: “I couldreally use a new pair of Guccishoes.” He understood immediatelythat she was a working girl and tookout his wallet. “No,” she said, “Guccishoes.” And to the store they went.

The tycoons’ marketingscheme has worked. Today, luxuryis indeed democratic: it’s availableto anyone, anywhere, at any price

point. In 2004, Japanese consumersaccounted for 41 percent of luxurysales, Americans 17 percent, andEuropeans 16 percent. Expansioncontinues in India, Russia, Dubai,and of course China, luxury’s newEl Dorado. While parts of China,like Xi’an, are still dusty andblighted, a new big-spending classis emerging at warp speed. When Ivisited the country in the spring of2004, luxury companies consideredChina to be an immature marketand an investment for the future.Eighteen months later, Chinaaccounted for 12 percent of all luxurysales—and this figure was expectedto grow exponentially. Luxurycompanies are opening stores notonly in Beijing and Shanghai butalso in rapidly growing second-andthird-tier cities such as Hangzhou,Chongqing, and even Xi’an. By2011, China is expected to be theworld’s most important luxurymarket.

And luxury’s baronshave reaped the wealth. BernardArnault, chairman and CEO of theParis-based luxury-brand groupLVMH Moët Hennessy LouisVuitton, is the most successful ofthem all. In 2006, Forbes named himthe seventh richest man in theworld, with a net worth of more than$21 billion. His fellow LVMHshareholders aren’t doing badlyeither. When Arnault took control ofLVMH in 1990, it had sales of about$3.65 billion (about €2.8 billion) withnet profit of $621 million (about €480million). In 2005, it recorded $17.32billion (€13.91 billion) in sales andnet profit of $1.79 billion, or €1.44billion. “What I like is the idea oftransforming creativity intoprofitability,” Arnault once said. “It’swhat I like the most.”

The luxury industry haschanged the way people dress. Ithas realigned our economic classsystem. It has changed the way we

interact. It has become part of oursocial fabric. To achieve this, it hassacrificed its integrity, underminedits products, tarnished its history,and hoodwinked its consumers. Inorder to make luxury “accessible,”tycoons have stripped away all thathas made it special.

Luxury has lost its luster.

PART ONE

CHAPTER ONE

AN INDUSTRY IS BORN

“Luxury is a necessity thatbegins where necessityends.”

—COCO CHANEL

MARC JACOBS is the mostinfluential creative voice in luxuryfashion today. As creative director ofLouis Vuitton, the world’s largestluxury goods company, Jacobsoversees the studio that in the lastdecade has produced sumptuousand witty versions of the classicVuitton monogram handbag—likethe denim jacquard one trimmed inchinchilla—that have sold by themillions. Yet Jacobs sees what hedoes at Vuitton as the antithesis ofluxury today. “The way I defineluxury isn’t by fabric or fiber or theamount of gold bits hanging from it,”

Jacobs says, sitting in his Parisoffice, sucking on his umpteenthcigarette of the day as his bull terrierAlfred gnaws on a soup bone.“That’s an old definition. For me,luxury is about pleasing yourself,not dressing for other people.”

The contradictionbetween personal indulgence andconspicuous consumption is thecrux of the luxury business today:the convergence of its history withits current reality. For most people,Louis Vuitton represents true luxury.The suitcase or handbag coveredwith its intertwining LV logo impliesthat its carrier appreciates the fine-quality craftsmanship, has themoney to afford it, and travels in thesame circles as other Louis Vuittoncustomers—in first class. Long ago,that assumption was true. LouisVuitton supplied kings and queens,high-society matrons, and businesstitans. It was the luggage of the richand famous. Today, however,

millions of people from a wide rangeof economic backgrounds ownLouis Vuitton products, ranging froma $120 money clip to a trunklikehumidor that holds a thousandcigars. Louis Vuitton is the greatestexample of what executives in thefashion business call democraticluxury: it’s big, it’s broad-reaching,and it sells wildly expensive stuffthat nobody really needs. “Whenyou look at [Louis Vuitton], you seeit is mass-produced luxury,” Jacobstells me. “Vuitton is a status symbol.It’s not about hiding the logo. It’sabout being a bit of a show-off.”

Louis Vuitton is thecornerstone of a publicly tradedluxury conglomerate called LVMHMoët Hennessy Louis Vuitton—orLVMH for short—run by Frenchtycoon Bernard Arnault. In 2005, ithad more than fifty brands—including Moët & Chandonchampagne, Givenchy couture, andTag Heuer watches—fifty-nine

thousand employees andseventeen hundred stores, and did$18.1 billion (€14 billion) in sales andmade $3.5 billion (€2.7 billion) inprofits. Its flagship is Louis Vuitton,which does an estimated $3.72billion in sales annually, accountingfor approximately one-quarter of thegroup’s total business. Vuitton is theMcDonald’s of the luxury industry:it’s far and away the leader, brags ofmillions sold, has stores at all thetop tourist sites—usually stepsaway from a McD’s—and has a logoas recognizable as the GoldenArches. “Luxury is crossing all age,racial, geographic and economicbrackets,” Daniel Piette, an LVMHexecutive, told Forbes in 1997.“We’ve broadened the scope farbeyond the wealthy segments.”

The heart of LouisVuitton is the trunk. Back in the mid-nineteenth century, when LouisVuitton started his business, trunkswere an integral part of travel, like

suitcases on wheels are today. Atraveler left for months at a time,with as many as fifty trunks in towfilled with everything from petticoatsto porcelain. Today Louis Vuittonmakes about five hundred trunksannually. Rarely are trunks used fortravel anymore. If so—and it’susually for nostalgic reasons—they’re often sent ahead by mail orboat, or loaded on private jets. Moreoften Louis Vuitton trunks, old ornew, are displayed in homes like artor used as shelves, coffee tables, orbars.

Louis Vuitton trunks arestill made more or less the sameway they were 150 years ago, mostlyat the Louis Vuitton compound inthe working-class Paris suburb ofAsnières-sur-Seine. Entering theVuitton compound is like steppingfrom drab, monochromatic Kansasinto the rich Technicolor world ofOz. Across a thick green lawnframed by strong old trees and well-

tended rose beds sits a simple two-story white stucco country housewith gingerbread trim and a silveryzinc roof. Louis Vuitton, ahardworking artisan of humbleroots, built the place in 1859 to movehis family out of filthy, crowdedParis. Out back is a century-old,two-story, L-shaped workshopwhere 220 artisans build hundreds oftrunks and sew thousands ofhandbags every year. It is one offourteen official sites—eleven inFrance, two in Spain, and one inSan Dimas, California—whereVuitton leather goods are produced.

The trunk’s structure isbuilt out of okoumé, a hard,lightweight wood from Africa, bycraftsmen in the big lumber shop onthe ground floor. For the hinge,Vuitton craftsmen glue a piece ofsturdy canvas to the inside, andanother on the outside. LouisVuitton invented this method in 1854to replace the bulky metal brackets

of the period. The canvas hingedoesn’t break, opens and closeseasily, and creates a flat surface onthe back of the trunk. The trunk’sexterior material—usually Vuitton’swaterproofed monogram or Damiercheck canvas—is glued onto thewood box and hinge. The cornercovers are made of brass or ofleather shaped by hot and coldpressure in a mold. The edge trim,known as lozine, is made of manylayers of paper and cloth pressedtogether and dipped in a zincsolution. Upstairs, workers nail onthe poplar belts around the middle,th e lozine trim on the edges, thecorner covers, and the hardware.The banging is so loud that most ofthe eight workers in the “hammeringdepartment” wear earplugs. Thelining, made of a pearl gray cottoncanvas called Vuittonitte, or asynthetic suede called Alcantara, isglued inside; khaki woven cottonstraps that read “Louis Vuitton” are

attached to hold items in place. Thetrunk is then cleaned up, inspected,and sent off to be packaged andshipped.

Thousands of handbagsare made at the Asnières compoundeach year as well. The steamer bag—originally designed in 1901 as alaundry sack for steamship traveland today one of the Vuitton’s mostpopular items—is made by hand.Steamer bags, handbags made ofexotic leathers such as crocodileand ostrich, and special-order itemsare all made by one artisan ratherthan on the assembly line. Vuittongets about 450 to 500 special orderseach year. Some are simply neweditions of an existing model, likethe trunk bed first designed forFrench explorer Pierre Savorgnande Brazza in 1868 for his Africantravels through the Congo; othersare a reworking of something thatalready exists, like a jewelry boxcovered in an exotic skin instead of

the monogram toile, or somethingdesigned to the customer’s specs.When I was in Asnières, one artisanwas finishing up a tennis bag inDamier canvas that holds tworackets; it took two weeks toproduce and would be the only onein the world.

The rest of Vuitton’sproduction is assembly-line work,most of it done on machines. In abig sunlit room on the second floor,a dozen seamstresses were runningup hundreds of LV monogramdenim Pleaty handbags on theirmachines. These bags would sellfor $1,150 apiece and be so popularthey’d be back-ordered withinweeks. “High profitability comes…inthe atelier—the factory,” BernardArnault once explained. “Productionis organized in such a way that wehave unbelievably high productivity.The atelier is a place of amazingdiscipline and rigor. Every singlemotion, every step of every process,

is carefully planned with the mostmodern and complete engineeringtechnology. It’s not unlike how carsare made in the most modernfactories. We analyze how to makeeach part of the product, where tobuy each component, where to findthe best leather at the best price,what treatment it should receive. Asingle purse can have up to 1,000manufacturing tasks, and we planeach and every one.”

Today, there are threeVuitton family members employedby the Louis Vuitton company:Patrick-Louis, a fifth-generationdescendent of the founder, whooversees special orders and servesas a house ambassador; hisyoungest son, Benoit-Louis, born in1977, who is watch special ordersmanager at the headquarters inParis; and Pierre-Louis, his oldestson, who works as a craftsman inAsnières. I ran into Pierre-Louis as Ivisited the workshop in the spring of

2006. Pierre’s a kind-looking fellow,rather pale, with hazel eyes, closelyclipped dark hair, and protrudingears. He was dressed in a white labcoat over a checked shirt and jeans.On the pocket of his coat was an LVlogo embroidered in brown thread.He was walking some bits ofcanvas for jewelry boxes from onestation to another. Pierre had joinedthe company about a year and ahalf earlier, after a short stint incomputers. He had visited theVuitton factories in the provincesand was so moved by thecraftsmanship that he asked Vuittonowner Bernard Arnault for a job.Arnault said, “Of course.”

“I love this company,”Pierre told me. “It’s in my veins.”

And then he got back towork.

LUXURY AS WE KNOW IT today is

rooted in old Europe’s royal courts—primarily those of France, whichset the standards for lavish living. Inthe seventeenth century, Frenchking Henri IV’s second wife, Mariede Medicis, wore for the baptism ofone of her children a gownembroidered with thirty-twothousand pearls and three thousanddiamonds. Louis XIV dressed insatin suits with velvet sashes andfrilly blouses, high-heeled shoes orboots, and wigs of flowing curlstopped with ostrich-plumedchapeaux. To maintain control overhis courtiers, he dictated to themwhat they could wear, when to wearit, and how to wear it. He declaredwhat height necklines should be,and the length of gown trains. Toplease the king, the ladies of thecourt wore wigs so tall that theirservants stood on ladders toassemble them.

Madame de Pompadour,the mistress of Louis XV, personally

encouraged and supported theluxury artisans and helped foundthe Sèvres porcelain factory toprovide the Château de Versailleswith its royal services. Louis XVI’swife, Marie-Antoinette, overran herannual clothing budget of $3.6million by buying gowns encrustedwith sapphires, diamonds, silver,and gold—but according toobservers, it was money well spent.She was “an object too sublime andbeautiful for my dull pen todescribe,” wrote John Adams, aU.S. diplomatic envoy to France inthe late 1770s and later the secondAmerican president. “Her dress waseverything that art and wealth couldmake it.” Napoleon’s wife, theempress Josephine, spent half ofthe $15 million France earnedselling the five-hundred-million-acreLouisiana territory to the UnitedStates in 1803 on clothes in tenyears. “French fashions must beFrance’s answers to Spain’s gold

mines in Peru,” declared LouisXIV’s finance minister Jean-BaptisteColbert, for whom today theCommittee Colbert, the Frenchluxury brand trade association, isnamed.

It was in the world ofnineteenth-century Frencharistocracy that Louis Vuitton wasable to rise from nothing to theworld’s most famous luxury travelbrand. Louis Vuitton himself wasborn in 1821 to a family of farmersand millers in the Jura, amountainous region at the foot ofthe Alps in eastern France. At theage of thirteen, Vuitton set out byfoot for Paris, then the city ofopportunity. The 292-mile trek tooktwo years; along the way, Louisearned his keep by working as astable boy or kitchen hand. Whenhe finally arrived, Paris was abooming town of one million, a cityof opulent palaces and horrificslums. “Here you find at the same

time the greatest luxury and thegreatest filth, the greatest virtue andthe greatest vice,” the pianistFrédéric Chopin wrote to a friend,according to Paul-Gérard Pasols inhis book Louis Vuitton: The Birth ofModern Luxury.

Vuitton became anapprentice to a master trunk makernamed Monsieur Maréchal on thecorner of the rue Saint-Honoré andthe rue du 29 Juillet—the site todayof the trendy fashion boutiqueColette. In 1854, Vuitton quit, openedhis own business on the rueNeuves-des-Capucines (nowknown simply as the rue desCapucines), and set aboutreworking the basic design of thetrunk. He changed the traditionaldomed lid to a flat top (to allow foreasy stacking on the backs ofcoaches) and replaced the leather,which turned moldy and cracked,with lightweight poplar covered witha waterproof dove gray cotton

canvas he developed calledTrianon gray, after the GrandTrianon Palace at Versailles.

Trunk makers back thennot only built trunks but also packedand unpacked them. Throughout themid-1800s, women wore voluminousgowns with layers of petticoatsknown as crinolines, made of wooland horsehair, under their skirts or,later, with bustles. The master ofsuch creations was a youngEnglishman named CharlesFrederick Worth, an acquaintance ofLouis Vuitton’s who had a dressshop in Paris on the rue de la Paix.Today Worth is known as the fatherof haute couture. Rather thanproducing dresses to order like hisconfreres, Worth designed seasonalcollections from which his clientscould choose. He was one of thefirst to stage fashion shows topresent his collections, and the firstto put a signature label on hisclothes. He became luxury fashion’s

first true arbiter of style: he dictatedwhat the fashion would be, and thepublic followed. “Women will stoopto any depths to be dressed by him,”wrote historian Hippolyte Taine atthe time. “This arid, nervous,dwarfish creature receives themnonchalantly, stretched out on acouch, a cigar between his lips. Hegrowls, ‘Walk! Turn! Good! Comeback in a week and I will have anappropriate toilette for you!’ It is he,not they, who chooses. They areonly too content to be dominated byhim—and even so they needreferences.” Worth’s dressesrequired some fifteen yards of fabric—such as floss silk, painted chiffon,or lamé gauze—and could takethree to four hundred hours toembroider. Buttons wereembroidered, too, each onerequiring three to ten hours of work.His dresses were so popular that hecould have a team of thirtyseamstresses working full-time for

one client all year long. His priceswere stratospheric, his vanitylegendary: he considered himself a“great artist,” on par with Delacroix.He snidely dismissed clients whoquestioned his skills, andshamelessly catered to aristocratsabove all others. Vuitton so excelledat packing these delicate frocks andbaubles that he became the officialpacker and trunk maker for theempress Eugénie, the extravagantSpanish-born wife of Napoleon III.Having her royal warrant was theultimate seal of approval.

Louis Vuitton’s businesswas doing well enough that by 1859he needed to expand. He bought anacre of land in Asnières, anortheastern suburb situated onboth the rail line to Paris and theriver Seine, which allowed for easyreceipt of raw materials as well aseasy shipping to the store, andconstructed a workshop of brick andglass with iron frames and trusses,

like those used by French architectVictor Baltard at Les Halles. On theground floor, Louis had abouttwenty artisans making trunks.Upstairs, he had a small apartmentwhere he would stay when visitingthe site.

Today, that two-roomspace serves as the Louis VuittonMuseum of Travel, which can beviewed only by appointment. Thewindowless gallery is clean andmodern, with high-gloss blond woodfloors; it traces the evolution notonly of Vuitton but also of modernluxury goods. The tour begins with astack of four old beat-up trunks. Thefirst is the revolutionary TrianonGray. Shortly after it was introduced,it was copied by the competition. SoLouis Vuitton came up with a newcanvas design—the second trunk—of red and beige stripes. He laterchanged the stripes to brown andbeige, which have been the house’ssignature colors ever since. The

third trunk on display is a chocolatebrown and beige checkerboard printknown today as Damier, designedby Louis’s thirty-one-year-old son,Georges, in 1888. The words“Marque Louis Vuitton Deposée”—or “registered trademark”—werewritten in white inside a few of thechecks, thus launching luxurybranding. And the fourth trunk is themonogram pattern of interlockingLVs interspersed with naïf-stylediamonds, stars, and flowers, whichGeorges designed in 1896 also inresponse to counterfeiting andregistered it as a trademark in 1905.No one knows for sure whereGeorges found his inspiration,though it is believed that theblossoms came from the Japonismemovement of the late nineteenthcentury. What is certain today is thatthe Japanese adore the Vuittonmonogram. By the end of 2006, 40percent of all Japanese owned aVuitton product, primarily from the

monogram line.By the end of the

nineteenth century, monarchyaround the world was giving way,through social or bloody revolution,to more equitable—or democratic—societies, and the IndustrialRevolution made inventors andentrepreneurs as rich as kings. Thisallowed the increasingly wealthybourgeoisie to share the lifestyleand tastes of the aristocracy—andthey did, wholeheartedly. AsAmerican economist ThorsteinVeblen argued in his famoustreatise The Theory of the LeisureClass in 1899, spending became theway people established their socialposition in an affluent society.American Industrial Revolutionfamilies such as the Carnegies,Fords, Vanderbilts, Rockefellers,Guggenheims, Pierpont Morgans,and Hearsts showed their socialmight by building gargantuanhomes filled with uniformed staff

and European antiques,underwriting public institutions suchas libraries and universities, andbuying gobs of luxury goods. InEurope, most reigning monarchyhad been abolished, but not theaspiration to emulate it. Aristocratscontinued to live grandly, as before,and a new bourgeoisie spentliberally to acquire all the sametrappings, from fully staffed manorhouses to complete sets of Vuittonluggage.

To keep up with thedemand at Vuitton, Georges addedanother two rows of workshops inAsnières. He opened a shop in Nice—(a favorite winter destination onthe French Riviera for wealthyEnglish, Russians, and Americans)—moved the Paris store from theOpéra district to the far-wealthierChamps-Élysées, and negotiateddistribution deals in the UnitedStates. Soon Vuitton became theluggage of choice for such

Hollywood stars as Mary Pickford,Marlene Dietrich, Lillian Gish,Ginger Rogers, and Cary Grant.Among the star pieces in the Vuittonmuseum collection is actor DouglasFairbanks’s smart Roma suitcasef r o m 1925, covered with naturalcowhide and lined with pigskin.

It was a glamorous time,perhaps the last true golden periodfor luxury, and you can feel thegaiety and refinement in the Vuittoncollection in such items as singerMarthe Chenal’s crocodile toiletrycase with tortoiseshell-handledgrooming utensils; crystal flaskswith gold stoppers; and the ever-popular drawstring Noé bag,designed in 1932 to hold five bottlesof champagne—four upright and afifth upside-down in the center. “Inthose days, fully furnished housesmeant fully stocked households,”wrote Maria Riva in MarleneDietrich: By Her Daughter, of ahome Dietrich rented in Los

Angeles in 1930. “Our inventory listsnever had fewer than eightcomplete dinner services for fifty, sixseparate lunch and tea services, allof bone china, dozens and dozensof crystal goblets, and linen enoughto stock Buckingham palace. Thishouse also boasted fourteen-karatgold cutlery; the sterling silver wasfor lunch.”

In the 1920s, France’sluxury fashion business wascomposed of an astounding threehundred thousand workers,including cutters, fitters,seamstresses, embroiderers,furriers, shoemakers, weavers,spinners, and milliners. In five yearsin the 1920s, the esteemedembroiderer Albert Lesage turnedout fifteen hundred elaborate piecesfor the Paris couture house Vionnet.In the 1930s, Lesage used hand-blown Murano glass to makeflowers to decorate dresses, andcouturier Elsa Schiaparelli flecked

her gowns with semiprecious jewelsset in gold. At Chanel, the atelierturned out hundreds of glitteringgowns for the smart set. DianaVreeland remembered orderingone: “The huge skirt was of silverlamé, quilted in pearls, which gaveit a marvelous weight; then thebolero was lace entirely encrustedwith pearls and diamanté; thenunderneath the bolero was the mostbeautiful shirt of linen lace. I think itwas the most beautiful dress I’veever owned.”

THAT ALL CHANGED with World War II.When the Nazis arrived in Paris in1940, many luxury businesses andcouture houses—including Chanel—closed shop. But couturier LucienLelong, head of the French coutureassociation at the time, persuadedseveral to remain open to save jobsand preserve pride. During the

Occupation, the Nazis ransackedthe association’s headquarters andconfiscated its archives. Theyclosed some houses—MadameGrès and Balenciaga among them—and tried to shut down theindustry fourteen times. Their planwas to move couture houses toBerlin and Vienna, which were to beEurope’s new cultural capitals.Lelong and his confreres wouldhave nothing of it. “You can force usto do anything you like,” Lelongdeclared, “but Paris haute couturewill never move, neither as a wholenor bit by bit. Either it stays in Parisor it ceases to exist.” To keep going,some luxury companies and couturehouses sold their products to thewives of Nazi officers andcollaborators. Vuitton was amongthem. It is a part of the family historythat the company does not mentionanywhere. In fact, it was effectivelyburied until Vuitton biographerStéphanie Bonvicini exposed it in

her book Louis Vuitton: une sagafrançaise, in 2004.

The Vuittons were asdivided as France. Georges’sgrandson Claude-Louis joined theSecond Armored Division in 1944and fought against the Germans.Granddaughter Denyse Vuitton’shusband, Jean Ogliastro, was sentto a concentration camp, andsurvived; a cousin named RenéGimpel, a respected art dealer, diedwhile being deported in January1945. Their father, Gaston-Louis,however, sided with French generalPhilippe Pétain’s Nazi-backedgovernment in Vichy for bothpolitical as well as businessreasons, and instructed his oldestson, Henry-Louis, to work withPétain’s regime to keep Vuittongoing. The company had a store onthe ground floor of Vichy’s elegantHôtel du Parc next to other luxurygoods shops, including the jewelerVan Cleef & Arpels. All were shut

down by the Nazis except Vuitton.Furthermore, Vuitton opened afactory to produce propagandaitems, including more than twenty-five hundred busts of GeneralPétain, and Henry-Louis wasdecorated by Pétain’s regime for hisloyalty.

When the warconcluded, it took some time for theluxury business to get going again.Materials were scarce, and someworkers never came home. Mostshuttered houses started up againand a few new ones opened,including Pierre Balmain, Givenchy,and Christian Dior; the latter kickedoff the revival of couture with hisNew Look in 1947. “The styles[during the Occupation] wereincredibly hideous and I couldn’twait to do something better,” Diorsaid. “I revived the ripe bosom, thewasp waist and the soft shoulders,and molded them to the naturalcurves of the feminine body. It was a

nostalgic voyage back to elegance.”French actress Leslie

Caron remembers the period well.In 1953, fresh from her success in AnAmerican in Paris, the twenty-one-year-old Caron was escorted to Diorby her former ballet master RolandPetit because, he told her, “youneed to be dressed properly.” AsCaron told me one summer eveningin the salon of her Left Bankapartment in Paris, “It was asimportant to be well dressed as itwas to be educated, have goodmanners, eat well.”

Caron and Petit met withChristian Dior and his headvendeuse at the avenue Montaigneheadquarters salon. “Roland knewvery well the première vendeuse,who was a grande dame de lasocieté—the vendeuses moved inthose circles,” Caron said. “Theyknew what to wear to which eventand wouldn’t let any dress be wornby two clients for the same event.

Never. And they had great authority.When they said, ‘No, darling, thatsimply does not suit you!’ youlistened.” After picking out a whitesatin duchesse gown with a knot inthe front and a little black velvetdress trimmed in grosgrain, Caron,like so many others, became adevoted couture client.

More than two hundredthousand women worldwide worecouture in the 1950s. It was anexpected part of a bourgeoiswoman’s everyday life. Today, incomparison, a mere two hundredwomen worldwide buy hautecouture. Suits start at $25,000, gowns$100,000, and are worn sparingly. Iremember Ivana Trump telling me in1988 that she wore her couturegowns a couple of times in NewYork and Palm Beach and then,rather than be accused of the socialfaux pas of being seen too manytimes in the same outfit, sent them toher mother in Czechoslovakia. And

this was before the fall of the Berlinwall.

Buying couture in thepostwar years was an exercise inhigh protocol. Twice a year, Diorsent out three hundred gold-embossed invitations to goodclients, magazine editors, reporters,retailers, and celebrities to attendthe showing of Monsieur Dior’slatest creations, which werepresented each January and July inthe couture salons of the early-nineteenth-century gray graniteheadquarters—or “house”—at 30,avenue Montaigne. Guests wereseated in rows of delicate chairs;behind them in alcoves sat gianturns of roses, gardenias, andcarnations whose scent perfumedthe air. The shows started preciselyon time, and no specialaccommodations were made forlatecomers. Once the duchess ofWindsor arrived after the showbegan and was relegated to the

staircase.The swanlike models

glided regally through the gold andolive rooms as an announcer calledthe name and number of the dressor suit, paused under the enormouscrystal chandeliers, posed armsakimbo, twirled with great purpose,effortlessly slid off the jacket orwrap, twirled again, and continued.The American and Europeandepartment store and boutiqueretailers seated in the front rowscribbled potential orders in theirnotepads, and the chic Parisian andcelebrity clients—many dressed inlast season’s Diors with pearlchokers, hats, and gloves—occasionally nodded approvingly.Shows lasted three hours; todaythey’re twenty minutes—half anhour is considered long. The showconcluded with a elaborate bridalgown, and the models wouldreceive a thunderous applausepunctuated with “Bravo!” and

“Magnifique!” Dior himself wasrarely there. “After all the horrors ofpreparing a collection,” heexplained, “I wouldn’t think ofattending a show.”

After the show, Caronremembers, “if you decided to buy,you stayed. The ladies would bestrewn out in the big salon, andthere were several salons. Thevendeuse called and asked themannequin to put on the dress youliked. You looked at it, at all itssides, and you’d say, ‘I like it, but I’dlike it longer, shorter, whatever.’Then you had a rendezvous andyou went into the cabines”—ordressing rooms—“and there werethree fittings for each dress.”

The Parisian clientswere, as Dior himself put it,“singularly difficult.” “At a fitting shebehaves like a contortionist,” he toldTime magazine in 1957. “She standsup, sits down, bends and wrigglesaround; actually she is testing a

dress because, she knows, anunhinged strap or a clasp couldmean disaster at a fancy soirée.Often she brings along her husbandor her lover, and they fidget as wellover stitches, seams andbuttonholes. They exasperate us,but we cannot afford to ignore theirfussing, however petty it may seem.Unless they leave chez Dior incomplete self-confidence, we haveblundered and our image will betarnished as a consequence.”

The couturiers wereoften personally involved in fittings,and the clothes were constructedsolidly so that they could be wornoften and for years. “A dress or asuit was built on you, taking intoconsideration your own shape andabove all, made to make you feelcomfortable and at your best. Youcould relax and think of somethingelse,” Caron said. “The dressbehaved well, served you well,whether you stood or sat for long

hours. Dior, Marc Bohan, Givenchy,Yves Saint Laurent would ask you,‘What are you going to be doing inthis outfit? Do you need to run ordance? Don’t choose velvet ifyou’re going to sit long hours at agala, it makes a mark on the seat.Let’s not make it tight at the seat, itwrinkles when you stand. Thislength is good for you, that one isnot.’

“Sometimes you seewomen today wearing suits wherethe arms are tight,” she told me. “Ithink, ‘Oh my God. Nobody knowsthat you have to take intoconsideration the upper arm!’” Shepicked up the catalog from the saleof some of her vintage couture atSotheby’s in June 2006 and flipped itopen to a photo of a Saint Laurentred and pink wool tweed suit thatshe wore in the 1965 film A VerySpecial Favor to show me what shemeant. “Look how beautifullymolded it is,” she said. “It fits just

exactly to your measurements.”Then she pointed to a picture of herin a Saint Laurent tangerine silk andsequin gown presenting MikeNichols with the Best Director Oscarin 1968. “This was a difficult dress tomake because there was no bra,”she explained. “It was silk jerseyand it was worked in a way so therewere no seams. That takes a lot ofimagination. Couturiers had theirtricks.” She turned a few morepages to a photo of Saint Laurent’sfamous pop art minidress from 1966:simple shifts made of geometric andflowing shapes in Crayola-likecolors. The form, she said, “was allin the wave, which was all differentpieces. The advantage is, the bustis worked in the seam and there’s alining, in Jap silk. Everything waslined in Jap silk. This had acomplete underdress in Jap silk.”

Couture houses soldtheir patterns to Americandepartment stores such as Saks

Fifth Avenue in New York or I.Magnin in San Francisco for one-year reproduction rights. That way,American society ladies whocouldn’t make the trip to Paris couldorder up a new couture creation intheir hometown. It wouldn’t be aParis creation per se, but prettyclose. And the Americandepartment stores did their best tore-create the ambiance of the Pariscouture salons, with private fittingsin spacious dressing rooms. Middle-market garment manufacturerswould pay a fee—in 1957, it was$2,000—plus royalties to Dior toincorporate elements of Dior’sdesign into dresses and suits thatretailed for $50 to $60 in the UnitedStates. “If you don’t come to Paris,you’re missing the boat,” one NewYork ready-to-wear manufacturersaid at a Dior show in 1957. “Thereare more ideas in a thimble herethan in all of America.”

Dior understood that the

middle market was the future ofluxury fashion, and sold not only hisideas but also his name tocompanies that could spread theDior gospel to those who could notafford a made-to-measure frock. Hestarted with American-madestockings, since the French industrystill hadn’t quite recovered from thewar. “I have the girls wear Americanstockings,” Dior told his backerJacques Rouët in 1948. “Why notuse our own name?” Dior hosierywas born, as was the notion oflicensing of fashion as a viablebusiness option.

The Walt DisneyCompany turned licensing into amegabusiness in the 1930s and1940s by having outside companiesproduce Mickey Mouse books, toys,and other kitsch. Dior saw licensingas a way to extend a luxury brandbusiness to a wider audiencewithout taking on the cost ormanagement responsibilities. Dior

contacted leading manufacturers inparticular domains and negotiateddeals for them to produce items withDior’s name. In return, Dior waspaid a royalty on the sales. By 1951,Dior had licenses for handbags,men’s shirts, gloves, scarves, hats,knitwear, sportswear, lingerie, andeven eyeglasses.

Soon licensing was thehottest business move in the luxuryfashion business. Couturierslicensed their names for perfumes.In 1959, Pierre Cardin, a former Diorassistant who started his ownbusiness, revolutionized fashion bylicensing the mass production ofwomen’s designer ready-to-wear.Instead of going to a departmentstore to have a Cardin dress madefor you with the store’s label inside,you could buy it off the rack and itwould bear the label “Pierre Cardin—Paris.” Cardin’s name wasstamped on everything fromumbrellas to cigarettes, making his

signature a coveted logo.Another former Dior

assistant—and later Dior’s heir—Yves Saint Laurent, took licensingone step further in 1966 byintroducing a lower-priced ready-to-wear line called Rive Gauche thattargeted young people. RiveGauche changed the fashionparadigm. Before it was simple:couturiers made exquisite clothesand sold a bit of perfume and someaccessories. Now there was a newpyramid model: made-to-ordercouture on the top for the truly rich,ready-to-wear by the samedesigners for the middle class, anda broad array of fragrances andaccessories for those at the bottom.With the advent of licensing names,the fragrance business began togrow, and couture diminishedrapidly.

“I stopped buyingcouture because, frankly, it wasconsidered really old-fashioned,”

Leslie Caron told me. “I rememberone of the fashion magazines askedme to do a layout in about 1968, andthey came up with people I hadnever heard of like Biba. You weresupposed to look like a flower child.You couldn’t wear hats anymore,you couldn’t wear gloves or a bra,and you looked really old-fashionedif you wore couture dresses.”

Master couturierCristobal Balenciaga was sodisillusioned by the dressing downof society that he abruptlyannounced the closure of his house.“I was staying with Mona Bismarckin Capri when the news came,”Diana Vreeland recalled in herbook. “Mona didn’t come out of herroom for three days. I mean…it wasthe end of a certain part of her life!”

It was also an end to acertain part of the luxury business.From then on, luxury was no longersimply about creating the finestthings money could buy. It was

about making money, a lot ofmoney. Couturiers licensed theirnames liberally, and not just onperfume and eyewear. Givenchyand Pucci both did special designereditions of Lincoln Continentals.Quality dropped. “I bought ready-to-wear made of really bad qualitymaterial for a while,” Caronremembered. “I have pictures of megoing to the Oscars or premieres inreally horrible rags that wereconsidered fashionable.” Serviceevaporated. “Bloomingdale’s is theend of shopping because there isn’tanyone to wait on you,” DianaVreeland wrote in 1984. “Then yousee a man; you think he’s afloorwalker: ‘I’m sorry, lady, I can’thelp you. I’m like you, I’m justlooking for somebody to help me.’So you go out into the street withtears in your eyes: you’veaccomplished nothing and you’velost your health!…Or I go into, say,Saks Fifth Avenue, and there on a

rack on wheels are two dozen $5,000dresses. On a rack! It shocks me…$5,000 dresses, dangling there…Ofcourse a lot of people enjoy thevariety. They go home empty-handed. But they’ve shopped. It’s asport.”

VUITTON WAS OUT of step with thetimes, and this is evident whenvisiting the museum. From thepostwar era to the early 1980s, thereis little on display. Henry-Louis, whowas in charge of sales, and Claude-Louis, who oversaw production,were gatekeepers, not innovators.Vuitton made old-fashionedluggage the old-fashioned way for alimited—and aging—clientele. Thebusiness foundered, the workshopin Asnières could barely meet themeager demands. By 1977, thecompany had two shops—one onthe avenue Marceau and the other

in Nice—a piddly 70 million FF(approximately $12 million) in salesand 7 million FF (approximately $1.2million) in profit.

Finally, in 1977, RenéeVuitton, the eighty-year-old familymatriarch, asked her sixty-five-year-old son-in-law Henry Racamier totake over. Racamier was quite apresence: he stood six feet two andwas regally handsome, with amanner both polite and genial. LikeLouis Vuitton, Racamier was fromthe mountainous Jura region in theeast of France. In 1943, he marriedGaston-Louis and Renée’s thirddaughter, Odile. He then started hisown sheet steel company, calledStinox, and ran it so efficiently that itbecame the leader in its marketsector. In 1976, just as the steelbusiness was taking a downturn,Racamier sold his company to theGerman firm Thyssen and retired.He was too dynamic to be contentdoing nothing, so when his in-laws

asked for help, he agreed.Racamier looked at the

books and discovered that retailers—mostly franchisees—were makingthe biggest profits. At the time, mostluxury companies were still small,run by the original founders, andtheir expertise was in creation andproduction, not merchandising. Itmade more sense, particularlyoverseas, to let someone else riskputting up the money for the storeand its stock. The local merchantsknew their clientele far better thanany Paris-based designer everwould. The merchants bought theproduct wholesale from the brand,sold it for twice as much—or more—at retail, and made a killing.

Racamier wasn’t afashion person; he was abusinessman. He decided toimplement a strategy called verticalintegration at Vuitton: he cut out themiddleman and opened Vuitton–owned-and-operated stores. It was

revolutionary in luxury fashion and aroaring success financially. Within afew years, Vuitton was enjoying awhopping profit margin of 40 percentwhen most of its competitors werestill earning 15 to 25 percent. Todaymost luxury companies followRacamier’s model and are nowvertically integrated.

Racamier expandedproduction at the Asnièrescompound and built new workshopsin the provinces. He introduced anew, popular line called Epi, whoseproducts were made of leather withfine, uneven horizontal stripes;arranged for Louis Vuitton tosponsor the qualifying races for theAmerica’s Cup regatta to raise thebrand’s profile; and opened storesthroughout Asia and on Fifty-seventh Street in New York. In1984—only seven years afterRacamier took over—sales atVuitton had increased fifteen times,to about $143 million, and profits by

almost thirty times, to about $22million. That same year, Racamierlisted Vuitton on the Paris Bourseand the New York Stock Exchange.Going public forced the company’sexecutives to work moreprofessionally, but it also made thecompany vulnerable for takeover.

I n 1986, Louis Vuittonacquired Veuve Clicquot, achampagne and perfume group thatincluded Parfums Givenchy, theperfume and cosmetic company thatwas aligned with but independent ofthe Givenchy fashion house. Thefollowing summer Racamierorchestrated a merger betweenLouis Vuitton and Moët-Hennessy,creating the group LVMH, then thesixth largest company listed on theFrench stock market. In 1988, headded the Givenchy fashioncompany to the portfolio—at thethen-astronomical price of $45million—and promised its founder,Hubert de Givenchy, that he could

remain as designer until he wantedto retire.

In less than a decade,Racamier had turned Louis Vuittonfrom a small family business thatsold to an elite clientele to apowerful, publicly traded brand withsubstantial sales and even morepotential. By merging it into anexisting and stable corporate group,and then by adding Givenchy tocreate a luxury fashion division,Racamier gave Vuitton the heft andthe organization it needed toconquer the world. Racamier sawglobalization as luxury’s future, andused the synergy among brands inthe group to map out and launchtheir expansion; he turned luxuryfashion from a one-man or family-run affair to a corporate industryfocused on the bottom line, and hemanaged to do so while maintainingthe brands’ integrity. Racamiermade one wrong move: he turned tosomeone outside the family for help,

someone who had no emotionalattachment to Vuitton or the otherbrands in the group, someone whohad a fearless ambition andabsolutely nothing to lose. It was amove that would change the courseof luxury forever.

CHAPTER TWO

GROUP MENTALITY

“War destroysman, but luxurydestroysmankind; at oncecorrupts the bodyand the mind.”

—JOHN CROWNE,SEVENTEENTH-CENTURY ENGLISH PLAYWRIGHT

EARLY ON A COLD February morningi n 1999, I met with Bernard Arnault,chairman of LVMH, at the group’sheadquarters in Paris to interviewhim for an article I was writing forNewsweek magazine. In ten years,Arnault had turned LVMH into aluxury monolith with dozens ofbrands earning millions of dollars.Arnault was in the midst of anattempted hostile takeover of Gucci,the publicly traded Florentine

leather goods house that had, underthe guidance of CEO Domenico DeSole and designer Tom Ford, in fiveyears rebounded from nearbankruptcy to become one of themost successful luxury brands ever.Arnault wanted Gucci in the LVMHgroup, and he invited me to hisoffice that morning to explain why.

He walked in quietly.Though tall, he stoops slightly, as ifembarrassed by his stature. He wasnattily attired in a tailored gray suit,which set off his ice blue eyes, andhis long, thin hands moved withgrace, conveying his love of piano.Since his English is halting, wespoke in French, he in a hushedtone. His voice was surprisinglynasal and solidly tenor, with anappealing lilt that makes itdangerously reassuring. Hismanner reminded me of the oldTeddy Roosevelt adage: speaksofty and carry a big stick. ExceptBernard Arnault carries a club, and

during the last decade he had usedit to beat luxury’s players intosubmission. Luxury was his gamenow, and he had written a new setof rules.

With Arnault’s guidinghand, luxury had gone corporate.Most of its major brands were nowpart of groups run primarily byexecutives who had little or nobackground in luxury but knewplenty about business. Theseexecutives included Johann Rupert,chairman of Richemont, whichowned Cartier, Chloé, and Dunhill;Patrizio Bertelli, husband of MiucciaPrada and chairman of Prada, whohad purchased a sizable chunk ofGucci stock; Jean-Louis Dumas, thechairman of Hermès, whichcontrolled John Lobb shoes andPuiforcat silversmiths, and, as adescendent of the founder, one ofthe few luxury heads who had beenraised, as the French say, with theculture of luxury; and Domenico De

Sole, the Harvard-educated lawyerwho had guided Gucci to itssuccess and was positioning it for amuch bigger future.

Arnault and I sat down athis conference table and got downto business. Why, I asked, was hetrying to take over Gucci?

“Because, first of all, thecompany is doing well, and theshares were undervalued,” he toldme. “Gucci is a brand with a lot ofpotential, in development and inamelioration of its businessactivities, and it has a good team.For us, it is evidentlycomplementary: it’s an Italian brandin a portfolio that is primarily French,and it’s one of the best businessesin the world.”

And what, I continued,was his plan for Gucci if hesucceeded?

“We want to bring ideasto improve profitability,” Arnaultexplained frankly. “The profitability

of Gucci is half that of Vuitton. Sothere is still room for improvement.”

If there is one thing thathas changed in luxury in the lastthirty years, it is the single-mindedfocus on profitability. In the old days,when luxury brands were privatelyheld companies, owners caredabout making a profit but theprimary objective in-house was toproduce the finest productspossible. Since the tycoons havetaken over, however, that objectivehas been replaced by aphenomenon I call the cult of luxury.Today, luxury brand items arecollected like baseball cards,displayed like artwork, brandishedlike iconography. Arnault and hisfellow luxury tycoons have shiftedthe focus from what the product is towhat it represents. To achieve this,they “enhance [the] timelessness”as Arnault likes to say, bytrumpeting a company’s heritage;hire a hip, young designer to give it

a sexy, modern edge; strengthenthe branding by streamlining thename (Christian Dior has becomesimply Dior, Burberry lost its ’s) andsplashing the logo on everythingfrom handbags to bikinis; andadvertise the entire packagerelentlessly to spread the newgospel to the masses.

Arnault plays up thecachet of his brands that much moreby attending their fashion showswith his striking blond second wife,a Canadian-born pianist namedHélène Mercier. The pair arrives ina chauffeured sedan, andbodyguards usher them through thecrowd to their front-row seats. Therethey hold court, greeting high-profileguests such as France’s former firstlady Bernadette Chirac or actressSharon Stone, who are seatedimmediately to their right and left.They pose for pictures and chat withmagazine editors and newspaperreporters until the show begins.

Most other luxury-group chairmendo not attend their brands’ shows,and if they do, they sit in back rowsand are unrecognizable. Few bringtheir spouses.

The result of all thishype is a product line that, Arnaultsays, “fulfills a fantasy. It is so newand unique you want to buy it. Youfeel as if you must buy it, in fact, orelse you won’t be in the moment.You will be left behind.”

BERNARD JEAN ETIENNE ARNAULTwas born on March 5, 1949, inRoubaix, an industrial town in thenorth of France not far from theBelgian border. The France of bigfamilies and industrial fortunes, it isperhaps the most conservativeregion of the country. Arnault’sfather, Jean, ran a family-ownedconstruction business; his mother,Marie-Jo Savinel, was a pianist. As

a boy, Arnault took up piano andshowed great promise, though notenough to make it a career. “Youhave to be super-gifted,” he said,“and I wasn’t.” Instead, Arnaultenrolled in the École Polytechnique,one of France’s prestigious grandesécoles that produce the country’sbusiness and political elite, andtook a degree in engineering. Upongraduating, he joined the familybusiness, called Ferret-Savinel, andi n 1973 married Anne Dewavrin, apretty blond from a prominent textilemanufacturing family in Roubaix.According to Nadège Forestier andNazanine Ravaï in their book TheTaste of Luxury: Bernard Arnaultand the Moët-Hennessy LouisVuitton Story, Arnault kept themarriage a secret from theemployees at Ferret-Savinel. (Fulldisclosure: while researching thisbook, I discovered that I was relatedto Dewavrin through marriage; thishas had no impact on my coverage

of Arnault.) He didn’t wear awedding band, and when hisdaughter was born, his secretarydidn’t even know.

Arnault was just assecretive about business. At twenty-seven, he negotiated to sell Ferret-Savinel’s construction division tothe Rothschilds’ Societé Nationalede Construction for the impressivesum of 40 million French francs; hetold his father only after the dealwas done. Jean Arnault steppeddown, and Bernard Arnault tookover Ferret-Savinel. Within fiveyears, the company’s developmentarm, Férinel, had become one of thetop private home developers inFrance, specializing in vacationhomes.

I n 1981, FrançoisMitterrand, the first popularly electedsocialist president of France, swiftlynationalized banks and majorindustrial businesses. The newsocialist economic policies made

business conservatives like Arnaultnervous. Arnault fled France withhis wife and two small children,Delphine and Antoine, to the UnitedStates, where he bought a splendidMediterranean-style home facingNew York’s Long Island Sound,enrolled his children in goodschools, and began buildingvacation homes in Florida withmoderate success. “It’s tough in theUnited States if you haven’t movedin the right circles from the start,” helater said. After a few years, thesocialists loosened their economicpolicies and Arnault decided it wastime to return. But he didn’t want toreturn as a property developer. Hecalled his counsel Pierre Godé inFrance and instructed him to find acompany to buy.

Like Arnault, PierreGodé comes from the north, the cityof Lille, where he worked as alawyer for Arnault’s father at Ferret-Savinel. Like Arnault, Godé is tall—

he stands six feet four—anddashing. And like Arnault, Godé iswily, determined, and unafraid ofconfrontation. The pair circled eachother at first, but once they bonded,it was for good. Godé served asArnault’s hatchet man: he woulddeliver the bad news and handlethe difficult situations swiftly, if notpainlessly.

I experienced thispersonally during my rendezvouswith Arnault back in 1999. When Iarrived for my appointment, I wasinformed by an assistant that Iwould get the bonus of talking toMaitre Godé about the Guccitakeover situation and was usheredinto a conference room. Godéswaggered in like a French JohnWayne, bore into me with hispiercing eyes, and calmlyproceeded to spin me dizzy with awell-versed tale about how awfulGucci was behaving and howLVMH was the victim. Never mind

that LVMH had launched thetakeover bid. I left the conferenceroom worked over, worn out, andwithout a shred of usefulinformation: mission accomplished.“I can be very unpleasant,” Godéonce admitted.

In July 1984, Godé calledArnault in New York with aproposal: Boussac.

The Boussac textileempire had been acquired by aholding company called SociétéFoncière et Financière Agache-Willot and was in the midst of thesecond largest industrial bankruptcyin France. Most of its holdings wereworthless. But there was one gemwaiting to be dusted off: ChristianDior, the stalwart French couturehouse long known as the GeneralMotors of fashion. Textilemanufacturer Marcel Boussac wasChristian Dior’s original backerback when the house opened in1946 and was an integral part of the

Boussac Group. (Marcel Boussacdied in 1980.) By the early 1980s, Diorwas a fiscal mess: the mainboutique was losing money, and 90percent of Dior’s sales werelicenses. In 1983, Dior’s own salesplus license royalties were 437million FF ($85 million), and its netprofits were a paltry 38 million FF($7.5 million).

Its only hope was to bebought out. Cartier made overturesin the late 1970s, offeringapproximately $300,000. Moët-Hennessy was interested, too, as italready owned Parfums ChristianDior. But Christian Dior as a loneentity wasn’t for sale. The Frenchgovernment insisted that Agache-Willot be sold as a whole. Godéconvinced Arnault to return toFrance and put in a bid. ThoughArnault was unknown in the luxurybusiness community, he had a legup on the other suitors. His wife wasa distant cousin of the Willots, who

were also from the north of France,and Arnault knew them socially:they all collected art and saw eachother regularly at auctions. Arnaultdecided to deal with the Willotsdirectly rather than throughbankruptcy courts.

He had the socialconnections, but he neededfinancial might, too. He convincedLazard Frères, the investment bankreferred to then as the “secondindustry minister” for its close ties tothe French government, to work withhim and help raise the majority ofthe reported $80 million purchaseprice. It was perhaps the wisestmove Arnault could have made: thelink with Lazard gave the thirty-five-year-old Arnault the heft andlegitimacy he needed to convincethe French government he was acapable buyer. It worked: by the endo f 1984, Arnault controlled Agache-Willot and, with it, Christian Dior.

Arnault immediately

began to ruffle feathers both inFrench business circles and at Dior.Until the 1980s, business in Francewas a gentleman’s game, governedby scruples and politesse. As heproved with the way he handled hisfamily’s company, Arnault wasn’tconcerned with either. He was anew breed of French executive, thesort whose goal was to succeed atany cost. He shocked the Frenchbusiness establishment—and theFrench government—by divestingthe Agache-Willot conglomerate ofmany of its holdings. Within fiveyears, Arnault had sacked someeight thousand workers and soldmost of the company’smanufacturing assets for nearly $500million—making Arnault one of therichest men in France.

At Dior, Arnault’soffenses were more personal.Unlike Dior’s gregarious formerchairman, Jacques Rouët, Arnaultdid not mix with workers. Instead, he

relied on a small group of loyalexecutives to advise him. Shortlyafter taking over Dior, Arnaultreportedly claimed that the sewingmachines in the ateliers above hisoffice disturbed him and ordered theroom to be soundproofed. Hereportedly further alienated staff byinsisting that they could no longeruse the corridor in front of his officeand that an elevator from theboutique to the executive officesupstairs was now reserved for onlyhis use. His weak handshake andhis habit of looking away when hespoke were seen as insulting, andhis attire to some anembarrassment. The latter heeventually corrected when heturned himself over to the fashiondepartment to be restyled.

Like Racamier, Arnaultwas a businessman, not a fashionperson. When he took over Dior,there were 260 licenses worldwidefor Dior products made by other

companies, many below luxurystandards. Dior handbags sold inthe United States, for example, weremade of cheap leather in Asia.Arnault reined all this in and beganto apply Racamier’s method ofvertical integration—the businessstrategy of controlling production,distribution, and marketing in-house. Sales increased, and so didprofits.

Most important, Arnault’sdevotion to the brand wasunquestionable.

A colleague asked himone day what he would do if hewere offered $500 million for Dior.

“I don’t want to sell,”Arnault responded. “The company’spriceless.”

FROM THE MOMENT Arnault got hold ofDior, he dreamed of building aluxury group, with the couture house

as the cornerstone. His model wasthe Moët-Hennessy group, whichincluded Moët & Chandonchampagne, Hennessy cognac, andParfums Christian Dior. Arnault’sfirst move came in late 1986: hesecretly met with Christian Lacroix,the critically acclaimed designer ofthe classic couture house Patou,and convinced Lacroix to leave withno advance notice, take several ofhis assistants, and open a newhouse called Christian Lacroix. Themove left Patou in tatters. In 2002,Procter & Gamble completed thepurchase of Patou from the foundingfamily. Today Patou continues tosell perfume, including its 1931classic, Joy, but it never producedanother couture or ready-to-wearcollection after Lacroix’s departure.

The sneaky—and somemight say unethical—way Arnaultcreated the house of Lacroixstunned the luxury fashioncommunity. It would soon prove to

be Arnault’s modus operandi: movein stealthily and conquer quickly,the luxury equivalent to theAmerican military’s “shock and awe”approach to war. Arnault andLacroix’s unscrupulous dealhaunted both men for years. In 1988,French courts ordered Lacroix topay $2 million in damages to Patou.And despite Lacroix’s criticalacclaim, by the time Arnault sold thecompany to the Miami-based FalicGroup in 2005, it had never turned aprofit.

I n 1987, Arnault struckagain: he wanted to buy Céline, aforty-year-old luxury women’s wearand leather goods company from itsfounders. Céline was a small familybusiness: Madame Céline Vipianadesigned, and her husband,Richard, handled the books. Thecompany did a meager $20 million(1.2 billion FF) in sales and $5million (26 million FF) in profitsannually. Like Dior and other luxury

companies back then, Céline’sshops were often franchises, ownedand managed by local merchantswho paid Céline a percentage of thesales. It was the franchises thatmade the money. It was an easyway for brands to expand theirpresence, particularly in foreignmarkets like Japan, and earn a lot ofmoney without much effort.

The Vipianas, well intotheir sixties, were thinking aboutretirement, and their son had nointerest of taking over. In 1987,Arnault proposed to buy Céline but,according to the Vipianas, allowthem stay on and help run it. Theyagreed and sold him two-thirds oftheir shares. However, withinmonths of signing the deal, theVipianas say, they wereunexpectedly ousted by Arnault.“You can stay at home, Grandpaand Granny,” Pierre Godéreportedly said, according to theVipianas. “We’ll call you if we need

you.”Feeling beaten, they

sold Arnault the remainder of theirshares. A few months later, theVipianas ran into Arnault and NanLegeai, Céline’s new beautifulblond CEO, at a restaurant in MonteCarlo. “If you’d told me that youwould put us out into the street afterthree months, I’d not have sold youthe company for twice what youpaid us,” Richard Vipiana hissed atArnault. “You treated us very badly.”

Maybe so. But in amatter of three years Arnault hadachieved his goal: he owned aluxury goods group.

In the spring of 1988,LVMH’s vice chairman HenryRacamier—in a move he wouldlater regret—rang Arnault andproposed that they meet to discussArnault’s possible involvement inLVMH. Racamier was in a powerstruggle with LVMH chairman AlainChevalier and thought that aligning

himself with Arnault would tip thebalance in his favor. Arnault hadother ideas. Once Racamierbelieved that he had Arnault as anally, Arnault secretly met withChevalier and negotiated anotherdeal that allowed Arnault to acquirea major stake in the group. Afterseveral months of battles withRacamier, Chevalier was worn outand stepped down as chairman ofLVMH. Arnault, by then the mainshareholder of LVMH, becamechairman of the group, andRacamier served its as vicechairman and managing director aswell as chairman of the LouisVuitton brand. For the next fifteenmonths, Racamier and Arnaultfought for control of the group—inthe boardroom, the courtroom, andthe press—in what became knownas the LVMH Affair. Arnaultreportedly hired a top privateinvestigator to look into Racamier’sand the Vuittons’ lives, and French

daily newspapers published storiesthat alleged—falsely—thatRacamier supported radical right-wing politician Jean-Marie Le Penand that his grandchildren goose-stepped like Nazis in the backyard.At one point Arnault filed criminalcharges against Racamier forallegedly committing fraud with aVuitton distribution partner,prompting police to raid Racamier’sSixteenth Arrondissement home themorning of a Givenchy coutureshow; the charges were laterdismissed. The French dailyLibération called Arnault “theMachiavelli of finance.”

Finally, in April 1990,following a judicial ruling in favor ofArnault, seventy-seven-year-oldRacamier resigned from Vuitton andLVMH. At forty years old, Arnaulthad it all, closing one of the mostvenomous business takeovers inFrance; it later contributed to Frenchtakeover regulation reforms. The

Vuittons packed up their belongingsand left the avenue Montaigneheadquarters, with Racamier’s wife,Odile Vuitton, in tears. “One alwaysrecognized that one day thebusiness might pass out of thefamily’s hands,” Denyse Vuitton’shusband, Jean Ogliastro, toldreporters. “It’s just hard that ithappened in this manner…Onecouldn’t say that Bernard Arnaultbehaved to us in a gentlemanlyway.”

Three months later,Arnault and his wife were divorced.

RACAMIER HAD JUMP-STARTED LouisVuitton. By the time he resigned, in1990, the company had expanded to125 stores and $4.167 billion FF(about $765 million at exchangerates then) in sales. But BernardArnault took Vuitton, and all ofLVMH, to another level altogether.

His motivation was simple: theluxury goods industry, he said, “isthe only area in which it is possibleto make luxury margins.” Heexpanded his group, focusing onwhat he calls “star brands”—brandssuch as Vuitton, Givenchy, andDior, which he described as“timeless, modern, fast-growing, andhighly profitable [companies built]for eternity.”

Some brands he boughteasily, others through bold,acrimonious takeovers. With eachnew brand, Arnault saw opportunityfor exploitation. The younger brandslike Bliss, Michael Kors, and MarcJacobs were easy: he streamlinedthem and folded them into theLVMH production, distribution, andretail network. The older brandswere another story. They needed tobe renovated top to bottom. To do it,Arnault implemented the new luxurymodel he helped develop: enhancetimelessness, jazz up the design,

and advertise like crazy.At Vuitton, he began in

1990 by hiring an ebullient forty-two-year-old French businessmannamed Yves Carcelle as his newhead of strategy and development;after a few months, Carcelle waspromoted to CEO and chairman ofLouis Vuitton. Carcelle was the onlyson of a civil servant and, likeArnault, had studied at the eliteÉcole Polytechnique. Rather thanpursue mathematics, Carcelle wentinto marketing. He worked briefly asa traveling salesman hawkingsponges and spent nine years witha German consumer productsgroup. In 1985, he was hired by a bigFrench textiles group to turn aroundits failing luxury linens brand,Descamps. In eighteen months,through staff layoffs and productionreorganization, Carcelle broughtDescamps back into the black.

Even so, Arnault andCarcelle had their work cut out for

them. “You think of Vuitton and youthink of airports,” Vogue’s editor inchief, Anna Wintour, told the NewYorker. “Until now, it has had nofashion cachet, no status. Vuitton’simage has been—it has been PalmBeach.”

To refurbish thecompany’s heritage, Carcelle andhis number two, Jean-Marc Loubier,launched Vuitton ad campaigns thatromanticized luxury travel;organized and sponsored antiquecar rallies, such as the VintageEquator Run in 1993 acrossSoutheast Asia; and invitedjournalists on tours of the Asnièresworkshop to write stories about howa Vuitton trunk was made. Theyreintroduced the century-old Damiercheckerboard canvas and launcheda retro handbag design called theAlma that was inspired by aluggage line from the 1930s.

Once they hadmanufactured the dream, they

livened up the design side. For thecentennial of the monogram canvasi n 1996, they hired seven cutting-edge designers to reinterpret thecanvas and ran the creations as anad campaign. Spanish designerSybilla came up with a backpackwith an umbrella sprouting from it.Azzedine Alaia wrapped amonogram handbag in leopard skin.Vivienne Westwood came up with abustle-like fanny pack. But Arnaultwanted more. One of the best waysto garner attention is the women’sready-to-wear shows held twice ayear in New York, Milan, and Paris.Covered by more than a thousandjournalists and photographed bydozens of newspapers, wireservices, and photo agencies, theseshows get immediate headlines—and pictures of the outfits appear inmagazines and newspapers all yearlong. “What counts with critiques isnot whether they’re good or bad,”Arnault told me, quoting Christian

Dior. “It’s whether they’re on thefront page.”

Arnault wanted awomen’s ready-to-wear line atVuitton and told his staff to find ahip, hot designer to do it. Afterreviewing various suggestions,Arnault hired Marc Jacobs. It was acurious choice. In his midthirties,Jacobs was scruffy and bohemian,a New Yorker deep in his bones. Afew years earlier, as the designer forNew York–based Perry Ellissportswear line, Jacobs shook upthe fashion world with a ragtagcollection of clothes inspired by rockstar Kurt Cobain and dubbedgrunge. The collection won Jacobsthe Council of Fashion Designers ofAmerica women’s wear designer-of-the-year award—and got himsacked from Ellis. For theeponymous company he startedwith his Ellis settlement, Jacobsmade pretty, modern, and dizzyinglyexpensive clothes for cool rich girls

like his pals Sofia Coppola and KimGordon, guitarist and singer for therock band Sonic Youth. What couldhe bring to the staid, bourgeoishouse of Vuitton?

Attention, that’s what.Jacobs’s Vuitton ready-to-wearcollections immediately became themost popular and critically laudedduring Paris’s fashion week and arenow seen as a style bellwether forthe industry. But the clothes areproduced in small quantities, sell forextremely high prices, and areavailable only in Vuitton boutiques.The ready-to-wear line’s mainfunction, it seems, is to garnerheadlines and dress up ads to sellleather goods: while it gets a greatdeal of attention, according toanalysts it constitutes a meager 5percent of Vuitton sales.

While revitalizing theimage of Vuitton, Arnault andCarcelle simultaneouslystrengthened its business side.

During Racamier’s reign, Vuittonoutsourced 70 percent of itsproduction. Carcelle pulled it allback in-house and increased thenumber of factories from five tofourteen in ten years. Carcelle alsocontinued Racamier’s effort to takecontrol of distribution by buying outthe brand’s U.S. franchisees. “If youcontrol your factories, you controlyour quality,” Arnault explained. “Ifyou control your distribution, youcontrol your image.” By 2004,analysts believed that, with its fullyowned distribution network of threehundred stores, Vuitton earnedgross margins of 80 percent.

The renovation of Diorwas far more brutal. Dior’s sixty-three-year-old couturier, MarcBohan, allegedly learned of hisdismissal from his job of twenty-nineyears in May 1989 when a reporterfrom Women’s Wear Daily called forcomment. “I was thrown out asabruptly and brutally as if I had been

an incompetent valet,” Bohan toldthe press. Arnault replaced Bohanwith Italian ready-to-wear designerGianfranco Ferré, a move thatoffended the French as well asthose in the couture business, manyof whom believed that a ready-to-wear designer knew nothing of theart of made-to-measure clothes.

At Givenchy, Arnaultwas just as brusque. After a seriesof tenuous negotiations that playedout in the press, Arnault and Hubertde Givenchy reached an impasse,causing the distinguished couturierto retire from the house he hadfounded forty-three years earlier.Arnault ignored Givenchy’shandpicked choice as successorand hired British designer JohnGalliano, the thirty-five-year-oldplumber’s son and darling of thefashion press who was known asmuch for his wild partying as for hisbias-cut flamenco dresses and1950s-inspired tulle confections.

Givenchy learned of theappointment at the same time asjournalists, through a release fromhis own press office. When I askedGalliano about the longtime,primarily American Givenchyclientele, he snapped in hisworking-class-accented English, “Idon’t intend to please them. I’m notgoing there to please them, andprobably a lot of them will moveaway.”

I n 1996, Arnault didn’trenew Ferré’s contract at Dior, andmoved Galliano from Givenchy toDior. Arnault interviewed Jean-PaulGaultier, the bad boy of Frenchfashion best known for designingMadonna’s cone-breast corsets, forthe Givenchy job. Gaultier turned itdown; he wanted Dior. Arnault thentook a look at Alexander McQueen,the twenty-seven-year-old son of aLondon cabbie. McQueen was ananathema in luxury fashion, with hissoft pudgy body, hard East End

accent, and enough rage to makeJohnny Rotten seem sweet. Hemade his name in fashion withshows like Highland Rape, in whichmodels in kilts and shredded lacedresses were splattered with blood.But as he proved during his studiesat Central Saint Martins in Londonand his apprenticeship on SavileRow, McQueen had great talentand, if he could direct his rage, evengreater potential. That’s whatArnault was banking on. More thanonce during negotiations, McQueenstood up and told Arnault off.

“Look,” McQueen’slawyer said, trying to calm his clientdown, “they’re the cart, and you’rethe only horse who can pull it.”

“I’m not their horse!”McQueen exploded. He turned toArnault.

“I don’t need you!” heblasted.

Then he stormed out ofthe room.

McQueen later changedhis mind and took the job.

I met McQueen a fewweeks before his Givenchy ready-to-wear debut in Paris for a cover-story profile for NewsweekInternational. He sat at Hubert deGivenchy’s desk, which overlookedthe avenue George V. He had justshaved his hair into a Mohawk forthe cover picture, and the trimmingswere scattered across the whiteFormica desktop. During our talk,McQueen told me, “My clothes areout there on a limb, and I getslagged for it. It’s like Hitler and theHolocaust. He destroyed millions ofpeople because he didn’tunderstand. That’s what a lot ofpeople have done to me becausethey can’t understand what I do.” Hequickly sought to shift away from thehouse’s longtime muse: “[Audrey]Hepburn is dead,” he told anotherreporter.

Arnault was just as cold-

blooded when reorganizing theexecutive offices. In 1996, hereplaced Parfums Givenchy’slongtime head Jean Courtière withformer Procter & Gamble executiveAlain Lorenzo, and ParfumsChristian Dior head Maurice Roger,known as the “Philosopher-King” forhis disavowal of marketing studies,with Patrick Choel, a no-nonsenseexecutive who had worked forUnilever for thirty years, mostrecently as CEO of Chesebrough-Pond’s in the United States. Notsurprisingly, the press dubbedArnault the “Terminator.” “For aEuropean, I have a U.S. approach,”Arnault explained. “That is, I facereality as it is and not as I would likeit to be. I build for the long term.” Alongtime colleague put it moresuccinctly: “[Arnault] is 100 percentcapitalist in a country that has neveraccepted capitalism. And he hasrubbed everybody the wrong way.”

The new designers

fulfilled their mandate—theygrabbed headlines with crazy stuntslike the Dior collection of newsprintdresses inspired by the homeless—and the new marketing executivesmade the most of the hoopla. Notsurprisingly, many longtime oldcouture clients fled to moretraditional houses such as YvesSaint Laurent and Chanel.

“There I was sitting in arow of the Dior show with Frenchfirst lady Bernadette Chirac andformer first lady Claude Pompidou,and they looked like they had beenhit in the face with a cold dead fish,”New York socialite and lifelong Diorclient Nan Kempner told me after aDior couture presentation ofEdwardian-style getups in 1997.“They couldn’t believe what theywere looking at: this conservativehouse where they’ve all bought theirclothes for years. How much wasthere that Madame Chirac orMadame Pompidou could wear?”

Arnault didn’t care;couture lost money, heaps of it. Anew generation of Dior customersflooded the LVMH brand stores tobuy something linked to the newlyhip brands. Perfume and handbagsales doubled, tripled, and that’swhere the big profits were. “Sellingto the right clients isn’t an issueanymore,” couture client andAmerican socialite Susan Gutfreundconceded. “When it’s all filtereddown, it sells to the masses. Youwalk through the airport and buy apair of Dior sunglasses that you canafford and you feel like you have abit of the magic.”

FOR MUCH OF THE 1990S, Arnault’sonly real competitor on the grouplevel was a conglomerate nowknown as Richemont, the Swiss-based firm that owns Cartier, VanCleef & Arpels, Dunhill, Montblanc,

and Chloé, and is controlled byJohann Rupert, an Afrikanerbusinessman from Johannesburg,South Africa.

Richemont beganmodestly: during World War II,Rupert’s father, Anton, took over asmall tobacco factory inJohannesburg with two friends. Butafter the war, Anton’sentrepreneurial skills took over: helicensed cigarette brands fromRothmans, a well-known Londontobacconist and, in the 1950s, wentglobal. In the 1970s, Anton boughtstakes in Cartier and Alfred Dunhill,which owned Montblanc writinginstruments. Like Vuitton at LVMH,Cartier became the cornerstone andcash cow for what would become aluxury group. Cartier added amoderately priced contemporaryline called Les Must de Cartier,which fueled growth and expansion.

In 1985, Johann Rupert, abanker who had worked for Chase

Manhattan and Lazard Frères inNew York and had run his ownmerchant bank in South Africa,joined the family-run firm. At thetime the group was growing rapidly:it acquired Chloé, a fashion houseknown for its hippie-chic clothes,and Piaget and Baume & Mercierwatches. In 1988, partly in responseto trade sanctions against SouthAfrica’s apartheid rule, Rupertreorganized the business. Heseparated the luxury brands fromthe family’s tobacco and miningassets, moved them to Luxembourgand Switzerland, and became CEOof the new group. He becamechairman of Richemont in 2002.

Johann Rupert is aselusive as Bernard Arnault isknown. He rarely appears in publicand grants few interviews. The onetime he made headlines in theBritish papers was for tellingMargaret Thatcher to “stopinterrupting me while I’m

interrupting you.” He travelsincessantly, logging seven hundredhours a year on his two companyjets. “In order to judge the mood andjudge the future, you’ve got to go tothe East,” he once said. “You’ve gotto go to South America. You’ve gotto walk the streets of New York.” Henever attends fashion shows. “Youare the star,” he explained toChloé’s chairman Ralph Toledano,“not I.”

When Rupert visits hisbrands’ stores, it’s informally: hedrops in, unannounced and oftenunrecognized. He gives his CEOscomplete autonomy but knowswhat’s going on. Though hisbackground is in finance, when hemeets with his executives, he talksmarketing and strategy, not figures.He looks long-term and rarely sellsoff his brands or trades them likeMonopoly properties when theydon’t perform. He invests in them,sometimes quite heavily, and waits

however long it takes for the return.Most of Richemont’s sales are injewelry and watches. “Weconcentrate on style rather thanfashion,” he explained. “We do notwant to sell things that we have todiscount two times a year.”

While Arnault and otherluxury tycoons were busy snappingup brands in the late 1990s, Rupertplayed the game conservatively. Hemade two major deals: he bought 60percent of the legendary Parisjeweler Van Cleef & Arpels in 1999for $265 million from the Van Cleeffamily, and he paid $1.86 billion in2002 for three luxury watch brands—Jaeger-LeCoultre, InternationalWatch Co., and A. Lange & Söhne—from Vodaphone. And heacquired controlling stakes in twosmaller companies: Old Englandhaberdashery and Lancel luggage.Rupert received—and turned down—offers by Tag Heuer, Ebel,Chaumet, and Zenith; each in turn

was quickly picked up by LVMH.“It’s not just about what you buy,” heexplained. “It’s also a question ofwhether you can support the brandsyou have when times are bad…Inmy view, you ultimately createshareholder value better by buildinggoodwill, rather than buyinggoodwill.”

Unlike LVMH, GucciGroup, the Prada group, and otherluxury conglomerates that clumptheir brands together to get betterprices for retail leasing andadvertising and produce theirdifferent brands at the samefactories with the same workers,Rupert keeps his companiesindependent of one another.“Product integrity has to be moreimportant than synergies,” he said.“David Ogilvy [the advertisingexecutive] used to say, ‘Theconsumer’s not a bloody fool; she’syour wife.’ The consumer wants toknow that Piaget watches are made

in the Piaget factory. [That’s] whatmakes it special. Otherwise it’s justanother brand.”

The Ruperts own 9.1percent of Richemont—the rest istraded on the Swiss exchange—and control the company with 50percent of the voting rights. As aresult, Rupert says he does not feelpressure to deliver substantial profitincreases each quarter. “We are notin a hurry,” he has said. Indeed,when analysts said he paid toomuch for Van Cleef, he shrugged.“In five to ten years’ time, it will turnout to be a good acquisition,” hesaid shortly after the purchase. Heis so cautious that banking analystshave nicknamed him “Rupert theBear.”

The strategy has workedwell. In 2005, Richemont did $5.25billion (€4.31 billion) in sales. Cartieraccounts for about half ofRichemont’s revenues, and as taggeri ng 85 percent of its

operating profits, according toanalysts. About 60 percent ofCartier’s earnings reportedly arefrom sales of watches.

WITH ITS BRANDS growingexponentially, and the money rollingin from the sales of perfume andaccessories, LVMH was flush andArnault was feeling omnipotent. In1998, he quietly began to buy uplarge chunks of stock of Gucci, oneof the hottest brands at that moment.

Gucci has had a roller-coaster ride of a history. Thecompany started in 1923 as a smallshop in Florence selling importedluggage. As the business grew,owner Guccio Gucci added aworkshop to produce his owndesigns. During supply shortages int h e 1930s, caused by economicsanctions imposed by the League ofNations on Mussolini’s Italy, Gucci

started experimenting with newmaterials like canvas and bamboo,and making smaller items such asbelts and wallets. In the 1950s and60s, under the guidance of Guccio’ssons Rodolfo and Aldo, thecompany flourished; its floralscarves, bamboo-handledhandbags, and horse-bit loaferswere favored by such icons asJacqueline Kennedy and GraceKelly.

The 1970s brought familyinfighting and overlicensing of thebrand. By the late 1980s, more thantwenty-two thousand products, fromcigarette holders to scotch, carriedthe Gucci name. “It was pretty muchtrading on its past reputation,” saidBrian Blake, who joined thecompany in 1987 and a decade laterbecame its president. “A very largeproportion of business at that timewas driven by the ‘interlocking G’canvas material, which was veryinexpensive to produce and had

very low price points. No trulydiscerning luxury goods clientwould shop at Gucci.” Famedmarketing strategist Faith Popcornput it more bluntly: “When you see[Gucci’s signature red and green]stripe, you want to throw up.”

In the 1980s, Rodolfo’sson Maurizio took over thecompany, and brought in DomenicoDe Sole, an Italian-born, Harvard-educated lawyer at a topWashington law firm, as presidentand managing director of GucciAmerica to right its course. Over thenext few years, De Sole fired 150 ofG u c c i ’ s 900 employees, hiredmanagers with serious retailexperience, brought distribution in-house, reined in licensing, andbought back franchises—in effect,applying Henry Racamier’s modelof vertical integration. In 1989,Maurizio convinced legendaryretailer Dawn Mello to quit her jobas president of Bergdorf Goodman

in New York and become Gucci’screative director in Milan. Mellodiscarded most of the existingproducts and hired a new designteam, including Tom Ford, a twenty-nine-year-old former model/actorwho studied interior architectureand had a few years experience inthe Seventh Avenue rag trade, torevive and update great old classicsas well as create a sleeker imagefor the house. “The bamboo-handled knapsack was the firstthing I did when I came to Gucci,”Ford told me. “The first day.”

Gucci had a new staff, anew look, and a new business plan.But it wasn’t enough. Maurizio’sastronomical spending combinedwith an economic downturn causedby a war in the Middle East and arecession in the United States—both big Gucci markets—nearly didthe company in. Losses werereportedly $102 million between 1991and 1993, and the company was on

the verge of bankruptcy. Investcorp,a Bahrain-based investment groupthat had bought out a number offamily members in the late 1980s,paid $170 million for Maurizio’sremaining 50 percent share in 1993.A year and a half later Maurizio wasshot dead in Milan by a hitman hiredby his ex-wife. Mello left, Tom Fordbecame creative director, and DeSole was named chief operatingofficer of the company.

One of De Sole’s firstmoves was to drop the price on allGucci products by 30 percent,putting them lower than Chanel andHermès and on par with LouisVuitton and Prada. Then Fordworked his creative magic to drawthe public to Gucci. When hepresented the first Gucci collectionunder his complete control in March1995, he shattered Gucci’s staidaristocratic image and established amore modern and blatantly sexyvoice. “Before I sent that first

women’s show down the runwaywith the hip-hugger pants and themetallic shirt, I remember being soterrified because it was a dramaticchange,” Ford told me in 1996. “Ireally had to rethink Gucci, andwhat Gucci should be. And a lot of[editors and retailers] said, ‘Oh, it’sgreat, but it’s not Gucci.’” It didn’tmatter. The public loved it. Guccisales shot up from $264 million in1994 to $880 million in 1996. Smallerhouses and mass-retail chains likeGap and Zara followed Ford’sdesign lead. Investcorp floatedGucci on the stock market, making itone of the most successful initialpublic offerings in fashion ever.

Back in 1991, Arnault hadtaken a good long look at Gucci withthe idea of buying it. But afterreportedly doing a great deal of duediligence, he backed off, tellingassociates that the brand wouldn’tgo anywhere. Instead Arnaultwatched it blossom into a star

brand, and now he wanted it, badly.In early 1999, after quietly spending$1.4 billion to buy 34.4 percent ofGucci stock—10 percent of which hepurchased from Prada—Arnaultlaunched a takeover bid. Tom &Dom, as Ford and De Sole wereknown in the fashion press, foughtback. Arnault was called “the wolf incashmere” and “a snake.” Women’sWear Daily dubbed theconfrontation “The War of theHandbags.” Ford threatened to quitif Arnault succeeded in his takeover;the clause in his contract thatallowed this quick exit was calledthe Tom Bomb. De Sole declared,“Arnault is trying to steal thiscompany.”

On Friday, March 19,1999, it all came to a head. At 8:30a.m., Arnault held a meeting of histop executives at the Disneylandoutside of Paris. After that, he wasto meet with De Sole again. But DeSole had other ideas. He and Ford

called a press conference in Paristo announce the formation of GucciGroup with the help of their whiteknight—and Arnault rival—FrançoisPinault, a French financier whocontrolled a group called Pinault-Printemps-Redoute (PPR), whichincluded the auction houseChristie’s, the Printempsdepartment store chain, and LaRedoute catalog. Pinault bought 40percent of Gucci, for $2.9 billion—or$75 a share, $10 less than Arnaultwas willing to pay. Pinault alsobought the Yves Saint Laurent RiveGauche ready-to-wear andcosmetics companies for $1 billion.Arnault said he found the move“stupefying.” “[Pinault] came to myhome with his wife, and my wifewas seated next to him at thewedding of his son,” Arnault whinedt o Women’s Wear Daily. He wasparticularly bent out of shape thatPinault didn’t have the good graceto consult him first on the deal.

Pinault laughed. “What,do you think I was going to ring himup and say, ‘Cher ami, I’m stealingGucci away from you?’”

Ford was soondesigning both Saint Laurent andGucci, and he and De Sole appliedthe vertical integration model toSaint Laurent to turn it into a globalluxury brand. It took a lot of work.Saint Laurent’s former businesshead Pierre Bergé was of the oldlicensing school. When PPR tookover Saint Laurent, it had 167contracts with licensees foreverything from clothing to cigarettelighters. It only had thirteen directlyowned stores worldwide. PPRacquired a few more classic houses—including Balenciaga, BottegaVeneta, and the jeweler Boucheron—which were renovated (with anew designer at the helm) andstreamlined. It also financed thelaunch of two new labels: StellaMcCartney, who left her design post

at Chloé, and Alexander McQueen,who quit Givenchy. In April 2004,Ford and De Sole left Gucci Groupbecause PPR wanted to take awaytheir autonomy and have themreport to senior group executives—in other words, morecorporatization.

Gucci’s victory againstArnault was significant: it was thefirst time Arnault was beaten at hisown game. The loss was stinging:“Bernard Arnault hates to lose,” aclose Arnault associate told me.Before the creation of Gucci Group,there were a handful of groups, butthey didn’t really compete; LVMHwas far and away the leader. Nowwith the formation of Gucci Group,Arnault had a direct competition forbrands, for designers, and forcustomers. It was a new game, andBernard Arnault no longer dictatedthe rules.

THE BIGGEST WINNER of the LVMH–Gucci battle was Prada: with the$140 million profit its chairmanPatrizio Bertelli made from sellingh i s 10 percent share of Gucci toLVMH, he went shopping for luxurybrands. In 1999, Bertelli bought 51percent of the trendy New York–based ready-to-wear company ofAustrian designer Helmut Lang, astake in the British shoemakerChurch & Co., and (after years ofwooing) controlling interest inGerman designer Jil Sander’shighly successful ready-to-wearcompany. In a mere six months,Bertelli had put together asubstantial privately held luxurygoods group; combined, the brandsdid more than $1 billion in salesturnover annually.

It’s hard to tell from theoutside of the Milan-basedheadquarters that Prada is one ofthe world’s most successful luxury

brands and the cornerstone for animportant luxury group. When youarrive at the company compound atVia Bergamo, 21, you think the cabdriver has made a mistake. Thestreet is gray and dreary, a deeplyindustrial section of a deeplyindustrial town. (LVMH’s corporateheadquarters, by contrast, are nowin a sleek new building on theavenue Montaigne, across the streetfrom the posh Hôtel Plaza Athénée.)You enter Prada through ananonymous portal-like oak door—there is no name, no plaque,nothing—and are greeted by asecurity guard dressed in gray.Everything is gray: the securityoffice, the cobblestone courtyard,the various factory-like buildingssurrounding it, and many of the carsparked in it. The only thing thatgives the place away is the guard’suniform: it is not the typical formlesssecurity garb but tailored Prada withits stark—some would say

neofascist—lines. That, and theclocks behind him showing the timein Milan, New York, Los Angeles,Tokyo, Sydney, and Hong Kong.When I was there in the spring of2006, several of them were off bymore than a few minutes.

I was taken to a room Ihad read about often. It is officiallyMiuccia Prada’s office, and it is asstark and contrived as her designs:poured concrete; a slew of orangeand yellow molded plastic Eameschairs; and, sticking up in the centerof the floor, a metal tube slide—byartist Carsten Höller—that runsthree floors down to the parking lotand is titled The Slide No. 5. Pradahas whizzed down it when asked toby reporters.

Prada entered the roomas if it were her salon and she hadbeen ushered in by her trustedbutler rather than hercommunications director. This wasa woman who had been raised in

haute bourgeois society, withservants and grandeur andpolitesse. Unlike her competitorDonatella Versace, who soobviously came from nothing,Prada’s airs are not airs at all: hersnobbery is in her bones. She waswearing a tightly belted full-skirteddress like 1950s matrons used towear—think of Lucille Ball in I LoveLucy—but made of navy blue silkfaille that rustled when she walked,with a light blue Oxford-like shirtunderneath. On her feet was a pairof bamboo platform shoes thatsqueaked as she crossed thepainted cement floor and made herteeter like a Chinese woman withbound feet. In her graying chestnuthair, cut sensibly at the shoulder,she had the requisite bourgeoisheadband, in dark green knit. Shedidn’t have a stitch of makeup on,not even lipstick, but her browswere well brushed. Her aristocraticprofile is the sort that has been

rendered in marble by masters, andher sharp nose is well freckled. Onher ears were big dangling antiquediamond earrings—somebody’sheirloom, if not her own—and justabove her left breast a big, gaudy1950s-like brooch.

She told one of herattentive assistants to bring her apot of fennel tea, which she poureddelicately like a proper English lady,and reluctantly told me a bit aboutthe roots of her family and hercompany. Her grandfather MarioPrada came from a family of civilservants. “They must have hadmoney, because they traveled,” shesaid, and Mario soaked in the luxurylifestyles of Europe’s upper classes.I n 1913, he opened a shop calledFratelli Prada with his brotherMartino in the Galleria VittorioEmanuele II, a late-nineteenth-century shopping concourse next tothe Duomo with mosaic tile floorsand a domed glass roof. With the

help of La Scala’s set designerNicola Benois, Mario decorated theshop like an English aristocrat’slibrary, with rich woods, brassrailings, and leather-bound books.Miuccia Prada told me that, contraryto the oft-recounted tale, FratelliPrada was not a luggage shop or“travel company,” like Louis Vuitton,but a boutique that specialized in“luxury objects.” Indeed, the door ofthe Galleria shop still has theoriginal sign, which reads Oggetti diLusso (Objects of Luxury). “He wentto Vienna to find the best leather forcases, Poland for crystal for bottles,”she said. “He sold watches andevening bags. He worked withartists as well as artisans.” Sheshowed me images of some of hisproducts: a small lizard handbagwith a marcasite-and-lapislazulibuckle from 1918, a black silkhandbag with a hand-carved ivorymonkey clasp from 1925, a toadskinwallet with a silver flower from 1927,

a tortoise and enamel watch from1938. “He had very grand ideas,” shesaid.

Miuccia said she doesn’tknow how the shop weatheredWorld War I, but it did, andsometime afterward Martino got outof the business. Mario opened asecond shop on the nearby ViaManzoni, not far from La Scala. Thecompany survived World War II, too,though Mario did close the ViaManzoni store then for good. Afterthat, Miuccia became vague aboutfamily details. She claimed it wasbecause she’s not interested in thepast, which may be somewhat true:the only thing historically referentialin her designs is the little enameltriangle label, which is based on hergrandfather’s trunk labels. Herreticence could stem in part from hertraditional upbringing. But I felt therewas also a bit of mystery, somethingthe family—or at least Miuccia—was hiding. When I pressed her on

it, she bristled and answeredhesitantly, if at all. What shewouldn’t tell me, I discovered fromsources close to Prada.

Mario married a womannamed Fernanda—Miucciawouldn’t tell me her name—andthey had two daughters, one beingLuisa, Miuccia’s mother. (Miucciawouldn’t tell me her aunt’s nameeither.) Sometime in the 1940s, Luisamarried a man named Bianchi,“from a wealthy, eccentric family,”Miuccia said. She wouldn’t tell meanything further about him—if heworked, if he supported the family, ifhe underwrote the company—except to repeat that he was“eccentric.” She wouldn’t even tellme his first name. “My mother wouldbe very upset. She would think I’vealready said too much,” Miucciaexplained. His name, I later learned,was Luigi, and everyone called himGino.

The Bianchis had three

children, Alberto, Marina, and Maria—who later became known asMiuccia—and they lived in a four-story, late-nineteenth-centurypalazzo on the Corso PortaRomana where Miuccia, as well asother family members, still residestoday. When I asked then why shewas Miuccia Prada, and not MiucciaBianchi, she said, “My name isMiuccia Bianchi Prada. Somewomen keep their name. It’s done inItaly.” In fact, according to sources atPrada, Miuccia Prada was officiallynamed Maria Bianchi until the late1980s, when she had her elderlyunwed maternal aunt adopt her,thereby officially changing her nameto Miuccia Prada.

After World War II, MarioPrada lost interest in his business,and it continued on unremarkablyuntil 1958, when he died and Luisatook it over. The notion of a married,haute bourgeois mother of threeworking in a shop was unthinkable

in Italy at the time. Miucciaexplained it this way: twobusinessmen actually ran the shopand “my mother worked there. It washer little thing on the side.” When Iasked Miuccia if she ever helpedout—ringing up sales, sending outorders—she looked at meincredulously. “I was a student,” shesaid in a tone that made it clear thatstudents of her rank did not work,even part-time in the family shop.Miuccia remembers going to theGalleria boutique once or twice inher youth. “It was not a woman’splace,” she said firmly, though it was—at least in theory—her mother’sshop. Her father, Gino, had little ifany involvement with the companyor the shop. At one point heproduced lawn mowers for golfcourses.

Her mother’s “little thing”limped along for another twentyyears, draining the family’sfinances. “We passed from being

rich to being just well-off,” Miucciatold an Italian paper. Finally in 1978,the twenty-eight-year-old Miucciatook over, and she was about asunprepared as one can be. She hada doctorate in political science fromthe University of Milan and hadstudied five years with the PiccoloTeatro to be a mime. Her only luxuryexperience was living it: she was afashion addict, wearing Yves SaintLaurent, Biba, and AndréCourrèges. She had moralobjections to taking over thebusiness: she was a feminist and acommunist, albeit an Yves SaintLaurent–wearing, haute bourgeoisfeminist communist who had neverworked a day in her life. “I lovedfashion like mad, but I didn’t like itas an idea,” she told me. But then,she reasoned, the company “wasn’tclothes, so it wasn’t frivolous.”When I asked her why she thoughtshe could run a company without somuch as one class in business

management or one day of on-the-job experience, she waved off thequestion like an annoying gnat.

A year into it, she nearlythrew in the towel. Then she metPatrizio Bertelli, a leather goodsmanufacturer from Arezzo, inTuscany. Fashion legend has it thatshe caught him at a trade show inMilan in 1978 selling cheapknockoffs of her bags, legallypursued him to stop, then decided tobring him on board to handle hermanufacturing instead. I asked herto recount the tale, and she came upwith another one altogether. Bertelli—she always calls him Bertelli,never Patrizio—came into theGalleria shop and told her, “Whydon’t we work together?” She wastaken by his “acute eyes” and saidshe’d think about it. “Probably had Inot met him,” she continued, “Iwould not have gone on. I couldn’thave bought a factory then. Now Icould do it, but then? A woman

opening a factory? I didn’t see it asvery possible. He had a factory. Hewas already doing it. He hadeverything. So I could do thecreative side. It took the companyimmediately to another level.” WhenI asked about the trade show story,she said tersely, “I knew hiscompany. I met other people, thenhim. I don’t know if I noticed himthere or met him in the store.” Thecouple’s relationship evolvedrapidly from businesslike toromantic. They lived together foreight years, then married in 1987 andhad two sons.

What is clear is thatBertelli pushed Miuccia to do thingsshe would have never doneotherwise. Within a decade, MiucciaPrada was overseeing the design ofshoes and women’s wear, whichwas often inspired by her bourgeoisupbringing and tastes. In themid-1990s, Prada launched Miu Miu,which was a secondary, more

youthful line, as well as men’s wearand Prada Sport—all, Miucciainsists, against her will. “Shoes, Ididn’t want to do them,” she told me.“Clothes either. I never wanted to domore.” When Miuccia balked,Bertelli responded, “Fine, then we’lldo them without you.” And that,Miuccia says, was “impossible” forher to allow. In retrospect, she ispleased he pushed her. “If I hadonly done bags I would have beenbored,” she says now. “You enlargeyour mind, you learn more.”

As Miuccia tells it, shehas always struggled to accept whatshe does for a living. “It’s a very bigconflict,” she explained. “I amtempted to say what is luxury:servants and sixteenth-centuryservice. If you want to talk aboutrare beauty, I know what that is. Tofake luxury today is easy. You putsome details from the brand’s past,you put a little bit of gold, and that’sit. I can’t bear that…Real luxurious

people hate status. You don’t lookrich because you have a rich dress.When you look at a person, do yousee the spirit or the sexiness or thecreativity? Just to see a bigdiamond, what does it mean? It’s allabout satisfaction. I think it’shorrible, this judgment based onmoney. It’s all an illusion that youlook better because you have asymbol of luxury. Really, it doesn’tbring you anything. It’s so banal.”

At one point, Miucciawas nearly saved from her dailytorment: she was asked to run forthe Italian parliament, though ofcourse she wouldn’t tell me when orby which party. She chickened out.“I’d have to stop doing my work,”she explained. “Can you imagine afamous designer doing politics?” Iwas about to mention that the pornstar Ilona Staller, known asCicciolina, served in the Italianparliament in the late 1980s, but I bitmy tongue.

AS MIUCCIA PRADA reluctantlydesigned clothes, shoes, andhandbags, Patrizio Bertelli focusedon the business side of Prada. Hismethod was absolute controlthrough fear. He is a short, stoutman with a bulldog face and well-trimmed wavy white hair. He wearsmod retro glasses—like PeterSellers but more narrow—whichmake him look like a hip intellectual.He is not known to have a sense ofhumor, and his temper is legendary.He explodes at the slightestmistake, “and not for one minute butfor half an hour,” remembers oneformer staff member. No one everspeaks back. Except Miuccia. Theycan fight like cats and dogs all dayat the office, then go home togetherfor dinner.

Bertelli is involved inevery company detail: he has

chosen the company’s stationery,dictated the menu in the employeecafeteria, and personally hiredmuch of the staff. When he openedthe American subsidiary in NewYork, he had the office furniture sentover from Milan as well as a hugesupply of pasta and his favoriteolive oil for the employee kitchen.The porcelain and the cutlery in theNew York office were the same asin Milan and Tokyo, and thereceptionists all wore the sameuniforms. At midday, cleaningpeople would come through theoffice to empty ashtrays and trashcans. Everything was alwaysshipshape, one employee told me.

Bertelli’s businessmethods are at timesunconventional. In the early 1990s,for example, he killed thecompany’s best-selling handbagline because he didn’t want Pradato be associated with just oneproduct. “He’ll cut off business even

if it’s profitable at the time when heknows it’s holding back growth,”Leslie Johnsen, Prada’s formerdirector of public relations in NewYork, said. He can become soinvolved in design that he has beenknown to redo an entire handbagcollection himself. Publicly, Miucciawelcomes his meddling. “It can beannoying,” she once said, “but whenhe puts his hands on a product, Ihave to admit, it becomes better.”

Once Bertelli hadsteered Prada into a thrivingbusiness—from $25 million in 1991 to$750 million in 1997—he startedspending money like those nouveauriche clients whom Miuccia soloathes. In the late 1990s, he sankmore than $50 million into theconstruction of Luna Rossa, a sleekgray and red yacht, for theAmerica’s Cup. Bertelli, an avidsailor, reasoned that the high-profilecompetition would bring a new sortof customer to Prada, as well as

promote Prada Sport—now knownas Linea Rossa—a line ofoverdesigned, overpriced athleticclothing launched in 1997. In the late1990s, the Prada store architectRoberto Baciocchi was hired to turnthe Via Bergamo building, whichwas a former gramophone factory,into the company’s newheadquarters and the FondazionePrada, the couple’s contemporaryart foundation. The hall, with itsexposed steel beams and barecement walls, is the setting forPrada’s women’s and men’s ready-to-wear wear shows as well as twoart exhibits each year. Artists haveincluded Mariko Mori, Barry McGee,and Carsten Höller. When I wasthere, New York artist Tom Sachswas setting up a show.

Then, in 2000, thingsbegan to go bad for Bertelli. LunaRossa made the America’s Cupfinals only to be soundly beaten byNew Zealand. Jil Sander up and

quit as CEO and designer of thecompany she had founded thirtyyears earlier. “Quite simply, Bertelliand I had different visions abouthow to run the company,” Sandertold me later. Without Sander at thedesign helm, the companyfoundered and the brand quicklybecame worthless. And Prada’snonstop expansion—including theconstruction of a $40 million RemKoolhaas–designed epicenter storein downtown Manhattan due toopen in late 2001—was sinking thecompany further into debt. To raisecapital, Bertelli decided to take thecompany public in late September2001. When the September 11terrorist attacks on New York andWashington happened, the Pradainitial public offering was called off,and the luxury market deflated,literally overnight. By the end of2001, Prada Group reportedly haddebts of about $1.9 billion,approximately what it did in sales.

It was discussing theIPO that Miuccia Prada took metruly by surprise. I told her I had readin the morning papers that, now thatthe company had shed the JilSander and Helmut Lang brands, itwas rumored in the business worldthat Prada might attempt an IPOagain. No, she said, it wasn’t true. Iasked, “How many times have youattempted it? Three, right?” No, shesaid, once. On September 18, 2001.The other times, she continued,were invented by the press.

I stopped writing in mynotebook and looked straight at her.I had heard that the accounting firmPricewaterhouseCoopers hadprepared dossiers for two separateattempts since the first one in 2001and, in 2002, Bertelli had held apress conference to announce oneof them.

In her reluctance to beforthcoming, Prada had unwittinglyexposed the Achilles heel of luxury

today: in becoming leaders of globalcorporations, luxury executivesmust now conceal from the publicnot only how their products aremade but how the individual brandsare doing. The truth, if widelyknown, could shatter consumerconfidence in the brands: they’dstop buying, profits would plummet,and the companies—and theirparent groups—could facebankruptcy. Publicly tradedcompanies are required to betransparent—that is, they mustpublish their financial data in theirannual reports. But when luxurybrands are consolidated intogroups, they can lump all theirfigures together to disguise what’sreally happening. Overall, LVMH israking in profits and its brands,thanks to the hype, seem highlysuccessful. What you don’t know isthat, as Vuitton is doing record saleseach year, the Givenchy and Kenzofashion houses are muddling along.

In the last decade, moregroups have formed, including theBulgari Group, the FerragamoGroup, and the Valentino FashionGroup, and those that existedpreviously have added substantiallyto their portfolios. Today, there arevery few European luxury brandsthat remain independent andprivately held. Among them areSonia Rykiel in France and GiorgioArmani, Versace, and Dolce &Gabbana in Italy, though Versacehas talked about going public sincebefore its founder, Gianni Versace,was murdered in 1997. GiorgioArmani, now in his seventies andwith no apparent heirs, has over theyears contemplated various options,including selling to LVMH andgoing public. Yet he resists.

I once asked him why. “Ican allow myself to go back to theoffice at night, to change whatever Iwant without having to justify it toanyone, and without any anxiety

about achieving certain financialresults because investors—whounderstand nothing—decide thattoday its ten of something, thentwenty then thirty. That’s theproblem,” he said. “Sometimesresults take a while, and most of thetime, the market requires that theresults be felt immediately.Psychologically, this isn’t good forour work, because it puts a damperon our enthusiasm.”

CHAPTER THREE

GOING GLOBAL

“He is poor whodoes not feelcontent.”

—JAPANESE PROVERB

KYOICHI TSUZUKI, a Japanesephotojournalist and publisher, hasspent nearly a decade takingpictures of luxury-brand-obsessedJapanese in their tiny apartmentssurrounded by their collections ofclothes, ties, scarves, jewelry,handbags, and shoes for theFashion News, one of Japan’soldest fashion magazines. Tsuzukicalls his subjects “happy victims”because, while they are victims ofbrand marketing, the items seem tobring them a sort of happiness. On acool November morning in 2005, Ivisited Tsuzuki in his apartment in

Tokyo and, over cups of jasminetea, he told me about these happyvictims. There is the Hermèscollector, a patent executive wholives in a tiny fourth-floor walk-upflat. He keeps all of his Hermèsshirts, ties, and leather goods intheir original boxes and bags, whichare stacked up on his tatami floor.He spent half a million yen (about$4,000) on an Hermès briefcase thathe carries with an Hermès towelwrapped around the handle to avoiddamaging the leather with his handperspiration.

There is a Buddhistmonk who collects Comme desGarçons religiously. Once a month,Tsuzuki told me, the monk shedshis robes, dons Comme desGarçons’ avant-gardeconstructionist clothes, and headsfrom his temple to Tokyo to pick upa few more pieces. He is soconvinced of their miraculouspowers that he says his delinquent

sister cleaned up her act when shestarted wearing Comme desGarçons. There’s an Englishteacher at a prep school who startedwearing Gianni Versace’sflamboyant designs to keep theattention of his students. After tenyears, he had one hundred piecesof Versace as well as an impressiveBulgari jewelry collection. He livesin a shoebox apartment with hisunemployed girlfriend, who spendsher days organizing the collection.There’s a Tom Ford collector (shehas both Gucci and Yves SaintLaurent), an Armani man, aMcQueen girl, and a MartinMargiela manic who is so fastidiousabout his collection that he nevercooks at home because he doesn’twant the clothes to retain the odors.The only thing in his refrigerator iseyedrops. “When he gets thirsty,”Tsuzuki said, “he goes to aconvenience shop and drinks therethen goes back home. He does not

want to put any kind of trash in theroom.”

Tsuzuki’s subjects seemextreme. But in fact they arerepresentative of the Japanesepreoccupation with luxury goods.Analysts estimate that 20 percent ofall luxury goods are sold in Japanand another 30 percent to Japanesetraveling abroad—meaningJapanese buy half of all luxurygoods. Today, approximately 40percent of all Japanese own aVuitton product. They claim inmarket studies that they buy luxurygoods for a logical reason:durability. Experts believe, however,there is a far deeper sociologicalmeaning. According to polls, theJapanese consider themselves tobe a classless society—in onestudy, 85 percent stated they weremiddle class. At the same time, inJapan, conformity is prized. Bywearing and carrying luxury goodscovered with logos, the Japanese

are able to identify themselves insocioeconomic terms as well asconform to social mores. It’s as ifthey are branding themselves.

Their impact on thebusiness is immeasurable. Theirtastes influence product and storedesign. Their travel habits dictatewhere brands expand, and theirexigencies affect how stores arerun. “We never make any decisionon our worldwide strategy withoutasking our Japanese colleagueswhat Japan would think of it,” saidLouis Vuitton CEO Yves Carcelle.The Japanese, in other words,homogenized luxury. And by doingso, they prepared it for globalization,which effectively is thehomogenization of the world.

THE JAPANESE LOVE of Westernluxury goods is a relatively recentphenomenon. In the 1960s and 70s,

the Japanese economy flourished,giving birth to a newly flush middleclass that wanted to live a moreostentatious life. Grand homes orvast real estate holdings—generallythe most blatant way to enjoy aswell as exhibit one’s riches—was anear impossibility in the denselypopulated island-nation of Japan.Instead, the Japanese chose toshow their wealth by dressing richly,and for the postwar generation,Western luxury items such asleather goods, silk scarves, furs,and jewels were the ultimate statussymbols.

Unfortunately, there waslittle to be had in Japan; distributionwas extremely limited. To satisfy thesurge in demand, entrepreneurialJapanese merchants traveled toEurope, bought items at full retailprice, shipped them back to Japan,and sold them for three to four timesmore in shops around Tokyo,creating what is known as a parallel

market. The parallel marketconfounded luxury executives backin Europe: their flagship stores weregetting cleaned out of stock, andthey had no control over how theproduct was being sold overseas.

In February 1976, LouisVuitton’s great-grandson Henry-Louis invited Kyojiro Hata,consultant for the internationalaccounting and consulting firm PeatMarwick, to his office at the avenueMarceau store to discuss theproblem. Hata, in Paris on unrelatedbusiness, knew nothing of theluxury industry and had never heardof Louis Vuitton. But he wasimpressed by Henry-Louis Vuitton’smanner—“He was a very shy,sincere person and extremelydiscreet,” Hata told me—and by thegenuine refinement of the store andits products. “The serenity and thehigh ceilings of Henry Vuitton’soffice were worlds away from myexperience,” Hata later wrote in his

memoir, Louis Vuitton Japan: TheBuilding of Luxury. “The long roomhad a small window from which toview the sales floor, and the wallswere embedded with antique trunks.I felt the long history of Louis Vuittonand the depth of French traditionthrough my body for the first time. Itwas an awakening for me.”

Vuitton explained toHata his exasperation: theJapanese were buying so much thatVuitton had placed a limit on thenumber of products that could besold to Japanese customers.Through the small window inVuitton’s office, Hata watched thefrenzied Japanese customers in theavenue Marceau store, buying likethey were at a fire sale. Intrigued bythe phenomenon, Hata turned toVuitton and proposed to do aresearch project assessing theJapanese luxury goods market.Vuitton agreed.

When Hata returned to

Tokyo, he found Vuitton monogrambags in shop windows all over townfor sale at astounding prices. At thetime, there was only one Vuittonwholesale importer in Japan, andone official retailer: the AnnInternational store in the AkasakaTokyu Hotel shopping arcade.When Hata visited the store, herecalled, “there was no stock at alland nobody knew when the nextshipment would arrive.” Hata wroteup his report for Henry-LouisVuitton, concluding it was time forthe company to embrace theJapanese market and expandproperly there. Vuitton concurredand hired Hata to oversee it. Untilthen, luxury companies had openedstores in a few internationalcapitals, often as franchises, andsold a limited amount of product indepartment stores; it was a nicheretail business. Hata had muchbigger ambitions: to conquer aforeign territory by selling not only to

Japan’s upper crust but also—andprimarily—to its large andincreasingly wealthy middle class.Vuitton’s expansion in Japan wasluxury’s first bold step towardglobalization, and it took an outsider—a businessman—to make ithappen.

Hata came up with andimplemented a two-prongedbusiness model. First, Louis VuittonParis would distribute directly toJapanese retailers rather thanthrough wholesalers—a businessmove unheard of in the luxuryindustry at the time. Second, LouisVuitton would establish amanagement service contractstipulating that its Japan officewould conduct all operations tomaintain the brand’s image, protectthe trademark, and handle qualitycontrol, advertising, and publicity. Inreturn, Vuitton would chargefranchise and management servicefees to the department stores. Louis

Vuitton headquarters in Francewould dictate everything to theJapan operation, from uniforms towrapping paper, to create a synergywith the home base. Vuitton’sproducts would be excluded fromdepartment store members-onlydiscounts and gift catalogs, all in aneffort to buff up the company’s brandimage. “We wanted to accuratelycommunicate not only the name ofLouis Vuitton,” Hata explained, “butthe brand’s values, which are itshistory and tradition.”

In March 1978, Vuittonmade its official Tokyo debut in fivedifferent department stores, followedin September by one in Osaka.Each shop was only seven hundredto one thousand square feet butstocked every size of steamer trunks—“the symbol of Louis Vuitton’scraftsmanship,” Hata told me.

Next, Hata tackled thepricing problem. When Vuittonopened its first Japanese store in

1978, prices were about two and ahalf times higher than in Paris, dueto a difference in currency rates andto government restrictions. To eventhe playing field a bit and stopparallel trade, Hata implemented afloating-rate system so that prices inJapan would be no more than 1.4times those in Paris, and wouldfluctuate with the exchange rate.Prices in Japan immediatelydropped by half or more, andJapanese shoppers suddenly sawLouis Vuitton as a good value,especially compared to itscompetitors. That first year, the sixstores sold $5.8 million worth ofVuitton products. “This surprised thewhole industry,” Hata remembered.Within two years, sales had doubledto $11 million. Vuitton appointedHata the Japanese branchmanager, and converted the branchinto a corporation, called LouisVuitton Japan. In 1981, Hata openedVuitton’s first freestanding store, in

the posh Ginza district.Furthermore, the

Japanese demonstrated anunparalleled predilection for quality.“Their attention to detail anddemand for quality is unmatchedand unyielding,” says ChanelJapan’s president RichardCollasse. “The Japanese have zerotolerance for flaws.”

He tells a story toillustrate point. Back in the 1980s,when Collasse worked for anotherluxury brand, a Japanese womanbrought a dress in and said it had adefect. Collasse looked and lookedand finally saw a two-inch threaddangling from the hem. It wasabsolutely unacceptable to her.Collasse exchanged the dress,bowed repeatedly, and sent her abig bouquet of flowers. Then hedecided to do a test. He took thedress to a French woman. She triedit on, liked it, saw the thread, andsaid, “I can cut it.” He took the dress

to an American woman. She tried iton, liked it, and never saw thethread.

Vuitton’s Hata ran intothe same thing. “During the first tenyears, we have often foundourselves having to return productsto Paris saying, ‘This level of qualityis unacceptable in Japan,’” herecalls. “At first we had a very hardtime being understood. If wereturned a product because thefastener was attached the wrongway, they argued that we shouldsell it to a left-handed customer. Ifwe complained that the stitcheswere not straight, they said it wasbecause of the nature of handstitching and that they could sell theproducts in Paris without a problem.On one occasion we returned all theproducts, saying, ‘Please sell thesein Paris.’” Finally, in 1991, Hataopened a Vuitton repair center inJapan; today, there are two.

LOUIS VUITTON’S expansion in Japanled the way; soon its competitorsbegan to expand their presencethere, too, selling in majordepartment stores and openingboutiques in Tokyo’s Ginzashopping district and in Osaka. Thetiming couldn’t have been better. Inthe early and mid-1980s, theJapanese economy was soaring: itgrew by 3.7 percent annually, andJapan’s postwar generationexperienced a dramatic increase ofdisposable income. Some of theinvestments were dizzying:Mitsubishi forked out $1.4 billion for80 percent of Rockefeller Center inNew York in 1989 and 1990; Sonybought Columbia Pictures in 1989 for$3.4 billion; Matsushita electronicstook over MCA, which includedUniversal Studios, in 1990 for $6.1billion; Japanese businessmanRyoei Saito spent $82.5 million for

Van Gogh’s Portrait of Dr. Gachet in1990.

But the economic boomalso created a new sociologicalphenomenon in Japan known inbanking circles as Parasite Singles:unmarried university-educatedwomen, ages twenty-five to thirty-four, who worked in good-payingjobs—as secretaries, teachers,executives—and lived with theirparents. Their economic power wasand still is impressive: analystsestimate that Parasite Singlesaccount for nearly one-tenth ofJapan’s population of 130 million.With few living expenses, ParasiteSingles use their ample disposableincome to shop. Their favorite items:luxury brand leather goods,preferably covered with logos.Indeed, 23 percent of all luxurybrand sales in Japan today areleather goods such as wallets andhandbags.

When they first emerged,

Parasite Singles shopped like madin Japan, driving luxury brands toexpand their presence and stockthere. Even after the bubble burst inthe early 1990s, and the Japaneseeconomy plunged into a decade-long recession, Parasite Singles’appetite for luxury brands did notwane. They were the onlydemographic group to increasespending during the 1990s, and theybecame responsible for up to 80percent of Japan’s consumerspending.

When they found theycould buy more overseas with theirstrong yen, Parasite Singlesembarked on international shoppingtrips, usually organized by chartercompanies, inciting brands to openstores in new markets and to addJapanese-speaking sales staff. Oneof Parasite Singles’ favoritedestinations was Hawaii: it wasclose, it was beautiful, and the yenwent far.

In the early 1980s, RolfVogel, then president of Chanel inJapan, went to Hawaii on vacationand was stupefied to see thenumber of Japanese there,shopping. “Let’s stop playing golfand look for a location,” he told hiscolleagues.

Vogel rang Chanelexecutives in New York to informthem of his idea.

“Hawaii?” theyresponded incredulously. “Are youcrazy?”

He wasn’t. In 1984, Vogelopened Chanel’s first freestandingstore in the United States—beforeNew York, before Beverly Hills—inthe Royal Hawaiian ShoppingCenter, a mall at the entrance of thefamed hotel’s drive. The storecarried accessories as well as asmall selection of ready-to-wear byChanel’s new designer KarlLagerfeld. The Japanese flocked toit, snatching up quilted leather

purses, gold chain belts, and two-toned shoes like crazy. Throughoutthe 1990s, the Waikiki boutique wasthe number one Chanel store in theworld, with $60 million a year insales.

The success of Chaneldrew other brands to open onKalakaua Avenue. All the usualsuspects arrived, each building alarge, lush boutique with Japanese-speaking staff. It was a wisebusiness move: within five years ofi ts 1992 opening, the Louis Vuittonstore on Kalakaua Avenue wasdoing nearly $100 million in salesannually. Several brands reportedthat their Waikiki stores were amongthe most successful in the world,enticing more brands to open thereand those who were there toupgrade their locations. In 2002,Chanel moved out of its RoyalHawaiian digs down KalakauaAvenue into a twelve-thousand-square-foot flagship; Cartier moved

into the old space.The new Chanel store is

a luxury shopping palace withexpansive salons, high ceilings,plush carpeting, and gobs ofhandbags, sunglasses, shoes, suits—and security video cameras thatare viewed at headquarters in NewYork. Of the seven hundred to eighthundred customers who enter theChanel boutique on Kalakaua everyday, most are Japanese and mostbuy accessories. Sometimes aJapanese customer will take apicture of an item in the store withher cell phone and zap the image toa friend in Japan with a note asking,“What do you think?” If the friendsays yes, then the customer willmake the purchase. If the desiredluxury brand product is not availablein the Waikiki store, the brand’ssalesclerk can find it in one of themainland U.S. boutiques and haveit overnighted to Hawaii before thecustomer heads back to Japan.

Joyce Okano, regional vicepresident for Chanel in Hawaii, tellsme that “more than half the sales ofChanel in Hawaii are to Japanese.”

THERE WAS ANOTHER great attractionthat drew the Japanese to Hawaii:buying luxury goods duty-free. Duty-free shopping allows shoppersholding boarding passes to buy tax-free goods that have never enteredthe local stream of commerce, thusproviding a discount of 10 to 30percent off full retail price. Hermèsproducts in Japan, for example, cost30 percent more than in France and15 to 20 percent more than in duty-free stores. In 2005, about 10 percentof all Hermès sales were duty-free.

Today, according to theTax Free World Association, annualduty-free sales are about $25 billion—$9.1 billion of which are luxurygoods. There are several duty-free

companies in the world today, butthe largest by far is Duty FreeShoppers (DFS), which operatesprimarily in Asia and the Pacific,and is majority-owned by LVMH. In2006, DFS did about $2.2 billion (€1.7billion) in sales—30 percent morethan its nearest competitor.

The notion of sellingitems duty-free dates back as far ascommerce itself. In Britain duringt h e 1500s, seamen were offeredliquor duty-free—or tax-free—forconsumption on board ships ininternational waters. In thenineteenth century, liquor,cigarettes, and perfume weresupplied duty-free to crew membersand travelers on ships for voyagesthat took weeks or months. Themodern version of duty-free retailingbegan with the International CivilAviation Organization at theChicago Convention of 1944, whichallowed the selling of articles duty-free on ships in international waters

and on aircraft on internationalflights, and created “customs-free”zones in airports. Soon after,Brendan O’Regan, the head of theShannon Airport Catering Service inIreland, opened a kiosk at theairport to sell gifts and souvenirstax-free to departing passengers ontransatlantic flights that stopped torefuel. Business started slowly—ona good day, it would do £5 in sales.But as international travel grew int h e 1950s, so did O’Regan’sbusiness: in 1953, it did £120,000 insales.

I n 1960, two Americanscollege buddies named RobertMiller and Chuck Feeney, bothgraduates of Cornell University’shotel management school, weredrinking in a bar in Barcelona anddreamed up a business to sell liquortax-free to GIs ending their tours inEurope. They called their businessDuty Free Shoppers and openedshops in Hong Kong and at the

Honolulu airport in Hawaii to targetAsian tourists. Business went sowell that they eventually hired aBritish accountant named Alan M.Parker and an American tax lawyernamed Anthony Pilaro to helpoptimize the profitability of thecompany and gave them each asmall stake. Between 1977 and 1995,DFS generated some $3 billion individends, 90 percent of which thefour partners received in cash orfunneled into their tax-driven trustsor foundations; both DFS andFeeney’s foundations were thenbased in Bermuda, an offshore taxhaven. “This was not just a nicecash cow they milked,” said lawyerwho knew the company. “The sizeis more on the magnitude ofGodzilla and King Kong.”

Feeney, the moreconservative of the pair, set up afoundation called the AtlanticPhilanthropies and donatedgenerously to Cornell,

underprivileged youth programs,and Sinn Féin, the political wing ofthe Irish Republican Army. He gaveanonymously, and most recipientsnever knew who their benefactorwas. “I simply decided I had enoughmoney,” he explained. “It doesn’tdrive my life. I’m a what-you-see-is-what-you-get kind of guy.” Miller, bycontrast, lived large, with statelyhomes reportedly in New York,Gstaad, Paris, Hong Kong, andYorkshire, England, and a taste forthe extravagant: he once threw athree-day party for which hisEcuadorian wife, Chantal, dressedas a South American princess,arrived in a hot air balloon. For hisdaughter Marie-Chantel’s marriageto Crown Prince Pavlos of Greece,Miller hosted a wedding for fourteenhundred guests that reportedly cost$1.5 million and included areception at the posh Claridge’sHotel in London officially hosted byQueen Elizabeth II.

In 1994, Feeney decidedto sell his stake to LVMH, DFS’slargest supplier. Miller was dead-setagainst it. “Despite his promises,Bernard Arnault has a pattern ofexploiting the assets of partiallyacquired companies for the benefitof LVMH with no concern for thebest interests of the minorityshareholders,” Miller charged incourt. Feeney and Parker sold theirmajority stake of the company toArnault for $2.47 billion. EventuallyPilaro sold his 2.5 percent to Arnault,too. Arnault abruptly stoppednegotiations for Miller’s 38.75 percent—said to be worth $1.6 billion at thetime—and Miller remained aminority shareholder of thecompany. Arnault told financialanalysts it was “not necessary atthis stage to invest an additional 9million francs [$1.58 billion] to takeadvantage of the synergies thatalready exist between [LVMH andDFS].” In other words, the world’s

leading producer of luxury goodscontrolled the world’s leadingpurveyor of luxury goods.

AS WITH LUXURY, Bernard Arnaultchanged the way duty-free businesswas done. Traditionally, duty-freestores had been in airports or atports, on airborne planes, or onships at sea—places where it wasguaranteed that the goods wouldnot be entering the local stream ofcommerce. Arnault had anotheridea: targeting tourists in town. Youstill need a boarding pass, and yourpurchases will be delivered to youas you board the plane. But you areshopping in town, just across thestreet from your hotel.

In Waikiki in 2001,Arnault opened on the site of the oldWoolworth’s a $65 million, three-floor, gleaming white shopping-mall-like store on Kalakaua Avenue

called the DFS Galleria to sellluxury goods at both duty-pay andduty-free prices. Compared to theusual stark, stock-laden duty-freestores in airports, the DFS Galleriawas a veritable palace. To enter,you can either walk through a sixty-five-thousand-gallon aquarium filledwith black tip reef sharks, spottedeagle rays, parrot fish, and othercolorful Hawaiian reef fish or drift inthrough the sidewalk openings intoan atrium loaded with Hawaiianfloral perfumes, macadamia nutcandies, and other Polynesiankitsch. The second floor is a regularduty-pay section that features hipfashion; logo-covered accessoriesfrom a few luxury brands, as well asmore reasonably priced labels likeLe Sport Sac; and the largestcosmetics section in the state. DFSdoesn’t charge the state’s 4 percentsales tax in the duty-pay sections ofthe Galleria—the company pays it—to make their prices more

competitive than those of the otherretailers on Kalakaua Avenue. Thethird floor is exclusively duty-free—there you’ll find luxury brands aswell as perfume, liquor, andcigarettes. Since you must possessa boarding pass to a foreigndestination to shop in the duty-freesection, there are very fewAmericans. And a great manyJapanese.

DFS has always usedcrafty tactics to get the Japaneseinto its stores—way back when,Chuck Feeney learned Japanese tonegotiate deals with Japanese touroperators so that they would steertheir customers into the stores. ButDFS under Bernard Arnault’sguidance has taken Feeney’sstratagems to another levelaltogether. Flights arrive from Japanearly in the morning, long before thehotels are ready for check-in. If theJapanese come on a package tour—and 85 percent do—they already

have their return boarding pass anda DFS shopping card, which allowsthem to enter the duty-free zone ofthe store. If they are traveling with atour company that receivescommissions from DFS, they arebused straight from the airport to theGalleria, where they are usheredinto a conference room for a briefingon Hawaii and DFS. Following thediscussion, they are guided to theduty-free floor, which is set up likeIkea: there is only one way out andyou have to pass through everysection of the store—luxury goods,jewelry, perfume, liquor, andtobacco—to get there.

Most of the top luxurybrands are represented: Prada,Hermès, Dior, Céline, Fendi,Ferragamo, Bulgari, Burberry,Cartier, and Van Cleef & Arpels. Onthe duty-free floor, all the majorluxury brands have miniatureversions of their regular boutiquesand primarily sell accessories such

as handbags, wallets, jewelry,watches, and shoes or smallfashion items like T-shirts andbathing suits—things that can becarried on an airplane. Many of theshops, as well as the tobacco andliquor sections, have signsannouncing reduced prices writtenonly in Japanese. Some brandshave boutiques on both the duty-pay and duty-free floors but arecareful not to carry identical items.The boutiques on the duty-free floorrarely carry shoes larger than size71/2 for women, or clothes largerthan size 8, because Japanesewomen are small. What theyprimarily sell, though, is leathergoods. In 2003, 42 percent ofJapanese travelers around theworld purchased a high-end orbranded handbag or leather good.

Generally, the Japaneseonly look during their maiden visit tothe Galleria. They prefer to return inthe evening, after dinner, to do their

serious shopping. Because of this,the Galleria—and most luxurystores on Kalakaua Avenue—stayopen until 11:00 p.m. DFS provides afree Trolley Express that cruises upand down Kalakaua Avenue,making stops at Louis Vuitton,Gucci, Cartier, Chanel, and the DFSGalleria. DFS will reimburse taxifare for those who buy in the duty-free section. And the charter busdepot is directly behind the Galleria,giving Japanese tourists yet anotherchance to pass by the store. Thegoal of DFS is to get the Japaneseinto the store as much as possible.

Though the secret toduty-free sales success is movingproduct in volume, there are someexclusive items. In 2000, forexample, Céline—an LVMH brand—created a line of handbags just forDFS, which is also an LVMHcompany. And on occasion Hermèsgets one of its coveted Kelly orBirkin bags to sell—normally they

are made to order and there’s aseveral-months-long waiting list.Not surprisingly, they sell almostimmediately. In February 2005,Hermès received a small blackcrocodile Birkin with a diamondclasp and a price tag of $82,100. AJapanese customer bought it withina matter of days. Galleria Hawaii isDFS’s biggest retail outlet, and theJapanese are by far its—and DFS’s—biggest-spending clientele.

Today, of Hawaii’s 7million visitors each year, 1.5 millionare Japanese. They stay for four orfive days or long weekends, andmost come to shop; tourism issecondary. “The Japanese knowwhat they are going to do from thetime they land until they leave,” saysOkano of Chanel. “They come withan agenda and know what they aregoing to buy in each store.”

The Japaneseobsession with luxury goods—andthe luxury companies’ obsession to

satisfy it—has dramatically changedWaikiki’s landscape. When I wentthere in the mid-1980s—not longafter Chanel arrived—KalakauaAvenue was a party scene, withteenagers cruising in shiny low-riding Japanese pickups, a fewworking girls available for lonelyconventioneers, five-and-dimes likeWoolworth’s, local bars with coverbands playing Hawaiian-twangedpop, and a couple of old movietheaters. I went to catch ClintEastwood’s Heartbreak Ridge atone.

When I returned in 2004,it was a different ambiencealtogether: there are no more localbars, no movie theaters at all; theone I went to in the mid-1980s wasbricked up, ready for demolition. Intheir place were glistening luxurybrand temples, Japanese travelagencies, and sushi bars. The onlything slightly Waikiki-ish left on thestrip were ABC Stores—a chain of

convenience shops that sellsunscreen, film, flip-flops, andHawaiian souvenirs made in China.When I mentioned this to KellynKubo, the director of Cartier’s RoyalHawaiian and Ala Moanaboutiques, she sighed. “It’s true,”she admitted. “Waikiki doesn’t havemuch to offer locals anymore.”

THE SUCCESS with the Japaneseemboldened and enriched luxurybrands; they had the courage aswell as the cash to expand globally.The plan was to roll out to theworld’s cosmopolitan capitals—places such as Paris, London, NewYork, Rome, Milan, Beverly Hills,and Hong Kong, where there wereboth a rich local clientele and asteady flow of Japanese tourists.The stores would be flagships: big,flashy showcases that would sellthe brand’s lines as well as its

image. Put simply, brands had to“build a fantasy world for thoseclothes and accessories—createthe life that your customers aspireto,” Tom Ford explained to me.Wildly extravagant displays ofwealth and creativity that havenothing to do with everyday life,flagships not only evoke the dreamof old cultured luxury but alsoembody the new opulent luxury oftoday. In essence, they feel unreal.

To achieve this, luxurycompanies called in architects tocreate their new stores. Gucci hiredrespected American interiordesigner Bill Sofield. Prada broughton Milan-based architect RobertoBaciocchi. And in 1996, BernardArnault placed a call to a NewYork–based architect named PeterMarino, best known for his work forBarneys.

Marino is quite acharacter. He stands about five feetnine, speaks with a “Noo Yawk”

accent, dresses like a biker in blackleather, has a nutty sense of humor,and is as chatty as yourinconvenient neighbor. He studiedat Cornell’s architecture school andbegan his career working for suchtraditional firms as Skidmore,Owings & Merrill and GeorgeNelson & Associates. In the early1970s, he hung out with AndyWarhol, and later redecoratedWarhol’s uptown townhouse andhis infamous Factory studio onUnion Square—assignments thatestablished Marino’s reputationamong the fashionable set. “Andywas quite a good calling card,”Marino later admitted.

I n 1978, Marino openedhis own firm, now known as PeterMarino & Associates Architects, andstarted doing the homes of wealthyjet-set clients such as couturierYves Saint Laurent, Chanel ownerAlain Wertheimer, and Fiatchairman Gianni Agnelli. Marino’s

style is deeply French, and hetravels the world with his big-bucksclients to buy the finest antiquesand art. For those who hire Marino,price is no object: the cost ofredoing one client’s living room andlibrary was $57 million. “Mine is verymuch a couture house,” he has said.

When Arnault called,Marino told me, “I wasn’t quite surewho he was at first.”

But when Arnault startedtalking about his companies, LouisVuitton and Christian Dior, Marinoclicked in.

“This is the beginning ofsomething big,” Marino thought tohimself.

“Well, can you come toParis tomorrow?” Arnault asked.

“I don’t think so,” Marinosaid.

But he did go the dayafter that.

Marino’s first assignmentwas the renovation of Dior’s original

avenue Montaigne store. Iremember visiting the old boutiqueback in 1982, before Bernard Arnaulthad contemplated buying Dior. Stilla teenager, I walked in to buyperfume for my mother andgrandmother for Christmas. Theplace reminded me of the drawingroom of an old-moneyed mansion.The walls were painted dove graywith snow white moldings. Thecarpeting was dark gray and cushy.Crystal chandeliers hung from theceilings, and mannequins dressedin elegant gowns, dresses, andchapeaux dotted the salons. Therewas no music, no chatter.Customers talked in hushed tones.The salesclerks were middle-agedwomen in prim suits and heels, theirhair pulled up in neat chignons: theepitome of chic Parisiennes, servingyou while setting an example. Theperfume room was off to the rightand bathed in natural light, theclassics displayed on an old-

fashioned wood-and-glass salescounter. I chose Diorissimo andMiss Dior, which the salesclerksilently wrapped in sheets of mattegray paper without tape or glue andtied up with white ribbon. They werethe most beautiful gifts I had everpurchased, and it was the mostrefined shopping experience I haveever experienced.

When Marino got donewith the store, I barely recognized it.What was once a foyer had becomea vast, two-story-high roundemporium-like space for handbagsand scarves—the items that touristsand middle-market customers buyen masse. To the right, where thedemure perfume counter once was,Marino put the shoe departmentwith tiger-stripe carpeting, mirrorsdraped in gray and cherry red taffetaand a zebra-legged console. Thatled to the women’s weardepartment: a mishmash of neo–Louis XVI and rococo Louis XV

styles, tea rose satin chairs withsilver raffia pompoms, ivory leoparddamask poufs on grooved gold-leafed legs, fluted silver velvetarmchairs, and two tea tablessheathed in snakeskin. There weresales tables in bronze with micainlay, gray silk fitting rooms withblack Chantilly lace trim, stoneflooring with silver molten glassinsets in Dior’s signature caningdesign, and Marino’s favorite item, astool with bronze goat legs. Theperfume and cosmetics room hadbeen moved to the back left sectionof the store, and one passedthrough it, like a hallway. It wasentirely fitted in silver-gray mirrorswith black and gold arabesques andfloral motifs painted on the silver foillining. Marino said he wanted toevoke a jewelry box. To me, it wasplain gaudy and light-years awayfrom the refinement and quietelegance of Dior pre-Arnault.

Dior executives were

thrilled with Marino’s transformationof the space. Its nouveau richeextravagance lured tourists as wellas shoppers from all economicclasses, and Marino became luxuryfashion’s favorite boutique designer.Along with Dior, he has producedopulent, highly designed stores forChanel, Donna Karan, Calvin Klein,Fendi, and Louis Vuitton, as well asValentino’s New York home and his152-foot yacht, TM Blue One. Whilemost businesses would shy awayfrom having the same designer asnearly all their competitors, luxuryfashion industry executives sees itas a validation of their impeccabletaste. Luxury fashion is a clubbyworld—designers all know eachother, many intimately so, supportstaff such as press attachés andassistant designers move freelyfrom one company to another,everyone dines in the samerestaurants and vacations in thesame locales. They refer to

themselves as “the fashion tribe.”Back in the old days,

when luxury companies were run bytheir owners or heirs, each househad its own distinctive style thatreflected the founder’s creativevision, right down to the boutique,normally just below the designer’sstudio. Now individualism has givenway to homogenization, not onlyamong stores within a brand butalso among brands themselves.Like Hollywood studios hiring thesame handful of bankable stars tolure middle-market audiences tosee their blockbuster movies, luxurybrands tend to hire the samearchitects and use the same designtricks to get crowds into the stores.Luxury brands used to beinnovative: they were revolutionaryin design, they’d come up withsomething new. Now, they try toavoid leading the way for fear ofalienating customers.

Marino was the perfect

compromise: he was crazy creative,but since they all hired him, theMarino look has become thestandard. Though Marino claimsthat each brand’s team of designersnever knows what the others are upto—“I’m the only link,” Marino toldme—Marino-designed boutiquesmost definitely have a common lookabout them: shiny and clean, withlots of gold, silver, sparkle, andgloss. The year-long remodeling ofChanel’s original rue Cambonflagship, for example, includedoxblood-hued epoxy-resin panelsflecked in gold, mirrors wrapped in amile’s worth of antique silver andgold ribbon, and faux-ivorymarquetry that evokes piano keys.And Marino’s decors makehandbags radiate like movie starson the red carpet. “Rule No. 1 is:don’t ever let the merchandise besubservient to the architecture,” hesays.

Though Marino-

designed luxury brand boutiquescost a substantial fortune—$20million to create or renovate aflagship is not unusual—theinvestment seems to be worth it.Sales at the Osaka and Hong Kongboutiques that Marino did for Fendiincreased by 300 percent withinmonths of their openings. AfterMarino renovated Vuitton’s store onthe Champs-Élysées for a secondtime in 2005—for an estimated $20million—it was expected togenerate $90 million to $115 million(€75 to 95 million) a year in sales.“We saw a phenomenal differencein sales before and after Marino—a20 to 40 percent increase,” FrançoiseMontenay, president of Chanel inEurope, told me. “And it takes ustwo years to recoup our investment.”B y 2006, Marino had done all ofChanel’s European and most of itsAsian hold stores.

LUXURY CONTINUED its global march,expanding in secondary cities suchas Monte Carlo, Venice, Chicago,Miami, São Paolo, and Osaka, andthe store decors echoed the opulentflagships. The idea—a central tenetof globalization—was to market acohesive image throughout theworld. Back in Japan, whereluxury’s globalization began, itsfounding father, Louis Vuitton’sKyojiro Hata, grew frustrated withthis marketing policy. “All the storeswere ‘consistent’ wherever youwent in the world, which meant theylooked the same, and it was gettingboring,” he told me. He wanted to dosomething to shake luxury up andmake it a voice in creativity again.

Hata has long beeninterested in architecture—hisbrother-in-law Masayoshi Yendo isformer president of the JapanInstitute of Architects—so Hatadecided to host a competition to

select an unknown architect to buildsomething fantastic. “We wanted itto be a Vuitton store, not anarchitect’s monument,” heexplained, and “if you commission astar you cannot argue.” Vuittonselected Jun Aoki’s proposal of abuilding with “fuzzy external walls,like air, mist, or mirage.” Whencompleted in 1999, the store was “anoblong cube, resembling atransparent jewelry case placed inthe middle of the city,” as Aokidescribed it, with a glass facade re-creating Vuitton’s Damier checkpattern. In 2002, Aoki producedanother architectural masterpiecefor Vuitton in the pretty, tree-linedshopping district of Omotesando: astore of “randomly stacked LouisVuitton trunks,” Aoki said, each“trunk” creating an airy, modernrectangular space to display andsell Louis Vuitton products.

The Omotesando storeset out to be the most glamorous

shopping address in Japan. Itoffered a concierge who would helpwith store orientation as well asbook restaurants or taxis andprovide information about Tokyo.On the top floor, there is a VIPsalon, which you access via privatelift, for special customers to try onclothes or place custom orders forluggage and accessories out ofview of the masses. To celebratethe opening, Vuitton threw asplashy party attended by moviestars, local celebrities, andimportant clients who sipped VeuveClicquot—an LVMH brand—as theymingled among the glass displaycases and posed for the paparazzi.

The strategy worked. Fortwo days leading up to theOmotesando store’s opening,fourteen hundred Japanese Vuittongroupies camped out front, waitingto shop. On the first day of business,the store’s clerks rang up astaggering $1.04 million in sales.

When I visited it in November 2005, amiddle-aged Japanese woman wastrying on a pair of LV monogram–covered blue jeans and a matchingmonogram denim shoulder bag withchinchilla trim as her husband sat inan armchair talking on his cellphone. His shirt cuffs were heldtogether with Vuitton cufflinks. In astroller next to them sat their dog,watching contentedly. On the fourthfloor, a group of large, loudRussians checked out Vuittonsuitcases as a posse of Japanesefashion guys with blond-streakedhair, tight shiny suits, wide-openshirts, and cowboy boots chatted upa pair of local girls in little jackets,microskirts, and stiletto boots. I gotthe feeling that trendy Japanesecruise the Vuitton store inOmotesando like young Americanshit happy hour.

The truly fashionableset, however, bypass all of that andgo to Celux—pronounced “say luxe”

like the French phrase “It’s luxury”—a private club tucked in the backupper corner of the building wheretrendy Japanese pay one-timemembership of about $1,850 andannual dues of $215 for the privilegeto buy modern art, vintage jewelry,luxury fashion, and leather goodsnot found anywhere else in Tokyo.Members enter through a discreetside door and take a private lift thatthey access with their Celux swipecard to the eighth-floor lounge withblood-red carpeting, exotic woodpaneling, and hip jazz. LVMHbrands are all around you: mod pinkPucci-print sofas by Cappellini,Kenzo aromatherapy products onthe coffee table, a wet bar on top ofan upright Vuitton trunk. There is animpressive collection of fashionbooks and modern art. Down adramatic curving staircase, thedouble-height suite is done up withred velvet armchairs, colored crystalfruit chandeliers, and baroque gold-

framed mirrors, displayingeverything from vintage-inspiredsunglasses by Oliver Goldsmith ofthe United Kingdom to filmy Lanvinblouses.

Some young designerscreate items for Celux, like theBritish brand Filth, which came upwith a vintage-style green armyjacket with the word “Celux” painteddown the sleeve. Naturally,everything from the artwork to thearmchairs is for sale. Members are“people with taste and fashionsense, like artists, entrepreneurs,deejays, and musicians,” saysChiaki Tanabe, Celux’s publicrelations rep. “Trendsetters.” Tobecome one, you must berecommended by an existingmember. By the fall of 2005, Celuxhad met about half of itsmembership goal of two thousand.

The Vuitton storeskicked off a luxury architecture warin Japan. In 2001, Hermès

inaugurated a stunning $137 milliontwelve-story glass-brick towerdesigned by Renzo Piano in Ginzawith fourteen hundred square feet ofrich retail space, a workshop,executive offices, an art gallery, anda forty-seat film screening room.The first dramatic architecturalluxury tower in Tokyo, it replaced asmall café. In 2003, Prada built an$80 million six-story temple topostmodernism on Omotesandodesigned by the Swiss architecturefirm of Herzog & de Meuron—thefolks who did the Tate Modern inLondon. With its striking five-sidedfacade of clear bubble-like glass ina twisted harlequin pattern, thePrada store seems to draw moretourists snapping pictures thanshoppers laying out the plastic. Andin December 2004, Chanelchristened its Ginza building. Theproperty, previously a Warner Bros.store with a giant TV screen playingBugs Bunny shorts, cost Chanel a

staggering $117 million at auction. Ittook three months to knock downthe existing building and anotherfourteen and a half for Peter Marinoto construct a new one.

It’s quite a building.There are ten floors, including aboutfourteen thousand square feet ofshopping space done up inabsurdly expensive materials.There is glittering silver dust on thepillars, woven gold-ribbon panelson the walls, and an undergroundcustomer parking lot (a rarity inTokyo) with Andy Warhol’s ChanelNo. 5 image to greet you when youpull in. Above the store there areplush executive office suites withexpansive windows; a vastmultipurpose cultural space calledNexus Hall that hosts classicalmusic concerts and photographyexhibits in conjunction with theBibliotèque Nationale de France; arooftop terrace with Japanesebamboo and water gardens; and on

the top floor, with a commandingview of the city, the Alain Ducasserestaurant Beige Tokyo. “I wantedthe best chef in the world,” RichardCollasse, Chanel Japan’spresident, says quite simply.

Marino’s pièce derésistance is the facade, which tookup half of the building’s constructionbudget: a gigantic curtain wall ofPrivalite glass with seven hundredthousand embedded light-emittingdiodes (LEDs) that at night projectswirling black-and-white images ofChanel symbols such as theinterlocking Cs, the tweed patternand camellias, making it effectivelythe largest television screen in theworld. The total cost of the buildingwas reportedly $240 million.Collasse will only say that it costtwice as much as “good-qualitybuilding” in Tokyo. A year and a halfafter it opened, there were still linesout front. Chanel presidentFrançoise Montenay told me that

she expected the store to recoup itsinvestment in three years.

PART TWO

CHAPTER FOUR

STARS GET IN YOUREYES

“Luxury lies not inrichness andornateness but inthe absence ofvulgarity.”

—COCO CHANEL

RACHEL ZOE blew into the JimmyChoo Oscar Suite on the fifth floor ofthe Peninsula Beverly Hills hotel ona rainy February morning in 2005 likeshe owned the joint. Dressed in ablack fitted Roberto Cavalli jacketwith fur cuffs, tight skinny jeans, aChloé belt, and five-inch-highstiletto boots with buckles, she air-kissed Sandra Choi, niece of theLondon-based luxury shoecompany’s namesake, and clockedthe crowd in a swift 360-degree

glance. Choi, the company’screative director, and TamaraMellon, its glam jet-set founder andpresident, booked the suite toreceive socialites, starlets, and A-list stylists looking for shoes toborrow for the myriad dinners andparties later in the week,culminating with the seventy-seventh Academy Awards onSunday night. Swishing her longBotticelli ringlets out of the way, andwith notebook-wielding Choi by herside, Zoe cut through the sea of tea-and champagne-sipping fauxblondes and headed straight intothe bedroom of the buttercup yellowsuite. The bed, dresser, desk, andarmoire had been replaced withlong banquet tables, each coveredwith white linen tablecloths, hugebouquets of white roses and tulips,and scores of dangerously tall andwildly expensive women’s shoes.

“For Salma”—as inHayek—“I need size-wise 6,” Zoe

instructed Choi in her acutenorthern New Jersey accent. “Shecalled me this morning. ‘Rachel, Ineed five inches!’” Choi nodded andjotted it down. Zoe picked up astrappy gold leather stiletto, handedit to Choi to note, and pointed outothers in silver and bronze. Theywere for Julie Delpy, who wasnominated for best originalscreenplay for Before Sunset. “I’mnot sure what her jewelry is going tobe,” Zoe explained, “so I’d like tokeep it open.”

She scanned the tableagain. “These are fabulous,” shedeclared of a bronze pair that tiedaround the ankle. She picked out apair of black platforms, too. “Can wedo a jewel on the platform?” sheasked pointedly. Choi nodded andscribbled. “Great,” Zoe concluded.She turned to leave but spiedanother table in the back corner.“Holy crap! Holy crap!” she wailedas she cradled a pair of purple satin

pumps with big jeweled buckles.“This is incredible! And look at this,”pawing a pair of five-inch silver-strap stilettos. “I could cry!”

Zoe—pronounced Zo,l i ke snow—is one of Hollywood’stop celebrity stylists, thefashionistas who are paidthousands of dollars a day to dressfilm, TV, and music stars. A decadeago, the job of celebrity stylist didn’teven exist. But with the onslaught ofpremieres, charity galas, andawards programs, all of whichrequire stars to look as if they havestepped out of the pages of Vogue,stylists have become as essential inHollywood as publicists, personalassistants, trainers, and chefs.Stylists attend fashion shows andvisit showrooms in Paris, Milan,New York, and Los Angeles, scanfashion Web sites like Style.com,and shop incessantly to pulltogether the hippest, sexiest, mostglamorous wardrobes possible for

their clients. For big events, like theOscars or Golden Globes, stylistsare on hand to dress the celebrity,add jewels, and tie sashes just right.Whenever a top celebrity does a“public appearance”—from a chaton David Letterman to a stroll beforecameras on a red carpet—you canbe sure a stylist has helped createthe look. The result for the luxurybrands, Zoe explains, is “a milliondollars of free advertising.”

For most of theirexistence, luxury brands had notadvertised. Leather goods housessuch as Louis Vuitton and Gucci ransome ads in magazines, andcouture houses such as Chanel andYves Saint Laurent hawked theirperfumes and cosmetics. But, asArie Kopelman, former president ofChanel Inc., explained to me, luxuryexecutives and designers “thought itan anathema to advertise fashion,that it would cheapen the business.”The generation of designers that hit

big in the 1970s, including GiorgioArmani and Gianni Versace inMilan, and Ralph Lauren and CalvinKlein in New York, changed thatperspective. They hired fashion’stop photographers such as RichardAvedon and Bruce Weber andsupermodels such as JaniceDickinson, Jerry Hall, and BrookeShields to star in their campaigns,which ran in fashion and artmagazines. In 1987, Chanelcouturier Karl Lagerfeld, anaccomplished amateurphotographer, started shooting thehouse’s fashion ads himself. Otherbrands followed. “The industrybecame more competitive, and youhad to be more aggressive,”Kopelman explained. “Advertisingplayed a role in that marketing.”

As the industry grew inthe 1990s, so did advertising. Guccinearly doubled its ad expenditurefrom $5.9 million, or 2.9 percent ofrevenues, in 1993 to $11.6 million, or

4.6 percent, in 1994. By 1999, Gucci’sadvertising and communicationbudget had grown to 7 percent, orabout $86 million, of its $1.2 billionsales turnover. In 2000, advertisingfor the entire group reachedapproximately $250 million, or 13percent of sales. LVMH spent morethan $1 billion in advertising—or 11percent of sales—in 2002, making itthe largest advertising buyer infashion magazines. “We are thelargest luxury goods advertiser inthe world,” Arnault once boasted. “Icannot tell you the exact savings—Icannot give away my secrets—but itis obvious that the more you buy,the better [deal] you get.”

Designers, or creativedirectors as they rechristenedthemselves in the 1990s, became anintegral part of the process. Theydreamed up ad concepts, chose themodels and photographers—Lagerfeld continued to shootChanel fashion campaigns himself

—and became the spokesmen fortheir brands. At Gucci, for example,“Domenico [De Sole] and Tom[Ford] sat down and said, ‘How arewe going to turn Gucci around?’”recalled Gucci’s then–chief financialofficer Robert Singer in 2001. “Andthey said, ‘We’ll make Tom a star.’”Ford sat for magazine profiles andTV interviews—often at one of hisspectacular homes—held news-making press conferences, andswirled with the jet set, his goings-on tracked by gossip columns. SoonFord and Gucci becamesynonymous for a hedonisticlifestyle that, Singer said, “becamethe platform for selling incrediblequantities of handbags.”

It worked for a while. Butsoon, as Claus Lindorff of the BETCLuxe advertising agency in Parisexplained, luxury brands realizedthey needed more than “a pretty girlin a pretty picture.” They neededreal people who had an air of

glamour about them.They needed

Hollywood.

HOLLYWOOD HAS A LONG and deeprelationship with luxury. During theGolden Age, from the 1920s to theearly 1960s, when powerful mogulssuch as Jack Warner and Louis B.Mayer were in charge of the studiosand ran them like kingdoms, movieswere rich. Characters had poshaccents, lived in grand homes,employed staff, dressedextravagantly, and made audiencesdream. The primary creators ofthese dreams were the costumers—the studios’ in-house designers whocame up with and produced theoutfits for everyone in a film from theleading lady to the extras. Back inthe 1930s, the bias-cut gowns thatMGM’s costumer Adrian designedfor Greta Garbo were so sublime

that fans wrote to her begging to buythem. Paramount costumer TravisBanton’s glittering gowns and slimtuxedos “made Dietrich,” DianaVreeland declared, and EdithHead’s structured, voluminouscouture turned several of AlfredHitchcock’s blond heroines intostyle role models. ColumbiaStudios’ French-born costumedesigner Jean Louis designed withsuch flair that he became known asHollywood’s Prince of Glamour.Among his masterpieces were RitaHayworth’s black satin hourglassgown in Gilda and the sheerbeaded chiffon second skin thatMarilyn Monroe wore to sing “HappyBirthday” to President John F.Kennedy. When Kim Novak went tothe Cannes Film Festival in 1956 forPicnic, she told me, “I had twotrunks of incredible wardrobe, thesefabulous gowns that Jean Louis atthe studio designed and they wereabsolutely magnificent. I swept

Prince Aly Khan off his feet.”Stars relished this

richesse. Silent-screen siren GloriaSwanson swathed herself in liquidsatin gowns, sparkling diamonds,mink, and ermine, both on and offscreen; Pinkerton security guardswould arrive at her studio dressingroom with chests of gems to dressup her costumes. “The publicwanted us to live like kings andqueens,” Swanson explained, “andwe did.” Joan Crawford was knownto change her clothes up to tentimes a day. “She had a specialoutfit for answering the fan mail,”cracked director JosephMankiewicz. She’d travel with morethan three dozen suitcases and hadher hip flasks made to match herensembles. She had her favoritehats copied a dozen times indifferent colors and at one point sheowned sixteen fur coats. “I look atthem and I know that I’m a star,” shepronounced. Crawford once

claimed that more money was spenton her wardrobe, per movie, than onthe script.

“Actresses had a lot oftaste themselves—and if they didn’thave it initially, they developed it,”actress Olivia de Havilland, bestknown for her role as Melanie in the1939 epic Gone with the Wind, toldme over tea in her Paris townhouseone winter afternoon. “Youabsorbed a lot. You knew it was anessential part of being in thatprofession because there was thepublic expectation. I remember Iwent to a film and during theintermission, the actress FrancesFarmer—long before herbreakdown—wasn’t carelesslydressed but underdressed andunder-made-up and I heardsomeone say, ‘That’s FrancesFarmer—oh, my.’ I myself was muchmore careful after that. It was such aresponsibility to be impeccable.”

Movie stars’ marketing

power was formidable. WhenCrawford wore a white Adrian-designed gown with organdy ruffledshoulders in Letty Lynton in 1932,Macy’s sold half a million copies.Grace Kelly’s wedding dress,designed by MGM’s Helen Rose forKel l y ’s 1956 marriage to PrinceRainier III of Monaco, was one ofthe most copied ever. Hollywoodstars endorsed clothes for the SearsRoebuck catalog and sold theirsignatures for labels. To have adress with Shirley Temple’s or JoanCrawford’s embroidered autographon the label was the bee’s knees.

When it came time tochoose the wardrobe for a film,French actress Leslie Caron, whoarrived in Hollywood in 1950 to stari n An American in Paris,remembers, “You went to thesalons, which was like a couturesalon with two dressing rooms, andeverything was brought to you.Helen [Rose] was capable of gently

persuading you if this or that wasfitting, but you certainly had a say.Every star had her own style. I wasforever trying to do French fashionsand get away from the Hollywoodlook, which had a lack of simplicityand too much froufrou. The studiomade my premiere dresses, too,and if you had to go to the Oscars,they would do a dress for you,especially if your film wasnominated.”

The best shoemaker intown was Salvatore Ferragamo, anambitious cobbler from a remotevillage east of Naples, Italy. Heoriginally settled in Santa Barbara,California, in 1914, where he and hisbrothers opened a shop and madecowboy boots and shoes for theAmerican Film Company’s movies.The studio’s actresses—MaryPickford and her sister Lottie, PolaNegri, and Dolores del Rio—soloved Ferragamo’s shoes for theirfilm roles that they went by the shop

and ordered pumps for theirpersonal wardrobes. In the early1920s, Ferragamo moved to LosAngeles and opened the HollywoodBoot Shop on the corner of LasPalmas and Hollywood boulevards.He created “Roman” sandals forCecil B. DeMille’s epics, includingThe Ten Commandments and TheKing of Kings, and shod the floor-show dancers at Grauman’sEgyptian and Chinese Theaters. Hemade shoes to order for RudolphValentino, Lillian Gish, Clara Bow,and John Barrymore, and hecreated a pair of one-of-a-kindpumps covered in hummingbirdfeathers for a princess visiting fromIndia, for which he was paid astaggering $500, the highest price heever received for a pair of shoes.

Ferragamo got caughtup in Hollywood’s social swirl.“Valentino would drop into myhouse on Beachwood Drive to eat abowl of spaghetti cooked as he had

liked it in Italy. He was a beautifulboy, always impeccably debonair,”Ferragamo wrote in his memoir,Shoemaker of Dreams. “JohnBarrymore, that perfect actor, usedto drop into my shop for a drink aswell as to buy shoes. It being thetime of Prohibition, drink wasdifficult to obtain, and anyone whowas lucky enough to come across aspare bottle promptly drank it.” Atparties “attended by virtually everystar in Hollywood—those who couldtolerate one another—from MaryPickford and Douglas Fairbanksdownward,” Ferragamo recalled, heplayed barman, whipping up hisown concoctions like “Green,” madeof mint and rum, and “Roscata,”which was gin, bitters, a dash ofbrandy, and a lot of ice. Though hewas friendly with his clientele,Ferragamo understood that “theworld’s stars do not come to mysalon to buy my reputation; theycome to buy shoes that fit and flatter

them.”Paris couture’s

relationship to Hollywood back thenwas limited and at times downrighttenuous. Coco Chanel traveledthere in the early 1930s to costume ahandful of pictures but quickly grewfrustrated and returned to Paris. Diormade clothes for a few of hisfavorite clients, including MarleneDietrich for Alfred Hitchcock’s StageFright and Olivia de Havilland andher co-star, Myrna Loy, for NormanK r a s n a ’ s The Ambassador’sDaughter. But in 1955, Dior refusedto provide a wedding dress forBrigitte Bardot to wear in the Frenchfilm La Mariée est trop belle. “Therewas no way Dior would riskincurring the displeasure of some ofhis most elegant clients by allowinghis dresses to be put on vulgardisplay on the screen,” wrotebiographer Marie-France Pochna inChristian Dior: The Man Who Madethe World Look New. “Dior was a

snob. He ranked living, breathingaristocrats far higher aestheticallythan their pale imitations on stageand screen.”

Only French couturierHubert de Givenchy saw howHollywood stars could serve asambassadors for luxury brands—and even then it took him some timeto figure it out. In 1953, Paramounttelephoned Givenchy in Paris tomake an appointment for “MissHepburn” to pick out a few clothesfor her new movie, Sabrina. Whenthe waif in a bob, T-shirt, ginghamtrousers, and no makeup came byfor her fitting, Givenchy was aghast.He thought he would be receivingKatharine Hepburn, who was notonly a huge Hollywood star but aBryn Mawr girl, the Americanequivalent to Givenchy’s aristocraticbackground and clientele. Givenchypolitely told the gamine Audrey topaw through the racks of theprevious season’s clothes and pick

out what she wanted. “I had no timeto meet with her,” he said. “I was inthe middle of making my secondcollection, and I didn’t have toomany workers then.” It was onlyover dinner that evening, whenAudrey Hepburn flaunted her socialcharm—she, too, had come from agood European family—didGivenchy see the possibilities of analliance. He dressed her for severalof her movies, including Breakfast atTiffany’s and Charade, andconvinced her to pose for theadvertising campaign for hisperfume L’Interdit. It was the firsttime a movie star allowed her faceto be used to promote a scent.Thanks to Hepburn’s unparalleledendorsement on and off screen,Givenchy was able to turn his smallcouture house into one of luxury’sfirst globally recognized andgenuinely successful brands. Yet ittook decades for his confreres in theluxury business to understand and

exploit the force of celebrity.

IN THE 1950S, following the advent oftelevision and a U.S. SupremeCourt ruling known as theHollywood Anti-Trust Case thatforced studios to sell off their theaterchains, the industry suffered afinancial slump and changed theway business was done. Actors andtechnical staff—including costumers—were gradually released fromtheir studio contracts; manycostume departments were shutdown. To make matters worse, filmsbegan to take on a more realistictone, with actors in more everyday,normal clothes—no ermine-trimmedpeignoirs or sequined siren gownsrequired. By the mid-1960s, moviecostumer designers were nearly anextinct breed. “They closed theirworkrooms down, they got rid oftheir designers,” the designer Bob

Mackie, who started as an assistantin the early 1960s for Jean Louis andEdith Head, told me. “Paramountgot rid of Edith Head; it was allchanging at that point. I had alwayswanted to be the designer at astudio but when I got into thebusiness I realized it was over.”

With no more EdithHead or Helen Rose or Jean Louisto provide glamorous wardrobesgratis, stars were forced to shopthemselves for premieres andawards shows, including theOscars. They’d frequent localdesigners such as Don Loper orJames Galanos, department storessuch as Bullock’s and I. Magnin,and a trendy European-style fashionboutique called Giorgio BeverlyHills on Rodeo Drive. For most ofthe twentieth century, Rodeo Drivewas an unpretentious street, withpharmacies, bookstores, and a fewgood restaurants, including theBrown Derby and Romanoff’s. In the

1950s, there were handful ofhaberdasheries where actors suchas Tyrone Power and Cary Grantshopped, and a divine lingerieboutique called Juel Park, whereBeverly Hills’ most soigné ladies,including Joan Crawford and GeneTierney, would have their silk andlace negligees made to measure.But in general, “Rodeo Drive wasn’ta fashion street,” Fred Hayman toldme—at least until he arrived.

The only way tounderstand Hollywood dressing, orin fact luxury retail in the UnitedStates today, is to talk to FredHayman, the man who introducedmodern luxury shopping toAmericans with his fashion boutiqueGiorgio Beverly Hills. In October2004, I rang Hayman’s office in afive-story building with his signatureyellow and white striped awningson Canon Drive, two blocks east ofRodeo. In his early eighties,Hayman is retired now but still goes

to the office a couple of days a weekto manage his store’s legacy. Heimmediately proposed we lunch atSpago next door a few days later.When I arrived at the famousBeverly Hills eatery at the appointedtime, I was ushered to what wasobviously Hayman’s regular table.He had arrived early and was busyreceiving good wishes from otherpatrons. Dressed nattily in aperfectly pressed shirt, trousers, anda jacket—a rarity in Los Angeles,especially at lunch—Hayman stoodto greet me. He is a small, elegantman with silver hair parted neatly onthe side, a crisp continental accent,and gracious manners, all of whichindicate not only his upbringing butalso the secret to his success.

Born in 1925 and raisedin Saint Gall, a small textile town inSwitzerland, Hayman immigrated asa boy to New York with his motherand stepfather. At seventeen, hewent to work as an apprentice in the

kitchen at Conrad Hilton’s famedWaldorf-Astoria Hotel, and over theyears rose through the ranks tobecome banquet manager. In 1955,Hilton asked Hayman to move toLos Angeles to oversee the diningrooms of the new Beverly Hilton.Hayman brought with him a staff offifty, primarily from the Waldorf, anddemanded of them what wouldbecome his signature managerialstyle: personalized service,impeccable manners, quietperfection. Soon the Beverly Hiltonbecame the place to be, with starssuch as Clark Gable, NormaShearer, and Irene Dunne droppingin regularly for drinks or dinner.

In the late 1950s,Hayman invested in a building onDayton Way just off Rodeo Drivethat housed a women’s clothingboutique called Giorgio. Surprisedto find out how much he enjoyedretailing, Hayman quit the hotel,bought out his partners, and took

over the store. He acquired the shopnext door, number 273 Rodeo Drive,connected the two, dressed them upwith cheerful yellow and whitestriped awnings, and put in a pooltable and an oak bar “with a fewbottles of booze,” he told me.Uniformed barmen servedcomplimentary tea, cappuccino,wine, and cocktails to customers asthey shopped. There was a denlikecorner with a fireplace, comfortablechairs, and a newspaper rack.Hayman’s third wife, Gale, was thestore’s buyer. Hayman chatted upcustomers such as Elizabeth Taylor,Barbra Streisand, and NatalieWood, while Gale and her prettysalesgirls modeled the latestcreations by Halston, Diane vonFurstenberg, Oscar de la Renta,and Christian Dior. The modusoperandi at Giorgio, as at theBeverly Hilton, was personalizedservice. “We wrote thank-you letterswhen customers shopped at our

store,” Hayman told me. “We hadfiles on all the customers, thick files,and if they hadn’t bought anything ina while, we followed up,” usuallywith a handwritten note that wouldbe delivered by a Silver WraithRolls-Royce with the license platen u mb e r 273. Giorgio “wasn’t aladies’ store,” Hayman explained. “Itwas like a home.”

The Haymans’ only truecompetition was Gucci, the firstEuropean luxury brand to open itsown boutique on Rodeo Drive, in1968. Aldo Gucci, son of the founderand head of the company at thetime, sensed that Rodeo Drive wasgoing to evolve into an importantluxury shopping street. The Guccistore was impressive: an imposingglass-and-bronze door gave way toa spacious main salon with Guccigreen carpeting and eightRenaissance-style Murano glassand Florentine bronze chandeliers.Upstairs there was a couture salon

called the Galleria that VIPshoppers accessed via a glasselevator. Gucci had a good celebrityfollowing: Grace Kelly, SophiaLoren, and John Wayne wereregular customers. Frank Sinatra soloved Gucci loafers that he sent hissecretary over to the new RodeoDrive store buy a pair even before ithad opened to the public. By thel a te 1970s, celebrities, locals, andtourists were snapping up Guccihandbags—ranging in price from$100 for basic leather to $11,000 foreighteen-karat-gold-trimmed lizard—so fast that the store managercomplained, “Our biggest problem isshortages.” “Gucci was as hot ascould be,” remembers Hayman.“There were lines around the block.”Beverly Hills became so “Gucciedout” that students at nearby BeverlyHills High School raised a fauxGucci flag on campus.

Within a few years,Giorgio and Gucci had turned

Rodeo Drive into a destinationaddress for luxury shopping,attracting not only wealthycustomers but also other brands.Ralph Lauren opened his first Polostore there in 1971. Yves SaintLaurent, Céline, Courrèges, andFred Joaillier soon followed,replacing local merchants and evena gas station with their expensive,exclusive boutiques. The superrichflocked to the street, and spentvoraciously. Hayman was onceforced to close Giorgio after an Arabclient arrived with his harem andbought every evening gown in thestore. In 1977, Giorgio Beverly Hillsgrossed $5 million, which meant thatit sold four times more merchandiseper square foot than Bloomingdale’sflagship in Manhattan, then thecountry’s most successfuldepartment store, according toAnthony Cook, who charted the riseof Rodeo Drive in New Westmagazine. “The times were good

and we were right for the times,”Hayman said with a laugh. In 1985,Chanel opened its first store on theAmerican mainland on RodeoDrive. Its decor lived up to thestreet’s growing reputation ofostentatious luxury: crystal shelves,suede walls, and a skylight inspiredby the crystal stopper of the ChanelNo. 5 perfume bottle. Writer JudithKrantz, who set her best-selling 1978nove l Scruples on Rodeo Drive,called the street “the moststaggering display of luxury in theWestern world.”

It only could havehappened in Los Angeles. L.A. wasa young, liberal city, settled bypeople who fled their conservativeroots to start anew. Its primarybusiness—cinema—was new. Itsmoney was new. There was nopretension, no snobbism, notraditional class rules—yet. To shopin luxury boutiques, you didn’t haveto come from a good family or dress

well, as was the case in America’sold, traditional cities. If you had thedough, you could go.

Oscar time was thebusiest, with stars crisscrossingRodeo Drive from boutique tojeweler to beauty salon. “Starswould spend months deciding whatthey were going to wear to theOscars,” remembers Gale Hayman.“Nobody sent them clothes.” Theproblem was, most stars didn’t havecultivated taste and they didn’t havethe studio costumers to guide themanymore. L.A.’s reputation as a laid-back city accentuated the problem.Folks knew how to dress down, butno one knew how to dress upanymore. The society ladies suchas Betsey Bloomingdale and NancyReagan still had James Galanos todress them in southern Californiacouture, and Bob Mackie designedspangly getups for Cher andcomedian Carol Burnett. But mostother celebrities were on their own,

sometimes with disastrous results.Who could forget when Demi Moorewalked the Oscars’ red carpet in1989 in a black cape and spandexbicycle pants?

They needed guidance,someone with good taste to dressthem as elegantly as theirpredecessors. And Giorgio Armaniwas happy to oblige.

BACK IN THE MID-1970S, a newgeneration of Italian ready-to-weardesigners emerged, turning theindustrial city of Milan into animportant fashion capital almostovernight. Among them were GianniVersace, who came from thesouthern town of Reggio diCalabria, and made his name withsexy sequin and leather clothes thatwere inspired by hookers;Gianfranco Ferré, an architect bytraining who made highly structured

clothes; and Giorgio Armani, ahandsome, quiet man who inventedwhat has become known as the softsuit.

To understand GiorgioArmani, and the austerity of hisclothes, you have to go back to hischildhood. He was born in 1934, themiddle child of three, in Piacenza,an industrial town forty milesoutside of Milan that was bombedrelentlessly by the Allies.“Sometimes I would find myself withmy little sister, who was three yearsold, hiding in a hole while a planetried to gun us down,” heremembers. Often, when he was outplaying with his friends, the bombalerts would sound and they’dscurry into shelters. But one day, hewasn’t with them—he hadsomething else to do, he doesn’tremember what—and “they diedand I lived,” he told me during aninterview in his office in Milan. “Itwas just good luck.” Another day, he

wasn’t so lucky. The neighborhoodboys were playing with gunpowderfrom an Allied cartridge they hadfound, and it exploded as Giorgiobent over to look. He was coveredin flames. He spent forty days in thehospital, where he was submergedin vats of pure alcohol. He stillcarries a scar on his foot where thebuckle of his sandal burned into hisskin. “Those were disagreeabletimes,” he says in his understatedway, “and their memory remains.”

But even as a child, withthe world coming down on his head,Armani’s talent for visual aestheticsemerged. One Christmas shortlyafter the war ended, his mother setthe table for the holiday feast ofroast chicken. Little Giorgio lookedon with displeasure—he did notapprove of her arrangement. “Therewere too many things—thecenterpiece, with flowers, and thensmall flowers everywhere. Iremember telling my mother, ‘Do

one of these things, not both.’” Hismother reeled at first, but after herson left the room, she removed thecenterpiece. “She understood thatthere was something different aboutme, that I had a sensitivity for certainthings, for aesthetics, for exteriors,”he says. “She realized that I couldtell if something was beautiful orugly.” From then on, she asked hisopinion on decor. Looking back,Armani says that she was the onlywoman “who really influenced thedirection of my work and my life…with her way of being, so simple butrigorous and severe at the sametime. She spoke very little but withwords that counted.”

I n 1955, Armani enrolledin medical school in Milan, but hesoon realized he was not suited tobe a doctor and returned to Milan,where he got a job at a localdepartment store called LaRinascente. During his eight yearsthere, Armani worked as a

photographer, a window dresser, anassistant men’s wear buyer, and thefashion coordinator. It was a goodjob, but a lousy fashion job. Menwith money and taste had their owntailors in Italy back then. Those whodidn’t had to buy off the rack fromthe sorry selection of baggy, saggysuits churned out by manufacturersin few sizes. Armani was appalledby this and decided to do somethingabout it. He went to work for Cerrutias an assistant men’s weardesigner for a collection drollynamed Hitman, and learned theessentials of suit construction andmanufacturing. He came up withseveral new approaches to men’ssuits, including dabbling indeconstruction. After a few years,Armani left Cerruti to launch afreelance career. “I was ready topursue my own path,” he told me. “Iwanted to discover my ownaesthetic.”

I n 1975, Armani and his

boyfriend, Sergio Galeotti, scrapedtogether $10,000 in start-up capital,rented a two-room office on CorsoVenezia, and launched the GiorgioArmani fashion company. Galeottihandled the business; Armanidesigned. For his first men’s wearcollection, which he presented tobuyers in a first-floor apartment inthe building where he and Galeottilived, Armani introduced his newsilhouette: the unstructured suit.Armani abandoned the traditionalstiff English wools and flannels innavy, black, and charcoal in favor oflighter, pliable fabrics such as linen,wool jersey, and woven textiles inmuted tones such as olive, mauve,slate blue, and a gray-beige dubbed“greige” that later became hissignature. Three months later, hedid the same for women intraditional men’s fabric. “This wasthe time of feminism,” Armani toldme. “Women needed clothing thatwent much further than the little

dress or a tight little suit—clothingthat provided strength and power.Yves Saint Laurent did it, and itworked well, but I thought it shouldbe translated into things that wereeasier to understand, moreadaptable to a greater number ofpeople. So I tried to alter this spirit abit, with the help of women in myoffice who saw men’s clothing andsaid, ‘Why can’t we have this, too?’”

Fred Pressman, thevisionary owner of the New Yorkmen’s wear store Barneys, thoughtArmani’s suits were genius and,according to Joshua Levine in TheRise and Fall of the House ofBarneys, Pressman flew to Milan inJune 1976 and offered $10,000 to sellArmani’s clothes—an enormousamount for a fledging company. Inreturn, Armani gave Barneysexclusivity to sell the brand in theNew York market. “That meant Sakswon’t get it, Bloomingdale’s won’tget it, Bergdorf couldn’t get it, the

specialty stores couldn’t get it,”Barneys executive Ed Glantz toldLevine. “It was a real coup.”Armani’s early American customerswere the in-the-know sorts, likedirector Martin Scorsese, ColumbiaPictures president Dawn Steele,Top Gun producer Don Simpson(who, since Armani had limited L.A.distribution, would order twentyblack suits at a clip from Barneys inNew York), and Bob Le Mond, atalent manager who representedJohn Travolta, star of the recent hitsSaturday Night Fever and Grease.

I n 1979, when Travoltawas hired to play a high-endHollywood hustler in director PaulSchrader’s film American Gigolo, LeMond told to Schrader that GiorgioArmani’s suits would be the perfectlook for Travolta’s character: asuave, vain male prostitute in LosAngeles. Schrader and Travolta metwith Armani in his studio in Milanand put together a wardrobe for the

role. Days before shooting wasscheduled to begin, Travolta pulledout to do Urban Cowboy and wasreplaced by the little-known RichardGere. It was a perfect fit. Armani’ssoft suits swayed with Gere’sswagger, his tight shirts sculptedGere’s buff torso. Gere was casuallyformal and heart-stoppingly sexy.The movie lifted Armani’s fashionreputation, but his distribution wasstill limited to Barneys and a fewother department and specialtystores. When Time put Armani on itscover in 1982, only the seconddesigner after Yves Saint Laurent toreceive such an honor, his U.S.sales were close to $14 million, amere 10 percent of his worldwidetotal. Armani wanted to dress morethan Hollywood and Wall Streethotshots. What about the rest ofAmerica? They needed great suits,too.

I n 1985, Sergio Galeottidied of AIDS. Armani was bereft

and poured himself into his work.Not only was he now in charge ofdesign, but he had to come up withand implement the company’sbusiness strategy as well. Lookingback at the impact that AmericanGigolo had publicity-wise, Armanirealized that the best way to reachthat middle-American audience wasto dress its stars. In 1987, hedesigned the retro-1930s costumesfor Brian De Palma’s gangster flickThe Untouchables, and suddenlycrowds of Americans poured intoArmani’s Madison Avenue store, hisfirst in the United States. Thefollowing year, Armani opened athirteen-thousand-square-foot,glass-front luxury emporium onRodeo Drive and inaugurated it witha splashy, exclusive benefit at L.A.’sMuseum of Contemporary Art forthree hundred of Hollywood’s mostpowerful and famous, with Spagocatering and Peter Duchin’sorchestra playing. The tone was set.

There was just one thing missing: “Ineeded to have the right peoplewearing my clothes the right way,”he said.

For New York, Armanihired Lee Radziwill, sister ofJacqueline Kennedy Onassis, ashis “special events coordinator.”Radziwill wore Armani everywhereshe went—the ballet, the opera,charity galas—and soon enough,her much-photographed socialitefriends were wearing Armani, too.But what about the West Coast,what about Hollywood? Radziwilltold her sister’s niece, MariaShriver, who lived in Los Angeles,about the job, and Shriver told herfriend, the Los Angeles Herald-Examiner society editor WandaMcDaniel, who had served as abridesmaid in Shriver’s 1986marriage to ArnoldSchwarzenegger. McDaniel, itseemed, had just the right mix ofconservative smarts and Hollywood

savvy for Armani. She was born andraised in Macon, Missouri, attendedthe University of Missouri’s famedjournalism school, and had workedas society editor first for the DallasTimes-Herald and, since 1977, forthe Los Angeles Herald-Examiner.“I remember my first week here Iwent to an event at the BeverlyWilshire and there was JimmyStewart, Cary Grant, and GeneKelly,” McDaniel told me over lunchat the Beverly Hills Hotel’s PoloLounge. “And I thought, ‘Oh myGod, I’m so out of my league here.’ Imean, in Dallas it was theCowboys’ football coach TomLandry and quarterback RogerStaubach. Those were the big stars.So I walk up to Cary Grant and said,‘I just want to say hello because Idon’t think I’m going to last past thefirst week of this job.’”

Instead, Cary Grant tookher out and introduced her to all ofhis friends, and within a matter of

months she had the town wired. Herscooplike approach to societyreporting triggered an old-fashionednewspaper war with her competitor,Los Angeles Times societycolumnist Jody Jacobs, and sherattled the entire state of Californiawith a frank and not terribly flatteringfive-part series about its former firstlady Nancy Reagan that came outduring the presidential campaignand included a rare interview withher father, Loyal Davis. “I tell you Ithought [Nancy Reagan] was goingto have my head chopped off,”McDaniel remembered, “and therewere several people who openedup to me a lot and were axed fromthe friends’ list.” The following year,McDaniel married Albert Ruddy, theproducer of such 1970s boxoffice hitsas The Godfather and The LongestYard (and most recently ClintEastwood’s Million Dollar Baby),with a swank star-studded receptionat the Beverly Hills Hotel. They

became a Hollywood power couple,and she become a far-better-dressed reporter.

In May 1988, Armanihired McDaniel to be the director ofentertainment industrycommunications. Her job: to getHollywood players to wear Armani.McDaniel lunched with celebritypublicists, managers, and agents,and wore and preached Armani atdinner parties. Armani swiftlybecame the uniform for producers,executives, agents, andpowerbrokers in town. But GiorgioArmani wanted more: he wantedmovie stars to wear his clothes inpublic and cause a stir that wouldbe captured by the paparazzi andrun in papers around the world.McDaniel snagged the first one:Jodie Foster.

I n 1989, Foster acceptedher Best Actress Academy Awardfor her role as a rape victim in TheAccused in a baby blue taffeta ball

gown with a giant bow on thederriere that she bought whilewindow-shopping in Milan.“Everyone blasted her for it,”remembered McDaniel. “I knewJodie would go back to the Oscarsthe following year to be a presenter,so I thought, why not call her rightnow and say, ‘You want to commitfor next year? Why don’t we get yougoing and know that decision isdone.’ And Jodie said, ‘You knowwhat? You can do this for the rest ofmy life.’”

Armani found thesecond one while watching a videoof Brian De Palma’s 1983 epicScarface: the willowy blond moll,Michelle Pfeiffer. McDanielcontacted Pfeiffer and offered todress her for the Oscars, too.Together they picked out a perfectnavy blue sheath. “Before I wentover to her house to get herorganized the afternoon of theOscars,” McDaniel remembers, “I

called and said, ‘What else are yougoing to be wearing?’”

“I don’t know,” Pfeifferresponded. “You’ll figure it out.”

McDaniel threw some ofher own handbags and jewelry inthe car, and when she arrived atPfeiffer’s old Spanish home inSanta Monica, Pfeiffer camedownstairs dressed in her Armanigown and a tiny sea pearl necklacethat her boyfriend, Fisher Stevens,had given her.

“Michelle,” McDanielsaid almost disapprovingly, “this isthe Oscars.”

McDaniel pulled out ofher sack a string of large baroquepearls and a black alligator clutchevening bag.

“But I don’t sparkle,”Pfeiffer wailed.

McDaniel slid her bigdiamond wedding ring off andhanded it to Pfeiffer.

“Is that weird?” Pfeiffer

asked.“No one is going to

know,” McDaniel responded.The next morning,

Women’s Wear Daily ran theheadline “The Agony and theEcstasy.” Under it there were twopictures: Kim Basinger in a freakishself-designed one-sleeve whitenumber, and luminous Pfeiffer in herunderstated, utterly tasteful Armani.

She wasn’t the only one.Armani also dressed Best Actresswinner Jessica Tandy, BestSupporting Actress nominee LenaOlin, Best Actor nominees DanAykroyd and Tom Cruise, BestSupporting Actor winner DenzelWashington, Steve Martin, JeffGoldblum, Dennis Hopper, and theceremony’s host Billy Crystal. “Wewere the only people calling,”McDaniel remembers. “We were theonly game in town.”

Women’s Wear Dailydubbed the event the “Armani

Awards.” Vogue’s Anna Wintourdeclared it “a revolution…the end ofthat glitzy, over-the-top, rathervulgar way of dressing. Armanigave movie stars a modern way tolook.” More important, it gaveAmericans a glamour they couldactually imagine wearing. Sales forArmani soared: between 1990 and1993, worldwide turnover doubled to$442 million, much of the surgecoming from the United States.Jennifer Meyer, Ralph Lauren’sWest Coast liaison at the time, said,“[McDaniel] single-handedlychanged the paradigm.”

THE MESSAGE WAS CLEAR: dressingcelebrities for the red carpet was thebest, and cheapest, advertising aluxury business could do. Thefollowing year “everybody tried tohire me,” McDaniel says with alaugh. “Valentino tried to get me. I

met Gianni Versace in a cabanahere at the Beverly Hills Hotel,hiding out. He said, ‘You areworking for Armani, come work forme!’” She turned them all down andkept wrangling celebrities forArmani. Calvin Klein began stagingan exclusive West Coast salon atthe Beverly Wilshire Hotel twice ayear where a select group ofcelebrities—including Meg Ryan,Anjelica Huston, and Goldie Hawn—could pick up his frocks atdiscount prices. Houses startedluring stars to sit in the front row oftheir fashion shows in Paris andMilan by offering them and theirloved ones free trips, hotelaccommodations, and clothes. Allthe stars had to do was smile for thepaparazzi for a couple of minutesand attend a champagne-infusedpostshow dinner or party. This way,the houses had a good relationshipwith the stars when it came time todress them for the Oscars or the

Golden Globes or some other bigred-carpet event.

The sales impact wasenormous. When Madonna wore asapphire satin shirt and black velvethipsters from Gucci to the MTVawards in 1995, sales exploded:within days there were waiting listsfor the pants in Gucci storesworldwide. After the world’s topcelebrity, Princess Diana, wasphotographed in 1995 carrying a Diorhandbag—dubbed the Lady Dior inher honor—the company sold ahundred thousand at $1,000 apiece,single-handedly raising Dior’s 1996annual revenues by 20 percent.Magazines devoted to celebritystyle sprouted, beginning with InStyle in August 1993. The goal of InStyle, founding editor MarthaNelson told me, was to show that“style was accessible. Readers feelthat they ‘know’ the celebrities in away that they’ll never know models.There’s glamour there but not a

distant glamour. Celebrities are inTV, movies, and pop music. Theyare in people’s lives and in people’sliving rooms. They are not thatmysterious.” Fashion magazinessuch as Vogue and Harper’sBazaar began to put celebritiesinstead of models on their covers.“The bottom line is celebrities sellmuch better,” Vogue’s editor inchief, Anna Wintour, explained tome.

The Academy Awardsceremony is by far the biggestcelebrity event and the mostimportant for luxury brands.“Hundreds of millions of peoplewatch the Oscars, all over theworld,” Lisa Schiek, former directorof communications for Gucci Group,told me. “If you’ve got the rightactress or actor walking up the redcarpet, saying that designer’s nameover and over, you get the heat, it’svalidation and you’ve got the world.The magnitude is awesome.”

Indeed, Dana Telsey, former luxurygoods analyst of Bear Stearns inNew York, declared: “The highlyanticipated red-carpet arrivals [are]arguably the most importantmoment for fashion and jewelrydesigners.” Carol Brodie, who wasworking for jeweler Harry Winstonwhen I met with her during Oscarweek 2005, told me that if a celebrityis photographed on the red carpet ofthe Academy Awards wearing yourproduct, “You’ll get a hit once amonth” for years. “Harry Winston’sadvertising budget in the U.S. isslightly over a million a year,” shesaid. “But if you ask nine out of tenpeople in this country about HarryWinston, they’ll say, ‘Oh yeah, theyare the jeweler who dresses thestars.’ Dressing celebrities is anoverwhelming way to gainawareness. Uma Thurman putPrada on the map. Charlize Theronput Vera Wang on the map. HalleBerry made Elie Saab. Americans

spend billions of dollars on luxurybrands because celebrities wearthem.”

Though it was quicklybecoming “a crowded field,” asMcDaniel recalls, dressing stars stillremained an intimate affair, like itwas back in those studio wardrobe-department days. “The celebritieswould come in directly to see us,”McDaniel said. They’d have tea andchat in the third-floor VIP lounge asthey tried on the latest eveningwear, then afterward maybe godown to the store and do a littleshopping. It was a friendly businessarrangement, a personal service.

“Then suddenly,”McDaniel remembers, “somebodyelse came in for them.”

STYLISTS ARE A RELATIVELY newphenomenon in fashion. Originally,stylists worked as fashion editors,

dressing—or “styling”—models forfashion shoots for magazines andcatalogs. But as the number offormal affairs exploded in the 1990s,from the Oscars and a fewpremieres to an avalanche ofpaparazzi-lined red-carpet events,stylists saw the birth of a new niche:dressing celebrities. Stylists wentfreelance and started signing upmovie, television, and music stars.A stylist’s job, as Rachel Zoeexplains, is to do “everything”:shopping, putting outfits together,dressing the star, creating acoherent look that reflects what thestar’s image is, or what he or shewants their image to be, in thepublic mind. When a star embarkson a media tour, the stylist will puttogether a notebook filled withPolaroids of outfits—“from bra toshoes,” Zoe says—with notesindicating which one to wear towhich event as well as which towear if it rains or if it is nice out. “No

matter how beautiful actresses are,they don’t know how to dress,” saysKelly Cutrone, founder of thefashion public relations firmPeople’s Revolution. “They need tobe told how to say the designer’sname—it’s Jeee-van-shee, not Ga-vin-chee—and how to put a dresson—what’s the front and the back—and how to walk in that shoe. Theyare in way over their heads. Andthat’s where the stylist steps in: theyare replacing what studios used todo.”

Soon the stylists beganto take credit for their work andbecame fashion stars themselves.Jessica Paster made her name atthe Oscars in 1998 when shedressed two Best SupportingActress nominees: Kim Basinger inan Escada pistachio silk taffeta ballgown and Minnie Driver in aHalston blood-red jersey columnwith a matching fur stole. WhenBasinger won for her role in L.A.

Confidential, Escada’s—andPaster’s—profile soared. Sincethen, Paster has dressed CateBlanchett, Uma Thurman, NaomiWatts, Joan Allen, and KateBeckinsale. L’Wren Scott, the six-feet-four raven-haired girlfriend ofMick Jagger, is a former model whostarted her styling career doingphoto shoots for Helmut Newtonand Herb Ritts. Scott’s signaturestyle is sophisticated and very hautecouture—more aspiration thanaccessible. Her premier client isNicole Kidman, but she has alsodressed Marisa Tomei and SarahJessica Parker. Phillip Bloch, aformer model turned fashion stylist,famously dressed Halle Berry forthe 2002 Oscars in a sheer burgundygown with sarong-like skirt by thethen–relatively unknown Lebanesedesigner Elie Saab. The movesimultaneously catapulted Berry,who won the Best Actress award, tobest-dressed lists and Saab to the

level of Paris couturier. Bloch wrotea book called Elements of Style:From the Portfolio of Hollywood’sPremier Stylist, became aspokesman for Lycra and Visa, andin 2007 was launching a luxury shoeand a middle-market lifestylecollection that he described as“Hollywood glamour for themasses.”

Rachel Zoe wasperhaps the hottest stylist in thebusiness when I met her at theJimmy Choo Oscar salon in 2005.Her client list read like Page Six oft h e New York Post: along withSalma Hayek and Julie Delpy, shehandled Lindsay Lohan, NicoleRichie, Mischa Barton, and JessicaSimpson. Some have great styleand simply needed help puttingeverything together. Others need acomplete workup: a total, seamlessnew look. For a reported $6,000 aday, Zoe provides it, turning T-shirt-and-jeans devotees into luxury

brand fashion plates.“Those girls get

photographed going to dinner,” Zoeexplained. “They get photographedgoing to lunch. They getphotographed from the minute theyleave their houses in the morning tillthe minute they go to sleep.” AsNew York designer Michael Korsnoted, “We’ve never lived in such apaparazzi moment. So manywomen get their fashion informationby looking at a tabloid, and [Rachel]has found a way of making thosegirls look intriguing and fabulouswhen they’re running out for aStarbucks.” By the summer of 2006,Zoe had become so influential thatyou could see references to hertrademark look on luxury brandrunways. And her fans are legion. Atthe Armani couture show in Paris,one girl standing behind megasped, “There’s Rachel Zoe!”when Zoe dashed in at the lastminute. “She’s the best stylist in

Hollywood today!” At some shows,Zoe has been asked for anautograph.

Rachel Zoe Rosenzweig—her agent convinced her to losethe complicated last name in 1997—was born in New York in 1971 to anengineer and his Berkeley-grad wifeand raised in Short Hills, NewJersey, the younger of twodaughters. Early on, Zoe realizedshe had champagne tastes. “I wasreading Vogue at thirteen and wasalways attracted to luxury,” shesays. “My father always said hecould drop me in a five-and-dimeand I could find the one thing thatwas a dollar.” During a familyvacation to Paris when she wasthirteen, Zoe took her savings andbought a messenger-stylemonogram satchel at Louis Vuitton.She still has it, and keeps it in acloset with her several hundredother Vuitton bags. She studiedsociology and psychology at

George Washington University inWashington, D.C., and worked as ahostess at the Mona Lisa restaurantin Georgetown, where she met adashing waiter named RodgerBerman and fell in love. Theymarried in 1998. He worked for a fewyears as an investment banker.Now he is now president ofRecognition Media, a company thatowns awards shows, such as theWebby Awards for excellence onthe Internet. After Zoe finished herundergraduate studies, she thoughtabout pursuing postgraduate workto become a psychiatrist but optedinstead to look for a job. A friend ofa friend told her about an openingas a fashion assistant at YMmagazine. She thought, “Why not?”and got it: three days a week at $75a day. Within three years, she wasYM’s senior fashion editor. “I loved itso much, I decided to do it the restof my life,” she says. In 1997, shewent freelance, styling for fashion

magazines. Often her subjects werecelebrities and on occasion theyasked if she could help them dressfor red-carpet appearances. SoonZoe had a host of private clients,including the Backstreet Boys,Britney Spears, and EnriqueIglesias.

Zoe’s trademark style—for herself as well as her clients—isSaturday Night Fever meets earlyCher: for day, skinny cropped jeans,little fitted jackets, reptile-skinstilettos, and gobs of chains; fornight, clingy goddess gowns. Herfavorite designers are KarlLagerfeld at Chanel, ChristianLacroix, John Galliano, MarcJacobs, and Tom Ford. “If I ever gota tattoo it would be ‘Tom Ford LivesForever,’” she gushed to Harper’sBazaar in 2005. She also collectsand uses a lot of vintage clothing,particularly from Halston, Pucci, andYves Saint Laurent. Zoe has evenreached into her personal wardrobe

of free clothes to dress her “girls”Lindsay Lohan, Nicole Richie, andJessica Simpson, prompting thefashion press to dub them “ZoeClones.”

She’s parlayed herstyling into other gigs, includingcontributing regularly toCosmopolitan, appearing on Oprah,and designing a capsule collectionof handbags for Judith Leiber. Sheis so famous for her taste that nowshe gets requests from the rich andunfamous to help them, too. “Peoplecome in to L.A. for three days andwant to pay me $20,000 a day to takethem shopping,” she saysincredulously. “I have someone whowants to fly me to Paris to take theirdaughter shopping.” She alsoconsults for various luxurydesigners for red-carpetappearances, giving them designsuggestions. “The designers don’thave time to know their clients—they’re too busy with their

collections,” Zoe explains. “And themedia pressure is immense. That’swhy I have my job, because themedia feels there is a sense ofpower and influence of style. Clientscome to me now—or their agentsand publicists—and say, ‘Help!Help! Help!’” In March 2007, shejoined the advisory board andsigned on as the creative consultantfor Halston, the legendary 1970sAmerican fashion brand that moviemogul Harvey Weinstein had justpurchased.

While Zoe is constantlybusy dressing her clients, Oscarseason is “colossal mayhem,” shesays with a laugh. “You can forgetsleeping between January andMarch. A million fittings, gatheringaccessories. Me and my twoassistants drinking coffee atmidnight. I get three hundred phonecalls and two hundred e-mails aday.” She has one primary rule:“There should never be more than

two dresses from the same houseon the red carpet.” To avoid this,Zoe normally asks for exclusivityfrom a brand. “It protects the brandfrom overexposure,” she said, “andmost importantly, it protects myclient.” In 2006, Zoe had JenniferGarner, who was presenting; KeiraKnightley, who was nominated forBest Actress; and six clientsattending the Vanity Fair party whoneeded to be as glamorous as themovie stars. On Oscar day, Zoepersonally helped dress herhighest-profile client, Knightley, in aVera Wang one-shoulderedburgundy taffeta gown, while herassistants were dispatched toattend to her other clients. “Youneed to have someone on hand incase of a fashion emergency, like abroken zipper or a popped button,”Zoe explained.

Luxury brands goextraordinary lengths to get theirproducts on those red-carpet

arrivals. They send unsolicitedpackages of goodies—known as“swag” in the biz—to celebritiesyear-round, usually via theirpublicists. “That’s what I’m here for—to handle the avalanche,” TroyNankin—publicist for such stars asHilary Swank, Angie Harmon, andSelma Blair—told me. “I send it tothe mom or to a charity. Escada sentthese purses around beforeChristmas, and then US Weeklyruns a photo of Selma Blair with acaption that reads ‘Selma Blairloves her new Escada bag.’ No,Selma Blair’s maid loves her newbag.” The Oscars traditionally havebeen the ultimate swagfests.Presenters received giganticbaskets of freebies—includingexotic trips, luxury watches, andcamcorders—that were worthhundreds of thousands of dollarsfrom the Academy until the IRScame down on them. The Academyvoted to discontinue the practice as

of 2007. Luxury brands, on their own,swag nominees and presenters too.I n 2005, the London-based leathergoods company Anya Hindmarch,for example, gave each BestActress and Supporting Actressnominee a Bespoke Eburychocolate leather tote embossedwith a personal message from theirdirector or co-star and stuffed withRevlon products.

Perhaps the most visibleeffort luxury brands make to dresscelebrities for the Oscars is to set upsalons at the finest addressesaround town, such as the JimmyChoo Oscar Suite at the Peninsula.They invite A-list and B-listcelebrities, publicists, agents, andstylists such as Zoe to come by forlunch, tea, or drinks to check outtheir latest, most fabulous wares—all available to “borrow” for the redcarpet. For small companies likeJimmy Choo, an Oscar salon is abonanza of publicity. “When you put

a pair of glamorous shoes on astunning actress about to receive anaward, well, you can’t beat that,”says Jimmy Choo creative directorSandra Choi. “Everybody whowatches the show, or reads about it,knows we took part. Everything wehave here is in the store and theycan come in and buy a piece of thatglamour.” Most of the time, as Choipoints out, no one can see theChoos underneath the long gowns.But every chance an actress gets,she’ll mention to a televisioncommentator or reporter that she’swearing Choos and give a littleflash of ankle to prove it. She’ll alsosay who loaned (or gave) her thedress, jewels, and handbag. Themorning after a red-carpet event,Choo, like all the other major luxurybrands that dress stars, e-mails apress release to reporters aroundthe globe that details who worewhich Choo shoes, often with a red-carpet photo attached. Says Choi:

“The mileage for the rest of the yearis phenomenal.”

The impact on the publicis profound. According to a studyconducted by Cotton Incorporated in2004, 27 percent of female shoppersages twenty to twenty-four said theygot clothing ideas from watchingcelebrities, up from 15 percent in1994. In the twenty-five to thirty-fourbracket, it jumped from 10 percent in1994 to 18 percent in 2004. Forwomen ages thirty-five to forty-four,it was 14 percent, up from 8 percentin 1994.

In February 2005, Idecided to see the salonfestfirsthand. I checked into theChateau Marmont, a favorite oldHollywood hotel for movie andfashion sorts, got in contact withluxury brand and product placementpublicists, and the invitations rolledin. Right there at the Chateau, inone of the Craig Ellwood–designed1950s bungalows in the garden,

French designer Roland Mouretshowed his recent couturecollection to stylists and theircelebrities. He wound up dressingCate Blanchett and Selma Blair forevents during the week, andScarlett Johansson for the Oscarsceremony. In the 1920s clapboardBungalow 1 overlooking the pool,the estate jewelry company SellJewelry hosted a ladies’ luncheonfor stylists, socialites, and fashioneditors to try on vintage rings andbrooches. At the Kwiat diamondscocktail party at The Four SeasonsHotel in Beverly Hills, guests sipped“diamond-tinis”—turquoise-huedmartinis sprinkled with gold dust. Wmagazine hosted an invitation-only“Hollywood Retreat,” in a modHollywood Hills home, where high-as well as low-wattage stars pawedthrough and borrowed Rena Langeclothes, Penny Preville jewels, andJaeger-LeCoultre watches. In theback bedroom, celebrity hairdresser

Chris McMillan tended to theirtresses; when I was there, PaulaAbdul was in his chair getting theworks. Afterward, I was invited tojoin guests by the pool for a light“spa” lunch by top L.A. restaurantPatina.

Over on Rodeo Drive,Chanel offered free professionalmakeup sessions to regular andcelebrity clients at the FrédéricFekkai Salon and Harry Winstonreceived customers and stylists inits jewel-box salon, with butlersserving martinis. In 2003, HarryWinston provided more than $40million worth of diamonds for theOscars, including a $3.5 millionnecklace for Queen Latifah. Up thestreet, Caroline Gruosi-Scheufele,co-president of the Swiss jewelerChopard, and her staff dispatched aheart-shaped diamond-studdedpendant as a gift to ElizabethTaylor, who would be the guest ofhonor at the post-Oscars Elton John

AIDS Foundation benefit, whichChopard co-sponsored. Sir Eltonand his partner, David Furnish, hadChopard diamond watches on theirwrists at the gala, which the LosAngeles Times duly noted in itsOscar party wrap-up.

Swarovski, the one-hundred-year-old Austrian cut-crystal company, took over gardensuite number 102 at the exclusiveRaffles L’Ermitage in Beverly Hills,one of a dozen luxury brand salonsat the hotel. Swarovski has providedcrystals for the film industry sincethe Golden Age, when it helpedcreate the sparkling ruby red shoesthat Dorothy wore down the YellowBrick Road in The Wizard of Oz.Today, Nadja Swarovski, thecompany’s vice president ofinternational communications andthe great-granddaughter thefounder, has unabashedly pursuedthe Hollywood angle. In 2000, shejoined the luxury onslaught during

Oscar week, booking the roomyfourteen-hundred-square-footL’Ermitage garden suite, whichgoes for $2,000 a night during Oscarweek. She had the company shiphundreds of handbags to L.A. andsent her top staff to get those bagsin the hands of movie stars.

“We have shifted fromthe supermodel to the celebrity,”Nadja told me over tea in the suiteone morning. “Celebrities make itmore realistic.”

The large plush beige-on-beige living room was filled withlong tables cluttered with eveningbags: clutches covered withshimmering silver, gold, or blackcrystals; little handbags made ofdusty rose or bronze crystal beads;plain silk clutches that could bedressed up with 1940s crystalbrooches. “Americans have specialneeds,” François Ortarix,Swarovski’s international PR head,said as he showed me the

collection. “Most want clutches,small, black, silver or gold. Theydon’t want to take any risk. At theCannes Film Festival you see crazythings on the red carpet. Here, it’straditional and conventional. Thereare so many critics reviewing whatyou wear, you aren’t allowed tomake any mistakes on the Oscarred carpet. You have to be perfect,and in a way that people want youto be, not as you are.”

Over in the corner on thefloor sat a pile of clutches, in gold,silver and black, ordered up byJessica Paster. Swarovski sentRachel Zoe a selection, but shedropped by without an appointmentto see what else they had to offerand left with a few more. Nothing inthe salon was for sale. “We are hereto create a dream,” Ortarix told me.“We don’t want to put a price on it.”

THE POWER and the money involvedin dressing celebrities in luxurybrands has brought out a frighteningruthlessness among stylists. Somehave been known to hoard the bestlooks, or an entire collection, untilthe night before an event so that noone else can see them, much lessuse them. Some ask their celebrityclients to reimburse purchases ofluxury goods that were actually giftsfrom the houses, or neglect to telltheir clients about the gifts, thenresell them and pocket the cash.One prominent stylist who dressedPink, Mary J. Blige, and P. Diddy,was reportedly convicted ofdefrauding eight New York jewelersof more than $1.5 million andsentenced to eighteen months tothree years in prison. He allegedlysold the jewels to maintain hisflamboyant lifestyle.

Stylists have a lot ofleverage. Some have asked luxurybrands for cash payments,

mortgage payments, exoticvacations. “Seventy percent of themmake it clear: ‘I think I could make ithappen.’ And they are waiting foryou to say, ‘If you make this happenI’ll take care of you, and I’ll hook thecelebrity up,’” says Kelly Cutrone ofPeople’s Revolution. “About 25 to 30percent say, ‘Yes I can make thishappen, but what’s in it for us?Money, clothes, trips, first-classtravel, the Ritz in Paris? What’s thebusiness of this?’” One stylistreportedly demanded that adesigner pay for her liposuction.The designer did, and the stylist’sclient was wearing the designer’sdress when she picked up her BestActress Oscar. Harry Winston’sCarol Brodie remembers anotherstory—“which I know is true,” shesays—about a stylist whodemanded that a designer furnishher home. The designer agreed, theactress wore the dress, and theworld’s fashion press declared her

the best-dressed star on the redcarpet. “It’s their lethal poker hand: ‘Ineed a vacation and can I use yourprivate villa and your private jet andcan you pay for my liposuction?’”Cutrone says. “And you have toante up.”

Says Zoe, “I have nevertaken a bribe or been paid to use abrand on the red carpet. But I’vebeen offered trips all over the world,gifts, cash, anything andeverything.”

And some stylists havebeen known simply to be caustic.For the Golden Globes in 2000,Jessica Paster wanted to dress herbig client Hilary Swank in a gownby Randolph Duke. The publicist forRandolph Duke at the timeremembers, “Jessica had heard wewere dressing Charlize Theron inthe same dress as Hilary, whichwas not true. At five a.m., I got thisphone call. ‘I will not be fooled!’Screeching. The most insane sound

I had ever heard. I held the phonefrom my ear, and she said, ‘I willruin you! You will never work withany of my clients again!!!’ So theydropped that dress and put Hilary inVersace.”

When I asked RachelZoe about such bad behavior, shesighed. “Stylists in general arereally vindictive and greedy,” shesaid, “and I get really frustrated withthis petty high school bullshit thatgoes on.”

Traditionally, none ofthat effort or graft guaranteed thatthe star would actually wear whatthe brand had sent via the stylist tothe celebrity. Luxury brands’Hollywood point-people would getconfirmation the afternoon of theevent, then see the celebrity showup with something else on thatevening. “For the Golden Globes [in2005] I sent over a collection ofwatches, cufflinks, and studschosen by an A-A-A-list star,” says

Harry Winston’s Carol Brodie. “AndI loaned to his girlfriend and hismanager and his manager’s wife,which I never do, but I knew he wasgoing to be the most visible personon the carpet. And I looked at thewires the next day, and he wasn’twearing it. I called the stylist andsaid, ‘What was that about? Whydid you waste my time?’ And thestylist told me, ‘He was all set towear it, but he got a tray full ofwatches in front of him and everysingle one was free for him if hewore it.’”

Eventually, flacks startedgetting confirmation from thecelebrity’s publicist in the limo onthe way to the event. Andsometimes even that didn’t meananything. “One year I had ChloeSevigny sorted out with Bulgari andhad her going in the car with it on,”remembers Cutrone, who at the timeworked for Bulgari in Beverly Hills.“And when she got out of the car,

she was wearing a cross by Asprey-Girard.” Finally, brands starteddrawing up contracts stipulating thatthe star would wear their wares at aparticular event, on press tours, orfor a year. One group did evenbetter: a few years ago, it quietlysigned a contract with a top styliststipulating that she would dress herclients exclusively in that group’sclothes. Sure enough, her A-liststars began to wear clothes fromthat group’s brands almostexclusively to premieres and galaevents—one actress even wore thegroup’s clothes to her wedding. Thestylist made out, too, getting paid onboth ends.

Then, a few years ago,the power quietly shifted away fromthe stylists and to the celebrities. Itstarted, says Cutrone, with thecelebrities asking if they could keepthe clothes, shoes, jewelry, and soon: “[Then] it was, ‘What else areyou going to give me?’ Then, ‘Give

me a $10,000 gift certificate.’ Andthen it was, ‘I want bank’—$100,000,$200,000, even $250,000. And thequeens of the bank game are thenominees and presenters at theOscars.”

Celebrity agents atWilliam Morris, CAA, ICM, andothers negotiate the contracts, andthe luxury brands state theirrequirements. A brooch must bevisible in an above-the-waist shot.Earrings have to be visible, so hairhas to be up. The celebrity must saythe brand’s name two to four timeson a national television channel.When asked to talk about his or herlook, the celebrity must refer to thebrand in an audible and clearmanner. “I thought it was amazing toput their star’s name on an e-mail,”says Armani’s Wanda McDaniel, ofagents shopping their clients forluxury brand deals. “But [the agents]are clear that it is an interestingcomponent for a star’s career. It’s

part of the star’s branding.”Without much coercing, I

heard several stories of actors oractresses getting paid to wearluxury brand goods to the Oscarsand Golden Globes. The mostfamous was when Charlize Theronand Hilary Swank reportedlydecided at the last minute to replacethe loaned Harry Winston jewelsthey were to wear to the GoldenGlobes in 2005 with danglingearrings and six-figure checks fromChopard, but said nothing publiclyabout it. Other celebrities andHollywood insiders have revealedthat Chopard regularly offered “aboatload of money,” as one put it, towear Chopard jewels. Chopard’sU.S. spokeswoman StephanieLabeille told the Los Angeles Timesthat the house did not have formalcontracts with the stars but that thecompany had used money as anincentive in the past. However,Chopard seems to be having a hard

time with its official positionregarding celebrity remuneration:two days after the Los AngelesTimes piece, in a conversation withme, Labeille denied that thecompany paid stars to wear itsjewelry.

“If you are a contractor,and you hire one company overanother because they paid you, it’scalled bribery—that’s illegal in theUnited States,” says Carol Brodie.“So if you are a celebrity andsomebody is paying you to weartheir goods and you choose itbecause they are bribing you, is thatillegal? It’s a tough ethical question.I think it’s all fine as long as youdon’t deceive the public and fess upthat you are under contract with thecompany to wear their goods. I thinkin a few years each brand will havea face associated with it, somethingwhere some money has beenexchanged to use the likeness of acelebrity, and the stars will wear the

brand from shoes to hats. Celebritydressing will purely be productplacement, openly and outwardly.”

CHAPTER FIVE

THE SWEET SMELL OFSUCCESS

“A womanenveloped inluxury has aspecial radiance.”

—COCO CHANEL

NESTLED IN THE HILLS near the townof Grasse, in the south of France, isa peaceful valley divided by asingle winding country road. Alongone side runs a small gentle rivercalled the Saigne. Along the otherare flat fields of rose and jasminebushes. The farm, known as LePetit Campadieu (The Little Campof God), is run by Joseph Mul, afifth-generation farmer in Grasse.Mul tends to one hundred hectaresof flowers, five hectares of which areCentifolia roses and another five

jasmine. Mul and his family havefarmed this land exclusively forChanel since 1986. Each May, heharvests fifty tons of Centifoliaroses, and each September, twenty-five tons of jasmine. In the hillssurrounding the valley there areseveral hectares of mimosa, whichhe distills for other perfumecompanies. Le Petit Campadieu isone of the last major flower farms inGrasse.

Monsieur Mul is a jollyF r e n c h paysan, the sort thatDoisneau photographed back in the1950s, with a round, red-cheekedface, twinkling clear gray eyes, anda broad, deep smile. He dressesusually in a polo shirt, work trouserscinched up under his belly, worndark brown sneakers, and atop hisslightly balding pate, a classiccasquette. He shakes your handfirmly, his thick fingers as rough asold cracked leather. When he talks,it’s in that distinct southern twang

known as an accent du Midi. Pain(bread), normally pronounced pahn,comes out payng. Same with vin(wine): vehn is veyng.

The Mul family startedout in the region in the nineteenthcentury growing hay. At the time,Grasse was a center for productionof leather gloves. Leather back thenhad a vile smell, so tanneriestreated it with animal fat infused withflowers. The demand for flowersincreased in the region, and theMuls replaced their hay with rosesand jasmine. From there, theGrasse perfume industry grew. Thebelle epoque for flowers in Grasse,Mul explained as he drove me in hisnavy Jeep Grand Cherokee to therose fields on a dewy May morning,was from 1920 to 1950. “That was thegeneration that flourished,” he says.“It was really a boom.” But in the1950s, labor prices began to rise inFrance, and the flower business,which relies on manual labor, first

moved to southern Italy andMorocco, then later to Egypt. Nowflowers are grown in such cheaplabor markets as Turkey, India,China, and since the fall of theBerlin wall, the Balkans.

For the perfume Coco,Chanel uses another sweet, soft-smelling rose called Damascena,which is cultivated in Turkey andBulgaria. Bulgaria’s Damascenaroses sell for $1 a kilo, six times lessthan Grasse’s Centifolia. Tocomprehend what all thisinternational sourcing has done tothe French flower industry, considerthis: In the 1920s, Grasse producedthirty tons of jasmine absolute, therich oil that is extracted from theflower. Today, it produces aboutsixty-five pounds. Grasse hasbecome like the haute coutureateliers in Paris: a boutiquebusiness kept alive by thegenerosity of those who understand,appreciate, and can afford the best

that money can buy.Chanel is Grasse’s most

important patron. It purchases all ofJoseph Mul’s jasmine and 40percent of his roses. The remaining60 percent is sold to laboratories thatcreate perfumes, primarilyInternational Flavors & Fragrances.The Centifolia annual production issmal l : 150 kilos of concrete, thewaxy substance that contains theflower’s absolute. Centifoliaconcrete from Grasse sells for threetimes more than Moroccan roseconcrete. Chanel is “one of the onlyold perfumes that hasn’t changed,”Mul said. “As long as No. 5 exists,we’ll be here.”

We arrive at the fields atabout ten in the morning, themoment when the rose blossomsopen. It is warm, with a softrefreshing wind. “Sea breezes,” Multells me as we walk down the rowsof bushes. The variety of Centifoliathat Mul grows is known as the rose

de mai, or May rose, because itblooms only once a year, for aboutfive weeks in May and early June.The aroma is overwhelming andvery particular: the Centifolia is afragrant rose, but not like the sweetpleasing ones in your garden. It is afar more voluptuous and seriousscent, with an acrid edge to it. Aboutforty workers, most dark-skinnedand many speaking Arabic, movedown the rows, quickly snappingthe roses’ heads off and slippingthem gently in pouches slung overtheir torsos. When the pouches arefull, they are emptied into big burlapsacks, which are loaded onto aflatbed trailer pulled by a tractor tothe extraction factory, a one-hundred-by-fifty-foot, two-storywarehouse-like building at the edgeof the fields. For most of thetwentieth century, the Mul familyonly farmed flowers and sent themelsewhere in Grasse for extraction.I n 1986, when Joseph Mul secured

the Chanel contract, he built anextracting plant on his farm“because,” says he frankly, “Grassewas dying out.”

The roses are broughtinto the plant, weighed into fifty-kilo—about 120-pound—batches, anddumped into one of Mul’s four vats,called extractors. There are fivelevels of fifty kilos each in theextractor, each separated by a giantdisklike grille so that the flowersaren’t crushed. The vat is filled witha volatile chemical called hexane,which dissolves the molecules inthe flowers and extracts theirprincipal fragrance. When theprocess is complete, the five layersof brown, spent roses are pulled out—it looks like a giant hazelnut layercake without icing—and discardedin a regulated compost receptacle.The syrupy liquid that remains iscooked in a still until the solventevaporates and is captured forreuse, leaving approximately six

hundred grams of concrete, a waxyburnt orange substance that smellslike pungent rose candles. Concreteis stored in tin canisters and has ashelf life of about two years.

When perfumers areready to make their perfume, theymix the concrete with alcohol—which, at Chanel, is made frombeets—and chilled at–15 degreesCelsius (5 degrees Fahrenheit). Thefat rises to the top, leaving theabsolute in the alcohol. The potionis reheated at 40 degrees Celsius(104 degrees Fahrenheit), thealcohol evaporates, and whatremains is the absolute. It takes fourhundred kilos of roses to make onekilo of concrete, which itself is madeup of four hundred grams of waxand six hundred grams of absolute.

Another method used tocapture scent from flowers ishydrodistillation to extract essentialoil. Flowers are heated with steamat 100 degrees Celsius (212 degrees

Fahrenheit) until their sacs ofscented oil burst. The steam carriesthe oil into a chilled condenser,where the steam turns back intowater. The essential oil is thenseparated from the water andbottled. Sometimes, the fragrantwater is bottled, too. Rosewater, forexample, has long been known forits healing properties, and is usedas a refreshing wash or antiseptic.As Chanel uses only Centifoliaabsolute for its perfume, the Muls dovery little hydrodistillation—onlyenough to provide friends andvisitors bottles of rosewater eachMay. Essence and absolute havedifferent attributes and thereforedifferent uses in perfume creation.Absolute is “more rich,” Jean-Claude Ellena, the perfume creator—or “nose”—for Hermès, explainedto me. “Essence is more exciting,vibrant and alive.”

THE PERFUME INDUSTRY does $15billion a year in sales. Someperfumes are the old stalwarts weall know: Chanel No. 5, Yves SaintLaurent’s Opium, Diorissimo, NinaRicci’s L’Air du Temps. But themajority are new. About twohundred new perfumes arelaunched each year—double thenumber from a decade ago. Thereason is simple: perfume isluxury’s most accessible andpowerful product. It’s easy to sell,and it crosses borders, cultures, andtarget audiences with ease. Forexample, 30 to 35 percent of allsuccessful male-targeted perfumesare worn by women. Perfumeserves as an introduction to, as wellas a flag-bearer for, a brand—and itreaps great profits. “[Dior’s perfumedivision’s] relationship with DiorCouture is extremely important,”Parfums Christian Dior’s chieffinancial officer, Jacques Mantz,

explained. “All the communicationand what happens around thecouture brand helps our [perfume]division, and the broad presence ofthe perfumes in selective retailersaround the world supports the Diorcouture brand.” In other words,perfume allows you, as the tycoonslike to say, to buy into the dream.

At the same time,perfume has a mystical, magicalquality. It catches your attention,enchants you. It complements andenhances your personality. It stirsemotion, within you and othersaround you. “Perfume was a linkbetween gods and mortals. It was away to contact the gods,” Hermès’sEllena told me. “Now it is a profanelink: it’s between you and me.”French poet Paul Valéry said, “Awoman who does not perfumeherself has no future.”

One day a few yearsago, a woman went to theOsmothèque, a perfume

conservatory in Versailles, and toldits president, Jean Kerléo, that shewanted to find her mother, who hadlong ago died. Kerléo was takenaback. Her mother, the womanexplained, always wore the sameoriental floral scent, calledArlequinade, introduced by PaulPoiret’s Parfums de Rosine in 1920.Her clothes smelled of it. The housereeked of it. A cloud of it lingeredwhenever she passed by.Arl equ inade was her mother.Arlequinade disappeared in 1928after Les Parfums de Rosine wentbankrupt. The only place it stillexisted was in the Osmothèque’sinventory of seventeen hundredperfumes. Kerléo took a touche—astrip of white absorbent paper usedby perfumers to test scents—dippedit in the tiny brown vial, and handedit to the woman. She inhaled, thensighed. “Ah, mother.”

Perfume, like luxury, hasa history as long as civilization

itself. Prehistoric man applied scentto his body, and the Mesopotamiansburned incense for the gods. TheEgyptians discovered enfleurage—the process of crushing aromaticplants such as roses, crocuses, andviolets in oil, which they kept inelaborate glass bottles and used formassage and their daily toilette. Forparties, they would throw flowerpetals across the floor that perfumedthe room when guests trod on them.Cleopatra was so obsessed withscent that the sails of her cedar shipwere perfumed. “From the barge / astrange invisible perfume hits thesense / of the adjacent wharfs,”wrote Shakespeare in Antony andCleopatra.

In Crete, athletesanointed themselves with specificaromatic oils before the games,wrote Diane Ackerman in A NaturalHistory of the Senses. Greek writerssuggested mint for the arms; thymefor the knees; cinnamon, rose, or

palm oil for the jaw and chest; andmarjoram for the hair and eyebrows.Alexander the Great liberallyperfumed his body and had histunics soaked in saffron essence.Romans bathed in perfume,saturated their clothes in it,drenched their horses and pets withit. Gladiators massaged their bodieswith various scented lotions beforebattle.

In the thirteenth century,a Spanish alchemist named Arnaudde Villeneuve refined the process ofdistilling alcohol—called aquaevitae (waters of life)—and soonafter, modern perfume as we know itwas born. “Alcohol was used as amedicine, and to make it moreagreeable, it was perfumed withlemon or herbs,” Kerléo explainedto me when I visited him at theOsmothèque in October 2006. Kerléoknows perfumes better than anyoneelse today: he served as Patou’schief perfumer for thirty-five years,

and in 1990 founded Osmothèque,which he still runs.

He took out a toucheand dipped it in a small flaconlabeled Eau de la Reine de Hongrie(Queen of Hungary Water), whichKerléo said was the first aromaticalcohol, created in 1370 for QueenElizabeth of Hungary to treatrheumatism and gout. It smelled ofrosemary and burned my nostrilsslightly when I inhaled. The queenused it liberally most of her adultlife, and it is said to have preservedher great beauty.

French king Louis XIVhad a team of servants on hand toperfume his rooms with rosewaterand marjoram and to wash hisclothes in a bath of spices andmusk. He ordered his perfumer tocreate a new scent every day. Forparties at the “Perfume Court” ofLouis XV, the staff doused doves inscent and released them to fly aboutthe guests, each flap of the wing

filling the salons with a rich aroma.During the eighteenth century,women perfumed their clothes andbodies, dusted their hair with sweet-smelling powder, and scented theirrooms with potpourris. Napoleondoused himself in two entire bottlesof eau de cologne, from Cologne,Germany, during his morning toilet.

In the mid-nineteenthcentury, perfume as we know ittoday came about when Frenchperfume houses such as Houbigantand Guerlain began creating scentsfor old-moneyed aristocrats and thenew-moneyed industrialists. Likecouture and leather goods, perfumewas an independent business, itsown domain, until 1910, whencouturier Paul Poiret introduced hisfirst scent, Coupe d’Or (GoldenCup), Kerléo said. He dipped atouche into a small flask of Couped’Or and handed it to me. I inhaledits spicy, floral musk. “It’s verymodern, no?” Kerléo said.

“Something you could wear today.”He was right. I wanted to dab someon right then and there.

Poiret produced thirty-sixperfumes in fifteen years, straightthrough World War I. One, a richsweet scent called Fruit Défendu(Forbidden Fruit), was launchedduring the war, causing a greatscandal. “How you could producesomething so luxurious when oursons are dying in the trenches?” thepublic howled. They bought itnevertheless. Poiret’s products sold,but he lost a fortune in the 1929 stockmarket crash. Shortly after, he wentbankrupt and fifteen years later hedied a pauper. His perfumes and hiscouture designs have mostly beenforgotten. But his idea of couturebrand perfumes lived on. Chanel,Lanvin, Schiaparelli, and Patou alllaunched perfumes before WorldWar II. The scents were heavy, fullof spice and flowers. The bottleswere works of art, produced by fine

crystal makers as Baccarat andLalique, and the customer base wasextremely limited. Perfume—knownin the business as extract, becauseof its potency—became an essentialpart of upper-class dress, like made-to-measure clothes, good shoes,fine leather gloves, and elegantchapeaux. The masses wore eaude cologne, a cheaper version thatwas a small dose of extract dilutedwith orange blossom or lemonwater. “Eau de cologne was veryfashionable in the 1920s , 1930s,before the war,” Chanel’s noseJacques Polge explained. “It wassold in the mass market and worn ingreat quantities. Now it haspractically disappeared.”

In the 1930s, luxuryperfume brands introduced eau detoilette, which is 6 to 12 percentextract diluted with solvents such asethanol and water, and it becamecommonplace in the 1950s. Unlikeeau de cologne, it smelled like a

weaker version of the extract andsold for a fraction of extract prices.“Eau de toilette was created to takeperfume to the street,” meaning tothe middle market, Polge explained.“It was the beginning of thedemocratization of luxury perfume.”

Shortly after BernardArnault purchased Dior in 1985, theluxury perfume business underwenta radical acceleration in creation,production, marketing, andconsumption. At Dior, for example,in its first forty years, it createdtwelve perfumes—one every threeor four years—including Miss Dior,Diorissimo, Diorella, and EauFraîche. In the twenty years sinceArnault took over, Dior hasintroduced more than thirty. In 2005alone, it launched four. Many aresequels: Dior’s 1985 hit Poison, forexample, gave rise to TendrePoison in 1994, Hypnotic Poison in1998, and Pure Poison in 2004.

In the 1980s, when luxury

brands began to focus more on themiddle market, they marketed eaude parfum, a more potent product—it is 8 to 20 percent concentrate,blended with alcohol—that sells forslightly more than eau de toilette. A1.7-ounce bottle of Dior’s J’adoreeau de parfum, for example, retailsfor $62; the same size eau de toiletteis $50. It was a wise marketing ploy:by incorporating the word parfum(perfume) into the name of theproduct, luxury brands offered to themiddle market what appeared to bea true luxury product, a piece of thedream. Perfume—known in thebusiness as “extract”—is made of 15t o 30 percent concentrate blendedwith alcohol; it is still the mostexpensive scent product—J’adoreperfume retails for $215 an ounce—and makes up for a small slice ofsales. It has, in fact, become likecouture: a modest portion of thebusiness, targeted to the rich. Toreach more of the middle market,

and to earn more profits, luxurybrands have extended their perfumescents into other product categoriessuch as body lotion and bath oil.

Today perfume in all itsmany forms is an essentialcomponent of a luxury brand. Old-time luxury brands that have nothingto do with fashion, such as thejewelers Cartier and Van Cleef &Arpels, all have perfumes.Newcomers such as NarcisoRodriguez and Stella McCartneyhave launched scents as soon astheir fledgling companies couldsupport it. Only one major luxurybrand does not have one: LouisVuitton. The company has a policyof strict control of distribution—itsells its products only in its ownboutiques and Louis Vuittonsections of department stores—andit believes that is not a large enoughretail network for a viable perfumebusiness. Original perfume brandssuch as Coty have become

corporate behemoths that churn outperfume products like Kraft makescheese. Luxury brands dominatethe perfume market: their glossy,gleaming counters clutterdepartment stores, and their high-design packages dominate theshelves of duty-free stores, andperfume chains such as Sephora(owned by LVMH), shoving smallerhouses such as Patou out of thepicture.

The greatest challengeto luxury brand perfumes today isthe recent rise of the celebrityperfume, such as Sarah JessicaParker’s Lovely and JenniferLopez’s Glow, both produced byCoty. Celebrity perfumes have ashort, explosive life: they hit themarket with a tsunami of publicity,sell vast amounts to the middlemarket, and then disappear. Andthey have pushed luxury brandssuch as Chanel, Dior, and Givenchyto do the same. “The industry has

educated consumers to be volatile,”said Michael Steib, a consumergoods analyst at Morgan Stanley inLondon. “The challenge for the biglabels is to differentiate themselvesfrom the other brands that are oftendiscounted, have a very short shelflife, and are totally dependent uponthe names associated with them.”

THE GRANDDADDY of modernperfumes is Chanel No. 5. WorldWar II GIs fighting in Europe broughtit home for their sweethearts. Marilyn Monroe declared it was all shewore to bed. In 1959, the Museum ofModern Art added No. 5’spackaging to its permanentcollection, and Andy Warholproduced a silk-screened image ofthe No. 5 bottle in a rainbow ofcolors. No. 5’s spicy orientalbouquet is the scent that youngperfumers try to duplicate: it is the

standard by which one measures anose. It is said that a bottle of No. 5sells every thirty secondssomewhere in the world every day.

In 2003, Chanel’s beautybusiness reportedly did $1.6 billionin sales, thanks in large part to No.5. According to Women’s WearDaily, No. 5 produces a profit marginof 40 percent—more than four timesthat of its competitors. This reliableand substantial profit allowsChanel’s owners, the Wertheimerfamily, to grow the companycautiously and invest in long-termprojects, such as the Muls’ farm.“ N o . 5 is outside of fashion,”Jacques Polge told me over dinnerin Antibes following my visit to theflower fields. “It comes from anotherera, and each year that passes, themore strange and foreign itbecomes.”

Chanel’s founder,Gabrielle “Coco” Chanel, came fromeven more humble beginnings than

Louis Vuitton. She was born inSaumur in 1883, one of threedaughters of a sickly mother and aphilandering father who worked asa traveling salesman. After theirmother died of tuberculosis whenGabrielle was eleven, their fatherdeposited the girls at an orphanagein the rustic region of Auvergne andwas never to be seen again. Ateighteen, Gabrielle was sent to aCatholic boarding school where thenuns taught her how to sew. Sheworked as a shopgirl for a locallingerie company and moonlightedat a tailor’s shop. She spentevenings at the town’s cabaret,singing for soldiers stationed there.Her two standards were “Ko Ko RiKo” (Cock-a-Doodle Doo) and “QuiQu’a Vu Coco?” (Who Has SeenCoco?), a ditty about a lost dog. Thesoldiers shouted “Coco!” when shesang them. The name stuck.

She made her way northtoward Paris, where she became a

courtesan and a milliner for thehorse set. One of her beaux, thedashing polo player Arthur “Boy”Capel, set her up in a millinerybusiness in 1910 at 21, rue Cambon,a block west of Place Vendôme anddirectly behind the Hôtel Ritz. In1912, she opened a shop inDeauville, the Norman seasideresort and horseracing center forFrance, and in 1915 in the southwestAtlantic beach town of Biarritz. In1918, Chanel moved the Paris shopto 31, rue Cambon, and it has beenthere ever since. She sold hats aswell as a bit of ready-to-wear, whichshe fashioned out of soft, pliablejersey like that used for Capel’spolo shirts. It was a radicaldeparture from the rigid taffetas andwools that were popular at the time.

I n 1919, Chanel wasintroduced to respected perfumerErnest Beaux by her new lover, thegrand duke Dmitri PavlovichRomanov. Beaux was born to

French perfumers in Russia in the1880s and grew up in Moscow tobecome the czar’s official perfumer.When the Romanov dynasty fell,Beaux fled Russia and moved to LaBocca, an inland town on the Côted’Azur near Cannes. Chanel metBeaux at his laboratory there todiscuss the idea of creating aperfume. Back then, perfumesprimarily were monoflora—violet,rose, orange blossom—andpackaged in extravagant bottles.Chanel found it boring. “I wanteverything in the perfume,” she toldBeaux, “and nothing in the bottle.”Her brief was just as succinct: anabstract of flowers that would evokethe odor of women. Beaux whippedup a series of exotic essais(samples) that were so rich heneeded something to balance them.He chose aldehydes, a group oforganic compounds that have achemical function like alcohol. “Itwas like putting lemon on

strawberries,” Polge explained tome. Beaux presented hisconcoctions to Mademoiselle. Shechose the fifth proposition andcalled it No. 5.

Chanel No. 5 was, andstill is, constructed of approximatelyeighty ingredients. The mostimportant is jasmine, which since1986 has been provided solely byJoseph Mul. There is ylang-ylang,an exotic flower that grows on theComores Islands off the west coastof Africa, and patchouli, a dried leaffrom Indonesia that was used as arepellent in silk shipments. There isorange blossom water and a varietyof spices, particularly clove, whichback in the 1920s was one of themost popular spices for perfume.And there is a healthy dose ofJoseph Mul’s Centifolia roses. Forthe flask, Chanel chose the mostbanal shape she could find, achemist’s laboratory bottle. “Now it’sthe Rolls-Royce of bottle design,”

Polge said with a laugh, “but then itwas very simple.” The rectangularcut-glass stopper was based onParis’s elegant Place Vendôme.

Chanel decided tointroduce No. 5 slowly,anonymously. First she did a test inCannes: she invited Beaux and afew friends to dinner at a toprestaurant, placed a bottle on thetable and when a chic womanwalked by, Chanel squeezed theatomizer bulb and filled the air withan invisible cloud of No. 5. Eachtime the woman stopped, smelled,and appeared to be enchanted bythe scent. Pleased with the results,Chanel returned to Paris and quietlylaunched No. 5. She didn’tannounce its arrival in the press orstock it in her store. She wore itherself, spritzed the shop’s dressingrooms with it, and gave bottles to afew of her high-society friends.Soon the buzz began: “Have youheard Mademoiselle Chanel has a

perfume?” When the buzz rose to aclamor, Chanel instructed Beaux toput No. 5 into production. “Thesuccess was beyond anything wecould have imagined,” recalledChanel’s friend Misia Sert. “It waslike a winning lottery ticket.”

Théophile Bader, thefounder of the French departmentstore Galeries Lafayette, wanted tosell No. 5, but to fill the order,Chanel needed to expandproduction. Bader introducedChanel to his friend PierreWertheimer, co-owner of theBourjois cosmetics company. In1924, the trio hammered out a deal toincorporate Les Parfums Chanel:Wertheimer, who would produceNo. 5 in his Bourjois factory, got 70percent, Bader got 20 percent as afinder’s fee, and Chanel received amere 10 percent. It didn’t take longfor Chanel to realize she’d beencrooked. She filed so many lawsuitsto get more control and more profits

—mostly to no avail—that by 1928,the Wertheimers had a lawyer onstaff who dealt solely with, asWertheimer called her, “that bloodywoman.”

Throughout the 1920s,Chanel added new scents to herfragrance line: No. 22 in 1922,Gardenia in 1925, Bois des Isles in1926, and Cuir de Russie in 1927.They were popular, but No. 5surpassed them all and thecompetition, too: in 1929, it wasnamed the number-one-sellingperfume in the world. By the 1930s,Coco Chanel was earning $4 milliona year and reportedly had assets of$10 million. “Under her glossyfaçade,” opined a French banker,“she is a shrewd, calculatingpeasant.”

When the Nazis arrivedin Paris in 1940, brothers Pierre andPaul Wertheimer—Alsatian Jewswho feared persecution—fled to theUnited States. Once settled in New

York, they sent an American namedH. Gregory Thomas to Grasse tosecure the formula and the primaryingredients to produce No. 5 in theUnited States during the war. Whilethere, Thomas helped Pierre’s sonJacques escape, via Morocco andPortugal, to New York. Thomas waslater named president of Chanel inthe United States, a post he held forthirty-two years.

Chanel closed herfashion house but continued to liveacross the street at the Hôtel Ritz, aNazi headquarters during the war,where she took up with a youngNazi officer named Hans Gunthervon Dincklage. In an extraordinarilyevil power play, Chanel denouncedthe Wertheimers to the Nazis. Butthe Wertheimers had anticipated hertreachery. In 1943, the family bought50 percent of an airplane propellercompany run by Félix Amiot, aFrench Aryan collaborator who soldarms to the German military. When

Chanel turned coat, theWertheimers signed Les ParfumsChanel over to Amiot, and the Nazisleft the company alone. After thearmistice, Amiot returned LesParfums Chanel to the Wertheimers.Amiot’s help in protecting theWertheimers’ company “saved hislittle neck” from the revenge-seekingAllies, Jacques’s son AlainWertheimer told Forbes.

Chanel, however, wasarrested by French resistanceforces. She was released threehours later with the help, it was said,of Winston Churchill, a friend ofanother of Chanel’s former beaux,the Duke of Westminster. Sheimmediately fled to Switzerland andcontinued to menace theWertheimers. She threatened toproduce her own version of No. 5—which she would call MademoiselleChanel No. 5—and two other newscents, and she filed a suit inFrance that charged that Les

Parfums Chanel made an inferiorproduct and demanded that it ceaseproduction and sales, and returnownership and rights to her. TheWertheimers negotiated a new dealwith Chanel: instead of 10 percent ofall French sales of No. 5, she wouldhave 2 percent of world sales andthe right to produce her own scents(without the numeral 5). She neverdid.

When No. 5’s salesbegan to lag in the early 1950s,Pierre Wertheimer paid a visit tothen-seventy-year-oldMademoiselle Chanel at the BeauRivage hotel in Lausanne. Within afew days, she was back on the rueCambon in Paris, planning therelaunch of Chanel couture. Her firstcollection of slim 1920s gaminelooks in the era of Christian Dior’sample New Look designs wasroundly dismissed. “A fiasco!” wroteone British paper. Another calledthe show “a melancholy

retrospective.” The crowd snickeredand grimaced. It was “one of thecruelest experiences I’ve everwitnessed,” film director FrancoZeffirelli recalled.

Chanel was unruffled.“I want to go on, go on

and win,” she told PierreWertheimer.

“You’re right,” he said.“You’re right to go on.”

She did, and eachcollection got stronger and better.Within a few seasons, the Chanelcollarless tweed suit and thegamine flapper dress were thepreferred silhouettes in fashion.Even Christian Dior went “back toChanel’s beloved 1920s forinspiration,” Newsweek reported.“His mannequins had flattenedbusts, waistlines where hips usuallyare, and not a curve was to beseen.” All this fashion successfurther boosted Chanel perfumesales and Mademoiselle’s position

in the company. Wertheimernegotiated his final deal with her:the family would pay for the rueCambon headquarters, her personalexpenses, and her taxes for the restof her life in return for control of hername for perfume and fashion. Asshe had no heirs, upon her deaththe family would receive herperfume royalty payments, too. Afew years later, the Wertheimersbought from the Bader family theremaining 20 percent of the house.When Chanel died at the Ritz in1971, the Wertheimers became thesole owners of the company. Theystill are today.

WITH NO. 5, Coco Chanel had turnedthe idea of a fashion-brandedperfume into a viable and quiteremunerative business. Louis Amic,a respected French nose who ranthe major perfume laboratory of

Roure Bertrand Dupont, decided tomake it a business unto itself. In the1930s and 40s, he went to couturehouses such as Elsa Schiaparelli,Piguet, and Balenciaga and toldthem, “You have good taste and youshould have a perfume. Let me do itfor you.” Back then, creating luxurybrand perfumes was a relaxed,pleasurable assignment. Often thecouturier and perfumer would meetfor lunch and over a four-coursemeal and a bottle or two of goodwine, they’d come up with thename, the basic recipe, thepackaging, and the marketing plan.Louis Amie’s son, Jean, continuedthe practice, doing perfumes in the1960s for Paco Rabanne, Givenchy,and Pierre Cardin. Only a handful ofcouture houses, such as Chaneland Patou, created, produced, anddistributed their own perfumes.

I n 1969, Roure BertrandDupont hired a young nose fromSaint-Rémy-en-Provence named

Jacques Polge to work for its NewYork office. Polge had become aperfumer by chance—he wasrecruited by a local firm whilestudying English and Frenchliterature at a university in Aix-en-Provence—but he soon became arespected young talent. While atRoure Bertrand Dupont, Polgehelped create perfumes for SaintLaurent and Givenchy. In 1974, AlainWertheimer, the twenty-five-year-oldgrandson of Pierre, took over asCEO of Chanel. By then, thecompany had dwindled down to theperfume line and the original shopon rue Cambon. “Chanel wasdead,” Alain Wertheimer said a fewyears later. “Nothing washappening.” Wertheimer had littlebusiness experience—he hadinterned at the Moët & Chandonchampagne winery in Épernay notlong before taking over Chanel—buthe saw quickly what needed to bedone to revive the brand. He reined

in distribution, pulling Chanel No. 5off drugstore shelves. He launchedthe Chanel Beauté cosmetics line,which was sold only in high-endstores. Then, in 1979, he calledPolge.

Chanel had employedonly two noses in sixty years: ErnestBeaux, the chemist who created No.5 in 1921, and Henri Robert, who didN o . 19, Cristalle, and Chanel forGentlemen. Robert, well into hiseighties, was retiring. The perfumearm of Chanel had been creativelydormant for some time. “There wasa new perfume every twenty years,”Polge remembered with a laugh.“People in the industry said, ‘You’recrazy to take this job. You’ll havenothing to do!’” But this was thehouse of No. 5, Polge reasoned. “It’sa mythical perfume.”

His confreres were right.When Polge arrived at Chanel,there were a handful of perfumes atthe time—No. 5, No. 19, and

Cristalle—and No. 5 accounted for80 percent of sales. “For a long time,[Chanel executives] didn’t want todo any new perfumes because theywere afraid it would cannibalize No.5,” Polge explained. But Wertheimerhad different ideas. He told Polge tomaintain the quality of Chanel’sexisting perfumes and to developnew scents that would follow thesame olfactory path. For his firstcreation, Coco, introduced in 1984,Polge visited Coco Chanel’sapartment in the rue Cambonheadquarters. “She had died in 1971,and this was 1979, and no one hadtouched anything,” he remembered.“I was taken by the mix of Venetianand baroque decor. What would thisdecor produce?” He came up with amix of Bois des Isles, Cuir deRussie, and sycamore—aprofoundly oriental fragrance. ForCoco Mademoiselle, launched in2001, Polge revisited Coco “to seewhat the same ideas would produce

ten years later.” The scent hadevolved, like fashion. For Allure,which came out in 1996, Polgecreated a perfume that would be theequivalent of Chanel sportswear—something comfortable, easy towear.

Among Polge’s chiefresponsibilities is to protect andnurture No. 5. “We care for No. 5every day of the year,” he told meone winter afternoon in his office inthe Paris suburb of Neuilly-sur-Seine. “Look, there are two flaconsof it here on my desk.” Indeed,among the little bottles of absoluteand essence clustered on hisotherwise empty desktop were twomarked “No. 5.” He constantly testsit to make sure, as he puts it, “that itis always the same and always thebest.”

Polge took me into thelab next to his office. It was all white,bathed in sunlight. On metalshelves above the worktables sat

old-fashioned indigo blue flacons ofabsolutes, essences, andsynthetics. Others are kept inrefrigerator-like coolers originallybuilt to store wine. He took a touche,dipped it into a flacon, and held it upto my nose. “This is the jasmine ofNo. 5,” he said as I inhaled. It wasabsolute made from Joseph Mul’sflowers. Jasmine from anywhereelse, Polge explained, wouldchange the scent of No. 5. Theliquid was thick and syrupy and thecolor of amber. The aroma waspungent.

“What do you smell?”“Flowers,” I said. “Rich

earth, like the dirt in a kitchengarden.”

“And tea,” he added. “Doyou smell the tea?”

Yes, he was right. Agood strong Ceylon tea.

BACK IN THE EARLY twentieth century,“every luxury brand hired a noselike a restaurant hired a chef,”Jacques Polge said. “Poiret had anose who later worked for Patou.Coty had a nose. Lanvin had one,who created Arpège.” Today, only ahandful of perfume companies havea nose on staff. Chanel hasJacques Polge. Hermès hired Jean-Claude Ellena in 2004. Patou, whichis owned by Procter & Gamble, hasJean-Michel Duriez, who took overwhen Kerléo retired in 1999. AtGuerlain, which LVMH acquiredfrom the family in 1994, the founder’sgreat-grandson Jean-Paul Guerlainretired in 2002 but still consults.

Most luxury brandstoday do not own, create,manufacture, or distribute theirperfumes. Luxury brands such asGiorgio Armani, Calvin Klein, JilSander, and Marc Jacobs licensetheir names to conglomerates suchas Procter & Gamble—“soap

companies,” sniffed Polge—or bigcosmetic firms such as Coty, EstéeLauder, and L’Oréal. (In 2005, Cotybought Unilever’s fragrancedivision, which included CalvinKlein, Vera Wang, and Chloé, for$800 million.) In return, theconglomerates produce, package,distribute, and market the perfume.Some designers are implicated inthe perfume’s creation from the start;some arrive at the end of thecreative process and simply choosethe juice.

Most perfumes arecreated by a handful of biglaboratories: Givaudan Roure inSwitzerland; International Flavors &Fragrances in New York; Symrise inHolzminden, Germany; Firmenich inSwitzerland; Quest International inKent, England; Haarmann & Reimerin Germany; and Takasago inJapan. Together, they do about $ 20billion a year in business, creatingsmells and tastes for everything

from luxury brand perfumes toFrench fries. Givaudan Roure is thelargest: in 2005, it did a staggering$2.1 billion in sales and possessed13.2 percent of the business. Amongits creations are Giorgio BeverlyHills, Calvin Klein’s Obsession,Cindy Crawford’s signature scent,and Guerlain’s new women’sfragrance Insolence. In late 2006,Givaudan stunned the fragranceindustry when it acquired Quest for$2.3 billion (£1.2 billion), making it farand away the largest fragrance andflavor firm in the world, withexpected combined annualrevenues of approximately $3.26billion. About 44 percent of thebusiness—or $1.43 billion—wouldbe in fragrance.

Givaundan’s biggestrival is International Flavors &Fragrances, a 170-year-old globalconglomerate that began as a smallfamily business producing puredrugs and essential oils and by 2005

had grown into a $2 billion businesswith ninety-six perfumers and sixty-seven flavorists on staff. Among its“Hall of Fame Fragrances” areGivenchy’s Organza, Lancôme’sTrésor (owned by Estée Lauder),Calvin Klein’s Eternity (owned byUnilever), Ralph Lauren’s Polo(owned by Cosmair), and EstéeLauder’s White Linen. Thefragrance division of theseconglomerates—which includes notonly luxury perfumes but alsoscents for detergents, soaps, andlotions—is the most remunerativepart of their business.

If a luxury brand—otherthan Chanel, Patou, and nowHermès—wants to launch a newperfume, the company puts togethera brief that explains what it wantsthe perfume to achieve and invitesthe laboratories to compete for theassignment. Unlike luxuryperfume’s golden years, whenperfumers and designers used to

dream up a new scent together overlunch, briefs today are written bymarketing executives with polls,surveys, and sales figures as theirguide. Briefs often have conceptualideas or marketing pitches. TakeDior’s brief for Quest International tocreate J’adore in the late 1990s: itdeclared that the scent should be“sexy like a stiletto and ascomfortable as a pair of Tod’s.” Butgenerally, luxury perfume briefs allfollow the same script. “Basically,it’s ‘We want something forwomen,’” a perfume executive toldt h e New Yorker. “Okay, whichwomen? ‘Women! All women! Itshould make them feel morefeminine, but strong, and competent,but not too much, and it should workwell in Europe and the U.S. andespecially in the Asian market, andit should be new but it should beclassic, and young women shouldlove it, but older women should loveit too.’ If it’s a French house, the

brief will also say, ‘And it should bea great and uncompromised work ofart,’ and if it’s an American brief itwill say, ‘And it should smell likethat Armani thing two years ago thatdid four million dollars in the firsttwo months in Europe but also likethe Givenchy that sold so well inChina.’” All of this leaves JacquesPolge resigned. “I hear the briefs ofbrands that declare that they want tocreate a ‘classic,’ like No. 5,” hesays with a sigh. “This is a falsenotion. We should try to create aperfume of its time, and perhaps itcan become a classic.”

If the labs are interested,they take on the assignment and settheir noses to work. Eachconglomerate works on an averageof ten to fifteen briefs at a time.Three weeks later, the labs presentthei r essais to the luxury brand’sperfume executives. If the suitschoose one of the proposals, they’llinitially order two or three tons of the

juice. If it sells well, they’ll ordermore. The toughest part of thebusiness, Polge told me, “is to beatthe competition and win the brief.”No matter how wonderful the scent,a perfume only exists if it is chosen.Labs are known to recycle a scentthey really believe in. They adapttheir discourse to make it fit the briefand include marketing studies in thepitch that show it has strongapproval ratings. Perfumecompanies will also buy juices theythink are marketable and keep themin reserve until they find the rightbrand for them. L’Oréal sat on ones u c h essai for three years untilViktor & Rolf chose it forFlowerbomb.

ON A BRIGHT MORNING in May 2006, Ivisited Hermès’s nose Jean-ClaudeEllena at his laboratory, which is inh i s 1960s contemporary home

tucked in the fragrant parasol pinesin the steep hills behind Grasse.Ellena is a dashing Frenchman inhis late fifties, tan and fit with a flopof sandy blond hair combed back, astrong chin, bright eyes, and awicked sense of humor. Dressed inpressed khakis and a crisp whiteshirt, he invited me to sit in his modliving room overlooking the forestedvalley and, over tea, explained tome how he makes perfume.

Today, a mere 10percent of the ingredients used tocreate perfumes are natural. Theremaining 90 percent are synthetic.Ellena told me, surprisingly, that thisis not such a bad thing. When Iasked him about the qualitydifference between synthetics andpure ingredients, he said, “I putnatural and synthetics at the samelevel. They are constructivematerials.”

Ellena ushered me intohis lab—a small sunny room next to

the living room—to make his point.He reached over to one of the twoturning stainless-steel stands thathold the clear glass flacons of the115 odors he prefers to work with.About 40 percent are natural, theremaining 60 synthetic. He opened aflacon containing a synthetic calledalcohol phenylethylique, dipped awhite touche into it, and handed it tome to smell. The odor was chemicaland bitter. He dipped another intogeraniol, put it with the first one, andI took a whiff: tea rose. He took athird touche, dipped it into iononebeta. Alone, it smelled of coconutoil, like Hawaiian Tropic sunscreen.But when Ellena put it with the othertwo, the overall odor was Chineserose. “With a hint of sake,” headded. He dipped a fourth intoacetate de benzyle and added it tothe mix, and we had a big, full-blossomed rose like you find at theflorist. “I am an illusionist,” he saidwith a laugh. “I make you believe.”

He dipped a touche intoessence of rose Turque, andhanded it to me. It was potent anddense—far more than thesynthetics. I smelled honey. “AndArmagnac,” Ellena pointed out. “IfI’m looking for the smell of agedalcohol, I’d say, ‘Ah! Rose Turque!’If I want the smell of sake it’salcohol phenylethylique. Geraniol issparkling. If I want a perfume withbubbles—tight, compact bubblesthat move—I use geraniol. I don’tuse materials for what they smell,but for what they do.”

The first synthetic,Ellena told me, was created in 1853:aldehyde benzoic, which smells ofbitter almond. By the late ninetiethcentury, there were loads ofsynthetics in perfume: Guerlain’sfamous perfume Jicky, introduced in1879, included synthetics. “Duringthe Industrial Revolution, webelieved in progress, that it wouldsolve all the problems of the world,”

Ellena explained, “and perfumesprofited.” By 1920, chemists hadcome up with 80 percent of thesynthetics used today.

Ellena has spent hiswhole life immersed in the perfumebusiness. Raised in a small townnear Grasse, he quit high school atthe age of seventeen because hedidn’t like formal studies. His father,a perfumer, helped him find a jobmanufacturing essences such asjasmine, clove, sandalwood, andlavender. Soon he was promoted tonose. In the late 1960s, Ellena spenta year in the United States to learnabout the American market, then inthe early 1970s moved to Paris,where he worked for Givaudan. Hecreated his first luxury brandperfume, called First, for Van Cleef& Arpels in 1976. He was twenty-eight. Since then, he has producedmore than one hundred scents,including Declaration for Cartier, InLove Again for Yves Saint Laurent,

Eau parfumée au thé for Bulgari,Night for Her for Emporio Armani,and Bazar Femme for ChristianLacroix. “I never know if a perfumewill be a success,” he says, “but Iknow what to do to not make a badperfume.”

Today Ellena is one ofeighty noses in France, and one ofthe most efficient. He prefers to use10 to 20 different odors in hisformula, versus 150 to 300, which isthe norm in the business, and he isknown to work quickly. He came upwith the basic formula for Hermès’sUn Jardin en Méditerranée in twoweeks and spent three monthsfinalizing it. His initial inspirationwas the scent of fig leaves lining atray that was being used to servechampagne at a cocktail party.Ellena lives some of the legends ofbeing a nose—he doesn’t eat garlic,and his house has no scentswhatsoever. But he debunks othermyths, like the idea of top notes and

base notes. “That’s bull,” he said.“When you smell perfume, yousmell everything at the same time.”When I asked about makingdifferent perfumes for men andwomen, he scrunched his nose andwaved his hand dismissively.“That’s just marketing.”

I n 1998, Ellena metVéronique Gautier, then head ofperfumes for Cartier; she hired himto create Declaration. Not long after,Gautier joined Hermès, and sheasked Ellena to do their new scent,Un Jardin en Méditerranée (AGarden in the Mediterranean),which launched in 2003. Thecompany was so pleased with itssuccess that the next year Gautierbrought Ellena in-house, where hecreated Un Jardin sur le Nil (Gardenon the Nile), which would serve asthe centerpiece for Hermès’s themethe following year, “As a RiverRuns.” The brief Gautier providedwas extremely brief: the name Un

Jardin sur le Nil. “I had an idea inmy head of what the perfume shouldbe—jasmine, orange flower, lotusflower, spice, and saffron—becausethese are the smells I imagined yousmell in Egypt,” Ellena told me.Then he traveled to Aswan, Egypt,to confirm his idea and discoveredthere were no jasmine blooms, noorange blossoms, and no lotusflowers. “It caused me greatanxiety,” he said. “I couldn’t sleepthat first night because I had to wipethis idea completely out of mymind.”

The next morning,Ellena set about constructing a newrecipe. He went to the Aswan souk,where he saw lotus root soaking inglass bowls filled with water. Hetook a whiff and found that the watersmelled of lotus flower. He went fora hike on Elephantine Island,across the Nile from the OldCataract Hotel, and pulled leavesoff the trees and bushes and

scrunched them to release theirodor. He was most taken with thescent of sycamore. “I kept thatsmell,” he said. He went down theNile to a Nubian village where themango trees were covered with ripefruit. He found that odor enchantingand decided to make it the theme ofthe perfume. He returned to Paris,wrote down the formula that was inhis head, and gave it to hisassistants. It was 70 percent of whatbecame the final perfume in thebottle. “In the beginning of thetwentieth century, perfumery wasmore figurative. It was floralbouquets,” he told me. “Now we arein narrative: the perfume tells astory.” Next, he says, perfume willbe olfactive: you will be able tosmell a place. Like Un Jardin sur leNil. You can smell the souk, themango groves, the heat, and the drydesert. “You will travel withperfume,” he said.

Ellena constructed Un

Jardin sur le Nil with both syntheticand natural ingredients. Fornaturals, Ellena turns to LaboratoireMonique Rémy (LMR), a small labin Grasse that is the leadingsupplier of 100 percent pure rawmaterials for the perfume industry. Ivisited LMR a few days aftermeeting with Ellena. When I droveup to the headquarters, tucked inthe middle of a charmless industrialpark on the outskirts of town, andsaw the place—two big navycorrugated metal warehouses withpoured cement floors—it was hardto imagine LMR as the perfumeequivalent to a couture atelier. Butas soon as I stepped out of the car,there was no doubt: even there inthe parking lot, I was bowled overby the aroma of flowers, grasses,and spices.

I entered theadministrative office’s smallreception room. On the wall hung a1997 Certified Vendor Award from

Estée Lauder Companies,“presented to LMR for outstandingquality and service in providingessential oils.” Displayed in glasscases were some of LMR’s recenthits: Prada’s signature women’sfragrance, Givenchy’s VeryIrresistible and Organza, Viktor &Rolf’s Flowerbomb, Dior Homme.LMR’s general manager, BernardToulemonde, a kind, gentle man,walked in, introduced himself, andexplained to me the LMR mission.“We work with only the most nobleextracts: white flowers, roses, tuberrose, daffodil, narcissus, jasmine,mimosa, and iris, which is the Rolls-Royce of perfumery,” he said.“There is a parallel between whatwe do and haute cuisine. The bestfood is only achieved by using thebest ingredients.” Same withperfume, he explained. “There is nota great perfume today that does nothave LMR products in it.”

LMR was born out of

frustration. From the 1960s to theearly 1980s, Monique Rémy workedfor the big perfume groups,including Unilever and Pfizer, as achemical engineer specializing innatural ingredients. It was a timewhen tycoons had started to takeover luxury brands and demandmore profits in all product areas,including perfume. “As a plantmanager, she delivered what theindustry wanted: the same butcheaper,” Toulemonde explained.“They started stretching the productwith solvents to make it cheaper tothe point that nobody knew whatnatural was anymore.” Ellenaremembered that period well.“Grasse had lost its soul,” he toldme. “Most companies there weredoing scents like ready-to-wear. IfGivaudan wanted a rose at thisprice, the lab said, ‘We’ll do it, andcheaper!’ They would dilute theirgood products with less expensiveones. The quality had changed and

was uneven.”By the early 1980s, Rémy

had grown so disillusioned that shedecided to go into business herself.Her idea, as Ellena recalls, was“stupidly simple”: 100 percent pureingredients. Her products cost farmore than the diluted ones thatwere in use. To sell them, shebypassed the commercial andmarketing departments of the biglaboratories and went straight to thenoses. Once the noses got a whiff ofher goods, that’s all they wanted.“The perfumers started telling thebuyers to buy at LMR,” Toulemondesaid. And the business took off. “Itwas very courageous of her,” Ellenatold me. “She did the inverse ofwhat the market was at the time.”

Like the couturiers inParis a decade earlier, Rémy soldher company in 2000 to a big group—International Flavors &Fragrances (IFF)—with the idea ofsoon retiring. But she wasn’t

pleased with how the corporateexecutives were running thecompany, and she fought with themfor LMR’s autonomy. She won. In2002, she hired Toulemonde, a foodengineer who had worked for Nestléand Sanofi, as her new generalmanager. The following year, sheretired and left Toulemonde incharge; her daughter Frédérique,who had worked as the company’scommercial director, left in 2005.LMR is small: it has thirty-fouremployees and does about €13million ($16.3 million) a year inbusiness, 40 percent of which is withIFF. The remaining 60 percent ofLMR’s business is with the other biggroups, Hermès and Chanel.“Those two houses use morenaturals than anyone else,”Toulemonde told me.

He handed me a pair ofplastic protective eyeglasses andguided me into the plant next door.The room is the size of an airplane

hangar, with towering, mad-scientist-like contraptions ofaluminum tubes and big Pyrexglass balloons that percolate andsteam and drip various fragrantpotions and oil-drum-sized vatsfilled with orange, brown, or greengoo. I walked over and sniffed oneand nearly sneezed. I read thelabel: hay. On the shelves satcanisters as small as 250 grams andup to 10 kilos. In the back was awalk-in refrigerator that containedabout half a year’s production, fromtwo years ago, as inventory andinsurance. “We’re dealing withnature,” Toulemonde pointed out aswe stood in the chilly walk-in, “andnature generally delivers once ayear and sometimes only a fraction.”

LMR’s specialty ismade-to-measure ingredients, acomplicated and expensive processthat only a few top brands, such asHermès, can afford. “Say I buy thebest quality lavender on the market,”

Ellena explained to me. “Lavenderhas three hundred molecules in it. Itell the lab to cut it in slices for me,like a sausage. This is high tech, toslice it like this. I go and smell allthe slices and choose the ones Iwant, the best ones, and have themput those molecules back together. Ihave a unique quality and itbecomes the beginning of acreation. I created the essence oforange in Un Jardin sur le Nil likethis with Monique Rémy. Sure, it’smore costly, but that’s not a problemat Hermès. The industrial level can’tdo this.”

LMR has given birth to asmall renaissance in Grasse.Toulemonde tells me that a handfulof young entrepreneurs have movedto the region and are reviving theflower-growing business. It’s aboutique industry: they are smallfirms, many of which are followingpractices of sustainable agriculture,like LMR. “It’s very trendy, like

organic vegetables,” Toulemondesaid with a laugh. No one, though,grows Centifolia—they leave that toJoseph Mul. “It’s a high-cost flower,and yield is too small,” Toulemondeexplained.

The perfume businesshas now become like luxuryfashion. There’s the tiny couturedivision, with a handful of smallproducers in places such asGrasse, the Comores, Turkey, andEgypt, which supply exclusive labslike LMR. And there are the ready-to-wear producers in third-worldnations such as India and Chinathat churn out synthetics for the bigboys. The reasoning for the shift isthe same as in fashion: cost. “Youcan’t earn enough in raw materials,”Ellena said.

IN THE MID-1990S, luxury brandsbegan to test-market their perfumes.

“[Luxury perfume] has become sucha big business that brands want tomake sure their investment is worthit,” a perfume lab executiveexplained to me. Chanel didn’t starttesting until the creation of Allure in1996, and it tests only for the color ofthe juice and the packaging, neverthe scent. For Allure, the colortested badly in the United States, soit was changed. Ellena insists thatHermès does not test its perfumesin any way before a launch. “Markettesting is the best way to repeat orcopy perfumes consumers alreadyknow,” he told me, “not to create.”

Once a perfume is readyto go, the marketing departmentorganizes a “launch” to get thepress rolling. Some launches arerestrained: I remember attendingone for Issey Miyake’s Le Feud’Issey in 1998 that was a low-keyluncheon for fifty reporters andeditors at the Musée des ArtsDécoratifs in Paris with speeches

by executives and samples of theperfume to take back to the office totry out. Others are less restrained.When Yves Saint Laurent, thenowned by the Gucci Group,launched Nu in 2001, it threw a wildlate-night party at the old Frenchstock exchange with toplessdancers in flesh-colored thongsrolling around in a giant Plexiglascorral. “All I see is an orgy,” crackedAmerican fashion designer JeremyScott at the fete. “[This launch] is allabout money. It’s in the Bourse. It’sa money event.”

To celebrate the launchof Un Jardin sur le Nil, in February,2005, Hermès organized a trip toAswan for two dozen fashion writersand editors as well as Hermèspublic relations andcommunications directors fromaround the world. Hermès chartereda plane from Paris on Air Egypt,brought along champagne andgood bordeaux (which Hermès reps

served during the flight, since it wasa Muslim-run carrier), and lodgedeveryone in Aswan’s finest hotels.For three days, there were nonstopactivities: boat trips down the Nile,champagne-drenched picnics, aguided tour of the Temple of Isis, aNubian banquet under the vaulteddining room of the Old Cataract withfestive music by an orchestra andchoir flown in from Cairo, and ofcourse, at midnight, belly dancing.All of this was to give the Hermèsstaff who attended a flurry of ideasfor marketing and advertisingcampaigns as well as window andstore displays, and to provide theattending journalists color for theirUn Jardin sur le Nil stories.Everyone went home with a bottle.

A few weeks after theAswan trip, Un Jardin sur le Nil waseverywhere. I walked throughdepartment stores in Paris and wasspritzed by bottle-wielding ladies.There were ads, posters, and

magazine stories. “You might spendthe same amount in advertising thatyou’d expect in first-year sales,”Tom Ford told me. “If you areexpecting $25 million in sales, you’llspend $25 million in advertising.”And like a mortgage, you have tokeep paying. “You must invest everyyear in fragrance advertising,”Jacques Polge said. “When youstop investing in publicity, salesdrop.” The investment worked forJardin sur le Nil. In its first year, itdid approximately $18 million insales, making it the number onescent in Hermès’s $100 millionperfume stable. Number two wasEau de Merveille, which debuted ayear earlier and sold a bit less thanUn Jardin sur le Nil. “Today, it’sdifficult to have a success,” Polgetold me. “When you look at thenumber of perfumes that arelaunched and how few remain…The difficulty is not only to succeed,but to last.”

WHEN A PERFUME does succeed, theprofits are formidable all around.The laboratory sells the juice to thelicensee at two and a half times thecost. The licensee retails it for two tofour times its cost and earns about30 to 40 percent in profits. Thelicensee then pays the luxury brandroyalties for use of the name. Thebig money is made in volume,which is why perfumes are pushedon the mass-market level,everywhere from department storesto airport duty-free shops—twothousand points of sale in theUnited States for major brands suchas Chanel or Dior is not unusual.Hermès, by contrast, is in fewer thanthree hundred.

Since the late 1990s,perfume sales have dropped,despite a dramatic increase inadvertising. Like many in the

business, Polge blames the crisison what he calls the “banalization ofperfumery”: the industrialization ofcreation, which kills craftsmanship,the mass distribution in perfumerychains—which, Polge says, “focuson the ephemeral side of perfume.All that we put into perfumedisappears [there]”—and the “quickhits” like celebrity perfumes. Theycan be very lucrative—JenniferLopez’s Glow, launched in 2002,sold $80 million worth in its firstthree years—but they generallyhave a short life and contributegreatly to the market’s saturation.

In response to sluggishsales and declining profits, luxurybrands have quietly been slashingthe cost of production. One of theeasiest places to cut back on cost—and therefore quality—is inpackaging. When Alain Lorenzotook over as CEO of ParfumsGivenchy in 1996, he eliminated thecellophane inside perfume boxes.

Cartondruck, a leading packagingmanufacturer, has been told byluxury brands “to look at how wecan execute the design at thelowest price,” says BruceBetancourt, general manager for thecompany’s American branch inFairview, New Jersey. “We will runfour-color process instead of twelve.We can print metallics instead ofrestamping them. Sometimes wereduce the size of the box so wecan print more boxes per sheet.”Most luxury brands have alsoeliminated what Betancourt called“flute liners”: the protectivecorrugated paper board around thebottle inside the box. “Now that israrely used,” he says. The samegoes with bottle production. Bottlesfor luxury perfumes cost on average10 percent of total production cost, afigure that luxury brands constantlystrive to reduce. “Everyone cutscorners, and they do it through theproduction,” Catherine

Descourtieux, marketing director forSaint-Gobain Desjonquères, aleading maker of perfume bottles inParis. “You can alter the shape ofthe bottle slightly or work with colorsthat cost less—subtle things that thebuyer won’t notice.” SaysBetancourt: “All brands launch theirperfumes with what is more design-driven and then later make value-driven decisions to maintain thesame look but reduce the aestheticsto reduce costs. This is prettyconsistent.”

But more and more,luxury brands are also looking forways to produce cheaper juice. Fornew perfumes, luxury brands submitbriefs with a final production pricethat is half of what it was a decadeago—a price that, Polge says, “isimpossible to meet at any quality.They ask to construct jasminewithout any flowers. Sure, there’sbeen a progress in chemistry: wecan reconstruct jasmine better than

we would thirty years ago, but it’slower in quality than the lowest ofreal jasmine. No odor can replaceanother. Replacing one withanother that is less expensive is thegreatest error you can make.” Onecompany looked into taking theentire production process to China.“It was going to be produced andfilled at the same location,”Betancourt remembered. To lowerthe production cost of existingperfumes, luxury brands have donesomething once unthinkable: theyhave instructed laboratories tochange legendary formulas byusing cheaper flowers or synthetics,or by simply diluting the perfume.“They say, ‘We need to cut costs.Do what you can to lower yourprices,’” Jean-Claude Ellena toldme.

Of course, brands andnoses deny this. Most claim on therecord that the changes in oldperfume recipes are due to new

government regulations oningredients. But the watering downof good perfumes for economicreasons does happen. When Iasked Jean Kerléo at theOsmothèque, who is effectively thecaretaker of perfumes for theindustry, if brands dilute or cheapeningredients in classic perfumes, helooked down and quietly said,“Yes.” When I asked which brands,he responded, “I don’t think I shouldanswer that.”

Perhaps the greatestthreat to luxury perfume sales,however, isn’t cuts in costs orquality. It’s a shift in marketing focusby the luxury brands themselves.“Perfume today is important,”Jacques Polge told me, “but couturehouses live with the handbag.”

CHAPTER SIX

IT’S IN THE BAG

“Contentment isnatural wealth.Luxury is artificialpoverty.”

—SOCRATES

LOOK AT A WOMAN TODAY , anywoman, and what do you see?Clothes that are more or lessanonymous. Shoes that are more orless anonymous.

And a handbag.It could be made of

leather or canvas or nylon. It couldbe a tiny clutch in her hand or abackpack slung over her shoulder.Never mind what’s in it. More thananything else today, the handbagtells the story of a woman: herreality, her dreams. And thanks toluxury brand marketing, that

handbag changes every fewmonths, like the seasons, like hermoods.

Since the late 1990s,handbags and other small leathergoods have joined perfume as“entrance products” to a luxurybrand. Once costing as much as, ifnot more than, ready-to-wear, luxurybrand handbags now come in awide range of materials, from nylonto crocodile, and an abundantnumber of styles at prices as low as$200. Unlike perfume, handbags arevisible on the body, and—like AirJordans for teenagers—give thewearer the chance to brandish thelogo and publicly declare her statusor her aspiration. “[They] make yourlife more pleasant, make you dream,give you confidence, and show yourneighbors you are doing well,” KarlLagerfeld told me. “Everyone canafford a luxury handbag.”

Today, when you walkinto a luxury brand store anywhere

in the world, you will find yourselfsurrounded by handbags. They arethe easiest luxury fashion item tosell because they don’t requiresizing or trying on: you look at it,and if you like it, you buy it. Done.They are easier to create andproduce than perfumes, and theprofit margin is astounding: for mostluxury brands the profit is betweenten and twelve times the cost tomake the item. At Vuitton, it’s asmuch as thirteen times. Handbagsare the engine that drives luxurybrands today. According to annualconsumer surveys conducted byCoach each year, the averageAmerican woman purchased twonew handbags a year in 2000; by2004, that number was more thanfour. At Louis Vuitton’s immensefour-floor global store in Tokyo, 40percent of all sales are made in thefirst room, which sells onlymonogram handbags, wallets, andother small leather goods.

“With the bag…there areno leftovers because there are nosizes, unlike shoes or clothes,”Miuccia Prada told me. “It’s easier tochoose a bag than a dress becauseyou don’t have to face the age, theweight, all the problems. And thereis a kind of an obsession with bags.It’s so easy to make money. Thebag is the miracle of the company.”

I n 2004, luxury brandscollectively sold $11.7 billion worthof handbags and other leatheraccessories, and the segment isonly getting stronger. While theluxury market grew by 1.2 percenteach year from 2001 and 2004,leather goods sales increased by 7.5percent each year. A large share ofthose sales are “It” bags: the latesthot designs that—thanks to luxurybrand ad campaigns and fashionmagazine articles—become themust-have of the season. Recent “It”bags include the Louis VuittonMurakami, with the signature

monogram stamped in rainbowtones on white leather, and theGucci Flora, a pretty floral printtaken from a scarf originallydesigned by the house for PrincessGrace back in the 1960s. Handbagshave become so important infashion today that an Englishjournalist wrote during LondonFashion Week in 2006, “Everybody—everybody—is talking abouthandbags with the intensity ofcardinals appointing a new Pope.”

The “It” bagphenomenon is young—less thantwenty years old—and has beenwholly created by the marketingwizards at luxury brand companies.I remember in the early 1990sreading stories in fashionmagazines that declared that if youcouldn’t afford to change yourwardrobe each season, you couldupdate your look with a newhandbag. Even my bureau chief atNewsweek in Paris picked up on

the trend. Back in 1996, as we sat inhis office and discussed a fashionstory for the spring season, he said,“Look, fashion is dead. It’s aboutaccessories.” How did he knowthat? Because luxury brands hadbeen pushing the message, and theproduct, relentlessly. “It’s like you’vegotta have it or you’ll die,” Tom Fordexplained.

Leather companieslaunched ready-to-wear lines tomake the brands—and thereforetheir handbags—sexier. Fashioncompanies pushed handbags to theforefront of their offerings and madethem the centerpiece of theirincreasingly provocativeadvertising. Handbags became anintoxicating lure.

And women got hooked,some disturbingly so. As I noted inthe Introduction, there are Japanesegirls who work as prostitutes to earnmoney to buy Louis Vuitton, Chanel,and Hermès bags. I read about a

woman who played backgammonfor Hermès bags. In September 2005,victims of Hurricane Katrina usedtheir Red Cross cards to buy $800bags at the Louis Vuitton boutiquein Atlanta. (Once the story hit thepapers, Louis Vuitton executivesinstructed their salespeople to stopaccepting Red Cross cards forpayment and reimbursed the RedCross for the purchases alreadymade.) Web sites such asBagBorroworSteal.com havecropped up for women to rent luxuryand designer handbags for afashionably short time instead ofbuying them—that way, they canchange their bags more often.

Women’s obsessionwith logo-riddled status handbagshas become such a part of Westernsociety that contemporary artistsriffed on it, often to luxury brands’great displeasure. At the VeniceBiennale in 1999, Frenchperformance artist Alberto Sorbelli

staged a happening calledL’Agressé (The Victim of Attacks)during which he had a woman in ablack minidress and spike-heeledboots and a man in a blue leathersuit beat him silly with Louis Vuittonhandbags. New York artist TomSachs produced a series of works in1999 that included McDonald’s-stylevalue meals done up in variousluxury brands’ logo wrap, a blackguillotine with a big white Chanellogo, and a miniature concentrationcamp made of Prada boxes.Surprisingly, Sachs received littlebacklash—only Hermèscomplained, he said. Indeed, theopening party at the GalerieThaddaeus Ropac in Paris was afashion happening, and SanFrancisco socialite and coutureclient Dodie Rosekrans bought theguillotine and donated it to theCentre Pompidou in Paris.

San Francisco artistLibby Black wasn’t so lucky. When

she recreated a Louis Vuitton store—replete with the entire Vuittonproduct line, all out of paper, paint,and glue—at the Manolo GarciaGallery in 2003, she and her galleryowner were called to Louis Vuitton’sSan Francisco office, wherecorporate lawyers told her she wasviolating copyright laws and had toshut down the show. Black kept itup anyway and never heard fromVuitton again.

IN THE WORLD of luxury brandhandbags, as in automobiles andclothing, there is a pyramid ofquality: made-to-order down tomass-manufactured. The best—theequivalent of a Rolls-Royce orChanel couture suit—is an Hermèshandbag. Made of the finest leatherand fabrics, sewed by hand, andwith starting prices of more than$6,000 and years-long waiting lists,

Hermès handbags are consideredby many to be the last true luxurygoods in the luxury fashion industry.They have long been the bag ofchoice for those who can afford tochoose. Jackie Onassis wasphotographed so often with herConstance bag slung over hershoulder that customers would askHermès salesclerks for “Jackie O’sbag.” Maryvonne Pinault, wife ofGucci Group owner FrançoisPinault, raised fashion eyebrowswhen she attended the Pariswomen’s wear shows in the fall of2001 not with a Gucci or a SaintLaurent, but with a large alligatorHermès Birkin bag on her arm.Martha Stewart showed up at herinsider trading trial in 2004 carrying abuttery brown Birkin and was takento task by the press for herindiscretion. Carrying into a jury trial“a bag that is surrounded by such athick cloud of wealth and privilegewas ill-advised,” Robin Givhan

opined in the Washington Post.Today, buying a luxury

brand handbag is an exercise inbanality: you walk into the well-appointed store past the chic-suitedsecurity guards, peruse what’s ondisplay, choose, pay, and walk outwith your purchase. The shoppingexperience may have beenpleasant, but in the end it was nodifferent from going to the Gap,except for the price. There isnothing unique about the product:the brand has churned outthousands of them, absolutelyidentical. Unless you place aspecial order to have somethingcustom made—and that is a verylimited business, available at only afew companies—what you get is aready-to-carry bag.

Buying an Hermèshandbag—or saddle, or luggage—on the other hand, is still a trueexperience in luxury. Hermèsboutiques do receive a few bags

each season to sell to customerswho walk in—a bit like a goodrestaurant always saving a table fora regular who drops in without areservation. But generally, if youwant to buy an Hermès bag, youhave to order it. The bags ondisplay in the store are just that:display models to show you theoptions. You choose the material:cowhide, reptile, ostrich, or evencanvas. You choose the color andthe kind of hardware: silver, gold,diamond-encrusted. And for theKelly, you choose if the seams areon the outside or turned in. And thenyou wait several months while it ismade to your specifications. When itarrives in the shop and you areinvited to come pick it up, it is yourbag. Another woman may have anavy blue cowhide Kelly with goldhardware and turned-in seams, butthat was her idea, just as yours wasyours.

Hermès handbags are

the antithesis of an “It” bag: most ofthe designs have been around foralmost a century and are covetednot because they are in fashion butbecause they never go out offashion. They don’t bearostentatious logos; the bagsthemselves are sufficientlyrecognizable. Hermès handbagsconvey old money and refinement—even if those who carry them haveneither. They are luxury’s discreetsymbol of wealth and success.

To see how an Hermèsbag is made is to understand whatluxury once was and what it is nolonger. On a cool spring morning inMarch 2005, I visited the Hermèsspecial orders workshop in Pantin,a seedy suburb north of Paris, to geta glimpse. Pantin is only thirtyminutes by car or Metro from the ruedu Faubourg Saint-Honoré store,but it’s another world altogether.Here, as in many other Parissuburbs, is where the poor

immigrants—mostly Muslims fromAfrica—have settled. Many live inpublic housing. Some run smallbusinesses, like mini-markets andsandwich shops, or work in menialjobs. A lot live on the dole. The raceriots of October 2005 erupted nearbyand eventually spread to Pantin.

In the middle of all this isHermès’s first subsidiary, HermèsSellier, housed in an enormouscontemporary glass-and-green-metal building constructed in 1991and decorated by Rena Dumas, arenowned interior designer and theGreek-born wife of Hermès’slongtime head, Jean-Louis Dumas,who retired in 2006. The building isthe exact opposite of the traditionalprewar aesthetic for which Hermèsis known. The atrium of pale stonefloors, glass walls, and glasselevators looks like that of a Hyattwithout the fountains and tropicalplants. One giant wall is covered ina checkerboard of Hermès silk

scarves. Next to the lift on each flooris a closed-circuit flat-screen TV thatbroadcasts images from the store onrue du Faubourg Saint-Honoré tokeep people in Pantin “connected,”a public relations woman explained.

Pantin houses Hermès’slargest leather production site—three hundred workers spreadamong fifteen ateliers—as well asadministration for, and someproduction of, ready-to-wear as wellas a school for leatherworking.Hermès requires that all newly hiredleather artisans—most of whomhave graduated from one ofFrance’s renowned leatherworkingacademies—spend two years asapprentices in its own schoolseither in Pantin or in the Vosges, ineastern France, to learn fromHermès’s senior leather craftsmenhow to cut skins and sew thehouse’s signature saddle stitchperfectly.

On the fourth floor is the

special orders workshop. It is herethat Hermès makes its gleamingcrocodile-and alligator-skin Kellys,Birkins, and Constances, in allsizes, some with diamond clasps.Special orders have always beenan integral part of Hermès. Amongthe more eccentric orders: a violinistwho wanted a leather violin caselined with Hermès silk foulards, abig-game hunter who orderedluggage made with the skins of hiskill, and a Japanese client whorequested a Pokémon characterprinted on her Kelly bag. In 1957,showman Sammy Davis Jr. ordereda black-crocodile suitcase bar totake on his travels and concerttours. In 2003, a young wealthyGreek man brought the tornmainsheet from his yacht and askedHermès to use it to make three Kellybags. Dumas liked the result somuch that he included the design inthe following season’s collection.

The special-orders

atelier has about forty workers, allyoung—the average age of leatherartisans at Hermès is thirty-three—and, surprisingly, many are women.Hermès, in fact, is a youthful andfemale-driven company. OfHermès’s 5,871 employees—fromstore salesclerks to leathercraftsmen—61 percent are fortyyears old or younger, and 65 percentare women. The company isgrowing, too. From 2000 to 2004,Hermès created 1,230 new jobs,including adding more than sixhundred leather artisans to threenew leather goods ateliers. By early2006, Hermès had fifteen hundredleather artisans. “We are frightenedto grow and [frightened] not togrow,” Jean-Louis Dumas oncesaid, “or to grow so much we blow agasket.”

Indeed, that’s what setsHermès apart from its competitors.Whereas Gucci Group’s CEORobert Polet declared within

months of taking over the helm in2004 that he planned to doubleGucci’s annual sales, then $2billion, in seven years, and BernardArnault crowed in March 2005 howhis group posted $1.26 billion inprofits for 2004, Hermès takes it slowand easy. In 2005, it did $1.85 billion(or €1.427 billion) in sales—areasonable turnover compared to itscompetitors, considering itsextremely high retail prices. Of that,40 percent was in leather goods.During Dumas’s thirty-year reign,Hermès could have increasedproduction to eliminate the waitinglists and sell the bags ready-madein the store. It could have become amultibillion-dollar company easily.But Dumas resisted. He preferred torun Hermès like a small, intimateluxury company, and that is thesame business philosophy thatdrives the company today. Thereare craftsmen in Lyon weaving silkfor scarves and ties, and others in

Limoges making porcelain dinnerservices. There are goldsmiths inMali crafting jewelry and Tuaregtribesmen in Niger making silverbelt buckles. There are Indians inthe Amazonian rain forests whoharvest latex sap for rubberizedhandbags. In 1995, Dumas took tenartisans from the Hermès stable ofbrands to the Thar Desert near thePakistani border for a weeklongexploration of their creative roots.The silversmiths studied the chiselsand hammers of local craftsmen.The perfume man sniffed the desertair. As tribesmen beat drums, thevisitors hoisted a Saint-Louis crystalchandelier over a flickeringcampfire. For Dumas, the messagewas as clear as the desert night:“The world is divided into two,” hepronounced. “Those who know howto use tools and those who do not.”

The artisans in thePantin workshop dress in apronsand white coats. Some wear

earphones to listen to music on theiriPods while they work. Theworkshop is perfectly silent exceptfor the occasional tapping of ahammer or the short burst ofstitching on a sewing machine. Noone speaks. They just build bags.Even with a lot of practice, makingan Hermès bag goes slowly. It takesfifteen to sixteen hours to make anaverage-size Birkin or Kelly. Thebigger bags take twenty-five to thirtyhours. In 2005, Hermès’s twelveleather ateliers in France produced130,000 handbags. Thanks to thewaiting lists, Hermès didn’t sufferlosses after the terrorist attacks ofSeptember 11, 2001, which causedone of the worst retail years inrecent memory. In fact, sales wentup. “After September 11, a lot ofpeople came in to buy that onespecial scarf or tie or bag,” RobertChavez, CEO of Hermès’sAmerican subsidiary in New York,told me. “They’d say, ‘I just want to

have one special thing.’”The first station in the

atelier is the reptile skins table.Three or four men inspect the skinsfor defects and cut the shapes forthe bags. All materials for Hermèsbags are cut by press machinesexcept for crocodile, alligator, andother reptile skins, which areextremely fragile and valuable. Theartisans in the special-ordersdepartment work with three types ofreptile skin: two crocodile and onealligator. The most delicate andexpensive is from the Crocodylusporosus of Australia. It has squarescales in the middle of the belly andfour to five rows of small roundscales down the side. There isCrocodylus niloticus, raised inZimbabwe. It has bigger squarescales in the middle and then twolines of big round scales down theside. The third is Alligatormississippiensis, which comes froma farm owned by Hermès in Florida.

The alligator has small rectangularscales in the middle and smaller,oval-shaped ones down the side.It’s hard for amateurs to see thedifference between mississipiensisa n d porosus. But there is adifference: in 2006, a porosuscrocodile thirty-two-centimeter Kellyretailed for $19,600; the same bag inalligator cost $16,700.

An average-size bagrequires three skins. Like humanfingers, each crocodile or alligatorhas its own print, so it takes time tofind skins that go well together. Onlythe skin from the soft underside ofthe reptile is used, never the back,which is scarred and rough. Thebelly is used for the bag’s sides andflap, the underside of the tail, whichhas bigger scales, for the bottom orthe side—or gusset. The skins arenot varnished; to obtain their brilliantvarnish-like shine, the artisanpolishes the skins quickly withagate stone. As a result, the skin—

and therefore the bag—is not waterresistant. Large bags like a fifty-five-centimeter Birkin, which is the sizeof a suitcase, are rarely made incrocodile. “Crocodiles are not verykind animals,” explains one of theartisans, “so to find one so big andwith no bite marks is unusual. Youhave to wait ten years for a skin likethat.”

When I visited, one ofthe craftsmen was working with aruby red crocodile skin, another withpine green. The men stand onspongy rubber mats—they’re ontheir feet all day—and lay the skin,which still retains the shape of theanimal, across big white tables.Under natural light streamingthrough skylights, they inspect theskin and circle the defects with awhite marker. All skins have defectsthat must be cut out. Cows havescars from wounds or mosquitobites that can’t be seen until thehide is tanned. “On crocodile and on

light, bright colors you seeeverything,” one of the artisansexplained. The piece he wasworking on had too many marks touse for the body or flap of ahandbag. Perhaps, he said, they’duse it for a gusset.

The skin men cut all theforms for each bag and put thepieces into a plastic tray, along withzippers, locks, hardware, lining,leather string for piping—everythingthat is required to make the entirebag. The tray is handed off to acraftsperson who will build the bagfrom beginning to end. Each artisanworks on three or four bags at a time—same model, same size, samematerial. One was working on amini Kelly in black crocodile with adiamond clasp. Diamonds arealways set in white gold and comewith a certificate verifying the weightof the gold and the stones. In 2004,the special-orders atelier made aruby red Birkin with diamonds on

the fittings for the Hermès store inHonolulu that sold for $90,000.

Most Hermès bags arebuilt from the inside out. The firstthing the artisan uses is a griffe, ahandmade metal tool that looks likean Afro comb with very pointy tips.The griffe, which comes in severalsizes, is pushed lightly along theedges of the leather to markperfectly and evenly where theartisan will sew the seam by hand.Only the zipper and the insidepocket are sewn by machine. Theartisan inserts a stiff piece ofcowhide between the outer skin andthe lining to give the bag strengthand rigidity. Everything on the bagexcept the zipper is made of leather(unless of course it is a raffia orcanvas bag). There are no unseenplastic reinforcements, no hiddencanvas or plastic linings.

The Kelly comes in twostyles: sellier, which means theseams are on the outside, and

retourner, which means the seamsare on the inside. The Birkin is onlyavailable retourner. The edges ofretourner bags have piping, usuallyin the same color as the rest of thebag. The piping is made bywrapping a piece of leather cordwith the skin, held together with a bitof glue. When it is all sewn together,there are eight layers of leather: theouter skin, the cowhide, and thelining on each side, plus the twoedges of the piping. On the Kelly,the flap is a continuation of the backof bag. On the Birkin, it is sewn on.

The artisans sew all theleather seams by hand with aclassic saddle stitch. The artisantakes two needles and one verylong piece of thread, long enough tosew together all the pieces so thatthere are no knots on the bag. Thelinen thread, which comes fromFrance, is break-resistant anddoesn’t burn when pulled throughthe leather. It is waxed with

beeswax to make it strong,waterproof, and smoothe. It alwaysmatches the leather, except whenthe skin is gold or natural, in whichcase white thread is used. Theartisan holds the leather togetherwith a long wooden clamp, leavinghis two hands free. He pierces eachgriffe mark with an awl, making ahole through the several pieces ofleather; sticks one needle through inone direction and the other throughthe other direction; tugs till the stitchis tight; and moves on to the next.The beginning and end of eachseam has three double stitches so itdoesn’t come apart. Once sewing iscompleted, the seams are tappedflat with a plastic hammer and theedges are shaved, sanded, andpolished with wax until they aresmooth and appear to be one singlepiece of leather. The handle iscomprised of six pieces of leatherand is shaped on the artisan’s thigh;each one takes about three and a

half hours to make. “If the handle isnot perfect,” said one artisan, “thebag is not perfect.”

When the inside andoutside of the bag are complete, theartisan puts it all together andattaches the hardware. Thehardware on most handbags todayis attached with screws, but, as Iwas told by an Hermès artisan,screws come unscrewed. Hermèshas a special method for attachingits hardware called pearling. Theartisan puts the clasp on the front ofthe leather and a metal backing onthe backside, sticks a nail from theback to the front through eachcorner hole, and clips off the lengthof the nail, leaving a tiny bit. Hetakes a special tool that looks likean awl but with a slight concave tipand taps the bit of nail gently in acircle until it is as round as a tinypearl. Each piece of hardware hasfour pearls—one on each corner—and each is exactly the same

shape. The pearls hold the twopieces of metal together forever.The hardware is then covered withclear plastic film to protect it fromgetting scratched. The artisan turnsthe bag right side out and irons itinto shape. Ever-delicate crocodileis ironed scale by scale. The artisanruns a skinny hot iron betweenseams to clean as well as defineand straighten the edge.

When the bag isfinished, a supervisor inspects it tosee if the stitching is balanced, thepearls are well done, the lockworks, the shape is perfect, and thesurface is unblemished. If thesupervisor approves the bag, it ismarked with a stamp that identifiesthe artisan, the year, and theworkshop. On the Kelly, the stampis on the leather buckle. The bag isplaced in the house’s signatureorange felt bag and sent to thelogistics department, about fifteenminutes away in the suburb of

Bobigny, to be inspected again. If itpasses, it is wrapped in tissuepaper, boxed, and sent to the store.Hermès wouldn’t tell me what theydo with bags that don’t passinspection.

IN 2007, Hermès had 257 storesaround the world, in cosmopolitanshopping districts, suburbanshopping malls, five-star hotels, andinternational airports. But theloveliest by far is the originalflagship at 24, rue du FaubourgSaint-Honoré, just steps off thePlace de la Concorde in Paris. Thetwo-floor store in the six-storycompany headquarters is athrowback to the late-nineteenth-century emporium: heavy black iron-and-glass doors, well-worn mosaictile floors, highly polished oak salescounters topped with glass displaycases, deco domed lighting. On the

walls hang beautiful eighteenth-andnineteenth-century equestrian printsand paintings. Among them is astunning 1727 portrait of King LouisXV astride a high-stepping steed,one of three by Jean-Baptiste vanLoo and Charles Parrocel. Anotherhangs in the Louvre.

Walk in any time of dayand the place is humming withactivity. Slim chic saleswomendramatically unfurl silk scarf aftersilk scarf for clusters of Japaneseshoppers and elegant Parisiennes.Tailors take measurements formade-to-order suits, and millineryexperts size up chapeaus to beworn at the next big wedding orhorse race. On the mezzanine,jewelers fit watches or help selectthe perfect pair of cuff links. In theback, salesmen in the saddledepartment show off bridles,hacking jackets, and saddles,which, like Hermès handbags, aremade to order and by hand. Hermès

has made more than forty-threethousand saddles since its foundingi n 1837. To be measured for one,customers make their way up theback stairs to the saddle atelier,where they straddle a leathersawhorse—just as clients have formore than a century—as one of thecompany’s eight saddlemakers,dressed in a worn cowhide apron,takes out his tape measure and getsto work. That, in a snapshot, is whatsets Hermès apart from itscompetitors in the luxury business.As its 2004 fall ad campaign, shot bythe late Richard Avedon, declared:“Nothing changes, but everythingchanges.”

In the center of the storeis another staircase that leads towhat Jean-Louis Dumas describesas the “soul of Hermès”: the formeroffice of Dumas’s grandfatherÉmile-Maurice Hermès, which todayserves as the Hermès museum.Open by appointment and curated

by Hermès’s director of culturalheritage, Menehould de Bazelaire,the two-room museum is a veritabletime machine that whisks visitorsback a century to an epoch whenone still traveled by horse, and lifefor the rich and noble was extremelyrefined. On the oak-paneled wallshang equestrian prints, carriagelanterns, silver spurs, leather crops,and harnesses, some decoratedwith royal coats of arms. Scatteredabout are hand-tooled saddles,trunks, toiletry cases, and achildren’s carriage from the reign ofNapoleon I. Today the museumserves as an inspiration for thecompany’s designers. For example,the gold-painted waves on aJapanese saddle were reproducedrecently on a silk scarf.

De Bazelaire is a tall,thin, handsome woman—shereminded me a bit of KatharineHepburn—and an educator at heart.She began her career teaching

Greek and Latin at the LycéeFrançaise in New York. In the 1980s,she returned to Paris to become anarchivist and was soon hired byHermès to replace its retiring part-time museum curator. Today,overseeing a staff of fifteen, she is incharge of the house’s archives,documentation, conservation, andmuseum. On a freezing Januarynight in 2006, she welcomed me intothe museum and told me all there isto know about the house of Hermès.

Thierry Hermès wasborn to Dietrich Hermès, anauberge owner, and his wife,Agnes, in Krefeld, a town on the leftbank of the Rhine not far fromCologne. The region was French atthe time, so Thierry, the youngest ofsix children, had French papers.The family was Protestant, aminority that had long beenpersecuted in Catholic Europe. Thispersecution, Jean-Louis Dumas hassaid, contributed to Hermès’s

success in the luxury business: bykeeping to themselves, the familylearned to succeed as merchants.

Krefeld was on the roadto Russia, and as a child, deBazelaire explained, Thierrywatched as Napoleon’s troopspassed by full of pride on their wayto Moscow and returned woundedand defeated. His oldest brother,Henri, a soldier in Napoleon’s army,was killed during battle in Spain in1813, and his parents and his fourother siblings died of disease,leaving Thierry orphaned at fifteen.I n 1821, he walked with a Dutchfriend to Paris. Thierry settled inNormandy, France’s horse country,to learn the harness-making trade,married, and had three children. In1837, he opened a harnessworkshop near the Madeleine inParis. Five years later he movedaround the corner to the boulevarddes Capucines. Today it is the siteof the Olympia theater. “It was a very

cosmopolitan quarter,” de Bazelairetold me. “The cafés were filled withroyals, courtesans, anddemimondaines, like MarieDuplessis, the woman who inspiredAlexandre Dumas’s Camille, andlater Verdi’s La Traviata. Shepromenaded down Paris’s grandsboulevards in a cabriolet carriagewith Hermès harnesses.”

In 1859, Thierry retired toNormandy and turned the companyover to his second son, Charles-Émile. By then, Charles-Émile hadmarried and had four children,including Émile-Maurice. The horsetransportation business wasbooming: in the 1860s, there wereninety thousand horses in thestreets of Paris. Charles-Émileinvented harnesses that protectedboth horses and passengers, suchas on that stopped horses frombolting. In 1880, he moved thebusiness to a pretty two-storybuilding at 24, rue du Faubourg

Saint-Honoré, near the Champs-Élysées and the Bois de Boulogne,which, de Bazelaire noted, “was thenoble horse country back then.” Theshop was on the ground floor, theateliers on the first floor, and theoldest son, Adolphe, lived in theconverted attic, where the museumis now located. Charles-Émileexpanded the business by addingateliers to produce saddles andjockey racing silks. In 1902, a sportsnewspaper writer described Hermèsas “the great horse bazaar in Paris.”

The dawning of thetwentieth century was, as for LouisVuitton, the turning point forHermès. In 1902, Charles-Émile’ssons, Émile-Maurice and Adolphe,took over the business. Émile-Maurice spoke English very welland was a globetrotter long before itwas fashionable. Following a trip toArgentina, where he saw gauchoscarrying their saddles in bigsatchels, he came up with Hermès’s

haut à courroies saddlebag. Hetraveled to Russia and secured anorder to produce harnesses andsaddles for Czar Nicholas II. DuringWorld War I, he went to the UnitedStates and Canada and saw a newinvention called the zipper. Hesecured the patent for Europe from1922 to 1924 and integrated it intoHermès designs, such as the sacpour l’auto, known now as theBolide. He remodeled the building,adding four floors, converting theold attic into his office, and turningthe southwest corner of the groundfloor into a big display window.

With the help of friendsLouis Renault (the cofounder ofautomaker Renault), and EttoreBugatti (the revolutionary Italiancarmaker), Émile-Mauriceintroduced products for theautomobile such as trunks that fit onthe back of a Bugatti and leatherwallets for maps. He enlistedcontemporary artists Jean-Michel

Frank, the Giacometti brothers, andSonia Delaunay to design products;developed new lines such ascouture and belts; and expandedthe retail network to suchfashionable French holiday resortsas Deauville, Biarritz, and Cannes.The Cannes boutique makes anappearance in F. Scott Fitzgerald’sTender Is the Night when NicoleDiver buys “two chamois leatherjackets of kingfisher blue andburning bush from Hermès.”

In the late 1930s, Émile-Maurice bought Mi Colline, a villa inthe hills above Cannes, not far fromthe Croisette shop. During the NaziOccupation of Paris, most of thefamily fled to Mi Colline. TheHermès store on the rue duFaubourg Saint-Honoré shut downfor four days and then reopened tokeep the employees working andreceiving wages, however small.Émile-Maurice’s son-in-law JeanGuerrand took over the store and

distributed potato soup to theworkers because, de Bazelairesaid, “everyone was starving.” As inmany stores that remained openduring the Occupation, there wereoften signs in the Hermès windowsreading, “Nothing for Sale,” due toshortages not only of materials butalso the will to sell to Nazis.General Hermann Göring ordered abig picnic trunk from Hermès, butthere was no leather and nomotivation, and it was neverproduced. Paper, cardboard, andother sorts of packaging werescarce as well; the only coloravailable was vibrant orange.Hermès used it for boxes and bags.Almost overnight, it became thehouse’s signature color.

I n 1945, Émile-Mauriceadopted the company logo basedon a drawing by nineteenth-centuryartist Alfred de Dreux of a groomstanding before a horse and opencarriage. The picture still hangs

behind his desk in the museum. Afew years later, he introduced silkneckties and the house’s first scent,Eau d’Hermès, which is still a stapleat the house. In 1951, the eighty-year-old Émile-Maurice died of astroke and his son-in-law RobertDumas took over. With the help ofGuerrand, Dumas focused on theburgeoning jet set. It was Dumaswho decided to rename the haut àcourroies the Kelly after PrincessGrace of Monaco—formerly GraceKelly—was photographed carryingit to conceal her pregnancy. Half acentury later, the Kelly remains oneof the most popular items atHermès.

Most important, though,Robert Dumas groomed his sonJean-Louis to lead the company intothe twenty-first century. Jean-LouisDumas is what the French call ungrand monsieur: well educated,distinguished, and charming. As helikes to point out, “Oscar Wilde said

elegance is power.” By the time hewas born—in 1938, the fourth ofRobert’s six children—the Dumasfamily not only sold leather goods tothe right sort, they were the rightsort. He attended Lycée Franklin, apreppy Jesuit school in theSixteenth Arrondissement, and wenton to France’s prestigious ParisInstitute of Political Science in theQuartier Latin, where he tookdegrees in politics and economics.Like his grandfather Émile-Maurice,he traveled extensively. In the early1960s, he and his Greek-born wife,Rena, climbed into a beat-upCitröen and drove down the SilkRoad to India. Dumas has said thatthe trip opened his eyes to vast gulfbetween rich and poor and gavehim a sense of spiritualism that hewould use later to guide thecompany.

I n 1963, Jean-Louis wassent by his father to work as anassistant buyer for Bloomingdale’s

in New York to learn the fashionretail trade. A year later, he joinedthe family business as a consultant,“an ideas man,” de Bazelaireexplained. The 1970s were a quiet,rambling time for Hermès. Luxurywas next to dead. The oil crisis, theeconomic recession, and highunemployment dried up spending.To make matters worse, RobertDumas didn’t push the companylike his father-in-law, Émile-Maurice, had. “Robert was verydiscreet, from a generation whereyou didn’t hawk your wares, youdidn’t sell per se,” de Bazelaireexplained. Instead, you waited forthe good, regular customers tocome in and buy. And they didn’t.Sales were so slow one year thatthe company was forced to shutdown the ateliers for two weeks.

I n 1976, the companyreceived an unexpected boost fromfashion photographer HelmutNewton, known as the “King of

Kink” for his sexually powerfulpictures. Newton adored Hermès.He found the rue du FaubourgSaint-Honoré store to be “the mostexpensive and luxurious sex shopin the world,” he wrote in hisautobiography. “In its glass casesthere were displayed greatcollections of spurs, whips, leatherware, and saddles. The salesladieswere dressed like strict teachers, inwraparound gray flannel skirts,blouses closed to the neck, and abrooch in the shape of a riding croppinned to their bosoms.” Newtonpaid homage to Hermès by shootinga portfolio featuring its products atthe Hôtel Raphael in Paris forVogue. And what pictures theywere. The most famous is of amodel on all fours on a bed, with asaddle on her back, while dressedin tight jodhpurs, shiny black leatherriding boots with silver spurs, and ablack lace scoop bra. “After seeingthe Vogue pages, [Robert Dumas]

succumbed to a malaise,” Newtonrecalled. “Happily,” Newton added,“he recovered.”

When Robert Dumasdied two years later from illness, theboard unanimously elected Jean-Louis as chairman. With the help ofhis cousins Patrick Guerrand andBertrand Puech, Dumas got thecompany back in shape. Hereinvigorated the silk scarf businessby hiring artists to make dazzlingnew designs and by havingsalesclerks show customerscreative new ways to wear them: asa belt, as a halter top, or simply tiedto a handbag for a splash of color.He hired an outside firm to do adcampaigns—a first for the house—and expanded the press office,which at the time had one person forthe entire company. (By 2006, therewere sixteen press attachés in Parisalone.) In 1980, he hired nineteen-year-old designer Eric Bergère justout of fashion school to liven up the

staid women’s wear line. And thenhe decided to revitalize thehandbag division.

THROUGHOUT the centuries, men andwomen have carried theirbelongings in some sort of bag.When the five-thousand-year-oldremains of a man, known as“Frozen Fritz,” were found in the iceof the Tyrolean Alps in 1991,researchers discovered that sewnonto his calfskin belt was a pouchcontaining small tools made ofstone, lime wood, bone, and horn. InGreece, schoolchildren kept theirknucklebone games in bags. InRome, women carried small netpouches called reticula, and theywere ridiculed for carrying theirpockets in their hands. In the MiddleAges, there were drawstring almspurses. In China, Buddhist monksand pilgrims carried small pouches

of amulets and icons. Africanmedicine men kept their diviningossicles in pouches, and nomadsthroughout the world used bags totransport their possessions on thebacks of their camels and horses.During the late eighteenth century,European women wore diaphanoushigh-waisted dresses withoutpockets and carried their essentialsin small sacks that are nowconsidered the forebears to thehandbag. In the late nineteenthcentury, when sewing andembroidery were social activities,ladies of the upper classes hadornate sewing bags to carry theirneedles and thread. Carryinganything more than that was seenas socially inferior: that’s why onehad staff.

The modern handbagwas born in the early twentiethcentury with the emergence ofsuffragettes. The handbag was “thesign of a new independence, that of

coming and going at will, of beingable to leave home withoutanswering to anyone,” writes FaridChenoune in Carried Away: AllAbout Bags. The handbag quicklybecame an essential accessory forthe average consumer. “It’s soinfuriating, this lack of pockets inskirts that are too close-fitting,”wrote one observer in Féminamagazine back in 1908. “All theprecious things you lose—purse,notebook, handkerchief—that youend up resigned to the handbag,day and night. Wealthy women arestill holding out—they can put alltheir bits and pieces in the car; butthe others have made up theirminds and the current thing is thehandbag.” With the arrival of theslim “flapper” silhouette, handbagsbecame an essential fashionaccessory. In the 1930s, couturiersbegan to quietly replace theircustomers’ initials with their own,thus launching the practice of

displaying luxury brand logos.By the time Diana

Vreeland joined Harper’s Bazaar in1937 as a junior editor, handbagshad become an integral andimportant part of the fashionbusiness, as she would quicklylearn. Shortly after she arrived at theaugust glossy, Vreeland had whatshe described in her memoir, D.V.,as a “brainwave!”

“We’re going toeliminate all handbags,” she told acolleague.

“You’re going to what?”he responded.

“Eliminate allhandbags,” she repeated. “Nowlook. What have I got here? I’ve gotcigarettes, I’ve got my lipstick, I’vegot my comb, I’ve got my powder,I’ve got my rouge, I’ve got mymoney. But what do I want with abloody old handbag that one leavesin taxis and so on? It should all gointo pockets. Real pockets, like a

man has, for goodness sake.”Then Vreeland

explained how she wanted todevote an entire issue of thevenerable fashion magazine to“showing what you can do withpockets and how the silhouette isimproved and so on.”

Her colleague ran fromher office—“the way you run for thepolice!” she recalled—straight toHarper’s Bazaar editor CarmelSnow.

“Diana’s going crazy!”he cried. “Get hold of her.”

Snow went to seeVreeland.

“Listen, Diana,” Snowtold Vreeland, “I think you’ve lostyour mind. Do you realize that ourincome from handbag advertising isGod knows how many millions ayear?!”

During World War II,handbags became simple andpractical, like the leather backpack

and the “game bag,” a largish sacworn across the torso so that onecould ride a bicycle easily, thepreferred method of transportationduring gasoline rationing. After thewar, designers embraced an arrayof interesting new materials such asplastic, Plexiglass, raffia, and straw.In 1947, Gucci introduced a spare U-shaped handbag made of gleamingblack cowhide with a handle madeof bamboo, a material that wascheap and abundant. In February1955, Chanel launched its now-iconic 2.55 (named for the launchdate), the rectangle-shaped quiltedleather bag with a fold-over flap andgold-chain shoulder strap. It had nomonogram; the interlocking Cs weresewn inside. Not long after, theKelly came into vogue, thanks toPrincess Grace.

During the feministmovement of the late 1960s, all theaccessories that for centuries hadbeen essential items in a woman’s

wardrobe—the hat, the parasol, thegloves, the muff—disappeared. Allthat remained was the baby of thelot, the handbag, and it moved upthe arm to the shoulder, freeing up awoman’s hands as she liberated hermind and her soul. “We’ve got intothe habit of using just one bag rightaround the clock,” reported theFrench fashion magazine Jardinsdes Modes. “No more changing thecolor to go with the clothes, no morematching sets—bag, gloves, shoes,and so on. You fine-tune your bagwith what you’re wearing byadjusting the length of the strap.”

As women joined theworkforce in droves in the 1980s,they found they needed a bag thatcould go from day to evening andcould work as a briefcase, too—andthey had the disposable income tospend to get a good one. Theyneeded something classic,something that wasn’t too flashy,that wouldn’t undermine their desire

to be taken seriously in a man’sworld. And since a good leatherhandbag was a hefty investment,women preferred a design thatwouldn’t go out of fashion tooquickly.

Luxury brands had theanswer. At Chanel, executivesdecided to push the thirty-year-oldquilted 2.55 bag. “I remember beingin all those meetings when we saidwe have to get aggressive aboutselling handbags,” Arie Kopelman,former CEO of Chanel Inc., thecompany’s American affiliate, toldme. “You can drive the businesswith accessories, you can advertiseit easily, you can promote it in manyways, and we said, ‘How can wemake this happen in the greatestway possible and really go after thebusiness?’ It was a product line thatreally needed a tremendous push tocapitalize on the opportunity.”

Kopelman was amongthose at Chanel who wanted to do a

big ad campaign promoting the 2.55and other similar bags. It was a boldmove, since back then, asKopelman pointed out, “[Chanel]didn’t really advertise except forperfume and cosmetics.” To theFrench, advertising fashion wasconsidered tacky: “You don’t dothat” was the standard response.But Kopelman, a former ad manwho had worked for the advertisinggiant Doyle Dane Bernbach fortwenty years before joining Chanel,helped to convince his colleaguesotherwise. The ad campaign ran,and Chanel handbag sales took off.“It was clearly a terrific marketopportunity,” Kopelman told me.“We jumped on a trend and madethe most of it.” Each season, Chanelreissued the 2.55 in new bold colorsand materials. Chanel designer KarlLagerfeld reinterpreted the 2.55’schain strap as a belt slung aroundthe hips and the quilting pattern wasused for everything from down-filled

coats to a stamped impression oneye shadow. In 1986, Lagerfelddesigned a magnificent coutureevening gown embroidered with atrompe l’oeil inspired by the quilted2.55.

At Hermès, Dumasreinvigorated the eighty-year-oldKelly. He expanded the range fromdark tones to a rainbow of colorsand in a variety of leathers andfeatured it in a snappy ad campaign.“He released the Kelly from itsconservative past,” de Bazelairesaid. “Shook it up. Put it in front ofthe scene.” Sales exploded. Waitinglists started, and they’ve neverabated.

One day in 1984 on anAir France flight from Paris toLondon, British actress Jane Birkinpulled her Hermès datebook out ofher bag and—whoosh—all herpapers fell out all over the floor. Shegroused as she scooped them upabout how the book needed a

pocket. Beside her sat Jean-LouisDumas.

“Let me take yours andlet’s see what we can do,” he said.

A few weeks later, Birkinreceived her datebook with a pocketstitched inside the cover.

“Now they all havepockets!” she told me when sherecounted the story. “Isn’t itmarvelous?”

During that same flight,Birkin grumbled to Dumas—shehad his attention after all—that therewasn’t a good leather weekend bagfor women, “one that isn’t too big, ortoo heavy when it’s full of stuff,” sheexplained.

“What would you want itto look like?” he asked.

She described it to him.Not long after, a big

package arrived at her flat. It was aleather weekend bag, just as shehad imagined it. Dumas hadadapted the haut à courroies to

Birkin’s specs and dubbed it theBirkin.

“You and Grace Kellyare the only ones with Hermès bagsnamed in your honor,” he told her.

HERMÈS’S BIRKIN and Kelly were bighits with the rich set, and theChanel ’s 2.55 with the workingwoman—I remember when I waswriting about fashion for theWashington Post, seeing the powerlawyers and lobbyists on K Streetwith their quilted bags dangling fromchains on their shoulders. But whatwas the young or average-incomewoman who wanted to befashionable to do? I was in mytwenties at the time and, though Ihad a good job, I shared anapartment with a roommate to makerent. I wrote about Chanel, but Ishopped at the Gap. My one luxuryfashion item was Chanel No. 5, but

the cheapest level: eau de toilettespray. Yes, I was buying into thedream. But I wondered: How could Iand my friends, most also in low-paying, starting-level jobs, be a partof the world of luxury fashion thatwe read about in Vogue andHarper’s Bazaar, beyond perfume?And how could we do it withoutlooking like those conservativelobbyists and lawyers?

The answer sat quietlyin an eighty-year-old mahogany-and-glass display case in Milan,waiting to be discovered. WhenMiuccia Prada took over hergrandfather’s company in 1978, shedidn’t want to reissue a designmade famous by Grace Kelly orAudrey Hepburn or JackieKennedy. She wanted to do newdesigns. Nothing at Prada would beold. She began exploring the use ofdifferent fabrics and designs andcame up with a backpack made ofnylon parachute fabric trimmed in

leather. She had it made on sewingmachines that made parachutes forthe Italian army and it came in twocolors: black and brown.

It didn’t sell for a while.“No one wanted the backpackbecause it didn’t scream luxury,”Prada told me when I met with heri n 2006. It was anonymous andsimple. As Holly Brubach wrote inthe New Yorker in 1990, “These wereupstart bags: by their design theydemanded to be taken seriously, butthey were made of a material that,according to most people’s taste atthe time, undermined theircredibility. Real bags, the sort ofbags people were proud to carry,came in leather or crocodile or silk,not nylon.” Fashion editors urgedPrada to put the company’s initialson the sack like Chanel or Gucci didto give it more cachet, but sherefused. She had always hatedlogos on luxury items when she wasgrowing up. Instead, she chose to

use the tiny triangle label that hergrandfather affixed on trunks. It wasin black enamel, with the nameFratelli Prada, a crown that signifiedthat the company was an officialsupplier to the Italian royal familyand “Milano.” Miuccia added a linestating that the company wasfounded in 1913 to validate its placeamong luxury brands, and attachedit to the flap of the backpack.

The backpack finally gotits close-up in 1988. Prada showedher first collection of women’s wear,and when editors and retailersstopped by the showroom to reviewand order the clothes, they cameupon the backpack. The nextseason it popped up in smallarticles in the glossies and ondepartment store shelves. Pradaincreased the buzz by sendingbackpacks to key editors as aChristmas present. “Then it hit,”remembers fashion public relationsexecutive Karla Otto, who worked

with Prada at the time. “It waseverywhere.”

The Prada backpackwas the ultimate “It” bag for theaverage consumer: it was hip,modern, lightweight, and at $450 farless expensive than finely tooledleather bags like the Kelly and the2.55. Prada backpacks were sopopular that New York Times streetfashion photographer BillCunningham stood on the corner ofFifty-seventh Street and FifthAvenue one afternoon, shootingwomen walking by with the sacksslung over their shoulders, the littletriangle with PRADA written neatlyin an exclusive serif typefacedesigned for the company’s logostuck on the flap for everyone tosee. The Prada backpack becamethe handbag design of the moment:every brand had a version. Thebackpack sold like crazy, made thecompany a fortune, and turnedPrada into a household name. All

the while, Miuccia Prada sat in herstudio and cringed. “She hatedseeing certain women carrying herhandbags,” recalls Leslie Johnsen,who worked as Prada’s director forpublic relations for North America inthe early 1990s. Meanwhile, Prada’shusband and company CEO,Patrizio Bertelli, sat in his office andplotted the company’s globalexpansion, funded with backpacksales.

The Prada backpack, infact, unknowingly became theemblem of the radical change thatluxury was undergoing at the time:the shift from small familybusinesses of beautifullyhandcrafted goods to globalcorporations selling to the middlemarket. When Tom Ford took overthe creative direction of Gucci in1994, he saw the potential of theyouth market in luxury fashion andpushed handbags into the forefront.Models would come marching down

the runway of his Gucci women’swear shows in Milan to the hip-hopsounds of Lauryn Hill or FatboySlim, dressed in sexy black satinsuits or white liquid jersey columns,clutching or wearing a fantastic newGucci bag. Soon fashion editorswere reporting not only on Ford’snew clothes but also on the newbags. The phenomenal sales ofFord’s bags pulled Gucci out of nearbankruptcy and helped underwriteits global expansion. “Tom Fordmade beautiful dresses, but healways stuck a great bag on them,”said Claus Lindorff of BETC Luxe.“How many $2,000 white satingowns are you going to sell? Luxurybrands know that clothing is a loss.The bag is the introduction to abrand. Even if it’s a ready-to-wearad campaign, what you are reallyselling is the handbag. Thanks toTom Ford, prêt-à-porter is the decorfor the accessory.”

So essential is the

handbag in the success of a luxurybrand today that Gucci Groupattributed the disappointing figuresat Yves Saint Laurent in 2005 to thefact that the brand hadn’t had a hitbag in a couple of seasons. AndYves Saint Laurent was, at leastuntil Gucci Group took it over in1999, a fashion house, not a leathergoods company. In 2006, GucciGroup was still supporting itsfledgling fashion brands, AlexanderMcQueen and Stella McCartney.But as Lindorff said, “It’s not going tobe clothes that make those brandswork. Those designers are beingtold, ‘Get a bloody handbag outthere that will sell well.’”

It was an “It” bag thatturned Fendi from a dowdy old furcompany into a top-tier luxuryfashion brand. Back in 1997, Fendi’saccessories designer Silvia FendiVenturini came up with theBaguette, a little, soft oblong pouchon a short shoulder strap that

nestles comfortably under the arm. Itsold out in a matter of months andsoon had a long waiting list,including for the $5,000 versionmade of silk handwoven in theManifattura Lisio in Florence. Alltogether, Fendi sold more than ahundred thousand Baguettes thefirst year. It became such animportant fashion item that it waswritten into an episode of Sex andthe City: when a mugger orderedCarrie Bradshaw to hand over herpurse, she responded, “It’s aBaguette.”

Venturini kept coming upwith new spins on it—in denim, orcovered in sea pearls—and stuck iton the arms of models showingFendi’s women’s wear, which hasbeen designed by Karl Lagerfeldsince 1965. The Baguette gave thehouse such a financial and fashionboost that by the fall of 1999, theluxury barons were fighting over it.Gucci, Prada, Bulgari, and LVMH all

tried to buy the company, firstfounded by Venturini’s grandmotherAdele Casagrande in 1918—shemarried Edoardo Fendi in 1925—andrun since 1954 by their fivedaughters. In the end LVMH teamedup with Prada and bought 51percent of Fendi for $520 million—valuing the entire company at nearly$1 billion. Some of Fendi’s suitorscomplained during negotiations thatBernard Arnault and Prada’sPatrizio Bertelli wanted to pay toomuch for Fendi. “They’re throwingmoney around like drunken sailors,”one remarked at the time.

B y 2001, the Baguettewas over. Bertelli wisely soldPrada’s 25 percent back to LVMH for$260 million, and over the yearsLVMH acquired more shares fromthe Fendi family, for a total of 94percent in 2007. For years LVMH haspoured money into Fendi—hiringüber–luxury brand architect PeterMarino for a costly renovation of the

Rome store, opening more thanthirty new free-standing stores inless than four years, buying backdozens of licenses—but by 2005, itwas still in the red. Market sourcesestimated that Fendi lostapproximately $31.2 million in 2004.Meanwhile, Silvia Fendi Venturiniand her team offer several newdesigns each season, hoping onewill be “It.”

TO MEET THE increasing demand forhandbags they had created, luxurybrands had to come up withinnovative solutions. Hermès stuckwith its limited distribution. ForDumas, it was a question ofintegrity: the heart of Hermès wasfine traditional craftsmanship, and tosacrifice that would undermine thebrand. The other major—and minor—luxury brands looked for ways toproduce more goods faster and

more efficiently. Louis Vuittonexpanded its production, addingworkshops in France and movingsome manufacturing to the Loewefactory in Spain. When I visited thespecial-orders atelier in Asnières, Igot a glimpse of how Louis Vuittonmakes its bags: seamstresses satbehind sewing machines, stitchingtogether scores of the new denimmonogram handbag. Unlike atHermès, where bags were craftedby hand one at a time, at Vuitton,the workers were churning them outassembly-line style, in twenty-bagbatches. Vuitton executives maycrow about quality, but thecompany’s focus is obviously onproductivity.

Gucci, on the otherhand, went high-tech. In March 2004,I visited Gucci factory headquartersnear Florence a few weeks beforeTom Ford and Domenico De Sole—and much of the team that workedwith them—left the company, to see

how Gucci handbags were made.My guide was Gucci’s productdevelopment director, AlessandroPoggiolini, an affable and politeman in his sixties who had joinedGucci in 1967 as a handbag artisan.(He retired from the company in2005.) The original Gucci factory,Poggiolini told me, was on the riverArno in Florence. Later it moved toVia della Caldaie, in the city center,and in 1971 it moved to an industrialpark called Casellina di Scandicci,about half an hour outside the city.

Back in the early 1990s,when Gucci was on the verge ofbankruptcy, most of its leathergoods were classics that carriedover from one season to the next.De Sole wanted to introduce morecreativity to design and ramp upproduction. To achieve this, in 1994,De Sole put Gucci productiononline. Poggiolini took me into avast room in the factory filled withdozens of desktop computers on

long tables to show me how itworked. “In the old days the bagwent straight from design to leather,which was time-consuming andexpensive and might have beenright or not,” he told me. Now,technicians work on the three-dimensional computer image of thebag with the creative teams inLondon, Paris, and Milan to perfectthe design. “You can turn aroundthe bag on the screen and reallystudy it,” Poggiolini explained. Oncethe design is green-lighted, thetechnicians print the pattern on pinkcardboard for the prototype. The firstprototype is made in a blackrubberized fabric called Peplon sothat the artisans can see the shapeof the bag. The leather details areglued on to give the design team anidea of what the bag will look likewhen completed. When Fordapproved the prototype, it went intoproduction.

Unlike at Hermès, where

artisans study the skins and figureout the best way to cut them for thehandbags, at Gucci the computermakes a map that shows thetechnicians how to lay out thepattern on the material. Fragileskins such as ostrich, lizard, andalligator are cut with a metal press.Cowhide, however, is cut by aspecial machine (developed andused exclusively by Gucci) withwater jets that move at twice thespeed of sound. Whenexperimenting with faster and moreefficient ways to cut the leather, thetechnicians tried lasers, but asPoggiolini explained, “it burned theleather and smoked.” They finallychose the water-jet methodbecause, as Poggiolini said, “it’sfast, it’s clean, and the quality of thecut is very good.” The water jet isremarkable to see because, in fact,you can’t see it. All you see is theleather cut, as if by magic, and amist from the water jet dissipating to

the sides. There were three of thesemachines at Casellina di Scandiccifactory when I visited and anothersix at other manufacturing sites inthe area.

S i n c e 1995, all Guccileather goods have been designedon computers. Between 1994 and1998, leather goods productionjumped from 640,000 to 2.4 millionitems per year, an increase of 277percent. In 1997, classic designsmade up 60 percent of Gucci’sleather goods inventory. By 1999,that had dropped to 10 percent.Production time—from prototype towarehouse—was cut from 104 to 68days. By 2004, Gucci Group, whichthen included Yves Saint Laurent,Sergio Rossi, Stella McCartney,Alexander McQueen, Balenciaga,and Bottega Veneta, turned out 3.5million leather goods a year.

After our tour of the mainfactory, we walked across theindustrial park to a small, two-story

blocklike building housing one ofabout ten subcontractors thatproduced Gucci Group handbags. Itwas owned and run by Carlo Bacci,who had joined Gucci in 1960 as ahandbag craftsman. Back then, allGucci leather goods were producedin-house. Bacci left in 1969 to starthis own company in Florence, andtwo years later began tomanufacture for Gucci, which bythen was subcontracting to outsideateliers. When I visited Bacci’sworkshop during my Gucci tour in2004, he had twenty-three people onstaff—including his wife and son—many of whom had worked at theGucci factory across the street. Heonly worked for Gucci Group, with apartnership contract that stipulatedthat Gucci would guarantee acertain number of orders each year.

The workroom wassimple: white, with cement floors,long tables, and overheadfluorescent lights. On each table sat

piles of bags from Gucci, Yves SaintLaurent, Stella McCartney, andSergio Rossi in various states ofcompletion. Gold cowhide clutcheswith linen lining. Bronze crocodilepurses with enamel snakeheadclasps. Basic bags were producedin two to three hours; more complexones took eight or more. Most wereglued together and sewn onmachines. The craftsmen worked ontwenty bags at a time—five times asmany as at Hermès—but likeHermès workers, they made eachone from beginning to end. Bacci’sstudio only produced handbags—wallets and belts were doneelsewhere—and it only turned outabout 250 bags a month because itdid the most complex designs withthe most precious skins. Eachfinished bag was stamped with acode that identified Bacci’s atelier.Bacci also managed subsuppliers,who did another two thousand bagsa month.

THAT’S HOW IT IS DONE in Europe. InChina, luxury handbagmanufacturing is a completelydifferent business. Yes, luxuryhandbags are made in China. Topbrands. Brands that you carry.Brands that deny outright that theirbags are made in China make theirbags in China, not in Italy, not inFrance, not in the United Kingdom. Ivisited a factory in GuangdongProvince and held the bags in myhands. To see them, I had topromise the manufacturer that Iwouldn’t reveal the brand names.Each brand made the manufacturersign a confidentiality agreementstipulating that he could not revealthe fact that he produced theirproducts in China. Furthermore, themanufacturer doesn’t let thecompetition know who else he isproducing. When the

representatives come to the factory,they are led directly to the sectionworking on their goods, and theytalk only to the team in charge oftheir goods. It’s as complicated askeeping a slew of mistresses.

There are three or fourfactories that specialize inmanufacturing luxury brand leathergoods in China, most in Dongguan,an industrial town about an hournorth of Hong Kong. Often they dolow-and middle-range business, forcompanies like JCPenney, Sears,Liz Clai-borne, and Ann Taylor thatrun $40 to $80. But they also produceluxury handbags. The change camein the mid-1990s when Coachdecided to move a small portion ofits production from the United Statesto China.

Coach was a new playerin the luxury goods category.Originally founded by anentrepreneur named Miles Cahn inmidtown Manhattan in 1941, Coach

had long been a conservativestalwart of the American leathergoods business: the sort of brandthat suburban mothers carriedbefore luxury brands went mass. In1985, the family sold the company toSara Lee Corporation, a hugeAmerican conglomerate that wasknown for its frozen cheesecakesand owned such brands as Hanesunderwear and Wonderbra. In 1996,Coach’s CEO, Lew Frankfort,decided it was time to renovate thebrand. He hired Reed Krakoff, ayoung, savvy designer at TommyHilfiger, as executive creativedirector, and together they mappedout a new future for Coach. Theidea was to reposition the brand asan American alternative to Pradaand Louis Vuitton, with pricesranging from $125 to $2,000. Theycalled it “affordable luxury.”

In 2000, Coach was listedon the New York Stock Exchangeand was split off from Sara Lee. In

2001, its sales were a respectable$600 million, and its customers wereprimarily in the United States, withsome in Japan and Asia. (Coachdoes not sell in Europe because itbelieves that competition from localbrands would be tough. Also, two-thirds of the luxury consumers arefrom the United States and Japan,which allows for plenty of growth.)That year, Frankfort and Krakoffdecided to change the creativedirection of the brand fromtraditional classics to more fashion-forward. They came up with a newSignature collection of items inleather and cheerful-colored canvasprinted with the company’s C logolike a checkerboard, and beganshipping new designs to storesmonthly instead of twice a year. TheJapanese particularly loved theSignature collection and bought itso fervently that, in 2003, Coachbecame the second most popularimported accessories brand in

Japan, after Louis Vuitton.To continue Coach’s

financial growth, Frankfort focusedon increasing distribution andmaximizing productivity. To do this,Coach rolled out new storesthroughout North America and Asia,and it switched its manufacturingfrom company-owned U.S.-basedfactories to outsourcing overseas,much of it in China. Today, Coachproducts are manufactured ineighty-four sites in fifteen countries;“a significant majority” are made inChina, a Coach spokeswoman said.I n 2002, Coach closed its lastcompany-operated manufacturingfacilities. The original Thirty-fourthStreet factory is now home toCoach’s executive offices as well asa small prototypes workshop. “Byshifting our production from owneddomestic facilities to independentmanufacturers in lower-costmarkets, we can support a broadermix of product types, materials, and

a seasonal influx of new, morefashion-oriented styles,” Coachsaid. “All product sources mustachieve and maintain our highquality standards…and we monitorcompliance through on-site qualityinspections at all Coach-operated orindependent manufacturingfacilities.”

The strategy paid off.F r o m 2001 to 2006, Coachexperienced double-digit growthevery quarter; by 2006, it was doing$2.1 billion in sales. At the sametime, thanks in large part to lowerproduction costs, profits soared.Coach’s stock value increased awhopping 1,270 percent in the firstfive years after the company’s initialpublic offering. And contrary toconventional wisdom, the perceivedquality of Coach products has risensince it shifted production from theUnited States to China and othercountries.

Emboldened by Coach’s

trailblazing success, other luxurybrands quietly began to look intoproducing leather goods in China.Luxury brands have been hesitantto outsource production todeveloping nations in part becausethey feared quality would becompromised and, more important,because of the perceived image thatthe goods were no longer up tosnuff. During the renovation andreinvention of luxury brands in thelast twenty years, executives havetrumpeted the fact that their productswere made by artisans in Italy andFrance who had not only theexperience but also the heritage ofluxury craftsmanship, as if makingfine leather goods, beautiful fabrics,and jewelry was in their genes, intheir blood. According to luxurybrand executives, that extraordinarygift could not be replicatedanywhere else in the world. The“Made in Italy” or “Made inFrance”—or for cashmere, “Made in

Scotland”—labels were the cachet,the reason these goods were“luxury” and cost so much. As laborcosts mounted in Europe in the1990s, businesses began to sourceto cheaper labor elsewhere in theworld.

Not luxury brands. Theycouldn’t publicly move productionout of Europe without damaging thebrand image they had so carefullycrafted. Their initial response was toraise retail prices, but only slightly,so as not to chase off all those newmiddle-market customers. Luxurybrands that were publicly tradedhad to answer to their shareholders,who wanted more of a return, moreprofits. That meant increasingvolume and lowering costs. Toincrease volume they ramped upproduction and advertising,particularly for handbags.

Lowering costs was amore delicate problem. How couldluxury brands slash the production

cost of their goods and maintain thesame high level of quality? In fact,they couldn’t. There had to beconcessions. In the name of profit—or, to put it more bluntly, greed—luxury brands began to compromisetheir integrity. Some cut corners inready-to-wear. “I remember being infittings in the mid-nineties where theCEO came in and said, ‘Womendon’t really need linings,’” oneformer major luxury brand assistanttold me. Soon that became theindustry standard. “There’s a raw-edge cutting, which is deemed post-Japanese avant-garde from adesign standpoint, but actually is aneasy way to cut production costs,”another luxury brand designassistant explained to me. “You canimagine how much less time andmoney it takes to make a dress orjacket if you don’t have to sew theouter fabric and lining together,press them, fold them back onthemselves, press them again and

add another seam to keep ittogether. If you do a raw edge, youjust cut the edge and it’s done.”Another Italian brand trimmed costsby cutting sleeves half an inchshorter. “When you get to athousand, you see the savings,” theassistant explained.

Many luxury brands cutcosts by using cheaper materials.Example: In 1992, I bought a pinksleeveless Prada cocktail dress thatwas made of thick iridescent cottonand silk faille, fully lined, andfinished beautifully. It cost $2,000,but it is couture quality and will lastforever. Ten years later, I bought apair of thin cotton-poplin croppedtrousers at Prada for $500. I put themon, and the gentle passing of myfoot ripped the hem out. I put myhand in the pocket, and it tore awayfrom its seam. I squatted down topick up my two-year-old, and thederriere split open. I hadn’t hadthose pants on ten minutes and they

were literally falling apart at theseams. I mentioned this to a formerPrada design assistant. “It’s thethread,” he told me. “It’s cheaperand breaks easily.” When I told himabout my gorgeous dress from 1992that was as solid as a Rolls, henodded. “That was then,” he saidwith a sigh.

The most obvious placefor luxury brands to trim costs wasthe same place that every otherindustry was trimming costs: in theprice of labor. And the cheapest andmost plentiful labor today is inChina. Once Coach proved thatChinese workers could meet luxurybrand quality standards, severalother brands moved a small amountof production there, too. Like Coach,they started with short runs ofclassic and basic designs of leathergoods. To get the technique right,one major Italian luxury brandexecutive sent a team of leathergoods artisans from Italy to teach

the Chinese workers. With eachsuccessful run, the brands gotbraver, ordering more, and otherbrands joined the exodus. By 2006,hundreds of thousands of luxurybrand handbags, toiletry cases, andsatchels were produced in Chinaeach year, unbeknownst tocustomers.

Few admit to it. Thesmall Italian leather goods firmFurla said it began to produce someof its wallets and handbags inChina in 2002. Despite BernardArnault’s declaration at a luxuryconference in Hong Kong inDecember 2004 that only Europeanartisans truly knew how to makeluxury goods, one of his LVMHbrands, Céline, produced its denimand leather Macadam handbags inChina the following year. A brownleather tag inside the bag stated thatit was designed in Paris and“handcrafted in China with thegreatest attention to quality and

detail.” In May 2005, Prada CEOPatrizio Bertelli boldly told theFinancial Times that the company,which at the time claimed that all itsclothing and accessories weremade in Italy, was “currentlyevaluating a series of opportunities”to produce in cheaper labor marketselsewhere in the world, includingChina. In fact, Prada had alreadybeen producing leather goods inChina for at least six months whenBertelli made that statement.

Today, the luxury brandhandbag is a study in globalization:hardware, like locks, come from Italyand China (primarily Guangzhou);the zipper comes from Japan; thelining comes from Korea; theembroidery is done in Italy, India, ornorthern China; the leather is fromKorea or Italy; and the bag isassembled partly in China andpartly in Italy. The sourcing issometimes as questionable as thetrue provenance of the bag: one

manufacturer told me that onesupplier claims his silk is Britishwhen in fact he buys it in China,stores it in the United Kingdom, andthen sells it at European prices.

Most luxury brands don’tproduce a lot of different styles inChina. Instead they reproduce thesame designs in different colors ormaterials. The luxury brand’sdesign team dreams up a new bagand sends a pattern to the factory inChina. The manufacturer does theresearch to find the materials,hardware, and, if needed, a sourceto do the embroidery. Sometimesthe manufacturer’s research paysoff: one replaced an Italian-madefabric that cost $21.50 (€18) a yardwith one from Korea that cost $12,and, he added, “the quality isbetter.” The Chinese manufacturermakes the prototype. Oncecorrected and approved, the bag isput into production.

The luxury brands are

fiercely protective of the logo andonly send the number of labelsneeded for the amount of bags ineach order. “If that label turns up onother bags, the logo is worthless,”the manufacturer told me. Few bagsactually carry the “Made in China”label. If they do, it is well hidden.For one bag, the tag was sewn intothe bottom seam of the insidepocket. For another, it was stampedon the reverse side of a postage-stamp-size leather flap that bearsthe brand’s logo. You need amagnifying glass to read it. Themajority, however, carry a “Made inItaly,” “Made in France,” or “Made inthe U.K.” label. The brands havelittle tricks to get around the Chinalabel. One brand’s “Made in China”label is actually a sticker affixed tothe outer package. The luxury brandrips it off when the goods arrive inItaly and replaces it with a “Made inItaly” label. Another has the entirebag made in China except for the

handle. The bag is shipped to Italy,where the Italian-made handle isattached. Some brands have thetops of shoes—the most labor-intensive part of the process—madein China and then attach the solesin Italy. These items can carry the“Made in Italy” label.

The craftsmanship canbe complicated. I watched Chinesegirls make intricately braided leatherhandles and tassels. “We learnedthe technique from Italy,” themanufacturer told me. The amountof glue used to construct the bagdictates the level of luxury—and theretail price. Low-end luxury brandsuse a lot of glue. Higher-end brandsuse little. One young and highlyrespected European brand thatproduces only very fine leathergoods doesn’t use glue at all—but itdoes quietly produce most of itsgoods in China. When you walk intoits production room, you only smellleather. “I hate glue,” the

manufacturer told me. “But that’show the brands can afford it.” Andhow they make their profits.

Production in Chinacosts 30 to 40 percent less than inItaly. “So we aren’t dirt cheap,” themanufacturer said. “There is apreconception in the U.S. andEurope that if the brands move toChina they’ll get it for 10 percent.Sure, there are factories that will dothat, but the quality won’t be thereand the brand will suffer. If we do itright and they get good productsfrom our effort, they will makemoney. In the end, we are themoney generator for them.”

Indeed they are. Theevening after I visited the factory inChina, I met some friends for a drinkat the bar at the new Harvey Nicholsstore in Hong Kong. As I entered thestore from the Landmark luxuryshopping mall in the heart of theCentral business district, I passedthrough the handbag department.

To my right, on the shelf, sat theexact same bag I saw the Chinesegirls making in the factory. It cost thebrand $120 to produce. It was forsale at Harvey Nick’s for $1,200.

A CHINESE FACTORY can be a bit likea university campus. The place ispopulated with thousands ofunmarried young people agessixteen to about twenty-six. Theyoften live in dorms on the property,eat off metal trays at long tables in acafeteria, and ride bikes or take thebus to town during their time off tohit a karaoke bar. One factory Ivisited has a game room with pooltables, Ping-Pong, and Foosball; abasketball court; a conveniencestore; and a computer room. A gymwas under construction. There’s adoctor onsite and day care. And theplace was absolutely spotless. “Ifit’s not a healthy environment, then

the workers aren’t healthy and ourgoods reflect it,” the manufacturertold me, adding, “We are one of thefew exceptions.” Factories thatproduce luxury goods have acouple of thousand workers, smallby comparison to mass brands. “ANike factory will have twenty to thirtythousand people,” the manufacturertold me. “It’s a town.”

Most of the workers areyoung women, somewhere betweenthe ages of twenty-two and twenty-six. The legal working age in Chinais sixteen—though, themanufacturer noted, “there are tonsof kids in regular factories here whohave fake papers.” Only about 15percent of the workers in Dongguanare locals. The rest come from thepoor cities in the north and from thecountryside and require a permitfrom their hometowns to goelsewhere to work. They earn about$120 a month and send it all home.“They come to work and get out,” he

said. “They work enough to supporta family, build a house. In five to sixyears, they earn between fifty andsixty thousand RMB, which is about$6,000 to $7,000. The workers haveno friends. No relatives nearby.They don’t mind doing overtime.They don’t care if they are workinglong hours or don’t have fun. Theyjust work. It’s a big culturaldifference.”

At the factory I visited inOctober 2005, the workday is 8:00a.m. to 12:30 p.m and 2:00 p.m. to 7:00p.m., and if there is overtime, 9:00p.m. to 11:00 p.m. at one and a halftimes the usual hourly rate. Allworkers have Sunday off. This isunusual: most factories in China run24/7, and shifts can last up to tenhours. I arrived in the early evening,just as the workers were about to goon break. In the four-floor factorythere is nearly twenty-seventhousand square feet of productionspace. The windows were open and

slatted to allow for cross-breezes.Fans sat silently in the corners;summers in the Pearl River deltaare stiflingly hot and humid. It takesabout ten months to build a factoryin China from scratch to production—one-fourth the time it does in theUnited States. In one large room offifteen thousand square feet, therewere fifteen rows of longworktables. At each table stoodabout a dozen thin young women inpale blue short-sleeve shirts anddark trousers busily gluing,hammering, and stitching seams onsewing machines. They weresurrounded by bags with covetedluxury brand logos. A room this sizeprocesses fifteen to twentythousand units a month. Unlike atHermès in France or Gucci in Italy,it’s all assembly-line work. Iwatched one girl as she gluedhandles onto the outside of acanvas tote. She placed acardboard pattern on top of the

canvas to make sure the strapswere attached in the right place,hammered them, then handed thebag off to the next girl, who in turnstitched the handles to the canvason a machine. The glue girl didabout two bags a minute. When itwas dinnertime, the girls puteverything neatly in its place,covered the machines—in case ofrain—and walked out, single file,giggling and gossiping as theycrossed the common to the six-storydorm for dinner in the ground-floorcanteen. Each girl had a photo IDbadge on a chain around her neck.

Not surprisingly,manufacturers in China are startingto experience problems. Suppliesare going up in price. There areelectricity shortages because thereare so many factories. And there’s ashortage of what is known as“sophisticated labor”: work thatrequires refined skills. As workersgain more education, they demand

more in wages and perks. Salarieswent up 30 percent from 2000 to 2005,from $90 to $120 a month, simply toretain workers. The gyms andcomputer rooms help, too.

The brands aren’tmaking it any easier. “They get allthe human rights complaints,”explained the manufacturer. “It’skilling me because they putconstraints and complain that wedon’t pay enough. I say, ‘If you wantit made same way for the samewages then just produce in yourcountry.’ We never want to treat theworkers badly because we want tomake the product. But the brandsare helping the workers, giving themmore value.” Nevertheless, thereare still casualties. On the way toDongguan, we read a story in thepaper of a worker who, just the daybefore, left the factory in anindustrial zone in Guangzhou after atwenty-four-hour shift, collapsed inthe street, and died. “Pure fatigue,”

the manufacturer told me. “It’s one ofthousands of cases here.”

CHAPTER SEVEN

THE NEEDLE AND THEDAMAGE DONE

If there were noluxury, therewould be no poor.

—HENRY HOME, LORD KAMES

CAN YOU SMELL the silk?” LaudomiaPucci asked.

We were standing in theentrance of the Antico SetificioFiorentino, the oldest silk factory inItaly, maybe even in the world,housed in an eighteenth-centurybuilding near the Amerigo VespucciBridge in Florence. Before us sat arack of big wooden spools wrappedwith luminescent silk thread in huesthat only nature can produce: thedark blue of the deepMediterranean, a gold the color ofwheat at harvest, a fuchsia like

French tulips in springtime.I took a deep breath and

could indeed smell the silk: a dampmusky smell of forests and cocoons.

Silk is known as thequeen of textiles. It has been usedfor Chinese emperors’ robes andCatherine the Great’s weddingdress, for Italian noble families’banners and the Pope’s SwissGuard flags, and for the thread thatstitched war wounds closed. Skierswear socks made of silk because itnaturally wicks moisture away fromthe body. Ben Franklin flew a silkkite during his electricityexperiments. Today silk remains thefabric of choice for couture gowns,whether they are in taffeta, satinduchesse, organdy, or tulle. “Silkdoes for the body what diamonds dofor the hand,” designer Oscar de laRenta once said.

Laudomia Pucci, a slim,elegant brunette in her early forties,is the daughter of Marchese Emilio

Pucci di Barsento, the founder ofPucci, the Florentine luxury fashionbrand known for its psychedelic-print silk jersey clothes that hasbeen majority-owned by LVMHsince 2000. The Puccis have deeproots in Florence. In the fifteenthcentury, the family served aspolitical advisers to the rulingMedicis. Their sumptuousthirteenth-century palazzo, on Viade’ Pucci, is decorated withelaborate frescos, and their familychapel in Santissima Annunziata isa Renaissance gem.

Emilio Pucci was raisedwith his younger brother and sisterby severe nannies. Anaccomplished athlete, Pucciexcelled in swimming, tennis,fencing, and skiing. He studiedagriculture at the University of Milanand the University of Georgia, andreceived a skiing scholarship atReed University in Portland,Oregon, where he earned his

master’s degree in social sciences.While there, he designed uniformsfor the ski team. He later earned aPh.D. in political science from theUniversity of Florence. He was amember of the 1934 Italian Olympicski team and served as a pilot in theItalian air force in World War II,returning “covered with medals,”Laudomia boasted.

After the war, he workedas a ski instructor in Switzerlandand, continuing his dual passionsfor innovation and skiing, designedthe first slim stretch ski pants withan elastic stirrup. They appeared inHarper’s Bazaar in 1948 and soonwere the preferred look on skislopes around the world. Thefollowing summer, Pucci opened asmall boutique on Capri, the jet-sethaven just off the coast of Naples,and filled it with clothes for “islandlife,” like cropped pants, dubbedCapri pants, in cheerful colors likeMediterranean blue, bougainvillea

pink, and sunshine yellow. In 1954,he officially launched the House ofPucci. With the fabric mills in Como,he created print silk jersey thatclung sensually to the body.Originally production was inFlorence, in little ateliers aroundtown. He signed the psychedelicpatterns “Emilio,” respectfullyleaving the Pucci family off and outof the limelight. “He believedwomen had to be free to move, nocorsets, or girdles,” Laudomiaexplained.

By the mid-1950s, theAntico Setificio Fiorentino was in astate of semi-abandonment. In 1958,Emilio Pucci purchased the majorityshare of the factory from aconsortium of fellow Florentinenoble families, effectively saving itfrom the wrecking ball. “It wassupposed to be bought by a hotelcorporation and turned into amodern hotel,” Laudomia saidincredulously. Pucci poured some

of his sizable fortune into the factoryand commissioned it to reproducethe damasks and taffetas that forcenturies had been used todecorate the family’s palazzo. Thelooms have been singing eversince.

In the spring of 2004, Irang up Laudomia and asked her toshow me the Antico SetificioFiorentino. “It’s really a specialplace,” she told me as we droveacross the Arno and turned thecorner onto Via Bartolini. You walkdown a narrow stone path draped inwisteria, cross a small courtyardgarden where for centuries thechildren of weavers have played,and enter a simple faded yellowhouselike building with thick walls,worn brick floors, and big airy roomswith high beamed ceilings. The firstroom is the warping room, wherethe silk thread is prepared for thelooms. One of the warpingmachines is a tall wooden

cylindrical contraption calledOrditoio, built in the eighteenthcentury according to plans byLeonardo da Vinci. It is the only oneknown to be in existence today.“You have to kick it to move it,”Laudomia explained to me. Theother warping machine at the factoryis a Benninger from 1879.

In the next small roomsat big plastic bags stuffed withskeins of gloriously colored silkthread. Until the 1920s, the Setificiodyed silk, most of it produced in theregion. Silk production in Italydisappeared after World War II.Today silk arrives from China inbulk, already dyed and ready to bespooled. You can tell that it has notbeen treated chemically, becauseyou can hear it rustle. Laudomiatook a bolt of emerald green taffeta,called ermisino—“the grandfather oftaffeta,” she said—and scrunchedthe fabric. “Look,” she said, “itstands up.” The fabric held the

scrunched shape, like tinfoil. “That’swhat silk is supposed to do,” shetold me. “Silk is a living thing.Today, manufacturers push it somuch, they kill it and destroy it.Weaving by hand respects the bodyof the thread.”

Next comes the patternmaking. Back in the Renaissance,the noble families each had loomsin their palazzi to produce silks todecorate the house and dress thefamily members. Laudomia tells methat when the oldest son married,the family would create a newdamask pattern that would bear thefamily’s name. A silk fabric designwas also created when a first sonwas born, and the family ownedexclusively it until he died.

The largest and noisiestroom of the otherwise sereneSetificio is the weaving room. It isthere that all the damasks andmoirés and even some linens arewoven by workers on manual

looms. Though it is a magical roomof movement, sound, and richesse,it is a sad shadow of what it oncewas. In November 1966, the Arnoflooded and the Setificio, which sitson the river’s banks, filled with waterand mud. Most of the patterns,designs, and archives—whichincluded the records of what eachloom had produced for centuries—were destroyed, but the looms weresalvaged. All are from 1780 and arepedaled with the right leg; the handpulls a rope, and the shuttle slidesthrough. When I visited one womanwas weaving a sixteenth-centurylampas called Princess Mary ofEngland; it is made of fine goldthread and advances only sixtycentimeters a day.

Workers require fiveyears of training to be able to weavesilk and linen at the Setificio. It’s atrade passed down from generationto generation. Back in the 1920s,Florentine girls came after school to

learn how to weave on small loomsbuilt for them. Today, there arethirteen weavers, mostly women.Each fabric is made from beginningto end by one weaver becauseotherwise you would be able to seethe change of hand in the cloth.Most weavers at the Setificio are intheir thirties or forties. Back in thefactory’s heyday, the weavers’ talentwas considered so precious thatwhen they decided to marry, thefactory would offer handsomedowries and other concessions toget them to stay on.

The Setificio isunderwritten by the noble families ofItaly who are still shareholders, andit receives commissions from allover the world. In 2000, the loomsproduced the silk for the costumesfor Siena’s annual Renaissanceparade. The factory has alsocreated damasks for one of the royalpalaces in Copenhagen and wonthe commission over Lyon to redo

two rooms of the Kremlin; itcontinues to make silk pouches forpotpourri for the Farmacia di SantaMaria Novella, the famedseventeenth-century apothecarythat operates in the heart of oldFlorence. Next door to the factory isa shop that sells the Setificio’s silksand linens. While there, I admiredan ivory silk and linen weave calledSpinone. It cost €125 a meter.Laudomia saw my interest. “Theproblem is, once you do one chairwith this fabric, the rest of the roomlooks awful,” she said with a laugh.

SILK IS CREATED through the processof sericulture, or silkworm farming.Silkworms are not worms at all, butrather caterpillars, and the Bombyxmori is the primary variety used forcommercial silk. The Bombyx israised on farms in China, Thailand,and India, where it feasts on

mulberry leaves and increases itsbodyweight ten thousand times inits four-week life span to about thesize of an adult thumb. After fourmoltings, it spins a two-inch-longwaterproof cocoon, ejecting liquidsilk at about a foot a minute. Twoweeks later, it emerges as a mothand mates like crazy for a fewhours. The female lays threehundred to five hundred eggs anddies in a few days. The eggs takesix weeks to twelve months tohatch. A few moths are allowed tohatch to continue the process. Theremaining cocoons are steamed tokill the caterpillar, washed by handin hot water to remove the gummysubstance called sericin, andunwound on a reeling machine,which spools the filaments on abobbin. The work is swift, the waterfilthy, smelly, and very hot. Usuallyfive to eight filaments are spuntogether to create a thread. Onsome farms in India, young girls

make thread by hand, unwindingthe cocoons and slapping andtwisting the filaments across theirthighs.

The Chinese began toproduce silk in the third millenniumBC for exclusive use by the emperorand his court. The Chinese keptsericulture to themselves forcenturies—anyone found guilty ofdisclosing its secrets wassentenced to death by torture—butthe fabric itself made its waywestward. When Alexander theGreat conquered Persia in 331 BC,he discovered swaths of theluminous silk. The five-thousand-mile Silk Road began in Xi’an,passed through the Jade Gate, andcrossed the Turkestan desert, theIranian plateau, and Asia Minor toConstantinople. There, silk andother exotic goods were loaded onships and transported to theMediterranean’s capitals. Travel onthe Silk Road peaked during

China’s prosperous and culturallyrich Tang Dynasty (AD 618–907), andglorious cities along the route, suchas Tashkent, Bukhara, andSamarkand, flourished. In Rome,only the wealthiest could afford silk—it was said to be worth its weightin gold—and they wore it so lavishlythat the government passedsumptuary laws to restrain itsconspicuous display. Caesar’s heir,Octavian, eventually restricted theimportation of silk because thematerial was too costly.

There are many legendsabout how the knowledge ofsericulture arrived in Italy. Onerecounts that in the sixth century,the Roman emperor Justinian senttwo monks to China to smugglecocoons in a hollow cane back toItaly. Another tells of an Asianprincess who brought the fabric toItaly as a bride. The most generallyaccepted, however, is that of Italianmerchants in the Middle Ages who

discovered the rich iridescent fabricin Hormuz, Persia, dubbedormesino; learned how it was made;took it home; and reproduced it.Today it is known today asermisino, the taffeta that Laudomiascrunched.

One of the early centersfor silk weaving was in the Tuscantown of Lucca. In the fourteenthcentury, several of Lucca’s weaverssettled in Florence and opened thecity’s first silk workshops. The city’srulers granted them tax exemptionsto pursue their art. The Arte dellaSeta, the silk weavers’ guild, wasformed and drew up strict guidelinesfor silk manufacturing. By the mid-fifteenth century, Florentine farmerswere required to plant mulberrybushes on their land to feedsilkworms. The noble families ofFlorence, including the Puccis,wholly embraced the luxurious silksfor both decor and clothing, asdetailed in portraits by such

Renaissance masters as Leonardoda Vinci, Raphael, and Botticelli. Bythe fifteenth century, silk was asymbol of Florence’s wealth andrefinement: when Cosimo de’Medici, the Grand Duke of Tuscany,arrived in Florence, he noted thatthe streets were filled with “finetapestries and hangings…Therewas not a shop to be seen that didnot put on a great show of works insilk and sumptuous gold.”

The Como Lake regionin northern Italy was at the time acenter for wool dying and weaving.The wool came from Scotland andSpain, across Flanders, down theRhine to Zurich, and over the Alpsto Como, where the lake’s purewater was perfect for dyeing. Whenturf wars broke out across Europe,the wool route shut down. The rulerof the region, Gian Galeazzo Sforza,and his uncle Ludovico Sforzadecided to bring silk production fromFlorence to Como to make up the

loss. Como has remained a textilemanufacturing center ever since. Inthe fifteenth century, King Louis XIof France set up silk manufacturingin Lyon to stop French aristocratsfrom buying the fabric from Italy, andthe industry flourished there forcenturies.

ON A RAINY SPRING afternoon in 2006,I drove from Milan through thecongested industrial northernsuburbs to Como, the Alpine lakeresort, to meet Michele Canepa,owner of Taroni, the last silk factoryin the city. Canepa is one of thosefriendly yet elegant Italians whoinstantly make you feel welcomeand important. When I met him, hewas dressed conservatively yetimpeccably in a brown herringbonejacket, charcoal gray flanneltrousers, a good blue-and-white-striped shirt with French cuffs, and a

conservative black knit tie. Hislongish chestnut hair was slickedback neatly, and his eyes weresmiling. The Taroni headquartersdates to the early twentieth century;Canepa’s office was filled with 1970scontemporary decor, including aglass-top table for a desk andmolded plastic chairs with chromelegs. Outside his small window astrong old magnolia was in bloom,many of its petals scattered about,knocked off by the pouring rain.

Canepa’s family hasbeen in the silk and textile businessfor two centuries in Como. Half ofComo’s business then was weaving—its specialty was silk twill, thefabric used for scarves—and theother half was manufacturing. In the1950s, it all began to change. First,since Europe no longer producedsilk, Como’s weavers were forced tobuy their thread primarily fromChina. Then they started to importtwill and other silk fabrics from

China, and changed their businessfrom weaving to dyeing, printing,and producing finished goods.When Canepa joined the family firmin 1968, it was third or fourth largestsilk manufacturer in Como.

In 1998, Canepa decidedto retire and sold the business,which is now located outside thecity, to his sisters. A year later hegot a call from his friend GiampaoloPorlezza, owner of Taroni.

“Would you beinterested in buying my company?”Porlezza asked.

Realizing that he missedworking, Conepa accepted.

Taroni by then was lastsilk mill in town. Silk production inthe Como region is one-tenth ofwhat it was in 1950. China is now theprimary producer, followed by Indiaand Thailand. Italian and Lyonnaissilk manufacturing firms areboutique businesses, and theirwoven silks are still considered the

finest. “If a client only wantseighteen meters’ worth, that’s whatI’ll do,” Canepa told me. “I take thetime to do it right.” In the Comoregion, there are only a handful ofother companies, including Manteroand Ratti, that do silk production ofthis quality. In Florence there is theAntico Setificio, but its production isminuscule. In Lyon there are a fewfactories weaving high-quality silk,including Bucol, which is owned byHermès and produces Hermès’ssilk scarves as well as fabrics forother couture houses. And that’sabout it.

We walked up the stairsto the muffled thumping sounds ofthe looms. As Canepa opened thedoor to the factory’s productionroom, I was hit with a gust of windcreated by the whirring machines.The air had the same musky odorthat I had first smelled in Florence.The sound was deafening. Theshuttle on the new computer-run

Grob Horgen looms moves soquickly that you can hardly see it—quite a difference from the old onesin Florence pulled through by hand.The older Benninger looms from the1960s, Canepa shouted to me, areslower and better. “On the oldlooms,” he hollered, “you canproduce a quality that is impossibleto produce with modern looms.” Oneof the Benningers was turning out asumptuous gold taffeta with bronzeand pale pink stripes. It was for atop couture house, Canepa told me.He had me touch another soft whitesilk with small checks. “It’swaterproof,” he explained. It, too,would show up on a runway in ayear. Canepa is contractually notallowed to disclose who his clientsare—they like to keep their sourcinga secret—but I can say that most ofthe major couture houses and thetop New York designers use hisfabrics for their finest creations.

Many of Como’s

manufacturers have moved over theyears to the countryside just southof the city. What were once farmsare now industrial parks. One of thetop manufacturers in the region isISAS. p.A. Located in a gatedcompound behind a big grocerystore half an hour down thesuperstrada from Como, ISAproduces ties and scarves for LouisVuitton, Christian Dior, Gucci,Fendi, and Pucci. ISA was foundedby Giorgio Bianchi just after WorldWar II. As a student, Bianchi visitedParis and was so taken withHermès’s silk scarves and ties hereturned to Como and opened thefactory to try to produce an Italianequivalent. He focused on oneproduct: silk twill. He designedsome print patterns himself; othershe bought in Paris. One of his firstclients was Céline, followed by Diorback when Christian Dior himselfwas at the helm. The company grewquickly, from 1 weaving machine in

the late 1940s to 150 in the 1960s, butit was hard to find enough labor,especially in such an agriculturalregion.

Since the 1960s, ISA’sbusiness has shifted, like Taroni’s,from weaving to printing andproduction. Today, the company isrun by Giorgio’s son Giambattistaand his wife, Gabriella, afashionable young couple with a lotof verve. They understand theimportance of China in themanufacturing business and areadapting accordingly. Weavingaccounts for a mere 5 percent ofISA’s business, and that work isvery specific: the company is downto thirty looms and only producescomplicated fabrics like jacquard orprecious taffetas and chiffons—“theluxurious fabrics,” Gabriella Bianchiexplained to me when I visited ISAin March 2006. “We leave the lessexpensive fabrics to others in Italyor to China.” Gabriella is a vivacious

brunette with an hourglass figureand a winning smile. When we met,Gabriella was dressed in a tightwhite denim dress, a black leatherfur-trimmed jacket cinched with awide belt, and a saucy pair of gold1940s-style heels. This, in Italy, isoffice wear.

Gabriella grabbed anumbrella and escorted me acrossthe parking lot from the shiny whitecorporate offices to the old beat-upfactory. The weaving was movedoff-site five years ago—about fivekilometers down the road—simplybecause it was too loud, sheexplained as we entered the oldloom room. The space isgargantuan—as big as an airplanehangar—with worn redbrick floors.Today it is where ISA makes all thesample ties and scarves. There arebolts of fabric, worktables, sewingmachines. In the next big room, awoman attaches bar-code tags toVuitton neckties, slides them into

cellophane sleeves, and placesthem in a carton to be shipped. Atanother table is a box of Gucci twillscarves. For Vuitton and someothers, the product is sent to thecompany, where it is boxed. ForFendi, the product is shippeddirectly to the stores.

“We do a lot of printingjust for Pucci since LVMH took itover, because we do printing andproduction for many LVMH brands,including Marc Jacobs, Céline, Dior,Fendi, and Louis Vuitton,” Gabriellaexplained. We walked up to thedesign studio, a small room withwomen at worktables andcomputers, adjusting scarf printdesigns. Luxury brand designassistants visit ISA’s factoryregularly and consult with the studioon designs. Sometimes they bringtheir own, and sometimes they alterISA’s proposed sketches. Often theyperuse the old leather-boundscrapbooks that contain swatches of

previous prints and weaves forideas. “This is the history of Como,”Gabriella told me as she pagedthrough a dusty volume of plaids.The tattered pages were brown andmottled, but the fabrics wereglorious, the colors pure, the weavetight, the yarn smooth and rich.

The initial hand-drawndesign is scanned into the computerso that it can be copied easily tocreate a repetitive pattern. Aprototype is produced by hand onenormous silk screens in the printroom, a gigantic space with a dozenfifty-meter-long tables and bigplastic tubs of ink that look like hugepots of finger paint. The placesmells like a Xerox machine. Iwatched as two large, strongwomen hooked a heavy, squarescreen on top of a long swath of twillon the table. They poured some inkon the screen, pulled a big scraperacross it, unhooked it, lifted theapparatus, and moved it to the next

plain section of twill. Once theprototype is approved, the design isprogrammed into computer-drivensilk screen machines and thescarves are printed one afteranother on twill affixed to the longtables. The printed scarves, still stiffwith ink, are washed in hugemachines until soft and inspectedunder hot lights for faults.

Much of the twill ISAuses comes from China. “There arethree or four companies there thatonly do plain twill, and it is cheaperbecause they never stop productionand that’s all they do,” Gabriellaexplained. “We buy twill from Chinawhen the quality doesn’t have to beperfect and the customer wantslower prices. For the first-qualitylevel we still do all the weaving inComo. You can see whensomething is printed well or wovenwell. This is the power of Como.”

Scarves with machine-sewn edges are sent to a sewing

room upstairs to be finished.Scarves with hand-rolled, hand-stitched edges are sent tofreelancers in the region who workat home or to a factory thatspecializes in hand-rolled finishingin Mauritius, an island in the IndianOcean just off Madagascar. Hermèshas some of its silk scarves finishedthere, too. The Mauritius factory“has good prices and good quality,”Gabriella explains. ISA producesbetween seven and eight hundredthousand scarves and six to sevenhundred thousand ties each year.They used to do more than onemillion ties a year, but “ties aregoing out of fashion,” she explained.The average twill scarf costs about$40 to $50 to produce. It retails forten times more, and prices arerarely reduced. The production costfor a scarf in China is 40 percentless, or $25 to $30 apiece. Somebrands now produce their scarves inChina. But several have remained

at ISA—at least for the time being—because, Gabriella explained, “wedo small quantities, we are flexible,we do samples in a week, andwe’re nearby. We now only do thehighest level of the market becauseit’s impossible for us to make itcheaper. We don’t have the prices. Idon’t know what it will be like in tenyears, but for the moment, it’s still agood business. And honestly, I don’tthink the Chinese are interested indoing small production. At least thisis what I hope.”

THE MANUFACTURING of clothing—like that of perfume, accessories,and every other luxury good—nowfollows the pyramid model: theexquisite work is produced in a verylimited quantity by a coterie ofhighly skilled traditional craftsmenin France, Italy, and the UnitedKingdom. The middle range, such

as ready-to-wear, is farmed out tobig factories in places like Spain,North Africa, Turkey, and the formerEastern bloc countries. GiorgioArmani said in 2005 that it produced18 percent of its high-end ready-to-wear line, Armani Collezioni, inEastern Europe. Gucci makes someof its sneakers in Serbia, and Pradadoes the upper part of some shoesin Slovenia.

I n 2004, Valentinoreportedly began to outsource its$1,300 men’s suits to a factory inCairo, where they were produced byveiled Muslim seamstresses wholearned their craft by watchingvideos on televisions in theworkshop. At the time, Italian textileworkers’ hourly wages were $18.63;the Egyptian workers earned 88cents. When the suits, destined forthe European market, arrived inItaly, Valentino representativesripped out the “Made in Egypt” tags—in Europe, companies do not

have to declare where their goodsare produced. Valentino suits for theAmerican and Japanese markets,which have stricter laws aboutprovenance labeling, wereproduced in Italy. In the United Stateand Japan, “perceived quality ismore important than real quality,”explained Valentino CEO MicheleNorsa. The cut in manufacturingcosts had a positive impact on thebottom line: in 2005, Valentinoposted its first profit in years.

The lowest end of theluxury spectrum, like logo-coveredluxury T-shirts and knitwear, areproduced in developing nationssuch as China, Mexico,Madagascar, and Mauritius. InFebruary 2003, I traveled to Mauritiusto see the process firsthand.

Mauritius is a tropicalparadise so ravishing that MarkTwain once wrote, “You gather theidea that…heaven was copied afterMauritius.” Endless acres of lush

sugarcane fields surround jaggedvolcanic mountains that rise out ofthe sea mist like peaks of meringue.Wide tranquil bays of vibrantturquoise are framed by swaths offine white sand and swaying palms.Colonized over the centuries by theDutch, the British, and the French,the island was the home of thelegendary dodo bird. TodayMauritius is a favored winter holidaydestination for Europeans and anoffshore financial center for India. Ithas also been, for the last thirtyyears, one of the world’s keycenters for textile manufacturing.Textile manufacturing in Mauritius isa purely contrived industry. Unlikeother major garment manufacturingcountries, which also produce muchof their raw materials, Mauritiusimports everything, from the yarn tothe packaging. Hundreds offactories dot the inland hills, whereworkers—predominantly women—produce sweaters, cashmere

blankets, and T-shirts for everyonefrom discount retailers like JCPenney to luxury brands such asGiorgio Armani and Burberry.

Mauritius was first“discovered” by the Portuguese,shortly after Vasco da Gama’sexpedition around the Cape ofGood Hope in 1498. In 1511, theDutch claimed the island andnamed it in honor of their sovereign,Maurice. During their fifty-year stayin Mauritius, the Dutch not onlywiped out the dodo but alsointroduced and cultivatedsugarcane, which they harvestedwith slaves they imported fromAfrica. In 1715, the French arrivedfrom the neighboring island ofBourbon (now Réunion), renamed itÎle de France, and declared itFrench. During the NapoleonicWars of the early nineteenthcentury, the French lost the island tothe British, who renamed itMauritius and developed the

sugarcane business with the help ofindentured laborers from theirnearby colony, India. Today mostMauritians speak both French andEnglish. In 1968, Mauritius receivedits independence from Great Britain,but, as Mookeshwarsing Gopal,chairman of the Mauritius ExportProcessing Zone Association(MEPZA), the industry’s tradeassociation, explained to me, “itsuffered serious economic structuralproblems. It was a poor country.”

The one thing Mauritiusdid have was abundant,unemployed manpower. In a 1975trade agreement to boostdeveloping nations, it received theright to export textiles duty-free andquota-free to the EuropeanEconomic Community (now theEuropean Union). The governmentsaw textile manufacturing asMauritius’s key to prosperity anddedicated all that it could todeveloping the industry there. This

allowed companies like ShibaniKnitting Company Ltd. to flourish.

Shibani is a big blockbuilding within the barbed-wire-topped chain-link fences inPhoenix, an industrial area in thehills inland from Port Louis. As Ipulled into the parking lot, I noticeda Max Mara factory across thestreet. Upstairs, in the clean, whiteretail offices of Shibani stood racksof its in-house label knitwear, T-shirts, and lingerie for the springseason one year away. If it weren’tfor the view of the Indian Ocean outthe windows, I would have thought Iwas in a showroom on SeventhAvenue in New York. In walkedSunil M. Hassamal, a large-setMauritian-born man of Indian origin.He sat down, asked an assistant tobring two cups of tea, and told meabout his company, one of thelargest on the island.

Hassamal’s family, oneof the more important textile

manufacturers in Mauritius, decidedi n 1986 to produce sweaters forEurope and opened Shibani with aSouth African partner. “Unlike otherMauritian companies who hadcheap labor, hand machines,handlooms—that was the traditionalway of doing it—we used electronicmachines from day one,” heexplained. “And we have keptmodernizing and expanding sotoday we at are at the forefront oftechnology.”

That’s evident from themoment you enter the factorydownstairs. The knitting room is thesize of a football field, the dozens ofknitting machines roaring as loudlyas newspaper presses; many of theworkers wear protective earphones.Most of the machines are from Stollof Frankfurt, Germany, and bear thecompany slogan—“The right way toknit!”—embossed on the side. Thereare also two three-gauge ShimaSeiki machines from Japan. “Some

people cut up fabric and sew ittogether,” explain Hassamal. “Here,the whole thing is knitted on amachine.”

Among the labelsShibani produces in Phoenix and atits two other sweater and oneintimate apparel factories on theisland are the French catalogcompany La Redoute, the Parisdepartment store Le Bon Marché,the high-fashion label Zadig &Voltaire, the French couture houseCarven, Armani Jeans, Nordstrom,and Ralph Lauren. “We used to doCalvin Klein Europe,” Hassamalsaid. “And we do all the cashmereblankets for Ralph Lauren.” All ofShibani’s cashmere comes fromMongolia and is then dyed andspun in China, Italy, and Scotland.Chinese cashmere is the cheapest;Scottish the finest and mostexpensive. “The quality used in asweater depends on what the clientwants to pay,” Hassamal said.

Generally, clients bring their ownsketches and some supply one-offsamples as patterns to follow. Thesweater is drawn on a computerfollowing specs for colors, type ofyarn (cashmere, lamb’s wool,Merino wool, or cotton), kind ofstitch, and size or gauge of theknitting. When the test swatch isapproved, the whole production isrun. Then the sweaters are sent tothe finishing room to have trims,collars, buttons, and labels added.

It was break time whenwe walked into the finishing room.The Mauritian women were chattingand drinking tea, as the Chinesegirls slept on folded arms on theirknitting machines. In the mid-1990s,Mauritius was at full employmentand needed more textile laborers tokeep the factories running. Thegovernment devised a system thatgrants foreign—or expatriate (expat)—workers three-year contracts.Expats—who come from China,

Bangladesh, Sri Lanka, and India—are an essential part of theMauritian textile labor force; in 2004,there were twenty thousand expatsworking in manufacturing on theisland, most twenty to thirty yearsold. Up to 25 percent of a factory’sworkforce can be expats. Thefactory owners are obliged toprovide housing and board as wellas pay wages. Generally, expatsare limited to one three-yearposting. “But they take anotherpassport and come again two orthree years later,” says MichelMayer, marketing director for WorldKnits, a T-shirt manufacturer inCoromandel, Mauritius, thatproduces for JCPenney, Guess, andArmani Jeans, among others.

Shibani has eighteenhundred workers on sweaters andfour hundred on intimate wear;expat workers predominantly fromChina and India make up about 10percent of the workforce in the

sweater factories. Shibani’s fourfactories run twenty-four hours,seven days a week, with four shiftseach day. The legal Mauritianworkweek is forty-five hours. “I’drather give preference to Mauritiusworkers than deal with lodging,food, passage tickets,” Hassamaladmitted, but “imports are betterskilled as machine operators andthere is less absenteeism becauseof family duties. Plus they don’tmind working nights and Mauritiansdo.” When the break was over, theChinese girls snapped up and wentright back to work. Their faces wereblank, their eyes empty. No onespoke. All you could hear was thedeafening sidth-sidth-sidth of theknitting machines.

B y 2003, Mauritius textileand clothing manufacturing exportsales amounted to roughly $1.5billion. The sector employed about40 percent of the country’s workforceand contributed 12 percent to the

gross domestic product. As a result,Mauritius had the highest per-capitagross domestic product in sub-Saharan Africa. There’s evidence ofthe prosperity in Mauritiuseverywhere you turn: new Europeancars, restaurants, shopping centers,and housing construction. “Textilemanufacturing is a main pillar of oureconomy,” trade chairman Gopaltold me.

But that may be headedthe way of the dodo. On January 1,2005, the World Trade Organizationeliminated the thirty-year-old textilequotas that gave birth to thrivingmanufacturing centers indeveloping nations such asMauritius, Bangladesh,Madagascar, and Sri Lanka.Mauritius was perhaps the worst hit,according to apparel industryconsultant David Birnbaum of ThirdHorizon Ltd. in “Winners and Losers2005,” a study of the economicimpact of the phase-out of twenty-

eight key garment-producingcountries. In 2003 and 2004, Mauritiuslost thirty companies employingfifteen thousand apparel and textileworkers. And Birnbaum reports thattextile shipments from Mauritius tothe United State in 2004 were down17.5 percent from 2003. Notsurprisingly, the majority ofproducers have moved theirmanufacturing to China. “TheChinese work seven days a week,twenty-four hours a day, they live inthe factory and are paid pennies anhour,” Michel Mayer told me. “Howcan we compete with that?”

IN THE NORTHERN AREA of Hong Kongcalled the New Territories—far fromthe banking towers, the grandhotels, and the luxury shoppingmalls—is an old industrial area oftired warehouses and rundownfactories that until a decade ago

was the pulsating heart of theregion. For thirty years, this sectionof town turned out everything fromplastic dolls to cashmere sweaterswith the “Made in Hong Kong” label.In the fall of 2005, I walked into theparking garage of an old factory ona crummy street, stepped into abeat-up elevator, and went up to themodern, well-appointed offices ofFang Bros., a forty-year-oldmanufacturing company that todayspecializes in knitwear. KennethFang, the company’s chairman, is adistinguished Chinese gentlemanwho speaks the Queen’s Englishand displays impeccable manners.When we met, he was in a tailoredhay-colored suit and cheerfulcashmere vest in a pastel argylepattern, his silver hair neatlycombed back, his hands perfectlymanicured. His card boasts that heis a commander of the BritishEmpire (CBE), an honor just belowknight bestowed by the queen.

Fang’s main business is knitwearmanufacturing. He also ownsPringle, the luxury Scottishcashmere knitwear company, whichhe bought in 2000 and is trying torevitalize.

I n 1949, when Mao Tse-tung established the People’sRepublic of China, Fang’s familyfled Shanghai to British-ruled HongKong. “Hong Kong back then was asmall fishing port,” Fang remembersfondly. His father set up a businessto continue what the family haddone in China: spinning cotton yarn.In the 1960s, the company startedweaving cotton fabric, which wasexported to the United States andGreat Britain to be made intoclothes. In 1956, Kenneth was sent toNorth America to study. He took abachelor of science in chemicalengineering at the University ofMichigan in Ann Arbor and amaster’s at the MassachusettsInstitute of Technology, and in 1966

returned to Hong Kong to join andexpand the family business. One ofhis first initiatives was to move thecompany into knitwear.

Back then, Hong Kongwas a manufacturing center oflightweight goods such as toys,plastics, wigs, and inexpensiveclothing. One-fourth of Hong Kong’seconomy was manufacturing, and 40percent of Hong Kong residentsworked in factories. From the late1970s to the mid-1980s, Hong Kong’smanufacturing quality had improvedenough to lure high-end brandssuch as Ralph Lauren, Calvin Klein,and Max Mara. Fang Bros. becameone of Ralph Lauren’s biggest Poloshirt manufacturers.

In 1978, China opened itsdoors, “inviting investment withcheap land and cheap labor,” Fangexplained. Many Chinese refugeesin Hong Kong, like Fang Bros.,returned to the mainland to openfactories, primarily in the Pearl River

Delta of Guangdong, thesoutheastern province that abutsHong Kong. Most were in andaround Shenzhen, a border townabout an hour north of the HongKong port by car or train. By themid-1990s in the Shenzhen region,more than six million workers wereemployed in thirty thousandfactories owned and run by HongKong manufacturers—as many asthe entire population of Hong Kong.Like Hong Kong two decadesearlier, the product manufactured inGuangdong was cheap in qualityand price.

As China’smanufacturing base grew, HongKong’s shrank. Chinese workers’skills improved and productionquality increased, yet costsremained low. Soon high-end andluxury brands began to relocatetheir clothing manufacturing fromEurope, the United States, HongKong, Mauritius, and elsewhere to

China. As with accessoriesproduction, few brands admit to it. Ina matter of days in the fall of 2005, Iheard from manufacturing andindustry sources in China thatseveral prestigious Italian brandsmanufactured ready-to-wear andknitwear there in pieces and had theitems assembled in Italy to carry the“Made in Italy” label, and ChristianLacroix had knitwear made there.Fang said, “We do a lot for RalphLauren and a small amount forDonna Karan,” which, since 2001,has been an LVMH brand.

Burberry’s chief financialofficer, Stacey Cartwright, told me ata luxury conference in Hong Kongin December 2004 that the British-based company produced “a smallbit of luggage in China. It’sexperimental, tiny, tiny.” A day later,a source who worked with Burberryat the time told me, “Burberry’sproduction in China is more thanexperimental. It is big quantities,”

and said it was primarily leathergoods and accessories. Some ofthe lower-priced Burberry BlueLabel, a licensed line that isproduced by the Japanese firmSanyo Shokai Ltd. for the Japanesemarket, is manufactured in China aswell. I remembered the Burberrytrench my husband tried on in Xi’anand thought to myself, “Maybe itwas real.” In September 2006,Burberry announced it wasshuttering a factory in South Walesthat had been in operation since1939 and produced polo shirts,leaving three hundred out of work,and moving the production to China.In November, Welsh actor IoanGruffudd, who had modeled in aBurberry ad campaign, protestedthe closure, and the Times ofLondon reported that PrinceCharles contacted Welshgovernment ministers to “ask if therewas anything he could do” to stopthe move. Peter Hain, Britain’s

secretary of state for NorthernIreland and Wales, asked BurberryCEO Angela Ahrendts to rethink themove and the Church of England,which has a $4.9 million stake in thecompany, requested a formalexplanation. “We found the costs ofproducing the polo shirts offshorewere substantially lower than thecoasts in Wales,” Michael Mahony,Burberry’s director of commercialaffairs, said at the time. “In fact, theywere less than half.”

The only luxury designerI heard openly embracemanufacturing clothing in Chinawas Giorgio Armani. “The ‘Made inItaly’ label is very important for thetop line because it suggests acertain specialization,” he saidduring his visit to China in 2004. “Butto manufacture some of our otherlines in China…as long as wecontrol the quality, then why not?”

Today, there are morethan thirty thousand apparel and

textile companies in GuangdongProvince, employing more than fivemillion people. China’s textiles andapparel industry is worth more than$100 billion a year; meanwhile,Hong Kong’s is nearly extinct. By2002, manufacturing made up only 5percent of Hong Kong’s economyand only one in ten Hong Kongresidents worked in factories.Instead, banking, trade, tourism, andreal estate were the primarybusinesses. “Most manufacturershave their headquarters, and somedesign and marketing in HongKong,” Fang said, “but assemblyhas moved to China.” Fang Bros.continues to produce a smallamount of knitwear in its Hong Kongfactory, but most of itsmanufacturing is done in China,where the company has fourknitwear factories and ten thousandemployees at one-third the cost ofHong Kong. Average garment andtextile factory wages in Guangdong

Province are $50 to $100 a month.(Pringle’s cashmere sweaters arestill made in Hawick, Scotland, butsome of the ready-to-wear is nowproduced in Fang’s factories inChina.) The living standard in HongKong has increased so much in thelast forty years, making it one of themost expensive and cosmopolitancities in the world, that “most youngpeople do not want blue-collarjobs.”

Fang seesmanufacturing in China quicklyevolving into a more sophisticatedand costly market, like Japan andTaiwan before it. “Everybody goesthrough the same track,” he said. Atthe moment, he explained, “theChinese are brand-contracting.” Butsoon, he believes, “manufacturerswill start to promote brands. I expectmore oriental brands to emerge inthe next decade, especially for theChinese market. The Chinesegovernment has been supporting

this: there are now fashion shows inBeijing, Shanghai, and Guangzhou.And manufacturers will pay moreattention to quality and consistency.You have high-quality, well-builtfactories. China has well-skilledlabor. In ten years it will be adifferent market.” However, Fangdoesn’t believe that luxury brandswill ever open their own factories inChina. “Why should they,” he asked,“if they can have someone producefor them and guarantee the quality?”

The exponential rise inmanufacturing in Guangdongprovince has caused a host ofenvironmental and labor problems.In late 2005, health andenvironmental experts stated thatthe factories and population inGuangdong were drawing too muchfresh water out of the Pearl River,allowing seawater to flow upstreamand taint the local water supply,forcing Guangdong and Macaoresidents to use only bottled water

for drinking and cooking. In January2006, several provinces farther upthe Pearl River opened thefloodgates of their dams to flush thesalt water out of the delta and slowdown the damage to its ecosystem.The air in Hong Kong, which isdownwind from GuangdongProvince, has grown increasinglysmoggy to the point that most days itseems cloudy when its not. “Whenthey shut down manufacturing inChina for one or two days fornational holidays, you can see thedifference,” Bonnie Brooks,president of Lane Crawforddepartment stores in Hong Kong,told me. “We get a couple of sunnydays.”

The constant pressure toincrease productivity has triggered arise in human-rights violations intextile manufacturing around theworld, according to the 2005 “AnnualSurvey of Trade Union RightsViolations,” published by the

Belgium-based InternationalConfederation of Free TradeUnions. In Bangladesh, workers atInternational Knitwear and Apparelwho demanded better workingconditions were fired, beaten, andtold they’d be killed if they joined aunion, the report stated. InCambodia, police armed with gunsand electric prods dispersedapproximately four hundredprotesting workers from a garmentfactory. In China, police detainedcotton factory workers in Shaanxiprovince for protesting changes intheir employment contracts. InChina, workers are not required towear protective gear such asearplugs or helmets when needed.“Foreign employers in the industrialzones, mainly textile groups fromSouth Africa, Hong Kong andTaiwan, pay wages below thestatutory minimum, refuse to paysickness benefits and makeunilateral deductions from their

employees’ pay packets,” the studysaid. “The authorities turn a blindeye to these infringements.”

Recently, China hascome under fire from human-rightsand labor organizations for childlabor practices. Though the legalworking age in China is sixteen,children as young as eleven ortwelve from poor families easily findwork in factories, since they arecheaper to employ than skilledworkers. Often Chinese children areforced to seek out work becausetheir families cannot afford to sendthem to public school. Students atpublic schools in China regularlypay for their books, food, boarding,and transportation, all of which cancost up to $125 a year—theequivalent of two months of factorywages and more than some farmersmake in a year. But that is slated tochange. The Chinese governmentrecently instituted a reform to largelyeliminate school fees.

In response to risingcosts of manufacturing in China,brands are moving production tonew cheap-labor markets such asVietnam and Cambodia. “Chinesefactories are coming here more andmore,” said Chinese manufacturerChen Guohui at his factory on theoutskirts of Hanoi. “Labor costs are25 to 30 percent lower than inChina.” His workers earnapproximately $60 a month. While inHong Kong, I heard from a highlyplaced source at a well-knownluxury brand that the company hadbegun to produce some of itsknitwear in Vietnam. AsMookeshwarsing Gopal in Mauritiustold me, “The textile industry has anomadic nature and requires cheapand abundant labor.”

Meanwhile, the Chineseare moving into ownership. Inaddition to Hong Kong manufacturerKenneth Fang buying Pringle in2000, Taiwanese media magnate

Shaw-Lan Wang bought thecentury-old French couture houseLanvin in 2001, YGM Trading Limitedof Hong Kong picked up Frenchcouture house Guy Laroche in 2004,and Singaporean businessmanCheng Wai Keung owns thevenerable 235-year-old Savile Rowtailor Gieves & Hawkes. Chineseentrepreneur Silas Chou is co-owner of both the esteemed Britishjeweler Asprey and the Americanluxury sportswear label MichaelKors.

And Chinesemanufacturers are looking toacquire textile mills in Italy, many ofwhich are in financial trouble due tocheap labor in China. Themanufacturers hope to take overestablished brands, set up jointventures to launch new brands, anddistribute Italian labels in China.“China is no longer content withproducing goods—it wants to go tothe next level, to share brand vision,

to be part of a distribution plan andbring added value to a project,” saidAlfredo Canessa, chairman ofBallantyne, the classic Scottishcashmere knitwear company nowbased in Milan, which is launchinga new brand called ChineseCashmere Company in a jointventure with the Hong Kong–basedcompany Fenix. “We want to be partof this scenario, if and when Chinawill no longer be a low-costmanufacturing country.”

PART THREE

CHAPTER EIGHT

GOING MASS

“If you wouldabolish avarice,you must abolishits mother,luxury.”

—CICERO

OUTSIDE IT WAS 110 in the shade. Butinside the Esplanade shopping mallat the Wynn Las Vegas hotel andresort on a July afternoon in 2005, itwas as cool and dry as a martini,and just as satisfying. Middle-agedAmericans in T-shirts and shortsflip-flopped their way down thearcade’s colorful Jacques Garciacarpet, sightseeing. They nippedinto Louis Vuitton and Dior to checkout the bags and scarfed down freechocolates at Frederic Robert. Theysnapped pictures of each other in

front of Cartier, ogled dresses atOscar de la Renta, and pawedManolo Blahnik’s towering goldsandals. Some bought, primarilysmall items like Vuitton credit cardholders and Chanel perfume. Mostlooked.

Like Kris Stewart, anadministrator at Miami University inOxford, Ohio, and her sister KathySorenson, a human resourcesexecutive for Sonoco ProductsCorporation in Long Beach,California—a couple of nice,average, forty-something whitewomen on holiday in Vegasshopping for “something special” forfriends with birthdays coming up.They hadn’t found anything by thetime I met them in front of Jean-PaulGaultier’s store, but they wereenjoying the tour. “We don’tnormally have an opportunity tostroll through these stores—wedon’t get to go to New York all thetime,” Stewart told me. “We have

none of these shops in Oxford. NoChanel and Dior in Cincinnati. Yousee ads for the brands, so it’s niceto actually see the products.”

Las Vegas has alwaysbeen America’s everyman town.Back in the 1880s, miners set outfrom there, hoping to strike it rich. Inth e 1950s, it was the epicenter ofpostwar decadence: the showgirls,the mob, the Rat Pack. In the early1990s, it improbably became a familyvacation destination, with theDisneyfication of the famed Stripadding pirate ship battles and roller-coaster rides. And today, it hasmorphed again, into a luxuryvacation resort with world-classrestaurants, art museums, spas, andgolf courses—and the greatestshopping in the United States. In theearly 1990s, “shopping wasn’t evenon the charts” of how touristspassed their time in Las Vegas,says Maureen Crampton, marketingdirector for the Forum Shops at

Caesars Palace, home of 150“specialty shops” including LouisVuitton, Gucci, Pucci, and Dior. By2006, shopping was the third mostpopular activity, after gambling andentertainment. In fact, the ForumShops at Caesars receive morevisitors each year than DisneyWorld.

Because of itsunrelenting flow of visitors—morethan thirty-five million annually,most of whom, like Stewart andSorenson, come simply to indulge—Las Vegas has become vitallyimportant market for the luxuryfashion business. Bernard Arnaultvisited the Louis Vuitton and Diorstores in the Esplanade four timesin the first ninety days Wynn LasVegas was open. “Las Vegas storesare always high in performance persquare foot—first, second or thirdbest [in the United States],” saysElaine Wynn, the wife of the Vegasimpresario Steve Wynn, and a

member of the board of directors ofWynn Resorts.

Vegas offers everythingthat luxury executives dream of:space, the traffic, the favorabledemographics. “It’s really a broadcross-section of people,” MarlaSabo, former president and chiefoperating officer for Christian DiorInc., North America, told me. “Wesee good clients from L.A. who visitfor the weekend, then you havesomeone walk in who comes fromsomeplace where we don’t havedistribution, and then you’ll havesomeone who has won a fortune atthe gaming tables and is looking fora place to spend it. And you knowthe Asian clientele has really takenoff in the last couple of years. Nowthere are nonstops from Japan toVegas. Because of this, we can seewhat works and what doesn’twork…and to get your brand imageacross to that many people is anincredible gift. Vegas is exposure.”

In the old days, whenEuropean luxury brands expandedto the United States, they primarilysold their goods in fine departmentstores in New York, Los Angeles,Philadelphia, and Chicago—citieswith industrialist and entertainmentfortunes and a vibrant social life.Back then, there was still a strictclass structure in the United States.Luxury merchants, be it BergdorfGoodman in New York or the localfine jeweler or silversmith in asmaller city, were considered thedomain of the rich, a frontier that themiddle class didn’t dare cross. “Wedon’t belong there,” mothers wouldwhisper to their daughters.

The barriers camecrashing down with the civil rightsmovement and social upheaval ofthe 1960s. Not only did blacks havethe right to enter establishmentsonce reserved solely for whites, themiddle class could emulate thewealthy, including patronizing their

finest addresses, without fear ofadmonishment or ridicule.America’s dream of a capitalistdemocracy was finally fully realized:nothing was off limits to anyoneanymore.

Luxury executivesresponded to America’s social andeconomic liberalizationconservatively by openingboutiques in New York and BeverlyHills and expanding their productlines in department stores to includelower-priced items such as scarves,ties, perfumes, and handbags. OldEuropean luxury firms were stillsmall, family-run affairs. Growth wasnot the top priority. After all,business was good, the familieslived well, and no one worked toohard. What more did one need?

But in the 1980s, whengrowth became not merely a prioritybut the sole objective, and Japanhad proved that luxury brandproducts could sell very big

overseas, the tycoons turned theirsights onto a new target: the middlemarket. And the biggest, wealthiest,most fluid middle market in theworld was the United States. Thequestion was: Where to start?Luxury had to find a place that hadan abundant number of customers,didn’t diminish the perceived statusof the brand, and wouldn’t cost afortune if the store flopped. LasVegas was the logical choice. It hadbuffed itself up, was growingexponentially, and, most important,was perhaps the lone place inAmerica—and maybe the world—where the have-nots lived, if only fora few days, like the haves.

Las Vegas was in asense the metropolitan equivalent ofcorporate luxury. Since nearly itsinception, Las Vegas has hawkedthe dream of wealth, with Lady Luckas its conduit. But it’s all a mirage.The sole objective for both LasVegas and today’s luxury brands is

to take your money. It was only amatter of time until the twoconverged.

“As funky and tawdry asLas Vegas has been in the past,people come here and feel they canindulge themselves in personalpursuits of pleasure,” Elaine Wynnexplained. “Maybe they aren’t thegreatest gamblers, and maybe theycan only play slots, but, boy, do theyknow how to shop. And it’s aheightened experience herebecause it’s judgment-free. No oneis looking over their shoulder tellingthem they shouldn’t be spendingtheir money on this or that way.When they come here they arereleased from all those inhibitions,and it created a wonderfulopportunity for retail.”

IN THE UNITED STATES, PresidentRonald Reagan’s tax breaks and

the rising stock market kicked off thetransformation of the middle classinto the middle market. The Internetboom of the 1990s bolstered it thatmuch more. America Online, inDulles, Virginia, for example, hadan estimated three thousandmillionaires on staff in 1999. All thisnew money and spending powerchanged the American Dream:average Americans were no longercontent being average. According toa University of Florida study in 1991,85 percent of those surveyedaspired to be among the wealthiest18 percent of American households,writes Juliet B. Schor, author of TheOverspent American: Why We WantWhat We Don’t Need. Only theremaining 15 percent said theywould be content being “middleclass.” In a 1986 Roper Center poll,average Americans claimed to need$50,000 to fulfill their dreams. By1994, it was $102,000.

Social priorities

changed, too. According to a RoperCenter study in 1975, a lot ofAmericans thought “the good life”meant a happy marriage, one ormore children, an interesting job,and a home, reports Schor. By 1991,many of responses were morematerialistic: “a lot of money,” “asecond car,” “a second color TV,” “avacation home,” “a swimming pool,”and “really nice clothes.”

S i n c e 1970, realhousehold income in America hasrisen by 30 percent; one-fourth ofAmerican households have anannual income of more than $75,000.B y 2005, four million Americanhouseholds had a net worth of morethan $1 million. What haveAmericans done with all thatmoney? Gone shopping. Between1979 and 1995, the averageAmerican’s spending increased byat least 30 percent and up to 70percent. And it was deeplysatisfying: According to a 1997 study,

41 percent of Americans betweenthe ages of twenty-two and sixty-one declared that shopping madethem “feel good.” To pay for it all,Americans went profoundly intodebt. Between 1990 and 1996, creditcard debt doubled; by 1997,American household debt was $5.5trillion, Schor reports. Yet it wasn’tenough: 27 percent of all Americanhouseholds with income over$100,000 claimed they couldn’t affordto buy everything they needed.

Other industrializednations have seen a similar trend,though not to the same extent. In theUnited Kingdom, disposableincome has increased by 88 percentin real terms in the last twenty years.In Italy it increased fourfold from the1970s to 2000, and in France nearlyfive times. Like Americans,Europeans went shopping, and theybought nice stuff. In 2004, nearly halfthe U.K. population claimed to havepurchased as least one luxury

product in the last twelve months.

THIS MADE THE luxury tycoons giddywith glee. Just as in Japan, theycould roll out their stores across theUnited States and Europe, fill themwith affordable, logo-coveredproducts targeted to this new, shop-happy middle market, and watchtheir sales—and profits—mount.“[Expansion] was in the air andneeded to be addressed,” Tom Fordtold me in 2006 about Gucci’sexpansion into the middle market int h e 1990s. “Had we not done it,someone else would have.”

Luxury brand executivesapplied their couture pyramid modelto their retail expansion. First, theyopened gleaming flagships in suchcosmopolitan capitals as New York,Paris, Milan, London, and BeverlyHills to set the tone. They were bigstores that contained the entire

collection, from couture gowns tokey rings, and were staffed withboth the snooty salesclerks whoknew the old-money regulars andfriendlier sorts who could help thenew middle-market customers. Likethe couture shows in Paris and themade-to-order leather ateliers, theflagships—with their polishedmahogany counters, plushcarpeting, contemporary art, orantique decorated salons—reaffirmed the marketingdepartments’ well-crafted image ofluxury, reinforced the companies’brand power, and seduced legionsof new followers from everyeconomic level. Armani’s flagshipon Rodeo Drive, for example, drawshundreds of customers every day,from movie stars looking forsomething new to middle-markettourists who visit it like a museum.The tourists may not fork out $3,000for a suit then and there, butchances are when they get back to

their hometown, they’ll hit the lower-priced A/X or Armani jeans storesand buy into the dream.

Luxury brands clumpedtogether on what were once streetsfilled with local merchants—BondStreet in London, Via Condotti inRome, Rodeo Drive, and MadisonAvenue—thereby changing thelandscape and the local economics,in a sense creating luxury ghettos.In part the clumping was to draw thecustomers more easily: they cameto see Dior and decided to checkout Prada and Gucci, too. But therewas also a financial consideration.Groups like LVMH, Gucci, andPrada negotiated blocks of realestate for their various brands. If youwanted Vuitton, you’d get Dior andCéline, Givenchy or Loewe, andoffer a good price for the lot. “Whenwe look to locate in a shoppingmall…we define which mall is aluxury mall, because they need allof our brands,” Arnault said.

In Beverly Hills thechange was dramatic. Real estatevalue took off. Old local retailersand landowners sold or leased theirspace for a fortune to the only folkswho could afford it: luxury brands.Even Fred Hayman, Mr. RodeoDrive himself, cashed out. Heleased the Giorgio building to LouisVuitton. (No dummy, Hayman heldon to the property.) “It’s a veryattractive company, an asset toBeverly Hills and certainly to RodeoDrive,” Hayman told me.

From there, the brandsdecided to roll out to the secondarycities such as Chicago, Miami,Hong Kong, Osaka—and LasVegas. Vegas was a dreamdestination, and luxury brands werenow in the business of sellingdreams. It had the demand, and itdidn’t have much in the way ofluxury retail—only Joseph Magnin,a small family-run boutique next tothe Desert Inn, and Neiman Marcus,

which had opened in 1981 as ananchor for Fashion Show, theStrip’s first shopping mall. At first,Neiman Marcus catered to wealthylocals who had previously donetheir shopping on Rodeo Drive orduring trips to New York. But soontourists discovered it, in particularcareer women who were coming toLas Vegas for business and forpleasure and spending their hard-earned money as they pleased.

To tap into this new free-spending demographic, in May 1992Caesars Palace and SimonProperty Group, a major malldeveloper, opened the first retailmall at a casino. Reproducingancient Rome, with colorful stuccohouses and cobblestone streets, theForum Shops offered a wide rangeof retailers from midlevel shopssuch as Ann Taylor and Caché toluxury brands Louis Vuitton, Gucci,and Bulgari. The target was tourists,plain and simple, and they bit big:

the revenue from May to December1992 was $500 to $700 per square foot—triple the national shopping mallaverage. By May 1993, it wasapproaching $1,000 per square foot.Five years later, Caesarsinaugurated a thirty-five-shopextension that included the Atlantisshow—an hourly Animatronicsretelling of the legend of the mythiccity, a five-hundred-thousand-gallonsaltwater aquarium—and a range ofretailers including Niketown, theCheesecake Factory, and Dolce &Gabbana. They, too, did a bang-upbusiness. Sales were $1,000 to$1,200 per square foot.

Steve Wynn took notice,and when he and his wife Elainedesigned Bellagio, their $1.6 billion,3,025-room luxury resort on the Strip,they decided to include a one-hundred-thousand-square-footcorridor called Via Bellagio,dedicated exclusively to luxuryretailing. “We wanted brands that

were at Neiman Marcus but didn’thave a presence in Las Vegas likethey did in Paris or Hong Kong,”Elaine Wynn told me. “We startedwith the big triumvirate—Chanel,Armani, and Gucci—then filled inthe blanks, adding Prada, YvesSaint Laurent. Chanel resistedcoming. We had to give them a verybig pitch. I remember my husbandtold Arie Kopelman [then presidentof Chanel Inc.], ‘Arie, you think youare doing me a favor but, believeme, we are doing you a favor.’ Ariewasn’t familiar with the new LasVegas. But he came to visit and hegot it immediately. Armani wasready to go, but everybody wassaying, ‘Who else is coming? If youget a commitment we’ll go.’ Theydidn’t want to be in a spottyneighborhood. Though they arecompetitive, they wanted to betogether because that would assurea look. We didn’t believe that thiswas an experiment. Neiman Marcus

was already doing a terrificbusiness and we were sure thatthere was a market to explore.When the audience changes everytwo and a half days, [business]grows. It was sure bet.”

It sure was. For NewYork jeweler Fred Leighton, the ViaBellagio shop had its highest salesper square foot. “Bellagio kicked upthe caliber of shopping in LasVegas,” remembers veteran LasVegas retailer Terri Monsour. And itproved that luxury retail was a bonafide flourishing business in LasVegas. In 1999 came the $1.5 billionVenetian hotel-casino with the five-hundred-thousand-square-footShoppes, where families glidedown an indoor Grand Canal ingenuine gondolas past palazzi thathouse not Casanova or Lord Byronbut Burberry and Jimmy Choo. In2003, Fashion Show completed a $1billion renovation and expansion,and in 2004, the Forum Shops

opened a third, sleek, modernsection for sixty luxury retailers,including Harry Winston, Baccarat,Pucci, Kate Spade, and a secondCoach store.

In a matter of a fewseasons, Las Vegas became thesecond city in which a brandopened a store, after New York. Forsome brands, it was first. ChristianLacroix opened its first Americanstore in the Forum Shops in August2006. Juicy Couture, the Californiaclothing brand that made itsreputation by selling luxury veloursweat suits to Madonna andGwyneth Paltrow, put its firstfreestanding boutique there, andVersace opened its only HomeCollection store there. It was a wisemove. With sales of $1,500 persquare foot, the Forum Shops didnearly four times more businessthan the average regional shoppingcenter in 2005, according to theInternational Council of Shopping

Centers, making it one of the mostsuccessful in the country.

Since then constructionof luxury shopping centers has notabated. The Wynns openedEsplanade with great fanfare onElaine’s sixty-third birthday in April2005. Next door, Wynn is buildingEncore, a $1.4 billion hotel-casino,with a ninety-thousand-square-footshopping mall for luxury brands,including Hermès. Across the street,the Sands Corporation, owner of theVenetian, is constructing a $1.8billion, three-thousand-room resortcalled Palazzo, with three hundredthousand square feet of retail spacethat will include ChristianLouboutin, Chloé, and BarneysNew York, due to open in 2007. AndMGM Mirage is building the $7billion, sixty-six-acre Project City-Center to open in 2009, with eighty-plus stores that will have “all themajor luxury suspects,” said WilliamTaubman, chief operating officer of

Taubman Centers Inc. “We’ve comeup with a plan that allows us to givethe major international brands streetfrontage and brand identity similarto what they get on the Ginza inTokyo and New York’s FifthAvenue.” Though brands are sure tohave several outlets along the Stripwhen the projects are completed,neither they nor the mall owners areworried about the idea ofoverexpansion. “People do not goup and down the Strip andcomparatively shop,” Terri Monsourtold me. “They tend to stay close totheir hotel.”

Shopping in Las Vegasis, like gambling, a two-tiered world.There are hoi polloi, like KrisStewart and Kathy Sorenson, thetourist sisters I met at theEsplanade, who play small stakesin the casino and cruise the luxurybrand mall. For them, shopping inLas Vegas is a treat. The items forsale are far flashier than what they

see back home, with lots of glitterand sparkle and not much hemline—all of which reinforce the idea ofLas Vegas as a city of luxuriousdreams. The stores themselves aremuch more inviting, with wide mallentrances and not a singlemenacing doorman to be seen. Andthe salesclerks are like the dealersin the casinos—they’re friendly, andthey take the time to educate youabout the products; they don’tassume that you know. “In NewYork I feel so uncomfortable walkingin a store, like I don’t belong there,”Stewart explained. “Las Vegas ismuch more relaxed, casual.” In part,that’s because the staff can’t alwayssize up who’s who. “You cannot bejudgmental in Las Vegas,” saysMonsour. “The person in cutoffs anda holey T-shirt can open up amoney belt and pull out $100,000 incash. I’ve seen it many times.” Butalso there is the great chance that ifyou don’t buy this time, you might

the next time you’re in town. In itsfirst year, half the customers atWynn’s Esplanade were repeat.

For Big Shoppers—thesorts, says Elaine Wynn, who fly infrom far corners of the world and“buy thirteen pairs of ManoloBlahniks at a time”—it’s a differentexperience altogether. Like thehigh-rolling gamblers—the onescasinos fly in on private jets, housein villas, and cater to attentively—Las Vegas’s Big Shoppers get theroyal treatment. Usually they callJustine Bach, head of Wynn’sPersonal Shopping Service, toannounce that they are on their way.Bach clears her schedule, thengoes to the stores in the Esplanadeto pull clothes, shoes, handbags,jewelry, watches—anything andeverything the customer might like—that she will either set up in aplush private salon just off the mallor send up to the shopper’s room totry on. Sometimes the shopper visits

the stores, too, with Bach in tow.There are two seamstresses and atailor on staff to make immediatealterations because generally thecustomer wants to wear it now.Sometimes Big Shoppers ring downto Vuitton to order a new suitcase(or two or three) for their purchases.Monsour also ships worldwide. Thehotel offers other perks to BigShoppers, such as limousineservice to and from the airport.“They are like the people who playbaccarat,” says Elaine Wynn. “Theydon’t come often, but when they doit’s a strong, strong business. Soyou have to have somethingavailable to satisfy their needs.” Inits first year of business, Esplanadedid an astounding $1,800 worth ofsales per square foot.

THE EXPANSION was racking upmillions in sales and profits and

making owners and shareholdersextremely happy. But all these newstores created a new problem:unsold merchandise. When luxurybrands sold their wares in their oneflagship store and a handful ofdepartment stores, their inventorywas limited. The little bit of ready-to-wear that went unsold was sent todiscount chains like Loehmann’s, orwas burned. Leather goodschanged so little that they remainedon the shelves season after season.

However, to sell moremerchandise and meet the quarterlyturnover projections, designerschurned out increasingly trendycollections of clothes, handbags,and shoes each season to drawcustomers more often to the stores.The downside was that the productshad a much shorter fashion life span—six months max—before theywere displaced by the newcollection. And with hundreds ofnew stores around the world, the

volume of leftovers was immense.Executives knew it was badbusiness to sell the leftovers for apittance to the discount chains, andwatch the Loehmann’s and Syms ofthe world rake in the profits. Burningthem and writing off the loss was outof the question; shareholdersweren’t about to watch their profitsgo up in smoke.

The answer laysomewhere between Rodeo Driveand the Las Vegas Strip—literallyas well as figuratively. Two hoursdue east of Los Angeles, in theheart of the California desert on theway to Palm Springs, is a shoppingcenter called Desert Hills PremiumOutlets, which houses many of thesame names you’ll find in BeverlyHills—Dior, Prada, Ferragamo,Gucci, and Armani—but sell itemsat up to 75 percent less. It is part ofChelsea Property Group, a leadingdeveloper of more than fortyupscale, fashion-oriented outlet

centers around the world. When Ivisited Desert Hills in July 2005,there was a decentsize crowd,considering the sweltering deserttemperatures. During the highseasons—October to March—youcan wait in a long backup onInterstate 10 just to get into theparking lot. Approximately sevenmillion people shop at Desert Hillseach year, a great many who havebought into luxury’s marketing of thedream but can’t afford luxury goodsat full or sale price, as well as thosewho can but want to get more fortheir money. “People are so intobargain hunting, and everyoneloves luxury brands,” Desert Hillsgeneral manager Kathy Frederiksentold me. “Customers sit down andlook at the map and say, ‘Wow! Youhave that and that!’ They get soexcited. ‘We can buy so much morehere with our money.’ People leavewith trunkfuls of merchandise. Theymake several trips to the car to load

up the trunk.”Outlet shopping is

perhaps luxury’s greatest ploy to getits goods into the hands of anyoneand everyone. “We have shoppersranging from celebrities who canhave it all but love the thrill of thehunt to value-conscious shopperswho aspire to wear these topbrands,” Chelsea Premium Outletsspokeswoman Michele Hornerexplained.

But outlet shopping isthe antithesis of the flagship, theantithesis, in fact, of luxury itself. “Itwas jolting to view pieces fromPrada’s brilliant fall 2004 ‘extremeromanticism’ collection withering onthe vine,” wrote columnist KarenHeller in the Philadelphia Inquirer in2006 after visiting WoodburyCommon Premium Outlets in NewYork. “The clothes were markeddown, picked over and repeatedlypawed, the opposite of how theywere originally displayed. Their

power to enchant seemedminimized, even at a third the price,smashed together like produce in astorage hold.”

Yet in today’s luxuryindustry, outlets make goodbusiness sense: they sell goods thatthe movie stars, the flagships, theads, and the billboards flack to themasses, but at a price that themasses can actually afford,sometimes in bulk. “The 1980s wereall about status and how much youpaid for something, but now it’sprestigious to say how much you’vesaved,” said Randy Marks,publisher for OutletBound.com, anonline guide to outlet shopping.“Outlets are accessible. If you wereto go to Rodeo Drive or MadisonAvenue, you might be intimidated towalk into Michael Kors stores. Butoutlets are not as uppity. Andretailers like that because they areopening their brands to people whomight not get a chance or be willing

to walk into a flagship store.”Outlet shopping began

in the late nineteenth century assmall company stores in factorieswhere employees could buy items—often rejects—at a discount. Itremained that way until 1970, whenVanity Fair clothing companyopened the first factory outlet centerin the United States in the oldBerkshire Knitting Mill in Reading,Pennsylvania. It was a clever way touse the space that sat empty aftermanufacturing moved elsewhere. Iremember my mother taking methere from our home outside ofPhiladelphia when I was a kid.We’d drive up early on Saturdaymorning, twice a year—spring andfall—to stock up on Vanity Fairbrands such as Fruit of the Loomunderwear and Lee jeans at a deepdiscount. The outlet was actually inthe factory: mammoth hangar-likeworkrooms filled with busloads offrantic 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, insideand out. We always left with Heftybags full of new clothes.

By the late 1970s, theentire town had become a giantoutlet center. Developers, likeChelsea, saw what happened inReading, realized that outletshopping was a burgeoningbusiness and by the mid-1980s, wereconstructing outlet shopping centersoutside of towns across America.Desert Hills Premium Outlets beganhumbly in 1990 as a strip mall wheremidrange brands could unloadoverruns and leftovers. “Though weare in the middle of nowhere,” saysKathy Frederiksen, “it was aninstant success. It’s a day trip fromL.A. and Orange Country, and wecapture residents and tourists fromPalm Springs.”

As outlet shoppingbecame a legitimate segment of theretail industry, American luxurybrands such as Ralph Lauren,Donna Karan, and Oscar de laRenta, and department stores suchas Saks—companies that knew theAmerican bargain-hunting mentalitywell—opened stores at these mallsand started sending their leftoversfrom each season there instead of todiscount chains. Several of thebrands sold so well that they beganto produce less expensive lines tobe sold solely in their outlet stores.Their success gave luxury brandsfrom Europe—where outlets werestill a foreign concept—the courageto give it a try.

In 1995, Desert Hills builta more highly designed addition.Gucci opened there in 1998, Tod’sand Prada in 1999, and Tag Heuer in2001. In 2002, Desert Hills opened atwenty-five-thousand-square-footaddition with a fancy brick outdoor

esplanade lined with handsomestorefronts dedicated to whatFrederiksen calls “high-endtenants,” bringing the total to 130stores. Ferragamo, Bottega Veneta,Hugo Boss, and Sergio Rossiarrived in November 2002. YvesSaint Laurent came in March 2003,and Dolce & Gabbana in July. Dioropened in late 2004. “We promotethe outlets as 25 to 65 percent off fullretail price,” says Frederiksen, “buta lot of these stores want to movethe merchandise, and you can get itfor a fraction of what it will cost inthe store.” Indeed, when I went intothe Dior store, I was surprised tosee that everything was 25 to 50percent off full retail price, someitems with an additional 75 percentoff the reduced price. That meantthat sexy lace bustiers cost a mere$25 instead of several hundreddollars. Desert Hills makes theshopping that much moreinteresting by selling coupon books

for $5 that offer further discounts inparticular stores.

The luxury brand outletstores are often done up to look liketheir regular full-price boutiques,with blond wood floors, chrome-trimmed sales counters, and glassdisplay cases. The salesclerks wearthe same uniforms, and hip music ispiped in. The stock usually comesfrom flagship stores around theregion—Beverly Hills, Las Vegas,South Coast Plaza in OrangeCountry, California—but it can comefrom as far away as Hawaii, HongKong, or Japan. It can be onemonth, one season, or a year or twoyear behind. Sometimes the itemshave a slight flaw or a hem is rippedout or buttons are missing; shoppersmust be diligent. “I once got homefrom the Ferragamo outlet only tofind two mismatched silk eveningpumps among my purchases,” wrotereporter Laura Landrop in the WallStreet Journal. But, says Linda

Humphers, editor in chief of ValueRetail News, a monthly tradepublication that covers the outletbusiness, “you will not see anyfuchsia sweaters with three arms…because today outlet chainsunderstand that is not goodbusiness. It’s not the qualitycustomers expect. And image is oneof the reasons for opening an outlet,so excess goods don’t end up [at adiscounter] where goods arejammed together.”

As a result, the array ofgoods at luxury brand outlets ischoice. When I went into the YvesSaint Laurent shop in July 2005, itwas as if I had stepped into a Bestof Tom Ford store. Suits, shirts,dresses, gowns, and shoes from allfour of his Rive Gauche collectionsfrom 2002 to 2004 were on the racks,and Ford’s fashion shows played ona video screen, though he hadn’tbeen with the company for morethan a year. “They do a lot of sales

by phone,” Frederiksen tells me.“People call and then Saint Laurentships it.” At the Versace boutique awoman picked up a black leathergown that an A-list actress had wornto the Oscars and returned to thecompany. Some brands use outletsas their primary sales venue formore middle-market areas.Burberry, for example, had a dozenoutlets in the United States in 2005,including a new one about fortymiles outside Seattle. At the time, itwas the only freestanding Burberrystore in the entire state ofWashington.

Desert Hills gets about100 to 150 bus tours a month—80percent are Japanese, and 10percent come from other Asiancountries. Bus tours originate out ofLos Angeles, arrive at 10:00 a.m. anddepart at 3:00 p.m., giving thecustomers five hours ofconcentrated shopping. Desert Hillshas a Japanese-speaking customer

relations representative, andseveral of the stores haveJapanese-speaking salesassociates. There are Japaneserestaurants at the mall, too. But theaverage outlet center customer inthe United States, according toOutletBound.com, is a forty-three-year-old white female with anannual income of $50,000 or more.The reason for this, Humphers toldme, is a mix of culture andmarketing. “Men in the U.S. don’tshop—90 percent of men’s clothingis bought by women,” she said.Furthermore, “outlet prices, whilebargains, are still higher than thosefound in discount and off-pricestores,” she said, and thatdemographic is “the most targetedin marketing programs.”

Desert Hills visitsincreased with the opening of theMorongo Casino Resort and Spadown the road in late 2004. DesertHills does what it can to buff up the

shopping experience: it has a VIPShopper Club that allows shoppersto download exclusive savingsoffers from merchants, and in 2005introduced Chop n’ Shop, ahelicopter service from Los Angelesto Desert Hills, for $770 per person.Each store has its perks too: goodcustomers get e-mails and phonecalls when new merchandisearrives, and customers can requestto be notified when specific itemscome in. “The winning formula is tobuild a center big enough to keepout the competition, that’s close to amajor metropolitan area so it attractslocal shoppers ten times a yearinstead of the four or five times ayear they used to,” said Humphers.

In the United States,luxury outlet malls are expanding.Las Vegas Premium Outlets isadding some 30 new stores to its120-tenant list. In the rest of theworld, outlet shopping is just takingoff. Former Washington, D.C., real

estate developer J. W. Kaempferbrought the notion of outlet malls toEurope in the early 1990s. Today hisfirm, McArthur-Glen, is the largestoutlet mall developer there: itssixteen Designer Outlet malls,located in such former industrialtowns as Troyes and Roubaix inFrance; Ashford, England; and justoutside Florence, Italy, draw fiftymillion shoppers each year to suchluxury brand outlets as Armani,Bulgari, Dolce & Gabbana, HugoBoss, Prada, Roberto Cavalli, andSalvatore Ferragamo. ChelseaPremium Outlets has opened onemall in Mexico City and four inJapan. David Simon, CEO of SimonProperty Group, the owners ofChelsea Premium Outlets, said in2006 that it was building a premiumoutlets mall in Korea. And headded, “We believe in China.”

WHILE MUCH of luxury’s expansion tothe middle market was created bythe machinations of executives incorporate offices, the idea forluxury’s newest and most promisingretail avenue was, like so manygreat inventions, discovered byaccident by an outsider. In 1998,freelance fashion editor NatalieMassenet told then–Sunday TimesMagazine fashion director IsabellaBlow that she wanted to produce anEdwardian-themed fashion shoot.The ever-creative Blow had onesuggestion: “Think porcelain.”Massenet went home that evening,sat down at her husband’scomputer, and for the first timesurfed the Web, in search ofEdwardian porcelain that mightinspire her. Instead, she foundsomething else: the endlesspossibilities of the Internet. “It was amind explosion for me,” Massenettold me over breakfast at the Westinin Paris in 2006.

How, she wondered,could she apply this to the world ofluxury brands? Suddenly, theanswer was obvious: onlineshopping, she said, was the “nextlogical step in the evolution” ofluxury retailing. Before luxury e-tailing, she told me, “you had thewhole media machine telling youwhat you needed to have, and thenyou had to travel to a city center tobuy it. You had women in theMiddle East who took shopping tripsto London and Paris twice a year,women in the country going to thecity.” Wouldn’t it be fantastic,Massenet thought, if they couldorder the luxury brand items theywanted from the comfort of theirhome and have them delivered in amatter of days? Wouldn’t that be atrue luxury?

Massenet, a prettybrunette who could pass for SandraBullock, immediately got to work ona business plan. Her idea: to do an

online fashion magazine where youcould buy the items you read aboutwith a click of the mouse. Shecalled it Net-a-Porter.com anddescribes is as “merchantainment—the convergence of impulse andmedia.” Her plan was to hire buyerswho would go to showrooms andorder clothes at wholesale that shewould sell for full-retail price online,just like a department store. To givethe site more depth and hookinterest, it would be set up like aWeb magazine, with articles that“tell readers what makes the itemsfor sale so special,” she said. “Youhave to keep the magic. If youreduce it to a garment, you aremissing the point of what thatgarment is about. It becomes ageneric item.”

Though new to theInternet, Massenet knew all aboutfashion and marketing. Born NatalieRooney in L.A., the only child of aforeign correspondent-turned-film-

flack and a Chanel showroommodel, she was raised in Paris,studied English at UCLA, andworked as a film productionassistant. In 1990, at twenty-five, shelanded her first fashion job, as astylist for a friend’s fashionproduction company in LosAngeles. In 1993, she joinedWomen’s Wear Daily as WestCoast fashion editor, where she didstyling and reporting, and coveredevents including the AcademyAwards. In 1995, she met ArnaudMassenet, an investment bankerbased in London. She left Women’sWear, moved to London andmarried him, and became seniorfashion editor for Tatler, a glossywomen’s fashion magazine, whereshe says she “learned about thehigh-fashion consumer.” She wentfreelance in 1998, and began to workwith Isabella Blow at the Times.

To get her Net-a-Porteridea going, Massenet called on

designers she had worked withwhile at Tatler and the Times to askif they’d participate. Among the firstto sign on were London-basedcompanies Jimmy Choo, Burberry,Matthew Williamson, and AnyaHindmarch. Once Massenetcompiled a list of about thirty-five,she started looking for investors. Itwasn’t easy. “We didn’t have abroad appeal to the investmentcommunity because we had abusiness plan that showed realisticsales projections and didn’t show apublic listing in six months,” she toldme.

Instead, she pulledtogether just over $1 million in start-up capital from friends and family inthree months and sublet a quaintartist’s studio in Chelsea, where theChelsea Art School had beenfounded. “It had a beautiful studioroom with a mezzanine where wekept the Jimmy Choo shoes andpackaging, and one of the

bedrooms was our stock room andthe other the packing room,” sheremembered. There were five onstaff. “We were a lean machine,”she says.

Yet the luxury industrywas averse to online retailing.Despite their rabid expansion insuch middle-market retail spots asLas Vegas and far-flung outletmalls, luxury executives deemedInternet retail tacky. “The luxuryindustry couldn’t get their headsaround the idea that a three-dimensional retail experience theyhad spent years perfecting could bereproduced in two dimensions, soinstead they stuck their heads in thesand,” said Marc Cohen, director ofLedbury Research, a consulting firmthat focuses on wealthy consumers.

And then there was theBoo.com fiasco. In the late 1990s, atrio of Swedish entrepreneursjumped into the Internet start-upfrenzy with a trendy sportswear e-

tailer they called Boo.com. Boo gotloads of press in such influentialbusiness titles as Forbes and theFinancial Times and hadimpressive backers, includingBernard Arnault. Surprisingly,Arnault is a bit of a computer nerdwho reportedly spends much of hisfree time surfing the Web. In the late1990s, he put €500 million of his ownmoney in an investment fund calledEurop@web that backed variousstart-ups, including the onlineauction house QXL, the Frenchsearch engine Nomade, and themusic e-tailer Peoplesound.com.

But Boo was a badlymanaged company. It ran a hugeoverhead—its plush offices inLondon, New York, and Paris held420 employees, an enormousnumber for a start-up. The founderslived large, flying on private jets oron the Concorde, traveling by limo,staying at hip four-star hotels. Theyhad a $42 million marketing budget

that they used on such follies asannouncing their May 1999, launchon billboards across Europe andScandinavia and hiring award-winning video director RomanCoppola to make their televisioncommercials. When they finallylaunched Boo.com, six months lateand seven weeks before Christmas,it was a technical failure: fewer than25 percent of attempts to access thesite were successful. And it was afinancial disaster: the companyburned through an impressive $7million a month. At its best, Boomade $1.1 million a month. Backerswithdrew their support. There werelayoffs, including the chief financialofficer. Finally, in May 2000—just sixmonths after it launched—Boo.comshut down and was liquidated. Thefounders had gone through $135million in two years.

The Boo implosiondidn’t drive Arnault away fromInternet retailing or teach him what

mistakes to avoid when launching asite. Au contraire. He poured morethan $100 million—from his personalEurop@web fund and LVMH—intoeLuxury.com, a San Francisco–based Web site dedicated toshowcasing and selling LVMHfashion brands. Arnault’s idea wasto produce an online version of aluxury department store, with eachfloor devoted to a different brand. Itwould sell everything from $20 Diorlipsticks to $20,000 Vuitton trunks, allwrapped beautifully in hard boxeswith tissue paper and shipped froma warehouse in Memphis,Tennessee, where FedEx’sworldwide distribution hub islocated.

To get customers toreturn to the site regularly, Arnaultand his team came up with thesame idea as Massenet: an Internetfashion and lifestyle magazine thatwould be informative as well ashighlight the brands available. Like

the retail side, the webzine wouldbe high-gloss—the onlineequivalent to Vogue. The eLuxurysite hired top editors and journalistsaway from such prestigious titles asConde Nast Traveler, In Style, andFood & Wine to create and write thecontent. No expense was spared.“We’d write articles like ‘CelebrityBeauty Secrets’ or ‘Hot Spas’ and todo it they’d send you some place forten days, put you up at the besthotel, and pay for you to take in allthe best restaurants, spas—everything,” remembers one ofeLuxury’s original writers. “Theamount of money they spent wasdizzying.”

ELuxury launched inJ u n e 2000—a month after theBoo.com flameout and about thesame time as a handful of othersites, including LuxLook.com,LuxuryFinder.com, and Net-a-Porter. Compared to the others,eLuxury was a monolith. “ELuxury

launched a week after we did and Ithought at the time, ‘I have oneweek to make it, then this hugelyfunded machine will take over,’”Massenet remembers with a laugh.

Actually, it didn’t workout that way. Though luxury onlineshopping made perfect sense—itappealed to wealthy customers whoknew the products and wanted theease of ordering from home, and itattracted a new middle-marketclientele that had coveted the itemsbut either didn’t have access to orfelt intimidated in the stores—it tooka while to get going. “The marketwas nonexistent,” says Massenet.“We had to create it.” Not all thesites survived. Both LuxLook.comand LuxuryFinder.com went underin 2001; eLuxury acquired their URLsand customer databases. AndeLuxury had its problems, too. LikeBoo before it, the company ran fartoo high an overhead and washemorrhaging money. Soon it

began to make substantial cuts inthe luxury side of its offerings: thefancy packaging disappeared,customers had to pay for returnshipping, the editorial contentstarted to shrink. “I remember in 2001every time I attended an editorialmeeting, there’d be one lessperson,” one writer told me. In 2002,the magazine was completelyphased out and only the e-tailingremained.

Only Net-a-Porterflourished. “Since we were small,we grew with the market,” Massenetexplained. Her overhead was tight,her staff top-notch: her main buyer,Sojin Lee, had worked for BottegaVeneta and Chanel before joiningNet-a-Porter. The articles on theWeb site were informative, thedelivery time was fast—same day inLondon and within seventy-twohours around the world—andservice was impeccable. “We don’tjust stuff the items in a Jiffy bag and

send them out,” Massenetexplained. “The girls iron the whitecloth bags, and stuff the sleeveswith tissue paper. We usehandmade, noncollapsible boxes.We knew that we could devaluebrands by offering online without allthe perks you get when you goshopping. We had to make Net-a-Porter more compelling than whatyou get in a store.”

The company’sadvertising consisted chiefly of wordof mouth and editorial mentions.“Vogue called us the chicest newboutique in the world,” Massenetsays proudly. With the rise ofGoogle and other search engines,and affiliate Web sites likeVogue.co.uk and Vogue.de, Net-a-Porter’s exposure grew. Businessnearly doubled every year, and thenumber of new clients increasedexponentially each month. To keepup, Massenet had to do “emergencyfund-raising” six or seven times. “If

we’d only had a few of Boo.com’smillions,” she says with a laugh.

I n 2002, Net-a-Porterlanded its retail angel. Chloé CEORalph Toledano agreed to let Net-a-Porter sell Chloé accessories. Itwas a real coup: Chloé’s parent,Richemont, generally shied awayfrom online retailing. Massenetbought fifty Bracelet handbags,which retailed at $1,000 a pop.Within three weeks, Net-a-Porterhad a waiting list of two thousandfor the bags. Toledano was sopleased with Net-a-Porter’s resultsthat he made the site Chloé’s officialonline store. In 2004, Net-a-Porterdid about $22 million in sales andposted its first profit. It’s beenearning a profit ever since, andsales are still doubling each year.B y 2006, it did was doing about $70million in sales.

I n 2006, Net-a-Porterfeatured about 150 brands, includingLVMH’s Fendi, Céline, and Pucci.

Massenet has carried Givenchy inthe past and was currently lookingat Dior. When I asked how shemanaged to have LVMH brands thatare also available on eLuxury, shesaid, “We have a retail relationshipwith the individual brands and theindividual management teams atthose brands. Although we havepositive relationships with each ofthe groups—Richemont, LVMH,Gucci Group—the decisions to goonline with us are made at thebrand level.”

In August 2006, Net-a-Porter opened a fifty-thousand-sqare-foot warehouse U.S.distribution center in Long IslandCity, New York, eliminating the dutyand taxes U.S. customers paidwhen orders were shipped fromLondon, and speeding up delivery.Central Manhattan residents getsame-day service; the rest of theUnited States receives orders withintwo days. By 2006, the company was

attracting a hundred new customersa day from 110 countries and theaverage order totaled $850. TodayMassenet’s customers range fromjet-set socialites to average middle-market consumers. The largestnumber—43 percent—are in theUnited Kingdom. North Americaaccounts for 27 percent, continentalEurope 15 percent, the Far East 8percent, and the Middle East 7percent. Surprisingly, ready-to-wearis the best-selling category.“Everyone thought it would be bagsand shoes,” Massenet explains.Clients regularly scan designercollections on Style.com and zap e-mails to Net-a-Porter requesting thatthe buyers select specific items.Net-a-Porter also alerts clients viae-mail about hot new arrivals. Formany brands, Net-a-Porter sellsmore at full price than mostdepartment stores, which meansmore profit for the brands.Massenet’s operations are still lean:

she only has 250 employees, anddoes little advertising—primarilyonline banner ads. Massenetherself is perhaps the company’sbest publicity. A woman with greatstyle and radiant beauty, sheregularly poses for magazinefashion spreads, with Net-a-Porterplugged in the captions. When I mether, she was dressed in a whiteChloé pencil skirt and black tee, athin chocolate brown Célinecardigan, and Marni heels—“allfrom Net-a-Porter,” she said proudly.

Net-a-Porter’s successhas finally removed the stigma ofthe e-tailing business for luxuryexecutives. Since 2005, LouisVuitton and Christian Dior haveopened online boutiques in France,Germany, and the United Kingdom.(In the United States, the sites linkto eLuxury.com.) Hermès launchedits online retailing in 2002 in theUnited States and in 2005 in Franceto hawk its basics such as scarves,

pocket squares, bracelets, andperfumes. Gucci Group beganselling Gucci accessories online in2003 and Bottega Veneta in 2005.And just in time. ForresterResearch, an Internet researchcompany based in Cambridge,Massachusetts, stated in aNovember 2005 study that thirty-ninemillion Europeans were buyingclothing online and predicted thatfigure would double to seventy-three million by 2009, bringing theonline share of total apparel sales to18 percent. Analysts believe thatonline apparel sales in the UnitedStates will reach about $14 billion by2009, making it more than computersand electronics. In 2005, online salesof jewelry and luxury goods in theUnited States rose by 31 percent.Furthermore, Forrester reported thatin Europe, “for each euro of clothingsold online, an additional threeeuros of offline sales will be net-influenced,” and concluded that

luxury brands now “have no choicebut to provide an online saleschannel.”

For Massenet, the futureof online luxury retailing is what shecalls “mass personalization”—essentially online couture. “Say youlike that gray dress but you want it inred,” she says. “We’ll have itmanufactured in red and deliver it toyou. When you have a thousandwomen who want it in red, itbecomes a viable business.” Theidea, she says, is “to offer customersexactly what they want. I think wewill achieve that in the next fiveyears.”

While her method isnew, Massenet’s idea is quite old-fashioned: Net-a-Porter is a modernversion of the classic departmentstore. She has also proved a basicprinciple in luxury merchandising: athird-party retailer can reach out tothe middle market and make akilling without hurting its reputation

because it is simply a conduit and itsells a limited amount of items,giving both the store and the luxurybrand the appearance of exclusivity.When luxury brands themselves gomass-market, however—selling afull range of goods in ubiquitousboutiques, outlets and duty-freestores and on their own Web sites—they undermine their well-craftedmessage. They become aneveryday occurrence, a commonpresence. They aren’t a luxuryanymore.

OF COURSE, reaching out to theaverage consumer, hawking thedream, creating “democratic luxury”as Burberry’s now-retired CEORose Marie Bravo trumpeted in thelate 1990s, was great for business.But going mass-market has had itsdrawbacks, too.

The most obvious is

theft, known euphemistically in thebusiness as shrinkage, and bycarrying more stock in more places,luxury brands have madethemselves increasingly vulnerableto it. The primary culprits arecompany employees, according tothe National Retail Security Survey,conducted annually by theUniversity of Florida. Garden-varietyshoplifters who stash items in theircoats or purses and slip out the doorare still a problem, too. Luxury’smost famous amateur shopliftingbust was in 2001, when twenty-nine-year-old movie star Winona Ryderwas caught trying to steal $5,500worth of merchandise at Saks FifthAvenue in Beverly Hills, including aGucci dress, a Dolce & Gabbanabag, and a Marc Jacobs top. Shereceived three years of probation, a$10,000 fine, and 480 hours ofcommunity service.

That sort of theft ismanageable: brands can simply

add more security cameras andguards. What’s become difficult isthe dramatic rise in theft-to-order ofluxury brand goods. “It’s not normalshoplifting anymore, where they’restealing one or two items,” said JoeMorrash, a detective with the stolen-property task force of theAlexandria, Virginia, policedepartment. “They’re stealing involume and selling to fences andunderground boutiques.” Somecapers are for-hire by private clients.In Minnesota, a dentist paid aprofessional thief to shoplift $250,000worth of Baccarat, Chanel, andother luxury brand items. He wascaught when, upon discovering thatthe loot included the wrong brandmen’s suits, he sent the thief back tosteal Armani.

But a lot are staged byorganized rings, many from LatinAmerica. They move from New Yorkto Washington to Chicago and stealin volume to supply boutiques

elsewhere. They make off with a lotquickly. Andrew McColl, aWashington-based agent for theFederal Bureau of Investigation,arrested a thief taking $100,000 worthof items from the Tysons Cornermall in northern Virginia. At times,robberies can get dangerous: theVersace boutique in Boston washeld up by two armed bandits, whoattempted to make off with $750,000worth of watches and jewelry beforebeing caught. One of the gunmenstruck an employee in the face witha.38 handgun, causing a gash thatrequired seventeen stitches.

The pros have theirtricks, like lining shopping bags withaluminum foil or duct tape toconfound alarms or fleeing via little-watched side entrances. There are“girdle bandits” who slip mostanything under their clothing. “Onethief I know put a whole mink in agirdle,” Gerald Dupree, a retiredshoplifter, told the Times. Another,

he said, “would go into a jewelrycounter and, you know they havechains hanging on display racks?She could just lift the chains up allat once and drop them down hersleeves.”

They also increasinglysteal from the source. Cargo theft—when delivery trucks are jacked—ison the rise. And thieves routinelybreak into luxury brand showroomsand fashion magazine storageclosets to steal samples. “Theyobviously had good taste,” Nylonmagazine’s fashion director MichaelCarl said after thieves swiped fifteenpieces of Prada and Chanel fromthe magazine’s offices in 2004. “Theysystematically went through andpicked out the nicest clothes.”

Another problem luxuryhas faced from going mass-markethas been attracting less-than-desirable customers and fans. Notall brands are thrilled with the sort offervor their advertising, celebrity

dressing, and retail expansion hascreated. Like Burberry—despiteRose Marie Bravo’s “luxury foreveryone” rhetoric. In Britain a fewyears ago, a working-classsubculture emerged called Chavs, aterm derived from the Romanytravelers’ word chavi, meaning“child.” Young and usually with onlya high school education, Chavshang out at small-town shoppingcenters, smoke cigarettes, andintimidate passersby. Their uniformis a baggy tracksuit, clunky goldjewelry, and anything andeverything with the Burberry check,much to the chagrin of Burberryexecutives. Chavs are “the samekind of slightly disenfranchisedsuburban kids” as punks were ageneration ago, Lucian James, abrand consultant in San Francisco,told the New York Times Magazine.“In the same way in the 70s [punks]would sort of [snort] glue, now[Chavs] are all just sitting at

McDonald’s wearing Burberry hats.”They are proud of their Chavnessand have their own set of celebrityidols, the tops being VictoriaBeckham, former Spice Girl andwife of soccer star David Beckham,and Daniella Westbrook, a working-class British TV actress who starredin the popular soap EastEnders.Westbrook was named the Queenof Chavs when she was snappedshopping in London dressed head-to-toe in Burberry check andpushing her Burberry check–cladbaby in a Burberry check stroller.The Chavs became most obsessedwith the Burberry check baseballcap. When Burberry stoppedproducing the caps, Chavs startedbuying counterfeit versions.

In the United States, therap subculture, with its obsessionfor bling, embraced luxury’s logo-ridden products, promoting brandsin songs, onstage, or in musicvideos. They also began splurging

on the clothes, jewelry, andhandbags in very public shoppingsprees. As Kanye West rapped, “I’mKon, the Louis Vuitton Don. Boughtmy mom a purse, now she LouisVuitton Mom.” It shouldn’t havebeen a surprise to luxury brands,since they created the obsessionthrough design as well asmarketing. Back in the early 1980s,at the nascence of the hip-hopmovement, street kids in Harlemand the Bronx took the logos ofGucci, Dior, Louis Vuitton, andChanel—back then veryconservative brands for bourgeoiswhite ladies—printed them on T-shirts, sweatpants, and baseballcaps, oversized and in loud colors,and showed up at hip-hop clubs oron street corners garbed up in thesespoofs. “Everything was verycartoon,” says Kim Hastreiter, co-editor of Paper, the New York–based avant-garde pop culturemagazine. “What a great way to

devalue status. It wasn’t bling. Itwas taking white status and takingthe air out of it.”

In the end, luxury pickedup on the trend. In the early 1990s,Chanel designer Karl Lagerfeldused the house’s double-C logo inthe same way the ghetto kids did—dangling it from necklaces, hangingit from chain belts, stamping it oneverything. Designers Marc Jacobsat Louis Vuitton, Tom Ford at Gucci,and John Galliano at Christian Diorincorporated this street take on oldluxury into their work. As KimHastreiter and David Hershkovitsrecall in their book 20 Years ofStyle: The World According toPaper, “Ford immediately producedsuperfly coats, suits, hats, shirts andbags, all covered in the traditionalGucci-logo fabric.”

And who became theirbest customers? The new superrichhip-hop stars such as Sean “P.Diddy” Combs, Jennifer Lopez, and

Beyoncé Knowles, deckingthemselves out in Fendi furs, FredLeighton diamonds, and anythingwith a Dior, Chanel, Gucci, orVuitton logo on it. Logos—particularly luxury brand logos—represent “all the shit we don’thave,” said Def Jam Recordsfounder Russell Simmons. “We’renot ripped-dungarees-rock-n-roll-alternative-culture people. We wantto buy into the shit we see ontelevision but we want to put ourown twist on it. Part of the fantasy offashion is about being successful.It’s aspirational. I put this on, I’mgetting laid. Not because I’m cooland raggedy but because I’m cooland clean. Because I want to buyinto this culture.”

Some brands embracethe bling obsession. Gianni Versaceonce boasted that rapper TupacShakur “wore Versace on the dayhe walked into prison and on theday he walked out of prison.” Dolce

& Gabbana dressed Mary J. Bligefor a concert tour, and, in 2005, LouisVuitton hired hip-hop star PharrellWilliams to design its newsunglasses line. Some cringesilently and ring up the sales. Andsome speak out. “What can we do?”asked Frédéric Rouzaud, head ofLouis Roederer, the last majorfamily-owned champagne houseand the makers of the top-ofthe-lineCristal, which rappers swig, as wellas sing about, often. “We can’tforbid people from buying it. I’m sureDom Pérignon or Krug”—bothowned by LVMH—“would bedelighted to have their business.” Inresponse to this apparent diss,rapper Jay-Z, CEO of Def Jam, tookCristal off the wine list at his clubs inNew York and Atlantic City andvowed to change the lyrics in thehalf-dozen songs in which hereferences the bubbly. “I view hiscomments as racist and will nolonger support any of his products

through any of my various brands,”the rap star declared.

Perhaps the greatestproblem luxury brands have createdfor their companies by going mass,banking analysts say, is financialinstability. Before its globalexpansion to the middle market,luxury was immune to economiccycles. The companies were smalland catered to a limited old-moneyclientele who were rich enough notto be affected by short-term drops inthe stock market or economicdownturns, and who shoppedconsistently and bought well.Luxury was a successful nichebusiness. But when luxury changedits target audience to the cost-conscious middle market that shopswhen flush but stops cold whentimes get tough, it made itselfdangerously vulnerable torecessions—as the industry wouldsoon find out.

In the mid-1990s, luxury

brand executives saw the Asianeconomic tiger as a hungry, deep-pocketed new customer base.“Anybody who had a name orwanted to make a name moved intoAsia,” Giancarlo Giammetti, thenmanaging director of Valentino, toldme. “If you opened one store, thenext thing you knew, you openedfive.” Gucci had seven outlets inHong Kong in 1998, three within asix-block radius. Prada had nine.New York City, in contrast, had justone Gucci and two Prada shops. Itwas inevitable that “thesecompanies were going to get killedbecause of their overcapacity” inAsia, said Joanne Ooi, president ofEast from Seventh Ltd., a wholesaleshowroom in Hong Kong forWestern designers trying to breakinto the Asian market. “Withouttourism, Hong Kong is only a city ofsix million inhabitants. How is itgoing to support nine Pradastores?”

But in July 1997,Thailand’s currency collapsed,triggering a two-year-long economiccrisis across Eastern Asian, andluxury took a beating. Valentino’sGiammetti immediately halted theconstruction of two Valentino storesin Singapore. Zegna closed three ofits four shops in South Korea. YvesSaint Laurent pulled out of Seoul’sGalleria department store, andLouis Vuitton shortened store hoursin Hong Kong. Gucci’s stockplunged a staggering 50 percent in amonth. LVMH lost 45 percent of itsstock value from July to October. AtHermès, sales in Southeast Asiadropped by 11 percent and its stockfell by 14 percent. “In South Korea,”British designer Paul Smith told me,“our business [was] gone,completely. Overnight.”

Four years later, theterrorist attacks of September 11,2001, stopped leisure and businesstravel cold for weeks and

diminished it greatly for two years,causing substantial losses for theluxury industry, which relies greatlyon travel shopping. LVMH’s netincome plunged from €722 million in2000 to a mere €10 million in 2001. Assoon as the industry recuperatedfrom those losses, SARS hit, ineffect shutting down Hong Kong,one of its biggest markets in theworld, for six weeks. Two yearslater, the threat of avian flu madeluxury executives extremelynervous.

Since luxury hasbroadened its audience, middle-market brands such as Zara, Gap,H&M, and Banana Republic havetaken advantage and moved in nextdoor. “I wonder if Abercrombiebeing next to Prada on Fifth andFifty-sixth Street will benefit Prada,”mused Joel Isaacs, president ofIsaacs & Company, a real estatefirm in Manhattan that specializes inluxury retail placement. “From the

view of foot traffic, it might. What I dosuspect is that Abercrombie willbenefit from Prada.” This retailintegration has turned once-chicshopping streets into touristattractions and driven luxury brandsto look for new, more “insider”addresses, such as themeatpacking and financial districtsin New York and Melrose Place inLos Angeles, for big-spendingluxury customers. Today there is notone bank, gas station, or drugstoreon Rodeo Drive. Instead, there aremore than thirty-five luxury brandfashion stores, twenty majorjewelers, and a half-dozen high-endart galleries along the fifteen-hundred-foot, three-block retailstretch of Rodeo Drive. In 2001,fourteen million people visitedRodeo Drive and it was averaging$1 million a day in retail sales. “Wedon’t want to be on Rodeo Driveanymore,” says Mario Grauso,president of the Puig Fashion

Group, which includes Nina Ricci,Carolina Herrera, and PacoRabanne. “That’s not the shoppingexperience anymore. You don’twant a busload of tourists out fronttaking pictures.”

CHAPTER NINE

FAUX AMIS

“Being copied isthe ransom ofsuccess.”

—COCO CHANEL

KRIS BUCKNER pulled his goldToyota Camry into the parking lot ofa strip mall in the Little Tokyosection of eastern Los Angeles andwalked up to the Starbucks for ourappointed noontime rendezvous.We were going to tour Santee Alley,the street market in downtown L.A.where fakes are sold at wholesaleand retail. Buckner is the founder,owner, and head of InvestigativeConsultants (IC), a privateinvestigation firm that chases downmanufacturers and distributors ofcounterfeit luxury goods. Mediumheight, the thirty-seven-year-old

native Southern Californian was fitand tan like a surfer, his copperblond hair slicked straight back. Hewas dressed neatly and discreetlyin a plain white polo shirt, newishjeans, and a pair of well-wornsneakers—nothing to drawattention. He’s wise and quick, areal gumshoe, with a tautconfidence that tells you he’s seen itall.

Buckner grew up inTorrance, California, a charmlessAmerican urban sprawl just south ofLos Angeles, and spent his teenyears surfing the Pacific coastlineand working part-time at BeckerSurfboards in Hermosa Beach. Attwenty-one, he entered the policeacademy and went on to become adeputy sheriff who walked the beatin Lennox and worked in L.A.County jails, keeping inmates inline. While he was a deputyBuckner qualified for his privateinvestigator’s license, so in 1994, at

the age of twenty-six, he decided togo into business on his own. He setup his office in his home basement,and with his wife and motherhelping out—answering phones,handling the books, even doingsome undercover work—he took onbasic assignments: witnessinterviews, litigation investigations,husband-and-wife matters. By thetime we met in November 2004, hehad ten PIs on staff and fouradministrative assistants whooccasionally do investigative work,too.

The Los Angeles–baseddesigner jeans company Guesswas the first client to ask Buckner togo after counterfeiters. TodayBuckner represents more thaneighty clients, from toner productsmanufacturers to the Motion PictureAssociation of America. But hisspecialty is luxury goods: hehandles more than thirty-fivebrands. Buckner’s method is

straightforward: he gets leads fromthe brands themselves, frominformants, and from lawenforcement officers who have seensomething suspect. He also hears alot from angry women who take aGucci purse or a Rolex watch theyreceived as a gift into the boutiquefor repairs or an exchange and aretold it’s fake. Buckner and his teamgather the evidence throughsurveillance, serve “cease anddesist” letters, and, if that fails, turnover the case to the LAPD oranother law enforcement agency toexecute search warrants and makearrests. “It’s like the drug business—dirty like that,” he told me in hisraspy tenor. “A lot of people willdrop dimes on the counterfeiters.”

We met a few milesaway because, as Buckner told mein his car on the drive over toSantee Alley, everyone knows himand if we wanted to see anything,we’d have to arrive quickly and

discreetly. With us was Buckner’sassociate, Hector Moya, a burlierand quieter sort, also in a casualshirt, jeans, and sneaks. We parkedin a lot just off Los Angeles Streetand hit the sidewalk at a good clip,heading toward Santee Alley, oneand a half blocks up. The ambiancewas like an outdoor bazaar in adeveloping nation: stalls sellingeverything from T-shirts toconfirmation dresses, with designerhandbags, jackets, and jeanshanging from the sun-bleachedawnings. The banter and thebargaining were in Spanish andKorean. The heavy, pungent aromaof spicy sausages and onionsgrilling on beat-up carts filled the air;mango skins and watermelon rindslittered the gutter.

I sensed a bit ofscurrying. “See that guy runningahead of us?” Buckner asked. Ascrawny Hispanic in a whiteguayabera darted through the crowd

a few steps in front, constantlylooking over his shoulder. “He’sgoing to warn them,” Buckner saidknowingly. Sure enough, when thekid got to the corner of Santee Alley,he let out a birdlike whistle. “Theyhave spotters on rooftops, two-wayradios,” Buckner explained, “to keepa lookout for us.”

When we turned thecorner into the alley, the kid haddisappeared into the crowd and thefirst stall we visited was empty.Minutes before, Buckner said, theplace had been open for business.Though the front gate was still up,there was no shopkeeper and mostof the merchandise had beenstashed in duffel bags or big blackplastic trash bags. As we walkeddown the concrete alley, Bucknerpointed out a vendor named Ruben.“He was arrested two weeks ago forsales of counterfeit merchandise,”Buckner said. “He was doing a dealin a parking lot nearby.”

We headed towardanother stall. A fellow in the streetgave the shopkeeper a sign—whistled, then waved his hand.“She’ll throw everything in bags andrun it out of here,” Buckner said.Sure enough, when we got to thestall, there were only a few Vuittonwatches and handbags still ondisplay. On the floor sat a couple ofoverstuffed trash bags and bigcardboard cartons, sealed. Thevendor, a small Asian woman wellpast fifty, stood at the counter, herhands resting nervously on ascrunched black plastic bag.Buckner’s alert turquoise eyeszeroed in on it. “What’s that?” heasked, and gently slid the sack fromunder her arm. Inside he found awell-worn Louis Vuitton catalog inJapanese. “They get this fromJapanese tourism agencies,”Buckner explained. “Chances arethey have the merchandise hiddenin the back.”

IN THE TIMES of ancient Rome,Greece, and Egypt; the Mayans andthe Incas; the American Indians andimperialist China, hallmarks andseals served as marks of origin: youknew who made your goods. In theMiddle Ages, craftsmen joinedprofessional guilds that providedmarked goods with a seal of qualityapproval in addition to thecraftsmen’s personal stamps orsignatures. When the IndustrialRevolution arrived in the mid-nineteenth century, goods could nolonger be traced back to a singlecraftsman—they were mass-produced in assembly lines. Todistinguish as well as protect theirproducts from the competition,companies trademarked their workand their logos, and trademarksbecame a guarantee of consistentquality. Since the 1950s, trademarks

and logos have been increasinglyused as marketing and advertisingtools and have evolved into brandsymbols.

Today logos brandpeople: by wearing or carrying anitem emblazoned with a logo, youdeclare that you are a member of atribe that subscribes to thatparticular brand’s message and itsethics—essentially the dreamsconjured up for you by themarketing department. Luxury-brandlogos convey wealth, status, andchic, even if the bearer of the logo-ed product is a middle-marketsuburban housewife who bought iton credit. “I think it’s completelyimpossible [to eliminate the logo]today,” Miuccia Prada told me. “Therecognition of the brand is tooimportant. The more you want toenlarge your business, the moreyou have to use your logo.”

By putting an emphasison the logo and spending more than

$100 million a year to advertise it,luxury companies made theirbrands, rather than the actualproducts, the objects of publicdesire. Unfortunately, they alsocreated a demand they couldn’tmeet, and a product that averageconsumers craved but couldn’talways afford. How manysecretaries, teachers, or salesexecutives could really buy a new$500 Prada or $700 Louis Vuittonh a n d b a g every season?Counterfeiters stepped in, providingan endless supply of copies at 5 to10 percent of the genuine product’sretail price. And luxury’s newhungry target audience startedbuying and buying and buying.

Counterfeiting is aboutas old as civilization itself. Duringthe last century of the RomanRepublic (100 BC), Romans grewrich and socially mobile, and one ofthe ways the upwardly mobile couldgain acceptance by the patrician

upper classes was to possess whatold-moneyed Romans possessed.“Wealth itself didn’t confer status,”explains Jonathan Stamp, aclassical historian and documentaryfilmmaker. “You needed wealth plussomething else, like objects.” Thepolitician and philosopher Cicero,for example, was an outsider whowanted desperately to be acceptedby the establishment, so he spent astaggering one million sestertii on acitron wood table at a time when theaverage annual salary was athousand sestertii. SuddenlyRome’s nouveaux riches had tohave tables just like it, and sincethey couldn’t afford the real thing,they had carpenters copy it in lower-quality wood. Sculptors reproducedthe great statues of the period incheaper materials for the newmoderately rich masses to use indecorating their homes andgardens. “People were spendingmoney like never before and cared

about superficial things,” Stampsaid. “All the old social structureshad dissolved, and it wasbemoaned by the patrician rich:‘People used to know their place.’”

Counterfeiting has longbeen a problem for modern luxury,too. Cheap knockoffs of checkedand striped canvas Louis Vuittontrunks prompted Vuitton’s sonGeorges in 1896 to design with thecompany’s signature logo print ofinterlocking LVs and Japanesefloral symbols. In 1948, a womanwho had paid a small fortune toexclusively own one of ChristianDior’s designs arrived at a nightclubonly to find another woman wearingan exact copy. “This is no joke,” thewoman wept, “but a tragedy.” TheFrench gendarmes launched aninvestigation that led six years laterto the arrest of a counterfeitinggang. The thieves bribedseamstresses for patterns andmodels to borrow outfits that they

would then copy.Through much of the

1970s and 80s, counterfeiting was asmall-time business. The luxurybrand watches, sunglasses, and T-shirts sold by merchants on thestreet were obviously fake; thequality was lousy, the prices cheap.Luxury brands generally didn’t gettoo worked up over it.

Two things changed thegame: the democratization of luxuryand the rise of China. When luxurybrands went democratic, theythought they could satisfy themiddle market with lower-pricedhandbags and perfume. Whatexecutives didn’t count on wasmiddle-market consumers satisfyingtheir craving for higher-end items bybuying fake versions that they couldpass off as real. At the same timeChina evolved into a capitalistmarket economy and the world’smanufacturing center, with a newclass of entrepreneurs who saw

counterfeiting as a viable business.The convergence of the two—bigdemand and big supply—wascataclysmic. And it took luxuryexecutives—and executives in mostother industries—by surprise.

S i n c e 1993, thecounterfeiting of all goods—fromDVDs to pharmaceuticals—hasincreased by 1,700 percent, reportsIndicam, an anticounterfeitingcoalition based in Italy. TheInternational AntiCounterfeitingCoalition (IACC) in Washingtonestimates that up to 7 percent oftoday’s global trade—$600 billionworth—is counterfeit. In 1982, theInternational Trade Commissionestimated global losses fromcounterfeiting and piracy to be $5.5billion; in 1988, it was $60 billion; andi n 1996, it was $200 billion. In 2004,the U.S. Department of Commerceestimated that American companiesalone lost between $20 billion and$24 billion annually. The loss of tax

revenue due to counterfeiting issubstantial, too: New York Citypolice commissioner RaymondKelly estimates that the city loses upto $1 billion in taxes annually.

While everything fromFerraris to mineral water iscounterfeited today, fashion is oneof the most popular sectors,because it is easy and cheap tocopy and even easier to sell. In 2000,the Global Anti-CounterfeitingGroup reported that 11 percent of theworld’s clothing and footwear wasfake, and the World CustomsOrganization believes the fashionindustry loses up to $9.2 billion (€7.5billion) per year to counterfeiting. In2002, the European Commissionreported that trade in counterfeitclothing, footwear, perfume andtoiletries reduces the EuropeanUnion’s gross domestic product bymore than $6 billion (€5 billion) eachyear and costs 10,800 jobs.

The most popular and

lucrative fashion knockoffs arethose bearing luxury brand logos.You can buy fake Louis Vuittonhandbags, Gucci sunglasses, andBurberry knapsacks in shops onCanal Street in New York andSantee Alley in L.A., in the souks ofMarrakech and Istanbul, on thebeaches of the Côte d’Azur, in fleamarkets, on the Internet, even in theliving rooms of suburban America,where housewives host “purseparties” to make some extra cash.And people do buy. As a result,counterfeiting has ballooned fromthe small-potatoes local business oftwenty years ago to a global rackettoday, one that is run by violentcrime syndicates that also deal innarcotics, weapons, childprostitution, human trafficking, andterrorism. The FBI believes thatterrorists financed the World TradeCenter bombing in 1993 with sales ofcounterfeit T-shirts in a store onBroadway in New York City,

according to the IACC. Interpolsecretary general Ronald K. Nobletold the U.S. House Committee onInternational Relations in 2003 thatprofits from counterfeit goods saleshave gone to groups associatedwith the anti-Israel Shi’ite terroristgroup Hezbollah, paramilitarygroups in Northern Ireland, andColombia’s main rebel army, FARC.One of the suspects in the March2004 Madrid train bombings is aknown counterfeiter, according theUnited Kingdom–basedAntiCounterfeiting Group.

Investigators evenbelieve that there may be a linkbetween counterfeiting and theSeptember 11, 2001, attacks on NewYork and Washington. The weekafter the attacks, fifteen hundredcounterfeit vendor stalls—somepurportedly owned and operated byal-Qaeda—at the Tri-Border Marketin South America, where $70 millionof business is done in cash every

day, closed shop. And during a raidin early 2002 on a midtownManhattan luggage store that wasrun by a man of Middle Easterndescent and sold fake luxuryhandbags and watches, New Yorksecurity expert Andrew Oberfeldtand intellectual property rightslawyer Heather McDonald found aflight manual and simulator programand copies of technical schematicsof a bridge. They immediately calledthe Joint Terrorist Task Force,which took over the case. “Profitsfrom counterfeiting are one of thethree main sources of incomesupporting international terrorism,”says Magnus Ranstorp, formerdirector for the Centre for the Studyof Terrorism and Political Violenceat the University of St. Andrews inScotland.

Surprisingly, mostcompanies didn’t see this comingand didn’t do much about it until thelate 1990s. Some players still shrug.

Louis Vuitton designer Marc Jacobstold me that he thinks counterfeitingis “fantastic,” adding, “as long asI’ve been here, everything that wehave done has been copied…Wehope to create a product that isdesirable.” Prada CEO PatrizioBertelli calls it part of “the game offashion,” and said, “I would be moreworried if my product wasn’tcopied.” They’re not the ones whoneed to worry: today, most luxurycompanies have extensive legaldepartments that focus only onintellectual property theft, as it iscalled. They also have investigatorson the ground, working the markets,chasing down leads on illegalfactories, in China as well as inLondon, New York, Los Angeles,and other distribution centers. LouisVuitton, one of the world’s mostcopied brands, has forty lawyers in-house and 250 outside privateinvestigators like Kris Buckner, andspends approximately €15 million

($18.1 million) each year fightingcounterfeiting, despite MarcJacobs’s view. In 2004, Vuittonconducted twenty raids a dayworldwide and put about thousandcounterfeiters in jail. Companiesthat are active in raids, that seizemerchandise and sue, definitely seea drop in their brand’s fakes on themarket. But the minute they easeup, the fake products, like a red tide,come right back. “This is a cost ofbusiness,” McDonald told me.“Advertising is working. You’ll neversee something counterfeited of abrand you’ve never heard of.”

BACK IN THE 1970S, before the adventof outlet malls, clothing wholesalerson Santee Street, a mainthoroughfare in the garment districtof downtown Los Angeles, began tosell leftovers out of the back-alleyentrances to their stores. It was such

a success that the ownersredesigned their showrooms,creating a discount boutique in theback that opened onto the alley, andSantee Alley, as it was dubbed,became a bona fide retail street,several blocks long, open sevendays a week.

In the 1980s, a surge ofKorean immigrants arrived in LosAngeles and found the bazaar-likeatmosphere of Santee Alley similarto the markets in Seoul. They beganto take over leases and expand thebusinesses. Their businessapproach was the polar opposite ofthe cost-conscious American model:the Koreans manufactured clothessuch as T-shirts and jeans fast, soldthem cheap, and didn’t worry aboutprofit-and-loss figures. Profit camein volume. Today manyleaseholders on Santee Alley areKorean, and they never quibbleabout rent, which is nowapproaching the levels of Rodeo

Drive.Slowly, counterfeit

luxury brand items such as watchesand handbags began to appear onthe store shelves. At first, the fakeswere easy to spot: they werecheaply made and lacked finesse.But as time went on, the quality gotbetter and the demand increased.Soon Santee Alley was not only acheap bazaar; it was L.A.’s premiercounterfeit market. Today, twenty tothirty thousand people descend onSantee Alley daily to buy everythingfrom inexpensive children’s clothesto fake Chanel sunglasses, makingit the third most visited destination inLos Angeles after Universal Studiosand Venice Beach.

Counterfeit designer T-shirts and simple dresses areusually manufactured byVietnamese or Latin Americanimmigrants in nearby Riverside andOrange counties becauseturnaround is a mere matter of days.

Some knockoff handbags arelocally made, too: Santee Alleyvendors go to neighboring MainStreet, buy generic bags for acouple of dollars, stamp on a logo orsew in a label, and sell them for $20.But the good bags with the logointegrated into the design—as wellas sunglasses, watches, and high-design garments like Burberryraincoats—are imported, primarilyfrom China. Often you find a mix ofboth locally made cheapos andimported top-quality items withinone shop, like the one run by a mild-mannered fifty-ish Indian vendorwho, when we visited in 2004, wason probation. “I kept telling him tostop selling but he didn’t,” saidBuckner as we walked into theshop.

By the looks of things,he still hadn’t. On the shelves satfaux Vuitton-style bags stampedwith colorful hearts rather than LVsand Chanel Cambon-style purses

with a bold “OC” instead of thehouse’s signature interlocking “CC,”making them technically not fake.Next to them, however, were acouple of black leather handbagswith regular Gucci labels on thefront. Realizing he’d been caught,the shopkeeper quickly reachedover and peeled off the Guccilabels; they were stuck on like Post-its. Buckner gave him a firmwarning. “I treat all these guys withrespect because it’s nothingpersonal,” Buckner told me. “Thesevendors shouldn’t be sellingcounterfeits—what’s wrong iswrong, what’s right is right—but itdoesn’t make them bad people. Thenetworks behind them are theslimiest.”

When we walked out,Buckner spied one of hisinformants, who beckoned us into adiscreet entry around the corner. Hehad just witnessed our visit and toldBuckner that the “OC” is really a

“CC”—that half the O peels off,leaving a Chanel-like double-Clogo. “They do it like that to get itthrough U.S. Customs,” heexplained.

Then he showedBuckner a piece of fake LouisVuitton hardware.

“You know where it’scoming from?” Buckner asked.

“Yeah.”“I’ll call you later.”The informant slid the

gold fixture back into his shirtpocket.

Santee Alley attractseveryone. “Judges, prosecutors,defense attorneys shop here,”Buckner said. “Affluent people fromNewport Beach.” A vendor namedPeter concurs. “The whole worldpasses by here,” he told me. “I soldsome shirts to Chaka Khan threedays ago. The police chiefconvention is in town and all thewives are down here buying Louis

Vuitton.”Peter is a tall, handsome

African-American in his earlythirties. His shop is actually a one-by-three-foot sidewalk space in frontof a store. He sells T-shirts withprized logos—when we visited, itwas Abercrombie & Fitch. Mostvendors in Santee Alley pay about$12,000 a month for their shops, thensublet the sidewalk to folks likePeter for about $1,000 a square foot,in cash. It’s often on the sidewalkthat you’ll find the most blatantcounterfeit goods, like Louis Vuittonand Chanel handbags and Gucciand Armani sunglasses.

Buckner told me thatPeter was “the smartest man inSantee Alley.” Peter just laughed. “Ijust know how to stay out of trouble,”he said. A native of RanchoCucamonga, a sprawling suburb onthe road to Las Vegas, Peter startedselling in Santee Alley in the early1990s when he was a student at

UCLA and needed some quickcash. He first sold fake handbags,but after three years switched to T-shirts. “When you are sellinghandbags, you are sellingsomebody else’s designs,” hereasoned. “I like designing thingsmyself.” He studied street fashionand would pick up on a new trendeven before the main brands did.He printed “Tommy Sport” T-shirtsand other products before TommyHilfiger trademarked it and made akilling.

In his fourteen years inSantee Alley, Peter has seen themarket evolve. “What they used tosell here was garbage,” he said.“Now you can get the same qualityas in Nordstrom, because theconsumer is smarter.” I asked howmuch he earns. “I’m doing all right,”he answered. When I asked him ifhe had any qualms about what hedoes, he shrugged. “Whereverthere’s a demand, you’ll always

have someone taking the chance.”What I realized from my

tour is that people don’t believethere is a difference between realand fake anymore. BernardArnault’s marketing plan hadworked: consumers don’t buy luxurybranded items for what they are, butfor what they represent. And goodfakes—the kind that can pass forreal—now represent socially thesame thing as real. I remember anAmerican woman I saw onemorning in the Peninsula Hotel inHong Kong. She was a chic NewYorker in her fifties, well dressed ina designer pantsuit, good jewelry,and Chanel sunglasses, andobviously wealthy enough to pay$500 a night at one of the world’s tophotels. She walked up to theconcierge desk and asked its chief,“Where can I buy a good fakeRolex? You know, a really goodfake.” The concierge looked at herincredulously and said he didn’t

know. I looked at her and wondered,“Are the sunglasses fake, too?”

ONE WEEK AFTER my tour in SanteeAlley, I boarded a train in the HungHom station in Hong Kong for a two-hour ride north to Guangzhou—which was known in the West asCanton—a city of eight million andthe capital city of GuangdongProvince. I was escorted by a luxurybrand intellectual property expertand a local counterfeit privateinvestigator. Once past theseemingly endless forest of high-rise towers of Hong Kong, wecrossed the lush plains of the PearlRiver delta into GuangdongProvince, where fourteen millionChinese live on four thousandsquare miles, making it one of themost densely populated areas in theworld. There remain some collectiverice and duck farms, and we spied a

few farmers out in the fields,working the fertile land with theiroxen. But as we approached the cityof Guangzhou, the farms gave wayto enormous blocklike factories,hundreds of them, where workersmake leather shoes, toys, clothing—everything. “This is why this regionis called ‘the Factory of the World,’”the expert told me.

Guangzhou has servedan important international port forcenturies. Arab merchants whotraveled to China on the Silk Roadin the seventh century settled inGuangzhou and turned the city intoa trade center. In the sixteenthcentury, the Portuguese colonizednearby Macau and made it a basefor foreigners who wanted to dobusiness in China. The Portuguese,Dutch, French, British, andAmerican traders would sail up thePearl River from Macau to sellopium and buy Chinese porcelain,silk, and tea. In 1839, the First Opium

War broke out when Qing EmperorDao Guang shut down the opiumtrade. In the early twentieth century,it was the center for much of therepublican movement that broughtdown the Qing Dynasty. Therepublic’s first president, Sun Yat-sen, was from the region, and hewas the head of Guangzhou’sKuomintang, the nationalist party.

During the first thirtyyears of communism, Mao Tse-tungneglected Guangdong, and theonce prosperous and flourishingprovince became one of the poorestin the country. As Jasper Beckernoted in his book, The Chinese, thestate’s investment per capita inGuangdong was the lowest in all ofChina. When Deng Xiaoping cameto power in 1978, all that changed.Deng wanted to use Guangdong asa laboratory for his economicreforms. The following year, hechanged the national one-child-per-family rule to two children in

Guangdong and told the provincialgovernment that it could keep its taxrevenue rather than contribute to thecentral government. Factoriessprouted across the delta like riceplants. As the demand forcounterfeit versions of luxury goodsin the West increased, legitimatemanufacturers in the region beganto produce fakes at night and onholidays. Eventually, workshopsopened in Guangzhou solely toproduce fakes. Today, Guangzhouis the capital of China’scounterfeiting business.

Fighting counterfeiting inGuangzhou is not easy for severalreasons. First, China does not havea history of intellectual propertyownership. Confucius was the firstto democratize education, and heencouraged the works of greatscholars to be copied in order tospread knowledge to all classes. Tofurther complicate the issue,China’s communist leaders

declared that the state—notindividuals, not companies orcorporations—owned all property.Since the economic reforms in 1978,the government has slowlyembraced the notion of intellectualproperty ownership. The first patentand trademark laws were enacted inthe early 1980s. “You have thisstrong heritage for many centuries[of copying], and then suddenlyeveryone tells you to stop,” saysFrederick Mostert, past president ofthe International TrademarkAssociation. “It’s a real culturaldilemma.”

Anticounterfeiting wasone of the subjects discussedduring the U.S.-China JointCommission on Commerce andTrade in Washington in April 2004. Inresponse, the Chinese governmentannounced the formation of a taskforce to tackle the problem, whichimplemented two new initiatives: itlengthened the prison terms of

convicted counterfeit vendors tothree years in order to detercounterfeiting, and it shut down thefamed Silk Alley counterfeit marketin Beijing to make way for a newfive-story shopping mall that wouldban counterfeit sellers. Bothinitiatives failed. When the new mallopened three months later, theinternational counterfeit syndicatesmoved in and took over the shopsformerly occupied by small-timedealers. One vendor who squawkedto the police was shot deadgangland-style. A month later, theU.S. trade representative declaredthat despite the Chinesegovernment’s efforts, intellectualproperty “infringements remain atepidemic levels,” and that China’soverall piracy rates have notdropped since the country’s 2001entry into the World TradeOrganization.

In an effort to raiseawareness in China, martial-arts

movie star Jackie Chan starred inan international public awarenesscampaign called “Fakes Cost More.”During the June 2005 pressconference that kicked off thecampaign, Chan fought off a groupof faux assailants wearing JackieChan masks, attacked a stagedcounterfeiting stall with a chain saw,and ripped the fake Gucci, Armani,and Versace clothes off an actordressed up as a tourist. “The easewith which authentic works can becopied in the digital world and theinstant wealth it brings has givennew rise to the second oldestprofession in the world: piracy,”Chan said. “It is easy to copy butdifficult to create.”

That was evident themoment we walked into Xinxing, thecentral wholesale market forcounterfeit leather goods, just downthe road from the domestic trainstation in Guangzhou. The market isa series of big warehouses with air-

conditioned stalls filled with fakeLouis Vuitton, Gucci, Chanel, Fendi,and Burberry products. Onewarehouse is for the Grade AAproduct—fakes that look so good it’shard for a non-expert to tell theyaren’t real. “Counterfeiters take theoriginal item and do a three-D scanof it,” the expert explained to me.“The process produces perfectcopies of patterns.”

The market stalls wereclean and well appointed with glassdisplay cases; vendors hadcatalogs, business cards, and agenial, courtly manner. It was hardto imagine that it was all completelyillicit. The only differences betweenXinxing and a legitimate wholesalemarket were the prices and thecustomers. I watched as a rotundmiddle-aged British man with asweaty red face and balding patenegotiated with a Chinese vendorfor an order of bogus Louis Vuittonbags. Going rate: 18 yuan ($2) for a

monogram wallet, 150 yuan ($19) forthe classic monogram purse. Theprice dropped by 30 percent fororders of more than one hundred. Apair of veiled Muslim women whowere on our train from Hong Kongthat morning were there, too,placing orders. “Gucci definitely hasa problem,” the expert said as heclocked the glut of double-G logobags on display—almost as manyas the ubiquitous LV fakes.

Across the street inanother warehouse are the lower-quality goods: the stuff that looksfake and is often a bastardization ormélange of brand names—likeBossco or Emilio Valentino—andcosts next to nothing. Smallwholesale orders are taken along ina suitcase by the customer or acourier. Big orders are far morecomplicated. An order of tenthousand handbags would bedivided into ten groups of athousand to be made by workshops

around Guangzhou. Counterfeitworkshops are light and mobile;after two weeks, they pack up andmove to escape detection. Once theorder is completed, it is wrapped upand deposited in a neutral place,like the courtyard of a local school,where it will be picked up by a localtransporter, often simply a guy on abike with a cart. The localtransporter will deliver it to thewholesaler in Xinxing, who willhave it taken to another neutralplace to be picked up by theinternational shipping agent and putin a shipping container. The goodsare often packed in shipments offoodstuffs or legitimatelymanufactured clothing to escapedetection by receiving customsofficials. Sometimes the goods(particularly watches) are shipped inpieces or without labels ormonograms, and are finished,assembled, or stamped by illegalimmigrants in clandestine

workshops at the destination. Eachtime the goods change hands, theprices double. All transactions aredone in cash.

Hong Kong used to bethe primary port, but its containerfees have become prohibitive forcounterfeiters, so more and moreshipments leave directly from theports of China: Shanghai, Dalian,and Guangzhou. From there, theship goes to a “cleansing port” suchas South Korea to change its pointof departure and then onward toJapan, the United States, Italy, orBelgium. Shipments directly fromChina are more carefully checked;by passing through a cleansing portthey become less suspicious.

On occasion, theshipment gets discovered duringinspection by receiving customsofficials. In June 2004, the U.S.Bureau of Immigration and CustomsEnforcement (ICE) arrested a dozenpeople and seized six shipping

containers—five with bogushandbags, luggage, and wallets,and the sixth with counterfeitcigarettes—coming into the UnitedStates from China, valued at $24million. ICE agents also seized$174,000 in cash and eleven bankaccounts. Officials said the suspectsprobably imported about twocontainers per week, each containerearning $2 to $4 million in profit.That same month, seventeenChinese men were arrested in agovernment sting operation forpaying $1 million in bribes toundercover ICE agents at PortElizabeth, New Jersey, to guaranteeentry of thirty shipping containers offake Louis Vuitton, Cartier, Gucci,and other luxury brand handbags,luggage, wallets, and sunglasses.The goods were to be sold by NewYork City retailers and streetvendors. The smugglers, membersof the Li Organization, one of themost powerful gangs on Canal

Street, wired thousands of dollars inproceeds back to China.

The street value ofChinese goods carrying counterfeittrademarks seized by the UnitedStates doubled between 2005 and2006 to $125 million, and counterfeitgoods from China and Hong Kongmade up 90 percent of all U.S.Customs and Border Protection’sintellectual property seizures. Thesame is true in Europe: Nearlythree-fourths of all counterfeit luxurygoods seized at ports originated inChina or Hong Kong.

While customs seizuresof counterfeit goods continue to rise,a vast amount makes it through. Theshipping containers are put directlyonto trucks and hauled either towarehouses to be stored or toworkshops to be assembled orstamped by clandestine workers.This is where human trafficking fitsinto the puzzle: the workers,sometimes children, have been sold

into labor. They, too, have beenshipped over and smuggled in.They are taken to tenementfactories and often locked in. Therethey live, work, sleep. “I went on araid in a sweatshop in Brooklyn,and illegal workers were hiding in arat hole,” Barbara Kolsun, seniorvice president and general counselfor Kate Spade, told me. “It wasfilthy, and it was impossible to knowhow old the workers were.”

The gangs then have thecounterfeit goods transported tostores in wholesale markets likeCanal Street and Santee Alley,where they are purchased bytourists, flea market merchants,purse-party ladies, andsuburbanites who believe thatbuying, selling, or owning fakes is,as McDonald put it, “a victimlesscrime.”

SHORTLY AFTER LUNCH inGuangzhou, we drove over to aChinese law enforcement agency, atypical linoleum-floored, fluorescent-lit office that could be foundanywhere in the world. The officers,most in their thirties or forties, werefriendly and polite—offering usgreen tea as they spoke proudly ofthe success they had recently infighting counterfeiting. After a fewminutes the chief came in andannounced that they’d gotten a tipabout a counterfeit workshop acrosstown. The informant was thelandlord: he rents to thecounterfeiter with full payment upfront in cash, calls the cops and getsa reward for the tip, then rents thespace again. “There are no ethics inthis business,” the expert tells me.“None.” The cops strapped on theirholsters, and a few put onbulletproof vests. Raids can bedangerous: sometimes workshopowners will pull a knife or have

thugs there to beat up the cops.During one raid in Xinxing market,someone shot a gun in the air; wheneveryone hit the ground, thecounterfeiters fled.

We all went downstairs,hopped into a pair of official vansand sped across town. Guangzhouis an industrial city withimpenetrable smog, dingy high-rises, elevated highways slicing thisway and that, and traffic congestionthat would make Los Angeles lookfluid. We pulled into the courtyard ofa white stucco tenement. The copsjumped out, guns drawn, ran upseven flights of an open-air stairwellto the top floor, scurried across thebalcony, looked through the windowof one of the flats to confirm it wasthe right place, saw the door open,and went in. If it had been closed,the cops would have needed awarrant. Once they checked out theplace to make sure it was safe, theywaved us up.

We hoofed it up thesteps, over empty Coke cans andother trash, and as we approachedthe top, the acute toxic smell of glueburned in our noses. We walkedinto the workshop—a long, wideroom with barred windows—andbefore us stood two dozen Chineseboys and girls, roughly eight tofourteen, sitting at old sewingmachines and standing behindplywood worktables littered withscraps of black leather, gooey potsof glue, and a cookie tin filled withstamps reading Versace, Boss,Dunhill. The children stoppedmidwork. One bag was stuck in amachine, half sewn. In the cornerwere big cardboard cartons filledwith counterfeit luxury brandhandbags in black leather. I pickedone up and checked it out: thematerials were cheesy, the sackslined with plastic, the seamsuneven. “Cheap fakes,” the expertdeclared.

The cops told thechildren to line up single file. Theylooked at us with their sweet facesfilled with confusion, their eyes tiredand sad: they didn’t know why theywere told to stop working. As theywalked out, some stopped to punchtheir time cards in hope of gettingpaid. Some glared at the owner, anoverweight middle-aged Chineseman, and his factory manager, aChinese woman in her thirties whosat in the small office next to thedoor, glum over a cold pot of tea.The investigators said it was rare tofind the owner onsite. Both werearrested. The cops started to box upthe handbags, the machines, thematerials, everything. It would taketwo hours. A truck pulled up in thecourtyard to haul it all off to a scrapyard, where it would be immediatelydestroyed. “They are out ofbusiness now,” the expert said. Thesquad does at least two of theseraids each day.

When it was time toleave, we had to run across thecourtyard to the vans to shieldourselves from debris that the kidsthrew from the balconies. To thechildren, the cops are the bad guys.Many of the children in counterfeitworkshops have been sold intolabor by their families in thecountryside. The children used tobe picked up at the train station andtaken to the factories, but the policestarted to stake out the stations andmake arrests. Now factories hireagents, usually a man and womanwho will pose as a married coupleand go to the country in a truck toget one or two children. If the agentsare stopped by police, the agentssay that the children are theirs.Some families in the country selltheir children because they believethat the children will have a betterlife in the city. But selling childrenhas become a big business inChina. The children work in

factories or turn to prostitution andsend their money home or bring it totheir parents when they return homefor the Chinese New Year. Mostearn between $50 to $100 a month infactories.

The children who workin counterfeit factories are usuallyhoused by the owners; the kids inthe raid I witnessed lived across thecourtyard in slum dorms. When acounterfeit factory is raided and theowner arrested, the children are leftnot only out of work but alsohomeless. One investigator whooften assists on raids in China wasso moved by the plight of the childworkers that he and a handful ofcolleagues founded a charity, whichhelps place the children from shut-down factories in schools andunderwrites their education andliving costs.

Sometimes the casesare truly horrific. “I rememberwalking into an assembly plant in

Thailand a couple years ago andseeing six or seven little children, allunder ten years old, sitting on thefloor assembling counterfeit leatherhandbags,” the investigator told meas we drove away from the raid.“The owners had broken thechildren’s legs and tied the lowerleg to the thigh so the boneswouldn’t mend. He did it becausethe children said they wanted to gooutside and play.”

ONE DAY IN 2004, New York securityexpert Andrew Oberfeldt and lawyerHeather McDonald wereparticipating in a raid in a counterfeitmall on Canal Street in downtownManhattan, when they saw a petiteblond woman sobbing hysterically.In a thick Texas drawl, she pleadedwith McDonald: “This is my first timeto New York and this is awful! I justwant to take my things and go

home.”McDonald asked the

police what the Texan’s “things”were: “She had fifty-eight of thesame bag,” McDonald saysincredulously.

McDonald said no, andthe Texan left in a huff.

Five minutes later shereturned, tears gone.

“I’m on the cell phonewith my lawyer, and he says youcan’t do this without my day in court,so I’ll take my bags and go,” shedeclared.

“No,” McDonaldresponded. “I’ll take your bags andsee you in court.”

“Two weeks later we’redoing a raid at a nearby location,”McDonald recalled when we met inJune 2005. “And who do we see?The same Texan. I told her, ‘Ithought you said you were nevercoming back here.’ And you knowwhat she said?”

“What?” I asked.“‘Bite me!’”I laughed out loud.“I’m sure,” McDonald

said, “that she was a purse-partylady.”

Purse-party ladies arethe drug dealers of the counterfeittrade: they buy from the wholesalersand sell to suburban users, folkswith a craving for the goods but notenough dough for the genuine thing.Like teenagers gathering at afriend’s upper-middle-class home tobuy a couple of joints with theirallowance or babysitting money,suburban women converge in well-appointed living rooms for wine,hors d’oeuvres, gossip, and fakeVuitton or Gucci handbags. Thewomen hosting these fetes willmake a killing—they double theirinvestment—and never declare it tothe IRS. Take Virginia Topper, thewife of a lawyer in Long Island, NewYork. When she was busted in 2003,

she had $60,000 in cash stashed inher underwear drawer and a Jaguarin the driveway. She was foundguilty and sentenced to communityservice. “She was the ultimateAmway lady,” Oberfeldt laughed.

Most purse-party ladiesdon’t see buying or selling fakehandbags as a real crime. It seemsso innocuous that churches,synagogues, and schools hostpurse parties to raise money forcharities or in-house events. In asurvey by the Anti-CounterfeitingGroup, one-third of thosequestioned said they wouldknowingly buy counterfeit goods ifthe price and quality were right, and29 percent said they saw no harm inthe selling of fake goods unless thepurchaser was at risk. “We’ll go onraids in Chinatown wholesalers andwe’ll find five or six suburbanwomen standing there—customers,”Oberfeldt tells me. “We’ll say tothese women, ‘The dealers take you

down dark corridors, through lockeddoors. The police say, “Open up!”The lights are turned out, andeveryone is told to be quiet. At whatpoint did you realize that somethingwas amiss here?’”

Some take it one stepfurther, passing off fakes in storesas the real thing. Buckner hadgotten a tip from an informant thatthe wife of a professional athletesold fake luxury brand handbags inher northern California boutique for$1,800 a pop. Buckner had hisoperatives purchase a couple ofbags, which he sent to the brands’headquarters to be verified. Turnedout the bags were, as Buckner put it,“grade AA counterfeit. It’s allcounterfeit.”

Back in 2003, Guccidiscovered that Wal-Mart wasselling counterfeit Gucci handbagsand wallets as authentic in severalof its stores around the UnitedStates. Gucci hired New York

lawyer Steven Gursky, of the GurskyGroup at Dreier LLP, to pursue Wal-Mart for “willful blindness,” apractice in which the store buyerdoes not ask the wholesaler ormiddleman the origin of fake goodsand then sells them as the realthing. It happens all the time: Gurskyhas handled willful blindness casesagainst Wal-Mart, Costco, andothers on behalf of Tommy Hilfiger,Calvin Klein, Diesel, and Nike, toname a few. Generally, middlemensell anything and everything theycan get their hands on. “We’ve hadcases where the vendor last soldthe retailer toasters and now it’sdesigner clothing,” says Gursky,“and the buyers don’t find this odd.”

In the Gucci case, themiddleman—actually amiddlewoman—had attended theLas Vegas Off-Price SpecialistShow, the largest American tradeshow devoted to selling odd lots ofapparel and accessories at reduced

prices, and picked up an order ofGucci handbags and wallets for asong. She testified later in the casethat she believed the goods wereauthentic because she heard thepeople in the booth speaking Italianand assumed they were employeesof Gucci. In fact, they were Israelisspeaking Hebrew and had boughtthe wallets and purses at a factoryin Romania. They were laterarrested in Miami for selling othercounterfeit goods. As they werealready facing criminal and civilcharges in Florida, Gucci decided togo after the middlewoman and Wal-Mart. Both settled on the eve of thetrial in June 2005. “The sale ofcounterfeit merchandise by areputable retailer is much moreinsidious than on Canal Streetbecause often on Canal Streetpeople assume what they arebuying is fake,” said Gursky. “Butwhen you walk through doors of a$200 billion retailer, you believe that

what they are selling is real. Andsometimes it’s not. The truth is, Wal-Mart is much more concerned aboutthe buck than reputation—theirs aswell as the trademark holder’s.”

Most luxury companiesnow have lawyers on retainer whospend each day surfing the Web,looking for fakes for sale.Companies such as AAA Replicas(www.aaareplicas.com) makeVuitton and Hermès knockoffs toorder for $200 to $400 apiece.Amazon.com and eBay are twofavorite places for counterfeitwholesalers to dump their stock.Amazon and eBay themselvescannot be held liable because theysimply host a transaction betweenbuyer and seller. But luxury brandsare hoping to change that bymaking the Web sites liable forenabling the business. In 2004,Tiffany sued eBay in New York’sfederal court based on thatprinciple, claiming that 80 percent of

Tiffany products offered on the sitewere fakes. In 2006, LVMH filed asimilar suit in Paris, stating that upt o 90 percent of Vuitton and Dioritems on eBay were counterfeit. Bye a r l y 2007, both suits were stillpending.

Many of the street-levelhawkers in Europe and the UnitedStates—the guys you see withwatches and bags spread out onblankets on street corners, or intrash bags slung on their backs onRiviera beaches—are Senegalesebelonging to a two-million-strongIslamic sect called the Mouridebrotherhood. They are illegalimmigrants who sell Gucci watchesand Vuitton baseball caps at a 400percent markup, then send the cash—millions of dollars—back toToube, their home base in Senegaland one of the fastest-growing citiesin Africa. There, the money hascontributed to constructingtelevision and radio stations, a

university, and one of the world’slargest mosques, with an eighty-seven-meter tower covered in $10million worth of imported marble.Rarely are Mourides prosecuted forpeddling counterfeit goods. Likepurse-party ladies, Mourides are, inthe minds of cops, small-timedealers.

Counterfeiting flourishesbecause it is a high-return, low-riskbusiness: Counterfeiters can earnmillions and are rarely caught. “Themarkup is like heroin,” saysOberfeldt. “Say I buy one ounce ofheroin for $18,000. Diluted one to ten,I now have $180,000 worth. However,conspiracy to commit a crime andcriminal possession of narcotics isan A–1 felony in New York. If I’mcaught with any part of that ounce ofheroin, I’m looking at eight totwenty-five years, and life if it’s amultiple offense. It’s mandatorysentencing. It’s almost like murder.

“If I brought in $18,000

worth of handbags in from China”—which would retail for at least 10times more—“you’d put me in jailovernight, maybe. And I’d call mylawyer and be out in the morning.Ninety-nine percent of the peoplecaught in New York state sellingcounterfeit goods do not go to jail.The judges do not have the laws tosentence. The highest-level crime tobe charged with in New York Stateis trademark counterfeiting, which isa C felony, like stealing a nice car.They never rat out their bosses.They just laugh at the cops.

“If you sell that heroin,”he continues, “you’ll have the DEA,the FBI, New York State and citypolice, Customs, and the IRS alllooking for you—and you’ll go to jailforever. If I sell counterfeit goods, allthose people except the DEA couldchase after me, but can’t doanything once they get me. So mostdon’t get involved.”

Like the drug business,

counterfeiting has become aprofessional racket run byorganized crime. In New York in the1980s until the mid-1990s, gangs—like a group of Asian American kidscalled the Born to Kill Gang—werein charge. “If we showed up to do araid, women would take counterfeitwatches, shove them up their shirts,and say, ‘I’m pregnant, don’t touchme!’” remembers Oberfeldt. “Once Isaw a three-month-old baby in amilk crate that sat on top of a case ofM-80 explosives. The gangs cameafter us with bats, they’d slash ourtires, throw knives and significantexplosives. It was terrorism. Theytried to intimidate us. Wevideotaped them and locked themup and we got a lot of street credwhen we manned up from ten toforty men and kept going.”

Today Canal Street isrun by grown-up gangs from China,like the Fukienese gang, as they areknown in New York, whose

members come from Fujian, aprovince along China’ssoutheastern coast just across thestraits from Taiwan. They speak aFujian dialect among themselvesand run the north side of CanalStreet, west of Broadway. And theyfreely let the police seize goodsrather than get arrested for fightingback. The network is tight. Like inSantee Alley, they all have direct-connect Nextel radio: if a police carturns a corner, the message isrelayed down six blocks instantlyand everything is shut down. Theyuse homeless people as lookouts,giving them walkie-talkies. Randomkillings don’t happen. “It’s bad forbusiness,” notes Oberfeldt.

But things can getdangerous. During a two-day sweepin November 2004, New York policearrested fifty-one members of twoviolent gangs and charged themwith a host of crimes ranging fromracketeering to trafficking in

counterfeit goods. Police seized$150,000 in cash and $4 million incounterfeit merchandise carryingthe names of Chanel, Gucci, andCoach. U.S. Attorney David N.Kelley told said the gangs“achieved their dominance throughunflinching use of violence andfear.” During their reign, a man whowas suspected of cooperating withpolice received “a beating withpipes until his bones snapped,”Kelley said. A rival gang memberwas shot in the head and survivedonly because the bulletmiraculously shattered against hisskulls.

Buckner tells me thatLos Angeles is less violent thanNew York, but dangerousnevertheless. When I visited hisoffice in southern L.A., he showedme surveillance photos of aHispanic vendor selling counterfeitmerchandise in Santee Alley. Theguy—a real muscled-up thug—had

the number 18 tattooed on hisfingers and his cheeks, signs thathe is a member of the EighteenthStreet Gang, an L.A. gang that paystribute to the Mexican mafia.Buckner has also seen guys withHezbollah tattoos and pictures ofSheikh Nasrallah, theorganization’s political leader. Arethey actually members ofHezbollah? No one knows for sure.What Buckner does know is that hehas to watch his back. “We’ve hadour tires slashed, our car windowsbroken. We’ve had surveillance onour office and on us to find out whatwe are up to,” he said. “One of ourmen was driving a van in SanteeAlley when gang memberssmashed the window and cut up hisface.”

To help crack down onthe sale of counterfeit DVDs inSantee Alley, the Motion PictureAssociation of America donated tencameras that were installed in and

around the market in 2004, and theluxury companies profited from theinitiative. That year alone, the LosAngeles Police Department seized$32 million worth of fake DVDs,watches, handbags, T-shirts, andmore. “As we are a relatively newretail area, it’s been the lawlessfrontier out there,” admits the L.A.Fashion District’s Kent Smith.

Some luxurycorporations have decided to goafter the counterfeiters more fiercelyby pursuing big judgments; inJanuary 2004, a New York judgeordered the thirteen Chinese andVietnamese plaintiffs to each pay arecord-breaking $18 million—totaling more than $500 million—toCartier. The gang had a virtualmonopoly on the counterfeit watchmarket in the United States and hadbeen sending up to $100,000 a dayback to their headquarters in Asiasince 1988. Following the judgment,Cartier filed seizure orders on their

houses, cars, and bank accounts.“We want to really hit them where ithurts: in the wallet,” a Richemontexecutive told me.

Other countries arefighting the counterfeiting trade bytargeting individual customers andretailers. In France, for example,tourists caught bringing counterfeitgoods into France can receive a€300,000 fine (approximately$390,000) and up to three years inprison. And in Hong Kong, customsofficials formed a task force of twohundred officers to stamp outcounterfeiting and piracy on theretail level. In two years, the numberof stores selling fake DVDs,software, and electronics in HongKong dropped from one thousand toone hundred. By 2004, there wereonly sixty. Counterfeit vendors in theTemple Street market in Hong Konghave been forced to move theirbogus Vuittons and Guccis from thestorefront tables to back rooms.

Fake watch vendors closed up onHong Kong’s busy Nathan Road.Today, a hustler may hit you up onthe sidewalk, but he has to take youdown back alleys and up darkstairwells into rooms with steeldoors to sell you a very good fakeRolex for a mere $45.

That’s all well and good,says Oberfeldt, but in his view thewrong tack. “The only way to stopcounterfeiting,” he says, “is to getpeople to stop buying all this crapjust to have these logos. We have totake it into our own hands.”

CHAPTER TEN

WHAT NOW?

“Luxury is theease of a T-shirtin a veryexpensive dress.If you don’t haveit, you are not aperson used toluxury. You arejust a rich personwho can buystuff.”—KARL LAGERFELD

HANDEL LEE is the modernAmerican dream. His grandfather,for whom he’s named, was aChinese diplomat who worked asan adviser for the Americanambassador in Beijing. AnticipatingMao’s communist revolution, Lee’sgrandparents and his newlywed

parents fled China in 1949. Theylived in Japan for several years andeventually settled in Washington,D.C., where Lee’s father served asthe deputy assistant secretary forscience and technology for theCommerce Department and hismother worked as an artist. Lee wasraised in the comfortableWashington suburb of Bethesda,Maryland, attended the University ofVirginia, and earned his law degreeat Georgetown. He joined theprestigious law firm Skadden, Arpsin New York, and in 1991 was sent toBeijing to open its office there—“notlong after June 4,” he points out,referring to the 1989 TiananmenSquare student protests two yearsearlier. “It was an interesting time,very quiet.” He soon became the go-to man for Americans who wantedto do business in China. When Iwent to Shanghai for the first time inApri l 2004, he was my go-to man,too.

Lee invited me to lunchon the sunny rooftop terrace of M onthe Bund, the trendy Westernrestaurant and preferred hangout forjet-set expats. When I arrived at oneo’clock sharp, Lee stood to greetme, his manners as impeccable ashis dark Armani suit. Lee is soft-spoken, straight-shooting, andseemingly honest: all things you donot associate with either lawyers orpowerful businessmen. Hisstrengths are knowledge—of thesituations, the players, the hiccups—and patience. Both are asessential to doing business inChina as air and water are to life.

“When I first came here, Iplanned to stay two to three years,”he told me as we tucked intomesclun salads with smoked duckbreast. “But every day you seesomething new and you hearsomething new—a new thought.” In1995, Lee had a new thought of hisown: to open a gallery dedicated to

contemporary art. “There was freshnew artistic expression that no onehad seen in China, and the onlyplaces you could catch it was at arthappenings, in underground artvillages or in artists’ studios,” hesaid. “China has been an amazingcivilization for five thousand yearsbut that’s because of its culture, notits military power. During the lastsixty years, the most dynamic artistsleft or weren’t allowed to show theirwork, and that was a tragedy.”

I n 1996, Lee opened theCourtyard, one of China’s firstprivately owned contemporary artgalleries, across from the east gateof the Forbidden City. The inauguralfete was a blowout, “with nineambassadors and long-hairedartists,” Lee remembered with alaugh. “The police came, and theywere shocked and surprised by thescene.” Government officials, hesaid, “were afraid it could have beenunhealthy art.” And with just cause.

“There was a lot of political contentin the work,” he admitted. ThoughLee had all the permits required, thegovernment shut down the gallerythe next day. It took eight months toget permission to reopen.

I n 1999, Lee decided totake the concept to Shanghai, buton a bigger, grander scale—“aplace with a gallery and arestaurant,” he said. During aChristmas call to a family friend, hementioned his idea.

“You should look at ourbuilding,” she offered.

Three years earlier, herfamily had purchased from thegovernment a 1916 graniteneoclassical building on the Bundthat had served as the UnionInsurance Company and later theMercantile Bank of India. But thefamily had never figured out what todo with it.

A few days later, Leechecked out the place.

“I can do a wholebuilding dedicated to setting thestandards for contemporary art,luxury, and society in Shanghai,” hethought to himself.

He wrote up a proposalthat included restaurants, luxuryretail, and an art gallery andpresented it to the owner.

“This is fantastic,” shetold him, and gave him carteblanche.

He dubbed it Three onthe Bund, after its address, andhired renowned architect MichaelGraves to turn the proposal intoreality.

Then he called GiorgioArmani.

IT TOOK THREE THOUSAND YEARS, butluxury has finally circumnavigatedthe world: it began in China and hasnow returned there, for consumption

as well as production. And it ismarching onward to India andRussia. The potential customerbase is phenomenal. In 2006, Chinaofficially had three hundredthousand millionaires, Russiaeighty-eight thousand, India seventythousand. In 2004, Moscow hadthirty-three billionaires, more thanany other city in the world. “This isthe century of emerging markets,”Tom Ford told me. “We are finishedhere in the West—our moment hascome and gone. This is all aboutChina and India and Russia. It is thebeginning of the reawakening ofcultures that have historicallyworshipped luxury and haven’t hadit for so long.”

When luxury businessarrived in China in the early 1990s,the market was nearly non-existent.Forty years of communism and theCultural Revolution had wiped outwhat was known as Chinese luxury,including the traditions of fine silk,

delicate porcelain, and handcraftedwood furnishings. The Chinesedidn’t even have a word for luxury.They used the phrase ming pai,which means “famous brands.”“When we opened here on NanjingRoad in 1995, people were pushingbicycles,” Louis Vuitton presidentand CEO Yves Carcelle told me atthe inauguration of the Louis VuittonGlobal Store in Plaza 66 inShanghai in September 2004.

At first, luxury brandsopened stores in safe places likethe lobby of the Palace Hotel inBeijing and the Plaza 66 luxuryshopping mall in Shanghai to showoff their wares. “It’s cheaper than abillboard,” said Paul French, adirector of business consultancyAccess Asia. “Just stick in somepurses and some girls.” In contrastto the rest of the world, the Chineseluxury market for much of the 1990swas male-driven: 90 percent of saleswere to men, and male-oriented

brands such as Boss, Dunhill, andZegna thrived. Government officialsand civil servants in Beijing,bankers and real estate barons inShanghai, and manufacturingentrepreneurs in the northernprovinces wanted all the trappingsof Western businessmen. Theybought Givenchy suits, Vuitton andDunhill briefcases and moneysatchels, Rolex watches forthemselves, and Cartier baubles fortheir wives and mistresses.

But in the early 2000s,Lee saw the luxury customer basebroadening and believed that themarket was mature enough tosupport a luxury retail-and-restaurant development. “Imaginethat the luxury consumer is the top 5percent of the population,” he said.“In Shanghai, that’s 900,000 people,in Beijing, it’s 750,000—and that’s notcounting expats who are white-collar executives with nicepackages. There are a half-million

expats from Taiwan and Hong Kongalone.” But rich locals weren’t theonly potential customers for Threeon the Bund. “In Shanghai, you seesecretaries dressed, out at night,”Lee told me. “They save up and buytheir Louis Vuitton bag. Mysecretary has a Prada bag. Shedisplays it prominently on her deskand she’s saving up for anotherone. And Beijing and especiallyShanghai are the shopping Meccasfor the wealthy from the north—Shenyang, Qingdao, and Harbin,”he continued. “Most are privatebusinessmen, in manufacturing andreal estate—they buy an entirebuilding at a clip. There are 250,000millionaires in Wenzhou alone.They buy in cash. They have crewcuts and Dunhill bags stuffed withcash. They bring in their wife orgirlfriend, say, ‘What’s the best?’and throw down the money.”

Armani’s presence inChina in 2004 was minuscule

compared to that of his competitors:a Giorgio Armani boutique in thePeninsula Palace Hotel in Beijing,Emporio Armani stores in Dalianand Wenzhou, and an ArmaniCollezioni in Shenzhen. For Lee,Armani was a natural choice forThree on the Bund. “He changedour aesthetic of contemporaryfashion, and I thought it wasimportant to bring him into China ina big way,” Lee said. “He’s vigorousand bigger than life, and that’simportant for China, the cult of theperson. At the opening of Chanel,someone asked where CocoChanel was. Armani would make abig impression on the Chinese.”

When completed, Threeon the Bund included a GiorgioArmani boutique; Emporio Armani;Armani Fiori (which sold orchidsand calla lilies shipped fromHolland); Armani Dolci (with Italian-made chocolates); two multibrandhigh-fashion boutiques; an Evian

Spa; four restaurants, includingJean Georges Shanghai; and theShanghai Gallery of Art. It would bethe launchpad not only for Armani inChina but also for the sort ofWestern-style retailing that luxurybrands had cultivated and masteredin the rest of the world. “It’s themoment to open here,” Armani toldme the day of the inauguration. “Youcan see things are happening. Lastnight when we went to dinner herein Shanghai, I was surprised by theway the people were so well turnedout. Even Paris doesn’t have thisatmosphere, this spirit.”

Armani made the most ofhis maiden voyage to the MiddleKingdom. He visited the ForbiddenCity, where Chinese tourists swirledaround him, snapping photos. Hewas the guest of honor at a cocktailreception at the Italianambassador’s residence, withhundreds of impossibly hip Chinesetwentysomethings dressed in Dior

corset dresses and Armani suits,chattering endlessly, champagne inhand. In Shanghai, he staged afashion show for a thousand peoplein a tent on the Pudong side of theHuangpu River, followed by a partyin the Shanghai Gallery of Art atThree on the Bund with anabundant supply of good Chiantiand heaping platters of carpaccioand prosciutto. Hundreds of young,beautiful Chinese danced to technoas American actress Mira Sorvino,British socialite Lady Helen Taylor,and Taiwanese movie idol ChenChang—“the Johnny Depp ofChina,” one girl swooned—heldcourt in the VIP section. “Everythingis alive here,” Bao-Wen Chen, aforty-one-year-old Shanghaineseinvestment banker, shouted to meover the booming music well aftermidnight. “There’s a culture ofyoung people who want to learnabout luxury and fine dining.Shanghai is not New York or Hong

Kong, but it’s not far behind.”Three on the Bund

kicked off the renovation of theelegant former banking districtalong the river, turning it into aluxury brand alley like the avenueMontaigne and Rodeo Drive in amatter of two years. In the first sixmonths, sales of Armani at Three onthe Bund were 50 percent more thanLee’s initial predictions. Three-quarters of the clientele at Three onthe Bund were local Chinese, andthey dropped an average of $400 to$500 per visit. Chinese womenbegan to take an interest in luxurygoods: sales went up, and luxurybrands began to putting morewomen’s clothing and accessoriesin their stores. By 2004, womenaccounted for 40 percent of luxurygoods sales in China, up from 10percent in the 1990s. “In otherprovinces, they say people will buyfood with their last penny, but inShanghai, we’d buy clothes,” local

shoe designer Denise Huang toldVogue shortly after the Armaniopening in 2004. Hong Huang,publisher of the luxury goodsmagazine I-Look, concurred: “A girlwill spend a month’s pay on ahandbag. No one would do that inNew York or London, but these girlshave confidence. They know moremoney, more opportunity is comingfor them.”

Fashion magazinesbecame the country’s mostimportant source of information onluxury goods. There are Chineseversions of Elle, Cosmopolitan, andVogue, each which sell about half amillion copies every month,primarily on newsstands. WhenVogue China debuted in September2005, it sold out its initial run in fivedays. The second printing sold outin three days. “The best-sellingbrands here are Chanel, Dior, andLouis Vuitton,” Vogue China editorAngelica Cheung told me. “Most

Chinese buy luxury as a statussymbol rather than taste. They likelogos. They want people to knowthey are carrying somethingexpensive. You see people walkinto stores and say, ‘Where is thisbrand from? Italy? Must be good!’They can’t pronounce the namesand they don’t know where it comesfrom. They just want it because it’sexpensive.”

Brands began to expandinto secondary and tertiary cities ofsix to eight million, such asHangzhou, Guangzhou, Chengdu,and Xi’an. By the end of 2006, LouisVuitton had fourteen flagships onMainland China, including one inXi’an, and had plans to open two tothree new stores each year forseveral years to come. “We are stillunderrepresented in China,” Vuittonmanaging director SergeBrunschwig said in 2005. “China’san underdeveloped market withgood potential.” Giorgio Armani

grew from five stores in April 2005 tofifty-three in 2006, and planned toopen another twenty-three in 2007.By the end of 2006, Greater Chinawas Armani’s second largestwholesale market in Asia, afterJapan. Salvatore Ferragamo hadthirty stores in China by early 2006and scheduled another ten to fifteenin two to three years. Calvin Kleinhad twenty-four freestanding storesfor its various lines in early 2006 withplans to open another eighty toninety stores by 2008. Valentinoopened its first mainland Chinastore in 2006 in the secondary city ofHangzhou, along the famous WestLake near Dolce & Gabbana andGiorgio Armani. Most are doing verywell. Since its arrival in Beijing in1992, Louis Vuitton has “never lostany money in any store in China,”boasted Vuitton’s China CEO,Christopher Zanardi-Landi.

Today, luxury—likeeverything else in China—is

booming. The Chinese economyhas grown like no other in history.B y 2006, China had become theworld’s fourth largest economy, afterthe United States, Japan, andGermany, and economists predictthat it will be number one within amatter of a few decades. By 2005,the luxury market in China wasworth about $1.3 billion, according toBain & Company, an Americanconsulting company.

The luxury customer inChina has evolved into what WilfredKoo, Givenchy’s president forChina–Asia Pacific, calls nouveauchic: young Chinese who “wereborn post–Nixon opening China,use the Internet, and have so muchinformation.” They spend money onthemselves and buy top-of-the-line.The nouveau chic bought so muchof Armani’s more expensive BlackLabel at Three on the Bund that Leedecided in 2006 to transform theEmporio Armani store upstairs into

Black Label space as well.Givenchy introduced a slimmer,more fashionably cut suit, andZegna manufactures a men’s wearline in China solely for the Chinesemarket. “And the women’s businessin China is going to boom-boom-boom!” Koo said with a smile.

When I met Koo, a third-generation retail merchant, in HongKong in November 2005, he wasbusy searching for new boutiquelocations in China. At that time,Givenchy had forty-eight men’swear stores, plus accessoriesboutiques in Beijing and Shanghai.All the stores there were franchises.“Three hundred shopping malls willopen in the next three years inChina,” he said, incredulously.There were six big malls planned inBeijing alone, making up six millionsquare feet of shopping, most to beopen in time for the SummerOlympics in 2008. Givenchy wasplanning to open two LVMH-owned

flagships, in Beijing and inShanghai, in 2006. “You will seeBeijing and Shanghai transformed,”Koo assured me.

Handel Lee is a majorforce in the transformation of both. Inthe fall of 2007, he plans to openLegation Quarter in Beijing, thecity’s first luxury complex outside ahotel, at a four-acre compound onthe southeast corner of TiananmenSquare that served as the AmericanEmbassy from 1903 to 1949 andwhere Lee’s grandfather worked forseveral years. Legation Quarter, asit is called, will include a 180-seatrepertory theater; a twenty-five-thousand-square-foot art gallery;seven restaurants, including one bystar New York chef Daniel Boulud;and a handful of “superluxury” brandboutiques, as Lee calls them.“Destination luxury like Brioni andPatek Philippe,” he said, “brandsthat don’t want to congregate withtheir competitors.”

In Shanghai, Lee isconstructing another luxurydestination on the six-acre site ofthe former British consulate justnorth of the Peace Hotel on theBund, a neighborhood that iscurrently undergoing a majorfacelift. Among the upscale projectsunder way are the Peninsula Hotel,Saks Fifth Avenue, and a retail-residential-office complexdeveloped by the Rockefellers.When Lee’s complex opens in late2009, it will have a small concert hall,art museum, luxury retailers and aboutique hotel. Like Three on theBund, both Legation Quarter andthe new Shanghai project should doa bang-up business. Analysts atErnst & Young predict that in 2010there will be 250 million Chinesewho will be able to afford luxurygoods, and by 2014 the Chinese willdisplace the Japanese as theworld’s premier luxury brandconsumer. “We started early

because we were really convincedthat modernization was going on inChina,” Bernard Arnault said at theopening of the Louis VuittonMansion at the China World TradeCentre in Beijing in November 2005.“We knew [China] would somedaybe the biggest market in the world.Whether it would be in twenty, thirty,forty years, it was irreversible.”

The Chinese domesticretail market is only part of the story.Like the Japanese, the Chinese liketo travel and shop. Mainland Chinarepresented only 2 percent of theluxury market in 2006, but theChinese accounted for 11 percent ofworld sales. That figure will likelydouble within a decade, accordingto Merrill Lynch. “There are 25million Chinese traveling [now] andthere will be 100 million in 2020,”Antoine Colonna, luxury analyst forMerrill Lynch in Paris, said in 2004.“They spend an average of $1,000on luxury goods [per person per

trip]. They might save on dinner orlodging, but not on luxury goods.”Vuitton chairman and CEO YvesCarcelle told me at the Vuitton storeinauguration in Shanghai in 2004,“Mainland Chinese are one of themost eager to buy when they travel.Each time we sell 100 in China, wesell 150 to Chinese abroad.”

The Chinese travelboom began in July 2003, when theChinese government eased travelrestrictions to Hong Kong. By 2005,76 percent of all mainlanderstraveling abroad headed to HongKong, and their preferred activitywas and is shopping: there’s morechoice in Hong Kong, and pricesa r e 10 percent lower than backhome, where they pay luxury taxes.“Three years ago, Hong Kongaccounted for 2 percent of oursales,” Bulgari CEO FrancescoTrapani told a luxury-brandroundtable in 2004. “Now it accountsfor between 15 and 20 percent.”

Luxury brands haveexpanded in Hong Kong to meet thedemand. In a matter of weeks in late2005, both Louis Vuitton and Chanelopened Peter Marino–designedmegastores. Louis Vuitton now hassix stores in Hong Kong and one innearby Macau. In comparison, it hasthree in Paris. DFS is opening aGalleria in Macau in 2008, primarilyto target the Chinese. Dior has nineboutiques in Hong Kong, includinga flagship on Peking Road inKowloon that is a massive eleventhousand square feet. “Mainlandersgo to Hong Kong with one goal—tobuy,” said Tom Doctoroff, director forJWT advertising in Shanghai.“Chinese people will gladly spend aprice premium for goods that arepublicly consumed. But it’s likebuying a big glob of shiny glitter.They know which brands arefamous, but they can’t tell you thedifference between them in terms ofquality or design. [They buy] to

burnish their credentials assomeone of the modern world bystocking up on a year’s supply ofprestige.”

That doesn’t perturbBernard Arnault. “I think, ultimately,the customers of luxury in China willbe sophisticated customers,” hesaid at the Vuitton opening inBeijing in 2005. They are certainlytrying. Mainlanders are enrollingtheir five-and six-year-olds in privatelessons (golf, music, ballet,horseback riding, ice skating, polo),etiquette schools, and fast-trackcourses that bill themselves asjunior MBA programs. “Thesepeople are rich economically butlacking in basic manners, and theyare not very fond of their ownreputation,” Wang Lianyi, an expertin comparative cultural studies atthe Chinese Academy of SocialSciences in Beijing, told the NewYork Times. “These new rich notonly want money, they want people

to respect them in the future.”

A RUSSIAN MAN buys a big newMercedes. Two weeks later hebrings it back to the dealer andsays, “I want a new one.”

“But sir, you just boughtthat car,” the dealer sputters.“What’s wrong with it?”

“The ashtrays are full.”That joke epitomizes

Russia’s new wealth today: youngbillionaire oligarchs with a taste forrichesse to rival the Romanovs’. “Ihave customers coming in to thestore and buying seven hundredsocks because they wear themonce and then throw them away,”said David Gisi, managing directorfor men’s wear at Mercury, one ofRussia’s largest retail groups. “Theyconsider Rolex to be almost likeSwatch.”

At first, wealthy

Russians spent their wealthoverseas. They bought the Côted’Azur’s grandest villas, Ferraris bythe dozen, French couture by thecollection. So many wealthyRussians have settled in London,Europe’s primary financial center,that it is sometimes referred to in theBritish press as Londongrad orMoscow-on-Thames. The chicneighborhood of Chelsea has beendubbed “Chelsky” and the luxurydepartment store Harvey Nichols isnow known as “Harvey Nicholsky.”When I asked a Dior employee atthe avenue Montaigne store in Pariswho were the best customers, shetold me without hesitation,“Russians.” They came in regularlyand dropped $10,000 to $20,000 in anhour. The salesgirls who speakRussian were among the store’sbusiest. At many of Armani’s ready-to-wear stores, Russians boughtmore than Americans andJapanese.

Now luxury brands arebringing their wares to Moscow,taking advantage of theextraordinary baroque architectureerected when luxury last flourishedin the Russian Empire, during theRomanov period. Outside ofMoscow and Saint Petersburg,there is no wealth—Russian’sminimum wage was about $27 amonth in 2005, and wage arrears in2004 were $820 million—andtherefore no luxury market. But thereis enough money in Moscow tomake luxury tycoons rich andhappy. After the 1998 financial crisisthat led to the collapse anddisappearance of most banks,Russians hoarded an estimated $50billion in cash, much of which theynow spend in luxury brand stores inforce. Merrill Lynch analysts havecalled Russia “a youngconsumption economy unwilling tosave.” Pambiamco Consultants, atop fashion marketing and strategy

firm in Milan, stated in 2004 that theluxury market in Russia was about$600 million, with an annualincrease of 6 to 8 percent. Accordingto AT Kearney, a Chicago-basedconsulting firm, Moscow was themost attractive emerging market forretailers in 2003 and 2004, andsecond, after India, in 2005. By 2009,analysts believe Russians willaccount for 7 percent of all luxurybrand sales.

Across Red Square fromthe Kremlin and Lenin’s Tomb isGUM, the historic nineteenth-century galleria that, during theCommunist era, was the StateUniversal Store. It sold government-issued clothes and food to localsa n d matryoshka nesting dolls totourists, and was known for itsempty shelves and grumpypersonnel. Today it is a luxury mall.Among the tenants along the marblewalkway are Louis Vuitton, Dior,and Moschino. For the Dior opening

in October 2006, actress SharonStone cut the ribbon with ChristianDior’s own scissors. Then thecompany hosted a lavish cocktailparty for 600 and, later, an intimatedinner of Beluga caviar, roastedlamb, Belvedere vodka, and vintageDom Perignon for 250 at Turandot,Moscow’s new gold-encrustedimperial Asian restaurant.

Nearby, Mercury Groupbuilt a one-hundred-thousand-square-foot arcade-like mall in anold cobblestone street calledTretyakovsky Proyezd (TretyakovDrive). There you’ll find wildly richRussians cleaning out dozens ofluxury brand boutiques, includingGucci, Prada, Dolce & Gabanna,and a three-floor Armani spread,replete with a VIP salon. In theevening, they return to TretyakovskyProyezd in their darkened-windowed Mercedes SUVs,dressed in their luxury brandpurchases, to dine at Mercury’s

haute-priced haute cuisinerestaurant, Tretyakov. “We arebuilding Via Montenapoleone,”Mercury’s vice president and retaildirector, Alla Verber, said, referringto the luxury shopping street inMilan. “We deal only in luxury,luxury, luxury. That means luxurycars, luxury fashion, luxury jewelry,luxury food and luxury homeproducts. We are a luxury empire.”

A thirty-minute drive fromdowntown Moscow is Crocus City, agigantic 690,000-square-foot luxurymall that opened in 2002 and has 180boutiques, including Armani, Pucci,Céline, Chloé, Versace, andGianfranco Ferré. “Before wedesigned Crocus City, we went toBal Harbour [in Miami] and ShortHills [New Jersey], and we visitedluxury malls across Europe. Thenwe combined everything we likedtogether in one vision,” CrocusInternational co-owner andcommercial director Emin Agalarov

said. “Crocus City is a place whereyou can walk in on a cold day andfind yourself in a tropical paradisewhere you can shop, relax and beentertained. There’s a hugeswimming pool with professionalsynchronized swimmers who doshows every three hours. There’s ariver that streams down thelimestone hallways.” It is in themidst of expanding, adding another120 boutiques, a thousand-roomhotel that Agalarov said will be like“the Venetian or the Bellagio, withRussia’s biggest casino, and…Russia’s biggest movie theater with20 to 25 screens.” When finished in2010, Crocus City will encompass10.8 million square feet.

The Russian expansionis working. Christian Dior reportedsales growth there of more than 50percent in 2004, and said that itsMoscow flagship was the fifth mostprofitable of its 170 stores. LouisVuitton CEO Yves Carcelle said

that the company sells more ready-to-wear in Moscow than anywhereelse in the world. No wonderChristian Lacroix took his hautecouture collection to SaintPetersburg in 2005. “And it sold verywell,” a Lacroix spokeswoman toldme cheerfully.

“IF YOU THINK CHINA is something,”Yves Carcelle told me, “wait untilyou see India.”

Unlike Russia or China,which both underwent communistperiods that all but erased the socialand economic class system andcultural heritage, India has alwayshad a wealthy elite that lived well.The maharajas often shopped inEurope and patronized luxurycompanies, including Louis Vuitton,Chanel, and Cartier, whichestablished the names back home.

What has changed in

India in the last few years is theeconomic rise of the Middle Class.Companies around the world haveoutsourced to India, creating jobsand an economic boom. In 2005,analysts estimated that twenty-twomillion Indians join the middle classeach year. For them, just as formiddle-market Americans,Japanese, Chinese, and others,logo-covered luxury brands aresymbols of their new prosperity.“People have the money and theywant to spend it, not save it,” saidRachna Mehra, account executivefor business development for NicoleMiller in India.

And luxury brands haveflocked to India to meet the newdemand. By 2006, Louis Vuitton hadtwo stores there, one in the OberoiHotel in Delhi and another in theswank Taj Mahal Hotel in Mumbai.Chanel inaugurated its first boutiquethere, designed by Peter Marino, inApri l 2005 at New Delhi’s Imperial

Hotel. The French press reportedthat its supply of No. 5 sold outbefore the store even opened forbusiness. Fendi opened a store inthe Taj Mahal Hotel in November2006 with accessories designerSilvia Venturini Fendi—mother ofthe Baguette bag—cutting theribbon, followed by a gala dinner atthe Taj Mahal Palace. Versacearrived in June 2006; Armani,Valentino, Ferragamo, and Hermèsall have plans to expand there.

According to bankinganalysts at Merrill Lynch, India hasabout five million luxury customersand is about ten years behind Chinain market development. As in China,the potential growth for the luxurysector in India is boundless. Bothcountries have more than onebillion people and, combined,account for nearly 40 percent of theworld’s population. Both haveexplosive economies and a newclass of wealthy entrepreneurs who

want to embody Western ideals andan emerging middle market with—as luxury executives like to say—aspiration. There are more than fourhundred million with the means tospend on luxury and high-endgoods, and says Mehra, “this 400million is ripe to shop.”

A study by Bain &Company consultants reported thatluxury business in India increasedb y 25 percent in 2005, second ingrowth only to China. “The growth ofluxury in India should be four timeshigher than the world average in thenext five years,” Bain & Companyreported in 2006. “The number ofhouseholds with revenues higherthan $230,000 a year should nearlytriple between 2005 and 2010.” In2006, India shoppers bought $434million worth of luxury clothing andaccessories, and that figure wasexpected to double to $800 millionb y 2010. Goldman Sachs reportedthat over the next fifty years, India

will be the fastest-growing majoreconomy in the world.

What makes India easierfor luxury brands to crack thanChina is its culture and itsknowledge of Western luxury: itnever closed its doors to the world.The most coveted luxury brand inIndia in 2006 was Gucci, followed indescending order by Armani, Dior,Versace, Vuitton, Ralph Lauren,Yves Saint Laurent, Chanel, andPrada, according to an ACNielsenstudy. “In just the last year, our clientprofile has definitely beenexpanding,” said Karen WilsonKumar, of Louis Vuitton in India.“We still have a customer thattravels widely and shops abroad.But we’re now seeing a new waveof clients that are young, upwardlymobile, double-income couples withexpendable money. We’re alsoseeing a young generation thatlooks for the fashion side of LouisVuitton—the new looks, brighter

colors and latest bags. There are alot of youngsters buying thepochette as their segue intoVuitton.” There is also a love andtradition of jewelry in India,particularly gold. Analysts atMcKinsey & Company believe thatsales of branded jewelry such asCartier and Boucheron will increaseby 40 percent annually, to more than$2 billion by 2010.

The only hitch seems tobe infrastructure. “The chance of anavenue Montaigne developing inIndia is very low,” said PrasannaBhaskar, India retail manager forLouis Vuitton. “We do not have thekind of roads and promenades herethat customers could easily walkdown.” India does not have shiny,newly renovated cities likeShanghai or Moscow either. AsValentino Fashion Group CEOMichele Norsa noted, “When youcome out of [Mumbai’s Taj MahalPalace & Tower] or a store in New

Delhi, the streets are congested andfilthy.”

Local developers arehoping to change that, or at leastoffer luxury brands an alternative.State governments are offering taxbreaks and discounted loans to helpdevelopers fund the construction ofmalls across the country: more than375 malls are slated to be completedb y 2008. The finance ministryreported in 2006 that the countrywould receive $150 billion over thenext five years for infrastructureimprovements, and privateconstruction companies have beenbusy building a $38 billion networkof new roads. That said, analystsand luxury brands see India as along-term market. “If you ask thefirms that are already there,business isn’t that great,” HermèsInternational CEO Patrick Thomassaid in 2006. “But the potential isthere, and it will become animportant market.”

DOWN A SHORT, nondescript streetjust behind La Scala opera house inMilan is the epicenter of what’s nextin luxury branding: the BulgariHotel. Housed in a former conventthat had been bombed to bits duringWorld War II and rebuilt in thecharmless postwar style of publichousing, the Bulgari has become,since its opening in May 2004, thepreferred gathering place for thecity’s chic and fashionable. Thereare only fifty-eight rooms, done upby renowned interior designerAntonio Citterio, with perks thatwere once de rigueur in luxuryhotels: superthick doors that makethe room truly soundproof, four-poster oak beds with featherbedding, oak-paneled walls, bigbathrooms, and walk-in closets withbeechwood hangers. There aremodern touches, too, like a motion

sensor in each room that letshousekeeping know when someoneis there and a spa with a lap poolwith gold-leaf tile steps. The Bulgaribrand has a discreet presence: acatalog on the coffee table, Bulgaritoiletries in the bath, Bulgari greentea candles on the bedside tables,which housekeeping lights for turn-down service. “It’s a PR machine forthe brand,” Bulgari CEO FrancescoTrapani said in 2005. “We do notexpect that this will be a hugemoneymaking venture. It’s more ofan image thing.”

Trapani is one ofluxury’s most savvy executives.When he was hired by his uncles,Bulgari president Paolo Bulgari andvice president Nicola Bulgari, tobecome CEO in 1984, Trapanidecided, like his fellow luxurytycoons, to take the one-hundred-year-old jewelry company that hisgreat-grandfather Sotirio Bulgarifounded to a broader market. He

introduced lower-priced jewelry,watches, and perfume; made adcampaigns more accessible;revamped the vaultlike shops intoairy, less intimidating spaces;expanded into new markets; andstuck prices next to items in windowdisplays to show middle-marketpassersby that they, too, couldafford Bulgari. In 1995, he listed 32percent of the company on the Milanstock exchange. Two years later, helaunched Bulgari leather goods,followed by boutiques dedicatedsolely to the new line. By 2005,accessories made up 8.4 percent ofall Bulgari sales. In the ten yearssince Bulgari went public, turnoverhas increased four times, to morethan $1 billion a year, (€919 millioni n 2005), and profit has risen fivetimes, to $154 million (€116.4 million).“When I took over, we were not partof the big game,” Trapani says quitefrankly. “Today we are.”

Hotels were the next

logical step. After all, tycoons like toboast that their companies aren’tbrands, they are lifestyles, and theircreative directors/designers aretoday’s ultimate arbiters of taste. Ifthey can dress you and your home,why shouldn’t they envelop you onvacation, too? In 2000, Versace andthe Australian property developerSunland opened Palazzo Versace,a 205-room, 72-condo resort on theGold Coast of Australia, with threerestaurants and a private marina.The place is a temple to theVersace aesthetic, withneoclassical furnishings, parquetfloors, and vibrant rococo-printdrapes, bedcovers, sheets, andthrow pillows. In late 2006, Versaceand Sunland signed a deal to rollout another fourteen PalazzoVersaces in the next fifteen to thirtyyears, starting with Dubai in 2009.“Our hotels aren’t for business,”Versace CEO Giancarlo Di Risiosaid. “They’re luxury.”

Giorgio Armaniannounced a licensing agreementwith Dubai-based Emaar Propertiesi n 2005 to develop a dozen Armanihotels and resorts. Armani himselfwill handle the design and decor;Emaar, which is investing $1 billionin the project, will manage. The firstwill open in Burj Dubai, the world’stallest building, and the second inthe Emporio Armani complex inMilan, both in 2008. Ferragamo has ahandful of boutique hotels inFlorence under the Lungarno brand,and Italian brands Missoni andByblos are reportedly working onhotel projects. Miuccia Prada toldme that she had been approachedto do a Prada hotel but declined.“For me, doing decoration of a chainis not enough,” she told me. “Wehave to have something to say.”

In 2001, Trapani signed adeal with Marriott: Bulgari would dothe decor and Marriott’s Ritz-Carltongroup would handle management.

They opened the Milan hotel threeyears later, followed in 2006 by aplush resort in Bali. “We believed itwas an innovative yet legitimateway of leveraging our brand andenhancing its awareness in theluxury market,” Trapani told me. “Ahotel gives us the opportunity toserve our clientele better with acomplete lifestyle experience.” In2005, the Bulgari in Milan generatedabout $17.5 million (€15 million) inrevenues. Bulgari’s 65 percent share—€9.6 million—was consolidatedinto its financial statements. Otherprojects include boutique hotels inLondon, Paris, New York, andTokyo, and by the end of 2005,Trapani was in talks with HandelLee to open a Bulgari hotel in Lee’sBritish consulate project inShanghai.

ON A FRISKY FRIDAY night in

September 2004, Paris’s hip setflocked to the rooftop restaurant ofthe Centre Pompidou to celebratefashion’s coolest new collaboration:Chanel designer Karl Lagerfeld andH&M, the Swedish low-priced retailchain. Like his work for Chanel,Lagerfeld’s H&M clothes were slickand savvy: skinny black pantsuits,crisp white shirts, mod shifts, andchiffonlike cocktail dresses. Unlikehis Chanel pieces, however, theywere all priced under $150—andmost under $100. Lagerfeld wantedto prove that cheap can be fabulous,too. In the end, good fashion isn’tabout price, he said, “It’s all abouttaste.”

Since luxury broadenedits reach to the middle market, it hasencountered something it had notcounted on: serious competitionfrom “fast fashion” companies, suchas H&M, Zara, Target, Mango, andTopshop, which produce trendynew clothes and accessories year

round and ship to their storesweekly. Their secret weapon iscomputer technology. Zara usesdata from its 426 stores to spot newtrends and offers ten thousand newproducts a year. Topshop generatesup to three hundred new designs aweek. The shelf life of a garmenthas fallen from six months to acouple of weeks, creating whatVogue editor Anna Wintour calls “aseasonless cycle” for fashion.

To compete with luxuryfashion, fast fashion has enlistedthe help of top designers. Targethired Issac Mizrahi; Topshop hashad Hussein Chalayan and SophiaKokosalaki; H&M brought inLagerfeld, Stella McCartney, andViktor & Rolf. Fashion darlingRoland Mouret, who quit hiseponymous London-based firm in2005 after a dispute with its owners,designed a capsule collection forGap, and in 2006, former Chloédesigner Phoebe Philo was

reported to be quietly consulting forthe company, too.

One snowy wintermorning in 2006, I visited H&M’smarketing director, JörgenAndersson, at the company’smodern Stockholm headquarters, tofind out how luxury fast fashionworks. Hennes & Mauritz—or H&Mas it is known now—is a Swedishphenomenon. It started out in 1947as a single store owned and run byan entrepreneur named ErlingPersson in Västerås, a town aboutan hour’s drive from Stockholm. Int h e 1970s, Persson’s son Stefanjoined the business and expandedit; in 1982, he became CEO, in 1998executive chairman. The companywas listed on the Stockholm stockexchange in 1974, and is one of thecountry’s top-performingcompanies, along with Ericsson. Inearly 2006, there were 1,193 stores intwenty-two markets with plans toexpand to Dubai and Kuwait.

H&M’s business is based on highturnover. New garments aredelivered to stores every day, whichdraws customers back regularly.More than 750 people work at theStockholm headquarters, includinga hundred designers who churn outcollections nonstop, fifty-fivepatternmakers, and a hundredbuyers for the company’s stores.“We usually work on designs a yearahead but we can turn somethingout in two to three weeks ifsomething hits fast,” Anderssonexplained.

Everyone I met therewas young, beautiful, andfashionably dressed in groovyclothes from the new H&Mcollection by Stella McCartney.Andersson—a tall, handsomeSwede, just like you’d imagine—told me that he and the company’screative director, Jan Noord, cameup with the idea of inviting luxurydesigners to do capsule collections

for the brand. “We wanted to do abig campaign for Christmas,something different, and we askedourselves, ‘What would be theultimate gift to women that wouldexemplify our motto of fashionquality at the best price?’” heexplained. “And we started to talkabout Karl. Women admire him, andhe has constantly proven to beinnovative. We called Karl and heloved the idea. He said, from hispoint of view, H&M is decidingwhat’s in fashion as much asChanel does, that fashion is createdby big fashion houses, but trendsare set in the street by how peoplewear clothes. We came up with theidea of a limited edition, a tightcollection, to combine massdistribution with exclusivity:‘massclusivity.’ We want to bedemocratic, but you have to be thereon a special day. You could neverfind Karl on sale.”

Lagerfeld did the

designs and worked with H&M tochoose the fabric, which came fromItaly, and the clothes weremanufactured in Turkey, Romania,and the Baltic states. Prices were 20t o 30 percent higher than regularH&M prices because, Anderssonexplained, “we wanted to do thebest quality possible.” When thecollection went on sale, the publicreaction was explosive. “We createda fashion event,” Anderssonremembered. “People would havebreakfast and then queue up atH&M. Some items sold out in twohours, like the sequin eveningjacket for women. It was all sold outby Christmas, which is what we hadhoped for. As Karl says in a videowe did, ‘Taste has nothing to dowith money.’”

The success of fast-fashion luxury designer collectionslike Lagerfeld’s H&M line has rattledthe luxury industry, and severalcompanies have changed the way

they do business to keep up.Ferragamo centralized inventoryand established computer links tosuppliers, cutting the design-to-delivery cycle by 20 percent, to tenweeks. Burberry began to offer fourto five capsule collections eachseason. Other fashion houses,including Escada, have come upwith midseason collections they call“hot fill-ins,” and are deliveringclothes to retailers even before theseasonal fashion shows in Paris,New York, and Milan. To keepfashion shows relevant, Frenchfashion association head DidierGrumbach has proposed holdingthem much earlier in the seasonalcycle.

More important, theemergence of luxury designer fastfashion has finished off whateverdivision was left between high-endand low-end fashion. These days,the rich buy Isaac Mizrahi designsat Target while the middle market

shops at Gucci. Mizrahi calls thephenomenon “bipolar shoppingdisorder.” Lagerfeld thinks it’s justterrific. “We live in a time whenexpensive and inexpensive—notcheap, I hate that word—can livevery well together,” he told me. “It’sthe first time in fashion this hashappened.”

“Before, cheap clotheslooked cheap,” Andersson told me.“Today, it’s nearly impossible to seethe difference, and that’s what weare trying to prove. We can never beas luxurious as Chanel, but luxury ismore in your perception than what itsays on the label. We see ourselvesas competitors with everyone—Gap,Zara, but also Chanel. Why shop atChanel if you can shop at H&M?”

CHAPTER ELEVEN

NEW LUXURY

The saddest thingI can imagine is toget used toluxury.—CHARLIE CHAPLIN

TODAY, THE LUXURY INDUSTRY is likeMonopoly. The focus is no longeron the art of luxury; it’s on thebottom line. In early 2006, Prada soldthe money-losing Jil Sander to aLondon-based private equity fundcalled Change Capital Partners fora reported $119.1 million. TheHamburg-based line is nowdesigned by a young, well-regardedBelgian named Raf Simons, whileJil Sander herself, who lives nextdoor to the headquarters, plots herreturn to fashion. Since 2000, Arnaulthas unloaded several of his brands.

He sold LVMH’s stake in MichaelKors fashion to SportswearHoldings, Ltd., the group that ownsTommy Hilfiger and jewelersAsprey and Garrard; Ebel watchesto the Movado Group; Pommerychampagne to the VrankenMonopole champagne group; andChristian Lacroix to the Falic Group,the Florida-based duty-free retailers.Most are thriving. At the time I wascompleting this book, it wasrumored that LVMH’s weakestfashion brands—Givenchy, Céline,and Kenzo—may have been on theblock. Procter & Gamble shut downthe Rochas atelier in 2006 but heldon to the perfume license.Designers—once the founders andowners of luxury companies—arenow hired hands that are asdisposable as the clothes andhandbags they create. “All these bigcompanies don’t care about you asa person,” former Givenchydesigner Alexander McQueen said.

“You’re only a commodity and aproduct to them and only as good asyour last collection.”

Presidents and CEOsprimarily come from the globalcorporate world, and the revolvingdoor spins so fast that there are nowa handful of headhunter agenciesthat specialize in placing executivesat luxury companies. Businessschools now offer degrees in luxurybusiness management. The job ofluxury CEO is extremely well paid:Burberry CEO Rose Marie Bravoearned $9.2 million in 2002, and,according to Forbes, Coach’s CEOLew Frankfort raked in $55.99 millionin fiscal year 2005, making him thethirteenth highest paid chiefexecutive in the world.

Brands are expandingtheir reach by licensing their nameson anything and everything onceagain. Versace designed a limitededition Nokia telephone (covered inone of its rococo prints) and a

Lamborghini. In early 2007, Pradaintroduced a signature mobilephone with the South Koreanelectronics firm LG. “A mobilephone is more and more anaccessory…an object of design andstyle, a status symbol which almostdefines a person—definitely one ofthe most important objects in awoman’s handbag,” a Pradaspokesman said.

Some applaud thedemocratization of luxury. “It meansmore people are going to get betterfashion,” Anna Wintour, editor ofVogue, told me. “And the morepeople who can have fashion, thebetter.”

But not everyone in thebusiness agrees. “What was onceexclusive in Beverly Hills is noweverywhere,” Fred Hayman told me.“It’s lost its cachet. The Gucci storein Beverly Hills was one of the mostextraordinary experiences inretailing. Now it is just another

Gucci store. When you get greedy,that’s what happens.”

“To me, luxury issomething you want to reach for,that is unattainable,” said IlseMetchek, executive director of theCalifornia Fashion Association.“Way back when, luxury wassomething you really wanted. Youlooked at society’s ladies and youwanted to live like them, and it wasunattainable. Now we have Ikeaand Desert Hills mall. Where is thedifference between Jimmy Chooand the C. H. Baker? Three strapsand a high heel at $700 and it’ll stillbe out of fashion at the end of theseason. There’s always a new heeland a new color. Luxury used tohave a shelf life.”

Miuccia Prada’s motherconcurs. “She says that the things[at Prada today] are not well made,that the fabrics are not as good, thateverything was much better in hertime,” Miuccia once said.

A handful of majorbrands—Hermès and Chanel inparticular—strive to maintain andseem to achieve true luxury. Thequality comes through in theirproducts—the handmade Kelly andBirkin bags, Joseph Mul’s roses inN o . 5—and in their philosophies.Both firms over the years havebought or invested in old, traditionalluxury brands that produced“exceptional products,” as Jean-Louis Dumas calls them, not forsimply profit but because theexecutives wanted them to continueto exist. At Hermès, the brandsincluded John Lobb shoes, Saint-Louis crystal, Puiforcat silversmiths,and Leica cameras. Chanel has asubsidiary that acquires esteemedFrench specialty companies thathave provided fine handcrafteddetails and accessories for couturefor decades and keeps them inbusiness. Known as Paraffection(By Affection), it includes the

embroidery house Lesage,shoemaker Massaro, milliner A.Michel, feather and flower houseLemarié, button maker Desrues,fabric-flower maker Guillet, andgold-and silversmith RobertGoossens, who collaborated withCoco Chanel to create jewelry forthe house from 1955 until her deathi n 1971. “You cannot advertise acouture dress then put garbage onit,” Karl Lagerfeld explained. “Indianembroidery is not bad. But Frenchembroidery from Lesage is anotherstory. As long as we are doingcouture, we needed thosecraftsmen.”

The philosophy behindthe move is the same as that whichsets these two companies apartfrom their competitors. “Luxury isexclusivity—it is made for you andno one else has it,” FrançoiseMontenay, Chanel’s president forEurope, explained to me. “At aminimum, it must be impeccable.

Maximum, unique. It’s the way youare spoken to, the way the productis presented, the way you aretreated. Like the tea ceremony inJapan: the ritual, the respect, thetransmission from generation togeneration. At Chanel, luxury is inour chromosomes. It’s our credo,something we try to achieve all thetime.”

The desire by customersto find that impeccable uniquenessfor less than the price of a car or ahouse has created a newsubsection in fashion: vintage.When I was a college student,“vintage” was a fifteen-year-old skirtthat you bought from the SalvationArmy for a buck. Today, “vintage” isa twenty-year-old Yves SaintLaurent haute couture velvet coatwith a mink collar for $3,000.Collecting and selling vintagecouture has become a good, bonafide business. Shop owners attendauctions and paw through closets of

old-time couture clients to find gemsfor young Hollywood actresses,New York socialites—in fact,anyone who wants somethingbeautifully made and most likelyone-of-a-kind. “Buying modernluxury has become an investment,”says Cameron Silver, owner ofDecades, one of Hollywood’s topvintage shops. “Vintage allowswomen to wear unique, high-qualityclothes for a fraction of the price.”

Silver, a tall, dark andstylish thirty-six-year-old fromBeverly Hills, got into the vintagebusiness by chance. Back in theearly 1990s, he was a singer whospecialized in German cabaret, andwhile touring the United States, hespent his free time in thrift storesand charity shops in cities such asMinneapolis, Seattle, and Miami,looking for hip designer men’sfashion. “On the racks I’d see all thisgreat women’s wear and a lightbulbwent off,” he told me. “I was looking

at vintage not as vintage but asmodern clothing that happened tobe thirty or forty years old.” Hereturned to L.A. and saw a 1926Deco building on Melrose a blockeast of the fashion mecca FredSegal with a For Rent sign in thewindow. Silver signed the lease andopened Decades in 1997.

At first, Silverspecialized in 1960s and 70s fashion,because, he says, “that’s the birth ofmodern fashion: Courrèges, Cardin,Rudi Gernreich, Yves Saint Laurent,Studio 54.” But as he learned moreabout the history of fashion, he said,“I could see the sexiness of atwenties beaded flapper dress orthe glamour of a 1930s bias-cutgown.” He started carrying a bit ofpre–World War II Chanel, Lanvin,and Schiaparelli as well asanonymous pieces that were ofextremely high quality. “When I buysomething, I ask, ‘Does it lookmodern and does it look sexy?” he

says. “Every woman at every agewants to look sexy.”

In addition to theMelrose boutique, Silver now has acorner in the Dover Street Market inLondon and does trunk shows indepartment stores around the world.Prices run from about $200 to $4,000,but can go as high as $35,000 for anearly Dior couture evening gown.He has about two thousand regularcustomers, including celebrities,their stylists, writers, producer’swives, businesswomen. “Basically,anyone with great fashion sense,”Silver says. His biggest sellers areoriginal Yves Saint Laurent, Pucci,Halston, and James Galanos.“Glamorous fashion,” as he calls it.“There’s not much glamour left incontemporary luxury fashion, and ifthere is glamour, it’s mass glamour.”

IN THE LAST FEW YEARS, there has

been the emergence of a new tribein the luxury business, what I callluxury refugees: designers,perfumers and executives who grewso disillusioned with thecompromises and greed of theluxury corporate world that they fledand started something small andindependent that would allow themto do what drew them to thebusiness in the first place: createthe best that money could buy.“Luxury fashion brands today aretoo available, everything is toouniform, and customer business istoo pedestrian,” Tom Ford, luxury’smost recent high-profile refugee,told me recently. “It’s likeMcDonald’s: the merchandise andphilosophy behind it is very similar.You get the same hamburger andthe same experience in everyMcDonald’s. Same with Vuitton. Wehelped create that at Gucci. It wasthe right thing at that time. Had wenot done it, someone else would

have it. The world was becoming aglobal culture. It was in the air andneeded to be addressed, and I’mproud of what we accomplished. Butit’s not what I’m interested in now.I’m in a backlash. All these handbagads make me sick. It’s so formula.And it’s foolish to think thatcustomers are not going to tune out,that they aren’t as bored with it aswe are. I believe that the littlecompanies are the big ones. Thereare lessons we can learn fromsmall, old-fashioned luxury.”

When Ford left Gucci inApril 2004, he took a year off to figureout what he was going to do next.He started a movie productioncompany called Fade to Black withthe goal of producing and directingfilms. He published a coffee-tablebook of his work. He designedsunglasses and created Tom FordBeauty, a cosmetics and perfumeline with Estée Lauder. And hewrote a business plan for a men’s

luxury fashion brand known simplyas Tom Ford that will include made-to-measure, high-end ready-to-wear, accessories, and leathergoods. “We’ll have $25,000 watches,custom-made jewelry, and hand-made suits,” he told me in May 2006,a year before he opened his firststore, in New York. “We’ll be closedto the public part of the day, and youhave an appointment and meet withyour fitter. It’s a way to do a new bigluxury. I’m not trying to createsomething for everyone. I amcreating something for the highlyvisual, highly urbane customer, andI believe there are enough of thesecustomers out there that businesswill be just as great as when you gomass.”

Perhaps my favoriteluxury refugee is French shoedesigner Christian Louboutin. Hemay be the most defiant voice inluxury fashion today. “I’m just backfrom a meeting with someone who

wanted to buy my company again,”he told me when we met at hisheadquarters office one freezingApril evening in 2006. “I said no,again.”

Louboutin is a rare birdin today’s luxury goods industry: ahighly successful, purposefullysmall, designer-owned-and-runcompany that produces impeccablymade items. Louboutin’s silk satinstilettos and crocodile pumps canbe found on the feet of the beautiful,the famous, and the fashionably in-the-know. Among his regular high-profile clients are Jennifer Lopez,Queen Rania of Jordan, Madonna,Elizabeth Taylor, and Today shownews anchor Ann Curry, whooccasionally flashes Louboutin’ssignature scarlet soles on camera.Louboutin’s company is tiny byluxury standards. After fifteen yearsin business, he only has sevenstores and thirty-five people on staff,including his salespeople. He sells

in several upscale departmentstores, including Barneys NewYork, Bergdorf Goodman, NeimanMarcus, and Saks Fifth Avenue inthe United States and HarveyNichols, Selfridges and Harrods inthe United Kingdom. He does noadvertising. He has no marketingdepartment. He does not activelypursue dressing stars for the redcarpet. He sells about 100,000 pairsof shoes a year. When I ask himwhat he does in sales annually, helooked at me blankly. “I have noidea.”

What sets Louboutinapart from his confreres is hisbusiness philosophy. “I see thesemen who build luxury brands tomake money, and I am working inthe same industry but I feel I havenothing in common with that,” heexplained. “Luxury is the possibilityto stay close to your customers, anddo things that you know they willlove. It’s about subtlety and details.

It’s about service. I cannot accept aplace where people are badlyreceived. I can’t imagine spendingseveral thousand dollars onsomething and the salesclerk getsannoyed because you take fifteenminutes to look. Luxury is notconsumerism. It is educating theeyes to see that special quality.”

This philosophy hasbeen instilled in Louboutin sincechildhood. He was born and raisedin a working-class neighborhood ineast Paris. His mother looked afterhim and his four sisters. His fatherwas a wood craftsman who madefine furniture and prototypes ofFrench train car interiors. “Therewere models of interiors of trains allover the house,” Louboutinremembered. Louboutin spentafternoons hanging out at thenearby Musée national des Artsd’Afrique et d’Océanie. On the doorwas a sign with the image of astiletto shoe crossed with a big red

X; spike heels wrecked the parquet.At the time, platforms were all therage. What on earth, Louboutinwondered, was this steep, slimshoe? He began to sketch it onschoolbooks and scraps of paper.

One day a friend gavehim a book about Roger Vivier, theshoe designer for Christian Dior int h e 1950s, who is credited withinventing the stiletto. Pagingthrough the book, Louboutinrealized he’d found his calling. Atsixteen, he was hired to designshoes for the famed Folies Bergèrescabaret, and learned how to makethem solid enough to withstandprofessional dancing and highkicks. In his twenties, he worked asa shoe designer at Chanel, YvesSaint Laurent, and Charles Jourdan,which at the time produced Dior’sshoes, and helped curate amuseum retrospective for Vivier,who was by then in his seventies.“Vivier taught me that the most

important part of the shoe is thebody and the heel,” says Louboutin.“Like good bone structure, if you getthat right, the rest is makeup.”

When the exhibitconcluded, Louboutin needed a job.He knew he didn’t want to return toworking for the big brands. “It wasno longer my dream,” he told me. “Iasked myself, ‘Do you want to workfor others for the rest of your life?’”He thought about founding his ownshoe company, but he says, “I didn’twant to show my shoes to retailersin an old leather suitcase in anoffice in a bad building in NewYork.” While he was shopping in thepassage Véro-Dodat in Paris’sSecond Arrondissement, he ran intoantique gallery owner Eric Philippe,who mentioned that a retail spacewas available down the way.Louboutin raised approximately$200,000 from his savings and theinvestments of two friends, signedthe lease and in November 1991

opened his shop. It was a jewel boxof a design, with cubbyholes in thewalls, each containing one shoe ortwo shoes. “If you make a preciousenvironment, then what’s inside isprecious, too,” he told me.

He produced his firstshoes in a little factory calledEvelyne Shoes in Nice. “They werenice, but they were not taking meseriously and they were really tooslow,” Louboutin remembers. Theywere also quite expensive: a singlepair of shoes cost about $110 ifLouboutin supplied the skin and$125 if the factory supplied the skin.“First cost!” Louboutin recalled,rolling his eyes. “Can you imagine?”His retail price was double, plus 20percent VAT, making his shoes apricey $270 to $300 a pair.

One of his firstcustomers was Princess Caroline,who, while trying on Louboutin’spumps, declared to her friend thatthey were “so Anouk Aimée,”

referring to the chic French moviestar. As it happened, the otherperson in the boutique was areporter from W magazine. Whenthe article was published withPrincess Caroline’s publicanointment, Louboutin became aninstant luxury star. The Americanretailers came that March to buy forthe winter 1992–1993 season, and, asLouboutin remembers, “I had noshoes. I had never consideredretailers wanting to buy my shoes.There are no luxury departmentstores in France. The French do notgo to a department store for luxurygoods. I was like Guerlain, who hadhis boutique and no distribution.”The buyers found Louboutin’sshoes to be quite expensive. Whenhe explained that his source wascostly, they said, “Why don’t you goto Italy?”

He took their advice andfound a factory in Lombardy thatwas more efficient and half the

price. He liked the place because itwas spotless and they madegorgeous shoes. “If you do luxury,”Louboutin explained, “you have totreat people in a human way andyou have to be elegant. You can’task poor people in bad conditions tomake beautiful things.” Though hisreputation and production wererising, his company was stillminuscule: himself, anadministration person, and a part-time salesgirl in the shop. “When Iwasn’t in Italy,” he remembered, “Iwas in the store, selling.”

His third season, headded his signature scarlet sole.Within three years, he broke evenand paid off his debts. In 1997, heopened a store on the Left Bank inParis. Then came stores in London,New York, and Beverly Hills. In 2003,he opened a franchise in Moscow. “Iwasn’t excited about doing afranchise,” he said, but “franchisesare good for places you don’t visit,

or are foreign to you. A franchise islike a translator in a country you donot understand.” In 2007, he isopening in Las Vegas.

The secret toLouboutin’s success is his ability tobalance the industrial and theexclusive. He will turn out twentythousand pairs of an elegant,classic pump, but he also designswhat he calls Cinderella shoes,delicate treasures that he producesin an extremely limited run. “I have asmall piece of batik from Mali that Iwant to use,” he told me. “I think Ican do twenty pairs of shoes with it:ten for two different stores. Thisway, a woman can have thepleasure of having a shoe she’llnever see anywhere else andanother shoe that is a great shoe.”In addition to the Cinderella shoes,Louboutin offers a made-to-measureservice where, like couture, you canchange the height or the color of adesign or come up with something

brand new and have it fitted to yourfoot. “That’s why I keep thecompany on a human scale,” hesays. “If I lost the laboratory, I’d losethe pleasure of design.”

The other reason hiscompany flourishes is simple:integrity. “I remember my fathercutting wood,” he told me. “If yousculpt in the vein, it’s beautiful. Ifyou go against the grain, it breaks.Same goes with business. If you gowith the flow, it grows naturally. Butif you try to grow your company inan unnatural way, it breaks…I didnot do a company to make money. Imade shoes and it became acompany.”

Naturally, the luxurytycoons have been circling for a fewyears now. The first bite came at adinner party for eight at a privatehome in Paris in 2000. Louboutinfound himself sitting on the sofasurrounded by four topbusinessmen.

“When can we buy a bitof your company?” one askedeagerly.

“I felt like a girl beinginvited to dance,” Louboutinrecalled. “I blushed and said, ‘Nothank you.’”

“My company grew littleby little, and one of the reasons isbecause I handle everything,”Louboutin told me. “I don’t have anydesire to rush, to concentrate on toomany markets. If I did, I would losethe core of my work, which isdesigning shoes.”

Yet Louboutin doesn’tcompletely dismiss the idea ofselling. “If there is a moment I nolonger want to play this game and Icould cash out and do somethingwith that money to help the poor andthe sick,” he said, “then I’d sell.”

ON A COOL SPRING morning in Paris, I

was chatting with a Hollywoodproducer friend who was in townand told him about this book.

“Fine,” he said, sizing upthe story like a movie pitch. “I seewhere you’re going with this: luxurycompanies have gone mass andalong the way forgotten theiroriginal mission, which was toprovide the rich with trulyexceptional products. So here’swhat I want to know: What do therich do now?”

“That’s a good question,”I answered. “I’ll find out.”

I thought back to my visitto the Vuitton factory in Asnières.Along with watching theseamstresses and technicianschurn out hundreds of logo bags, Isaw the craftsmen making a largesquare wooden jewelry casecovered in python. Nothing on thebox identified it as Louis Vuitton—no monogram, no label—andthough I am not particularly keen on

reptiles, I found it to beexceptionally beautiful. It was aone-of-a-kind special order, I wastold, for a “good client.” Anyone withenough jewelry to fill it, I said tomyself, must be a very good clientindeed.

For the ultimate inlingerie, the rich go to Alice Cadollein Paris, a couture housespecializing in undergarments runby Poupie Cadolle, the great-great-granddaughter of founder HerminieCadolle, who invented the bra backin 1889. The experience of having acustom-made bra at Cadolle isluxury in the old-fashioned sense ofthe term: genuine personalattention, exquisite materials,beautiful handcraftsmanship, all tocreate something just for you.Poupie, a genial blonde with aknowing smile, receives you in hersalmon-colored salon with plumvelvet drapes and Herminie’sNapoleon III sofas, asks you what

you’re looking for, and takes yourmeasurements. She has fourhundred basic designs to choosefrom and then alters the pattern to fityour body. You select the fabric—although she prefers to work withlace and tulle—and you choose thecolor, although Poupie pushesblack. “I find that 95 percent of thewomen look beautiful in black,” shetold me. “It looks good against theirskin.”

Poupie makes about 550made-to-measure bras a year, 100strapless bras, 50 girdle-likefoundations (“for ample women towear under couture gowns,” shesaid), and 30 traditional lace-upcorsets for clients who includeseveral movie stars, one queen, anda few of the showgirls from theCrazy Horse Saloon in Paris. Shemakes corsets for films as well,including for Juliette Binoche inChocolat, Monica Bellucci in HowMuch Do You Love Me?, and the

cast of the French retro whodunit 8Women. Four times a year, Poupietravels to New York to see herregular American clients. The basicbra requires three fittings and costsabout $800. Matching underwear is$160 to $400, depending on thefabric.

A few years ago, acorporation offered to buy Cadolle.“I said no,” Poupie told me. “Wehave been independent for 120years, we can be for another 50.”She’s grooming her pretty twenty-eight-year-old daughter Patricia totake over when she retires. In 2005,Poupie had to move out of thebuilding where her great-grandmother Alice set up shop in1911. It was a charming old placewith a clackety gated elevator and aplush salon with red-velvet drapes.Today, it is part of a half-block-longRoberto Cavalli store.

The really rich still buyand wear couture, which runs from

$20,000 for a basic suit to $100,000 foran evening gown. But the regularsgenerally do not pay full price.“We’re dickering, we’re in theArmenian rug dealer stage,” life-long couture client Nan Kempnertold me a few years ago regarding aDior couture jacket she loved butfound to be overpriced. “One hasone’s priorities,” she said.

She got the jacket.I remember attending a

fitting for one of Dior’s best clientsone afternoon in the avenueMontaigne couture salons. Sheordered eight or ten gowns withmatching made-to-measure shoes.When she was presented the bill,the vendeuse made sure to pointout that these were special prices.The message was clear: if you buycouture in bulk, you get a discount.

The really rich do notattend the couture shows either.“Most of the Chanel clients are nothere,” Karl Lagerfeld told me after

the Chanel couture show in July2006. “They have other things to do,you know? But the oceans arecrossed by private jets for fittings.”

“Who are they?” I asked.“New fortunes. Huge

fortunes. People who are richer thanair. People we don’t really know—we know if the money is clean—butpeople who don’t want to beidentified. It’s not the red carpet.Whenever you have the dress onthe red carpet, those women, theycancel their order immediately. Thewomen who buy couture don’t wantto be identified with actresses.”

“Where do they live?”“China, there are more

than a couple.”A few days later,

Chanel’s head seamstress and oneof its vendeuses were flown with thecollection to China for the weekendon a private jet. “There will alwaysbe a need for haute couture,”socialite São Schlumberger told me,

“because there will be people who,if it exists in red, will want it in white,who want quality, something specialfor themselves, something wherethere aren’t dozens of the same.”

In the United States, therich shop at Giorgio Armani. Thewealthiest 5 percent of Americansaccount for 47 percent of all sales inArmani-owned stores, VictoriaCantrell, senior vice president andchief information officer for GiorgioArmani Corporation, said in 2006.

For jewelry, the richprefer custom-made. The Frenchfine jeweler Boucheron, owned byGucci Group, reported in 2005 thatspecial orders were up 15 percent ayear.

For handbags, theyorder Hermès.

Yet they also shop atoutlets. When I was at the DesertHills Premium Outlets in August2006, I spotted a shiny young coupleloading shopping bags into the

trunk of their ivory Maybach 62sedan—which at the time sold formore than $380,000 new. When Itried on a pair of black leather mulesat the Sergio Rossi outlet later thatafternoon—which, at half price, stillran $200—the saleswoman told me,“We had a princess in here the otherday who so loved those shoes shebought them in every color. Shecomes here every season.”

They demand and takeadvantage of perks, such aspersonal shoppers who not only pullclothes for private viewings andfittings in plush salons but also caterto a customer’s every whim.Danielle Morolo, a personalshopper at the AmericanaManhasset luxury shopping centerin Manhasset, New York, packscustomers’ suitcases. She runserrands—once it was all the wayPalm Springs—and she spent partof her vacation in Florence to huntdown lace for a customer. “I’ve had

people call me from the office andask me to go to their homes andpick something out of the closetbecause they didn’t like what theywere wearing,” she said. “I have thesecurity codes to clients’ homes.”

They don’t even have toshow up to shop. “My best customerlives in Atlanta, but hasn’t been inthe store since the Super Bowl2000,” said Jeffrey Kalinsky, owner ofthe trendy fashion boutique Jeffreyin Atlanta and in downtown NewYork. “We mail her a package everyweek, she picks out what shewants, and sends the rest back.These days, we go to them.” LosAngeles retailer Tracey Rossregularly secures tickets toAmerican Idol or movie premieresfor customers, and sendscustomized gift baskets to theirhomes or hotel rooms.

Hong Kong luxuryretailer Lane Crawford opened aVIP suite that connects to its

neighboring Four Seasons hotel in2005 for its best clients. The three-thousand-square-foot PlatinumSuite, as it is called, is spacious andmodern, with commanding views ofHong Kong harbor. Among its perksare the hotel’s concierge andrestaurant services as well asstylists and makeup artists to helpyou choose just the right outfit fromLane Crawford and get dressed foran event. The suite is often bookedfor private meetings and dinnerparties, but Bonnie Brooks,president of the Lane CrawfordJoyce Group, told me during visit, “Ifyou are in Hong Kong for the day,and want a place to park, you cancome here. And you don’t have tospend.”

Saks Fifth Avenueinvites its top-spending clients to anannual dinner at a top New Yorkrestaurant—in 2006, it was at LeCirque—and sends them home withgoodie bags stuffed with cashmere

blankets, Baccarat crystal vases, orFabergé eggs. Neiman Marcus’scustomers who spend $5 million ayear on their Neiman Marcus creditcard receive complimentarymemberships to Exclusive Resorts,a luxury residence club, and threeweeks at one of the properties.“[Big-spending customers] like to becoddled,” a Saks spokeswomansaid. “Getting VIP treatment makesyou feel special. It’s human nature.You love to get the prize.”

In Las Vegas, the reallyrich stay in hidden villas that arefurnished with European antiquesand include twenty-four-hour butlerservice, private pools, private gyms,saunas and steam rooms, andentourage rooms for their nannies,pilots, chefs, and whoever else is intow.

They have perfumemade just for them, like Louis XIVdid two centuries ago. Each year,Patou receives a handful of orders

for in-house nose Jean-MichelDuriez to create a made-to-measureperfume bottled in a Baccaratcrystal flacon. The service costsapproximately $70,000.

And if they live in or visitSouth America, they shop at Daslu,the world’s most luxurious store.

OVER THE LAST FEW YEARS, I hadheard about Daslu, the luxuryfashion emporium in São Paolo,Brazil, owned and run by a savvy,ambitious woman named ElianaTranchesi, and, to me, it soundedlike everything that luxury brandsprofessed to be.

Daslu started, like mostother successful luxury ventures,quite humbly. Back in 1958,Tranchesi’s mother, a high-societylawyer’s wife named Lucia Piva deAlbuquerque, would fly from SãoPaolo to Rio de Janeiro to buy

Brazilian high fashion. Then she’dinvite her lady friends to her modest1940s home in the posh Vila NovaConceição neighborhood to sellthem the clothes, donating a portionof her profits to charity. At the time,Brazil was closed to imports. IfSouth Americans wanted Europeanluxury, they would travel to Europeor the United States to buy it. Overthe years, Lucia’s living roombusiness grew. Official store hourswere 1:00 to 5:00 p.m. She hired herfriends’ daughters to help withsales. Her uniformed maids scurriedabout, serving tea and coffee andfetching clothes from various rooms.It became known as Daslu, whichtranslates to “In Lu’s House.”

I n 1977, Eliana, thentwenty-one, began to get involved.She worked as a salesgirl andlaunched an in-house label, whichshe designed and had produced inBrazil. Lucia bought the house nextdoor to expand the retail space. As

the business grew, Lucia addedanother, and another, and another,and connected them, creating awarren of salons filled with shoes,clothes, handbags, and jewelry.Eventually Daslu took up the betterpart of a tree-lined block. “It didn’thave any windows, and there wereno signs outside,” Tranchesi told meover tea at the Plaza Athenée oneOctober afternoon in Paris in 2005.“There was an awning with a big Don it, and that’s it.” When Lucia diedin 1983, Eliana took over.

I n 1989, Brazil’s newpresident, Fernando Affonso Collorde Mello—the first democraticallyelected leader in twenty-six years—implemented an economic plan tobattle the country’s rampant inflationthat included freezing assets andbank accounts, and easingrestrictions on imports. ForTranchesi, it was an answer to herprayers. “I said, ‘We are going tohave Chanel, Gucci!’” she

remembered. “And my friends said,‘Are you crazy? No one has anymoney.’” Tranchesi didn’t care. “Iknew we had clients with taste,” shetold me, “that there would be amarket.” She jumped on a planeand flew to Europe to meet withfashion houses. “The first collectionwe bought was Claude Montana,”she remembered. It was followed byValentino and Moschino. In themid–1990s, a Chanel bigwig traveledto São Paolo and stopped by Dasluto see what the all the hubbub wasabout. He was bowled over.

“We have to have aChanel store in here,” he toldTranchesi when they met in her littleoffice upstairs. “But where?”

Tranchesi lookedaround.

“Here,” she said.“There were thirteen

other important retailers in SãoPaolo at the time with big displaywindows on the street,” Tranchesi

told me, “and he chose Daslu,inside, on the third floor, in themiddle of the men’s department! Hecame to the opening and at the endof the day he was on his kneesputting shoes on clients’ feet. Wesold 70 percent of the collection inthe first day. I asked friends to leavebehind some of what they hadpurchased so I could show it thesecond day.”

Though Chanel was aroaring success, Tranchesi still hadtrouble getting brands to sell to her.“They didn’t see Brazil as a goodmarket,” she said. “But then they’dcome here and were overwhelmed.”Eventually, she snagged Gucci,Prada, Zegna, and Dolce &Gabbana, which all set up in-storeboutiques. To make room for them,Tranchesi had to keep buying andrenting neighboring houses. By2002, she had twenty-three houses,for a total of 135,000 square feet, andseventy thousand clients. Their

armored limos with bulletproof glassclogged the street. Neighborsstarted to complain. WhenTranchesi needed to expand evenmore, the zoning commission saidno, so she decided it was time tomove. In June 2005, she closed theold, rambling Daslu andinaugurated the new Daslu, a180,000-square-foot Florentine-villa-like fashion emporium in VilaOlímpia, a bustling business districtabout a mile from the originallocation. In the first four months, sheadded fifteen thousand new clients.

In April 2006, I traveled toSão Paolo, the world’s fifth largestcity, with eighteen million people,specifically to visit the new Daslu.Even with all I knew about the store,I was still knocked out.

You enter by a longprivate driveway and pass throughtwo security gates. The economicdisparity in Brazil is radical anddivisive: the poorest 40 percent of

the country’s 188 million possessonly 8 percent of its wealth, manyliving in sprawling urbanshantytowns known as favelas. Therichest—the country’s ruling class—live like pre-revolution aristocratswith fortified homes where theyentertain lavishly, with armoredlimos and bodyguards. “We have alot of problems with security here,”Mônica Mendes, Daslu’sinternational director of marketing,explained to me. “The really richdon’t go out and walk in the streets.”Most cars have darkened windowsnot to block sunlight but for security,and you never, ever roll yourwindow down. Locals will drivethrough red lights rather than stopand take the risk of being carjacked.Mendes was so nervous sitting atone red light where there were afew squeegee guys that when itturned green and we drove onunharmed, she crossed herself andsaid a prayer of thanks. “São Paolo

is one of the most important marketsfor bulletproofing,” she said.“Everybody has it.”

Once you arrive at thestore’s entrance, a valet takes yourcar and you are whisked inside thevanilla marble hall to the conciergedesk, where a hostess will sign youin. If you are a regular, you haveprobably already alerted yourregular salesgirl that you arecoming, and the hostess will ring totell her you’ve arrived. If not, you willbe assigned a salesgirl for yourvisit. The salesgirls are known asDasluzettes and are the daughtersof São Paolo’s best families. Theyare très soigné—tall and thin, withsmooth butternut skin and longglistening hair—and they move inthe city’s rarefied social circles,attending smart dinner parties andextravagant galas nightly. “Thesalesgirls live the life that thecustomers live,” Tranchesiexplained. “So they understand.”

If you’re a regularcustomer, chances are yourDasluzette has already pulledseveral pieces that you willprobably love and put them aside ina private salon for you to try on.New clothes arrive often, which iswhy Daslu’s best customers tend tocome to the store four times a week.“Women in Brazil are completelycrazy about fashion,” Mendes toldme during my visit. “Clients buyAmeri can Vogue, tear out thepages, give them to the salesgirland say, ‘When that arrives, I wantit.’ When the Fendi Baguette firstcame out, we sold them all inpresale before we received them.”

If you are a newcustomer, like I was, yourDasluzette will give you a tour,collecting items that interest you asyou move from room to room. Likethe old Daslu, the store layout is likea house with interconnectingsalons. The decor is in soft off-white

tones with thick champagne-huedcarpeting—it’s as if you’ve plungedinto a vat of crème anglaise—andwhite orchids everywhere. On theground floor are the designerboutiques, including all the regularsuspects: Vuitton, Dior, Gucci,Valentino, Jimmy Choo, SergioRossi, Chloé, Pucci, Valentino,Manolo Blahnik. “Every youngBrazilian woman knows ManoloBlahnik,” Tranchesi said with alaugh. “And Valentino sells wellbecause the husbands love theirwives in Valentino dresses.” Formost of the brands, Daslu owns thefranchise and chooses the clothes.But the brands usually handle thedecor themselves, to maintaincontinuity; Peter Marino designedthe Chanel and Dolce & Gabbanaboutiques. Vuitton, Burberry,Armani, and Ferragamo lease theirspace from Daslu. The Vuittonstore, at four thousand square feet,is the largest in Latin America.

On the second flooryou’ll find fine jewelry, perfume,lingerie, swimwear, vintage wear, afew more luxury brands, achampagne bar, the Leopolldinarestaurant, and Daslu private labelfor women, known as DasluCollection. No men are allowed inthe Daslu women’s department, andthere are security guards posted atthe entrances to make sure. Thereare no dressing rooms on thewomen’s floor. Instead, customersstrip down to their lacy underwearand try on the clothes right there onthe sales floor. “My mother onlyreceived friends, so there was noproblem changing in front of oneanother,” Tranchesi explained. “I didthe same: friends receiving friends,so no need for changing rooms. It’snatural for Brazilians. You aren’tashamed if men aren’t around.”

The Daslu collection hasbecome a pillar of the store. Itaccounts for 60 percent of sales

there and is now carried by severalinternational retailers includingBergdorf Goodman, Saks-Jandel inWashington, Tracey Ross in L.A.,and Harrods and Browns in London.Tranchesi still designs thecollection and has it made in Brazil,mostly in locally producedmaterials. The clothes are casualchic: swishy jersey dresses, sexystretch jeans, towering strappysandals decorated with big fauxjewels, filmy gowns flecked withcrystals. As you settle into one ofthe cozy corners with comfy sofas totry them on, the maids, known asthe “uniform girls” because of theirblack dresses with white apronsand stockings, will serve yourefreshments. “When Daslu was inmy mother’s house, the maids, whowore the same uniform, helped andserved,” Tranchesi explained. “Theystarted by giving coffee or water.Then they started to put the clothesback.” Now there is an army of three

hundred.The ambiance at Daslu

is clubby and delightfully upbeat.Customers come from Rio andSalvador, Argentina and Peru.Everyone knows everyone—thereare plenty of air kisses. They shopfor a few hours, meet up for high teain the Leopolldina restaurant or for adrink in the champagne bar, catchup on gossip, then shop some more.Six times a year, Daslu hosts afestive fashion show/party for tenthousand of its best customers. “Thewomen dance, shop, and have agreat time,” Mendes says. OnTuesday evening, Daslu stays openuntil ten, and chic Paulistas meetthere for dinner and shopping. Thewealthy and famous like Daslu, sheexplained, “because you have a lotof privacy, you have everything youneed, and everyone is treated like aVIP.” Celebrities particularly like thesafety of the Daslu compound.“Nothing happens to them here,”

Mendes said. “No one notices orbothers them. [Formula Onechampion] Michael Schumachercame here last year and nobodysaid anything. [Brazilian soccer star]Ronaldo is one of the mostimportant clients we have at Dasluand nothing happens. Noautographs. No photos. Nothing.” Afew years ago, Tranchesi had astudy done of shopping habits atDaslu. “Normally, in a Brazilianshopping mall, 20 percent buy,” shetold me. “At Daslu, 75 percent ofpeople who walk inside buysomething.”

On the third floor is themen’s department. There’s aJohnnie Walker whiskey bar, abookstore with a fireplace andsofas, and even a La Perla lingerieboutique, “so they can buy for theirwives and girlfriends,” Mendessays. There’s a men’s Daslu ready-to-wear line; departments dedicatedto electronics, athletic wear, and

gym equipment; a travel agency; aluxury real estate agency;Mitsubishi, Volvo, and Masertidealerships; a Ferretti yacht broker;a Daslu helicopter dealer (onehangs on display in the atrium); atobacconist; a music department; aJapanese restaurant called Kosushithat is considered the best in SãoPaolo; and a wine department witha selection of vintages to rival thebest caves in Paris.

On the fourth floor, youfind the children’s clothing and toydepartment, with a playroom and akid’s-height bar with bowls ofgumdrops and plates of chocolatechip cookies, a bank, a pharmacywhere you can fill yourprescriptions, a hairdresser whereeach client has a private room, anda spa: “Brazilian women are crazyabout the body and skin care—it’sunbelievable,” Mendes said. “Theyhave facial massages regularly.”Daslu of course has the best

facialist in town. “It takes four or fivemonths to get an appointment.” Sheadds. In addition, there is CasaDaslu, with table-, glass-, andsilverware as well as refrigerators,barbeques, and a Viking showroom;a stationer to do your engravednotepaper and invitations; achocolate shop run by Tranchesi’ssister, where all the chocolates aremade by hand; and a bakery calledPati Piva that does extravaganttiered wedding cakes. On theground level, there is a consecratedwedding chapel, and on the fifthfloor is a series of immense terrace-like reception rooms and a ballroomthat can seat thirteen hundred, allwith a view of the city. “I think Dasluis the only place in Brazil where youcan do everything for your wedding,including holding the ceremony andthe reception, booking thehoneymoon, and buying the house,”Mendes said.

When it is time to pay,

you are ushered into a lounge-likeroom where you sit on one of thecomfortable Louis XVI chairs, havea coffee brought to you by a uniformgirl, and chat with your salesgirlwhile everything is run up. On thecounter sits a pile of the latest DasluCDs, a compilation by the Dasludeejay of hip Brazilian and Latinmusic, which you can buy for a fewreales. On the wall is a flat-screenTV broadcasting Daslu TV.Throughout the store, Daslu radio isplaying. You pay the bill and areescorted out by your Dasluzette,empty-handed. Everything has beensent down to your car, or up to thehelipad.

There are sevenhundred Daslu employees,including the uniform girls; athousand others employed by brandshop-in-shops, travel agencies,restaurants, and so on; and ninehundred third-party serviceproviders such as valets, janitors,

and security guards. Next door,Daslu has an employee day carecenter called the Villa DasluEducational Center with a nurserywhere female staff can come andnurse their babies three times a day,and a school for children up to agefourteen. Some two hundred attend.The children receive instruction inEnglish, art, sewing, piano, guitar,and ballet—often by clients. When Ivisited the school, I met two tall,elegant clients who had justfinished teaching a group of eight-year-old girls in the ballet studio.There is also a pediatrician, adentist, and a psychologist. After ahot lunch in the school cafeteria,children seven and older go to thelocal public school. Youngerchildren stay and play. They havesnack time on picnic benches in thegarden. “The uniform girls wereunhappy with the schools and thequality of life for their children, sowe opened the school,” explained

Mendes as we walked down thehallway and visited classes. “This iseven better than my children’sschool.”

But what really setsDaslu apart from other luxuryretailer’s is Tranchesi’s personalinvolvement with the business.Chances are, you’ll run into herwhile you are shopping, and she’llask how the kids are, help you pickout a few things, or assist in fittings.“In America, in Europe, retailersknow what they’ve sold by lookingat the numbers in the computer,”she told me. “I know what we sellhere because I’m on the shop floor. Idon’t sit in an office. I run thebusiness from here”—and shetapped her belly. “In luxury brandstores, when you pay, they forgetabout you. They completely forgetabout you,” Mendes told me. “Elianadoesn’t just know the name of theclient, she knows the client. Daslu isher house, and the customers are

her guests.”Shortly after the opening

at the new location in July 2005,Daslu was raided by federal policeagents and Tranchesi was arrestedfor alleged tax evasion. Thegovernment alleged that import-export firms falsified invoices listingprices of imported goods far belowmarket value to allow Daslu to payless in duty. “It was crazy—280police came to the office,” saidMendes. “You never see that in afavela, even when there is a bigdrug trafficking bust. But Daslu, yes.It was to show off in the press, todraw attention from Lula and hisproblems,” she said, referring toPresident Luis Inacio Lula da Silva,the country’s socialist president,who has been embroiled in a seriesof corruption scandals. Tranchesiwas released shortly after. InDecember 2006, Daslu was orderedto pay $110 million in back taxes.The store planned to appeal.

On the second day Iwent to Daslu—it took three entiredays to see the place—I had lunchwith one of its good customers, achic woman named Cristiane Saddi,the marketing director for the localMercedes dealership that herhusband owns. She also volunteersat a local Syrian-Lebanese hospitalthat her grandmother and her great-aunt founded. Saddi is one of thoseremarkable women who give Brazilits reputation as the land ofstunningly sensual women: thin,tan, and taut, with long black hair asslick as oil and eyes to match, shewas dressed in a tight white Dolce& Gabbana blazer over a lacy whitecamisole, skinny white Dieseljeans, big diamond stud earrings,and towering heels. We met inLeopolldina, Daslu’s elegantrestaurant and one of São Paolo’stop power spots, packed daily withcelebrities, businessmen, andsocialites. The chef is Italian, and

the cuisine is a Best of Europe tour:filet mignon with red wine sauce,wild mushroom risotto, lobster-stuffed ravioli, prosciutto and melon,and seviche.

We talked of her Dasluexperience. “My mother used to goto the original one and would takeme,” Saddi said as she tucked intoan ample lunch of beef filet andpasta. “I started shopping theremyself when I was fifteen. Now I’mforty-three. It grows and grows andnever loses that family feel. You’renot received as a client but as afamily friend. When I got married,we lived just down the street. Iwould call and say, ‘I need a gift forthis or that,’ and they would pullsomething. Salesgirls are yourfriends. They are in the same socialswirls. When you go to Daslu, it’snot to buy a new pair of shoes. It’s tosee your friends. You can’t find thisservice anywhere else in the world.”

And we talked about life

as a São Paolo socialite: “You canbe everything all together—work,mother, hostess—because youhave staff,” she said. “In return, youhelp with the schools, houses,everything. My driver has been withme twenty-one years, since Imarried, and I have watched hischildren grow up. When he was sickI put in him in the hospital and gothim the best doctors, the besttreatments. You help them, becausethey help you. All the families heredo that. It’s an exchange.”

What I really wanted toknow, though, was this: what, forCristiane Saddi, is luxury today?

“Daslu is a luxurybecause you can do what youwant,” she explained, pouring darkchocolate sauce over two slices ofcake. “They have the best brandsand the best choice in the world,from bras to evening gowns tohousewares. Everything you needfor everything. How many fashion

stores also sell cars? You just thinkabout a product—you can buy it atDaslu.”

After two days at Daslu, Iunderstood what she meant. Daslumay have been dreamy, but itwasn’t a dream.

As she dug into hercake, I began to think about thestate of the luxury business, how itseemed over the last two decadesto have lost its soul. I wonderedwhere it would go: what would it doonce the Japanese and Americanshad grown weary of luxury brandsand emerging markets weresaturated? When gimmicks like artgalleries and gala concerts wouldno longer draw crowds in thestores? When there were no morecorners to cut and there was nomore growth to be had? Was thereenough integrity or value left inthese brands to allow them tocontinue to call themselves“luxury”? Or, more important, to

maintain their legitimacy, I askedSaddi, would they be able to keepthe wealthy like her and her peersas customers?

“Yes,” she said. “TheLouis Vuitton here carries only itsmost expensive items,” she said.“Daslu clients don’t need the logoentry-level handbag or to wearlabels or logos. We buy from luxurybrands, but not ordinary products.Special items. There’s alwayssomething special. You can seewhat is mass and what is special.Luxury is not how much you canbuy. Luxury is the knowledge ofhow to do it right, how to take thetime to understand and choose well.Luxury is buying the right thing.”

And with that, Saddiwiped the chocolate off her lips,reapplied her lipstick, got up, andkissed me good-bye.

“Must get back to work,”she said, and she clicked off in herstilettos.

ACKNOWLEDGMENTS

Deluxe exists thanks in large part totwo extraordinary women: NinaHyde, the legendary fashion editorof the Washington Post, who gaveme my first job as a fashion reporterin the late 1980s, and taught me thatfashion was as serious andrespectable a beat as covering theWhite House; and Amy Spindler,style editor of the New York TimesMagazine, who assigned me aseries of major investigative piecesabout the fashion industry in the late1990s, and said to me, “You shouldturn this into a book.” She was right.Sadly, like Nina Hyde a decadeearlier, Amy Spindler succumbed tocancer far too young and before shecould see it happen.

Peter Riva helped shapethe idea for Deluxe and gave me thekick I needed to sit down and writethe proposal. My agent, Tina

Bennett at Janklow & Nesbit, hadthe patience to keep rereading it forwhat seemed like forever until itsparkled, then sent it to Ann Godoffand Emily Loose at Penguin Pressin New York and Stefan McGrath atPenguin Press in London, who—onmy fortieth birthday, no less—courageously took me on andguided me into authorhood.Penguin Press editors JaneFleming and Helen Conford tag-teamed me, asking all the rightquestions and adding neededstructure, both to me and themanuscript. Happily, theirinterpretation of “a couple of moremonths” was as elastic as mine.

Deluxe would notcontain half the information it hasw i th o u t Newsweek. My editorsFareed Zakaria, Nisid Hajari, andSusan Greenberg and my Parisbureau chief Christopher Dickeyallowed me to wander the planet onbehalf of the magazine in search of

the real story behind the luxuryindustry, and published earlyversions of these reportages inNewsweek’s international edition.Sue Greenberg further gave upweekends and part of her NewYear’s vacation to gently shape themanuscript into a seamless read, asshe has done with my Newsweekcopy for more than a decade.Longtime Newsweek Paris bureauphoto editors Ginny Power andJacqueline Duhau helped to chooseand find just the right pictures toaccompany my words and poppedup my spirits when they started towane.

A slew of young, hungryreporters helped me with research,including Marie Valla, JennyBarchfield, Remi Hoki, J. J. Martin,Erin Zaleski, Florence Villeminot,Nicole Martinelli, Laura Czigler, andLauren Greenwald. These dynamicyoung women spent hours chasingdown obscure numbers, setting up

interviews in far-flung places, and,when needed, translating foreignlanguages. Fact-checker supremeAustin Kelley pored throughmountains of documents,deciphered my scribble, andfollowed up with sources to makesure I got it right. And several luxurybrand PR folks—including AmeeBoyle at Giorgio Armani, OlivierLabesse at DGM Conseil, Marie-Louise de Clermont-Tonnere andClaire Chassard at Chanel,Annelise Catineau and OlivierMonteil at Hermès and theunflappable Nathalie Tollu at LouisVuitton—answered my seeminglyendless barrage of follow-upquestions with speed and aplomb. Icould have never pulled this booktogether without them.

I am deeply grateful tothe hundreds of people Iinterviewed for Deluxe on therecord, including Wanda McDaniel,Kenneth Fang, Tom Ford,

Laudomia Pucci, Kris Buckner,Handel Lee, Menehould deBazelaire, Leslie Caron, and Oliviade Havilland, and those who spoketo me off the record and told me thesecrets of the luxury industry.Mônica Mendes was right to insistthat I travel to São Paolo to seeDaslu firsthand, and wasextraordinarily welcoming when Idid, and Jennifer Woo and BonnieBrooks of Lane Crawford, WilfredKoo of Givenchy, and David Tanghelped me negotiate Hong Kongand Guangzhou, making whatseemed impossible achievable.Several friends, including LaurieSprague, Cathy Nolan, KevinMulvey, and Mike Medavoy, readDeluxe in rough form or debated itspremise with me, and their inputshaped its outcome. I must alsothank photographers Don Ashby,Marcio Madeira, and PatrickDemarchelier and artist Tom Sachsfor generously providing beautiful

images for Deluxe, Andre Balazs,Philip Pavel and everyone at theChateau Marmont for putting up withme as I tried to channel the hotel’swriting ghosts, and the indefatigableJune Newton, who kindly invited meinto her home and took the mosthonest portrait of me ever.

More than once whilereporting and writing Deluxe Ithanked the heavens above forallowing me to start my journalismcareer in the Style section of theWashington Post—the writer’ssection of the writer’s newspaper—during the reign of the formidableBen Bradlee. Editors Mary Hadar,Deborah Heard, Rose Jacobius,and Gene Weingarten and musiccritic Joseph McLellan took me as agreen and eager college student,gave me terrific assignments, andpushed me to dig deeper and writebetter. It was journalism boot campand finishing school all in one, and Iuse all that they taught me every

day of my career.Most important, I could

have never written Deluxe withoutthe encouragement of my family andthe profound support and love of myhusband, Hervé, and our incrediblypatient daughter, Lucie—my light—who gamely accompanied me onmany of my reporting adventuresand spent half of her six-year lifewaiting for me to finish this project.

Now, honey, now wecan go play in the park.

NOTES

INTRODUCTION

Page

The luxury goodsindustry: Claire Kent,luxury goods analyst,Morgan Stanley London, e-mail, April 18, 2005.Thirty-five major brands:Claire A. Kent et al.,“Making the Sale,” MorganStanley Dean Witter,March 11, 1999, p. 10.In Asia: David B. Yoffieand Mary Kwak, “GucciGroup N.V., (A)” HarvardBusiness School, case 9–701–037, September 19,2000; revised May 10,2001, p. 4.The Chinese enriched:Palmer White, The MasterTouch of Lesage:

Embroidery for FrenchFashions (Paris: Editionsdu Chêne, 1987), p. 16.As Diana Vreeland:Diana Vreeland, D.V.(New York: Da CapoPress, 1997), p. 47.“I’m no philosopher”:Stanley Karnow, Paris inthe Fifties (New York:Random House, 1997), p.263.In 2005: “Best & Most2005,” GenerationDataBank,www.generation.se.In their best year: RanaForoohar, with MacMargolis in Rio de Janeiro,“Maximum Luxury,”Newsweek AtlanticEdition, July 25, 2005, p.44.The Swiss bank: RanaForoohar, “Going Places,”Newsweek International,

May 15–May 22, 2006, p.54.The private security:Ibid., p. 58.By 2011: Foroohar,“Maximum Luxury,” p. 44.When Arnault: DeborahBall, “Decisiveness andCharisma Put YvesCarcelle in the Hot Seat atLVMH’s PrincipalD i v i s i o n , ” Wall StreetJournal Europe, October 1,2001, p. 31.“What I like”: “Arnault, inHis Own Words,” Women’sWear Daily, December 6,1999, p. 11.

CHAPTER ONE: AN INDUSTRY IS BORN“Luxury is a necessity”:Anna Johnson, Handbags:The Power of the Purse(New York: Workman,2002), p. 21.Its flagship: Eric Wilson,

“Optimism’s the Point, NotExcess Baggage,” NewYork Times, October 13,2005, p. G1.“Luxury is crossing”:Joshua Levine, “Liberté,Fraternité—but to Hell withEgalité!” Forbes, June 2,1997, p. 80.“High profitability”: SuzyWetlaufer, “The PerfectParadox of Star Brands,”Harvard Business Review,October 2001, p. 123.Louis XIV dressed:Stanley Karnow, Paris inthe Fifties (New York:Random House, 1997), p.268.Louis XVI’s wife: JudithThurman, “Dressed forExcess: Marie-Antoinette,Out of the Closet,” NewYorker, September 25,2006, p. 138.She was “an object”:

Palmer White, The MasterTouch of Lesage:Embroidery for FrenchFashion (Paris: Editions duChêne, 1987), pp. 20–21.“French fashions”:K a r n o w, Paris in theFifties, pp. 268–69.At the age of thirteen:Paul-Gérard Pasols LouisVuitton: The Birth ofModern Luxury, (NewYork: Abrams, 2005), p. 13.The 292-mile trek: Ibid., p.21.“Here you find”: Ibid., p.24.Vuitton became: Ibid., p.30.In 1854: Ibid., p. 354.Throughout themid-1800s: White, MasterTouch of Lesage, p. 24.“Women will stoop”:K a r n o w, Paris in theFifties, p. 270.

Worth’s dresses: White,Master Touch of Lesage,pp. 24–25.His prices: Karnow, Parisin the Fifties, p. 271.Louis Vuitton’sbusiness: Pasols, LouisVuitton, p. 88.To keep up with: Ibid., p.76.“In those days”: MariaRiva, Marlene Dietrich: ByHer Daughter (New York:Knopf, 1993), p. 111.In the 1920s, France:Whi te , Master Touch ofLesage, p. 56.In five years: Ibid., p. 51.In the 1930s: Ibid., p. 62.“The huge skirt”: DianaVreeland, D.V. New York:Knopf, 1984), p. 98.But couturier Lucien:Marie-France Pochna,Christian Dior: The ManWho Made the World Look

New (New York: Arcade,1996), p. 78.“You can force us”: Ibid.,p. 77.The Vuittons were: KimWillsher, “Louis Vuitton’sLinks with Vichy RegimeExposed,” Guardian, June3, 2004, p. 15.“The styles [during]”:K a r n o w, Paris in theFifties, pp. 266–67.I remember Ivana: NinaHyde, “Lacroix’s Curtain-Raising Couture; KickingOff the Fall Shows withSoft Chiffon & Crepe,”Washington Post, July 24,1988, p. G1.The swanlike models:K a r n o w, Paris in theFifties, pp. 258–59.“After all the horrors”:Ibid., p. 264.The Parisian clients: Ibid.,p. 263.

Couture houses: Ibid., p.260.By 1951: White, MasterTouch of Lesage, p. 80.Soon licensing: RichardMorais, Pierre Cardin: TheMan Who Became a Label(London: Bantam, 1991), p.91.“I was staying”: Vreeland,D.V., pp. 106–7.“Bloomingdale’s”: Ibid.,p. 134.By 1977: NadègeForestier and NazanineR a v a ï , The Taste ofLuxury: Bernard Arnaultand the Moët-HennessyLouis Vuitton Story(London: Bloomsbury,1992), p. 54.Finally, in 1977: HughSebag-Montefiore, Kingson the Catwalk: The LouisVuitton and Moët-Hennessy Affair (London:

Chapmans, 1992), p. 82.He decided: Ibid., p. 16.Recamier expanded:Pasols, Louis Vuitton, p.280.In 1984: In 1984, Vuittonsales were 1.25 billionFrench francs and profitswere 197 million Frenchfrancs. Chris Hollis(Investor Relations,LVMH), e-mail with theauthor, February 5, 2007.In 1986: Sebag-Montifiore,Kings on the Catwalk, p.115.

CHAPTER TWO: GROUP MENTALITYThe result: SuzyWetlaufer, “The PerfectParadox of Star Brands,”Harvard Business Review,October 2001, p. 122.The France: JenniferSteinhauer, “The King ofPosh,” New York Times,

August 17, 1997, Sec.3, p.1.“You have to”: JoshuaLevine, “Liberté, Fraternité—but to Hell with Egalité!”Forbes, June 2, 1997, p.80.Upon graduating:Nadège Forestier andNazanine Ravaï, TheTaste of Luxury: BernardArnault and the Moët-Hennessy Louis VuittonStory (London:Bloomsbury, 1992), p. 10.Arnault fled: Ibid., pp. 13–14.“I can be”: Ibid., p. 11.Its only hope: HughSebag-Montefiore, Kingson the Catwalk: The LouisVuitton and Moët-Hennessy Affair (London:Chapmans, 1992), pp. 23–24.He convinced Lazard:

Levine, “Liberté,Fraternité,” p. 80.It was perhaps: Sebag-Montefiore, Kings on theCatwalk, p. 41.He shocked: David D.Kirkpatrick, “The LuxuryW a r s , ” New YorkMegazine, April 26, 1999,p. 24.Unlike Dior’s: Sebag-Montefiore, Kings on theCatwalk, pp. 30–31.When he took: Forestierand Ravaï, Taste ofLuxury, p. 17.“I don’t want”: Sebag-Montefiore, Kings on theCatwalk, p. 37.In 1988: Nina Hyde, “TheBattle of Lacroix,”Washington Post, April 7,1988, p. C1.Feeling beaten: Sebag-Montefiore, Kings of theCatwalk, pp. 50–58.

In the spring: Ibid., p. 137.At one point: Ibid., p. 220.The French daily:Forestier and Ravaï, Tasteof Luxury, p. 93.Finally, in April: Sebag-Montefiore, Kings on theCatwalk, p. 232.His motivation: Forestierand Ravaï, Taste ofLuxury, p. 106.He expanded: Wetlaufer,“The Perfect Paradox,” p.121.Carcelle was: DeborahBall, “Decisiveness andCharisma Put YvesCarcelle in the Hot Seat atLVMH’s PrincipleD i v i s i o n , ” Wall StreetJournal Europe, October 1,2001, p. 31.“You think of Vuitton”:Zoe Heller, “Jacob’sL a d d e r, ” New Yorker,September 22, 1997, p.

109.“If you control”: Levine,“Liberté, Fraternité,” p. 80.By 2004: “LVMH: Full ofPotential, Will It BeRealized?” Merrill Lynch,November 2002.Dior’s sixty-three-year-old: Sebag-Montefiore,Kings on the Catwalk, p.192.“[Audrey] Hepburn”:Kirkpatrick, “The LuxuryWars,” p. 24.In 1996: Levine, “Liberté,Fraternité,” p. 80.“For a European”:Steinhauer, “King of Posh,”p. 1.“[Arnault] is”: Ibid., p. 1.He travels: John MarcomJr., “The Quiet Afrikanerbehind Cartier,” Forbes,April 2, 1990, p. 114.“We concentrate”:William Hall, “Companies

& Finance: When Time Is aBusiness’s UltimateLuxury,” Financial Times,June 9, 2000, p. 34.“It’s not just about”:James Fallon, “Rupert’sWay: While CompetitorsSpend for AcquisitionsLike There’s NoTomorrow, RichemontCEO Johann Rupert Plansfor a Rainy Day,” Women’sWear Daily, May 30, 2000,p. 8S.“Product integrity”: Ibid.“We are not”: Hall,“Companies & Finance,” p.34.“In five to ten”: Fallon,“Rupert’s Way,” p. 8S.Cartier accounts for:Miles Socha, “MilkingFashion’s Cash Cows,”WWD The Magazine,November 3, 2003, p. 88.By the late 1980s:

Kirkpatrick, “Luxury Wars,”p. 24.“It was pretty much”:David Yoffie and MaryKwak, “Gucci Group N.V.(A),” Harvard BusinessSchool case (9–701–037),May 10, 2001, p. 2.Gucci sales: Ibid., p. 9.De Sole declared:Kirkpatrick, “Luxury Wars,”p. 24.Arnault said: Ibid.Pinault laughed: SarahRaper, “LVMH’s Arnault:The Tower and the Glory,”Women’s Wear Daily,December 6, 1999, p. 8.When PPR took: Yoffieand Kwak, “Gucci GroupN.V. (A),” p. 14.Her father, Gino: Myriamde Cesco, “Galeotta fu unab o r s a , ” Lo Specchio,January 8, 2000, pp. 76–80.

“We passed”: Ibid.“It can be”: MichaelSpecter, “The Designer,”New Yorker, March 15,2004, p. 112.Once Bertelli: CathyHoryn, “Prada Central,”Vanity Fair, August 1997,p. 96.By the end of 2001:Specter, “The Designer,” p.114.

CHAPTER THREE: GOING GLOBALIn February 1976: KyojiroHata, Louis Vuitton Japan:The Building of Luxury(New York: Assouline,2004), p. 7.“The serenity”: Ibid., p.11.Hata came: Ibid., p. 23.“During the first tenyears”: Ibid., p. 75.But the economic boom:Claire Kent, Sarah

Macdonald, Mandy Deex,and Michinori Shimizu,“Back from Japan,” MorganStanley Equity Research,Europe, November 14,2001, pp. 3, 7.They were the only: IleneR. Prusher, “JapaneseRetailers Turn to‘ S h e t a i l e r s , ’ ” ChristianScience Monitor, August29, 2001, p. 1.It was a wise: DeborahBall, “Decisiveness andCharisma Put YvesCarcelle in the Hot Seat atLVMH’s PrincipalD i v i s i o n , ” Wall StreetJournal Europe, October 1,2001, p. 31.In 2006:www.moodiereport.com/pdf/tmr_may_06_6.pdf.In 1960: Stephanie Strom,“LVMH to Buy Duty-FreeEmpire for $2.47 Billion,”New York Times, October

30, 1996, p. D1.Between 1977 and 1995:Judith Miller, “He GaveAway $600 Million, and NoOne Knew,” New YorkTimes, January 23, 1997,p. A1.“This was not”: JonNordheimer, “Slaughteringthe Cash Cow: Millions ofDollars Couldn’t KeepDFS Group Together,”New York Times, March12, 1997, p. D1.Feeney, the more: Miller,“He Gave Away $600Million,” p. A1.Miller, by contrast: JerryAdler, “He Gave at theO f f i c e , ” Newsweek,February 3, 1997, p. 34.In 1994: David D.Kirkpatrick, “The LuxuryW a r s , ” New YorkMagazine, April 26, 1999,p. 24.

Feeney and Parker: VickiM. Young, “MillerThreatens Suit after LVMHPulls Out of Talks for DFSS ta k e , ” Women’s WearDaily, March 20, 1997, p.1.In 2003: “JapaneseInternational Travelers:Trends and ShoppingBehavior,” 2003JTM/TFWA JapaneseTraveler Study, ExecutiveSummary, p. 1.“Andy was”: JoshuaLevine, The Rise and Fallof the House of Barneys(New York: Morrow, 1999),p. 118.For those who: Ibid., p.199.“Rule No. 1”: Kate Betts,“The Retail Therapist,”Time, May 30, 2005, p. 53.Sales at the Osaka: Ibid.After Marino renovated:

Miles Socha, “King Louis:Louis Vuitton’s NewClothing Store,” Women’sWear Daily, October 10,2005, p. 1.Hata has long: Hata,Louis Vuitton Japan, pp.40–43.“It’s luxury”: ElizabethHeilman Brooke, “TokyoClub: A New Way toShop,” International HeraldTribune, February 27,2004, p. 14.The total cost: “ChanelOpens Flagship Shop inTokyo’s Ritzy Ginza,”Agence France Presse,December 4, 2004.

CHAPTER FOUR: STARS GET IN YOUR EYESGucci nearly: David B.Yoffie and Mary Kwak,“Gucci Group N.V. (A),”Harvard Business School,case 9-701-037,

September 19, 2000;revised May 10, 2001, p.10.LVMH spent: FedericoAntoni, “LVMH in 2004:The Challenges ofStrategic Integration,”Stanford Graduate Schoolof Business, case SM–123, March, 17, 2004, p.12.“We are the largest”:David D. Kirkpatrick, “TheLuxury Wars,” New YorkMagazine, April 26, 1999,p. 24.At Gucci: Yoffie andKwak, “Gucci Group N.V.(A),” p. 10.Silent-screen siren: PattyFox, Star Style: HollywoodLegends as Fashion Icons(Santa Monica, Calif.:Angel City Press, 1995),pp. 76–77 and pp. 83–90.When Crawford: Ibid., p.

24.Grace Kelly’s: Ibid., p. 96.Hollywood stars: Ibid., p.92.sold their signatures:Marian Hall, with MarjorieCarne and SylviaS h e p p a r d , CaliforniaFashion: From the OldWest to New Hollywood(New York: Abrams, 2002),p. 92.He originally settled:Salvatore Ferragamo,Shoemaker of Dreams:The Autobiography ofSalvatore Ferragamo(Florence: Giunti GruppoEditoriale, 1985), pp. 37–48.In the early 1920s: Ibid.,pp. 51–54.“Valentino would drop”:Ibid., pp. 89–92.But in 1955: Marie-FranceP o ch n a , Christian Dior:

The Man Who Made theWorld Look New (NewYork: Arcade, 1996), pp.161–162.For most of the twentiethcentury: Scott Huver andMia Kaczinski Dunn,Inside Rodeo Drive: TheStore, the Stars, the Story(Santa Monica, Calif.:Angel City Press, 2001),p.12–18.The Gucci store: SaraGay Forden, The House ofGucci; A Sensational Storyof Murder, Madness,Glamour, and Greed (NewYork: HarperCollins,2001), p. 39.By the late 1970s:Anthony Cook, “Wheelingand Dealing on StatusS t r e e t , ” New West,February 27, 1978, p. 20.Beverly Hills: Ibid., p. 19.Hayman was once: Karen

Stabiner, “Spring Fashion:King of the Hills,” LosAngeles Times Magazine,February 15, 1998, p. 18.The neighborhood boys:Judy Bachrach, “Armani inFull”, Vanity Fair, October2000, p. 193.Fred Pressman: JoshuaLevine, The Rise and Fallof the House of Barneys(New York: Morrow, 1999),p. 90.In 1979: Michael Kaplan,“Blame It on Armani,”Movieline, September 19,1999, p. 74.W h e n Time: Levine,House of Barneys, p. 92.Vogue’s Anna Wintour:Author interview, Paris,July, 2001.Jennifer Meyer: JareenStabiner, “Dressing Well Isthe Best Revenge,” LosAngeles Times Magazine,

December 11, 1988, p. 42.“Those girls”: GabyWood, “She’s Got theLook,” Observer, July 16,2006, p. 12.Zoe has even: BoothMoore, “In Her Image:Rachel Zoe’s Clients(Lindsay, Nicole, Jessica)Often Look Like…Her,” LosAngeles Times, July 16,2005, p. E1.According to a study:Lifestyle Monitor, January,2005.Sir Elton: Shawn Hublerand Gina Piccalo, “TheHeirarchy,” Los AngelesTimes, March 1, 2005, p.E5.One prominent stylist:Libby Callaway, “RedCarpet Catfighting: TheSeamy Side of the Stars’Style Wars,” New YorkPost, February 29, 2004, p.

48.One stylist reportedly:“Fat Chance,” PeopleHollywood Daily, February26, 2005, p. 14.Chopard’s: Booth Moore,“Red Carpet Revenue,”Los Angeles Times,February 22, 2005, p. E12.

CHAPTER FIVE: THE SWEET SMELL OFSUCCESS

“A woman enveloped”:Janet Wallach, Chanel:Her Style and Her LifeLondon: Mitchell Beazley,1999), p. 162.“[Dior’s perfume]”:Federico Antoni, “LVMH in2004: The Challenges ofStrategic Integration,”Stanford Graduate Schoolof Business, case SM–123, March, 17, 2004, p. 6.Prehistoric man: DianeA c k e r m a n , A Natural

History of the Senses(New York: RandomHouse, 1990), pp. 56–59.In Crete: Ibid., pp. 60–61.French king Louis XIV:Ibid., p. 62.“The industry has”:Caroline Brothers, “ThePrecise Smell of Success,”International HeraldTribune, October 21–22,2006, p. 12.In 2003: Miles Socha,“Milking Fashion’s CashC o w s , ” WWD theMagazine, November 3,2003, p. 88.She was born in:Wallach, Chanel, pp. 5–18.She made her way: Ibid.,pp. 19–31.First she did a test: AlexM a d s e n , Chanel: AWoman of Her Own (NewYork: Henry Holt, 1990), p.135.

Théophile Bader: Ibid., p.136.Throughout the 1920s:Stanley Karnow, Paris inthe Fifties (New York:Random House, 1997), p.273.Her first collection:Wallach, Chanel, p. 150.Even Christian Dior: Ibid.,p. 154.Together, they do:Chandler Burr, “The Scentof the Nile,” New Yorker,March 14, 2005, p. 78.In late 2006: Brid Costelloand Matthew W. Evans,“Givaudan-Quest: Creatinga New Number One,”Women’s Wear Daily,November 27, 2006, p. 3.Take Dior’s brief: Burr,“Scent of the Nile,” p. 78.“All I see”: “FashionScoops: In the Flesh,”Women’s Wear Daily, July

11, 2001, p. 5.They can be: Burr, “Scentof the Nile,” p. 87.When Alain Lorenzo:Joshua Levine, “Liberté,Fraternité—but to Hell withEgalité!” Forbes, June 2,1997, p. 80.

CHAPTER SIX: IT’S IN THE BAGHandbags have: AndreaLee, “Bag Lady,” NewYorker, September 25,2006, p. 80.“It’s like you’ve”: AnnaJohnson, Handbags: ThePower of the Purse (NewYork: Workman, 2002), p.54.I read about: ReggieNadelson, “Out of the Box,”Departures, May–June,2002, p. 146.In September 2005: BenWiddicombe,“Gatecrasher,” New York

Daily News, September10, 2005, p. 20.At the Venice Biennale:Farid Chenoune, CarriedAway: All About Bags(Paris: Le Passage Paris—New York Editions, 2004),p. 72.Jackie Onassis:Nadelson, “Out of the Box,”p. 143.Maryvonne Pinault: Ibid.,p. 176.Carrying into a jury:Robin Givhan, “Martha’sMoneyed Bag Carries TooMuch Baggage,”Washington Post, January22, 2004, p. C1.Among the more:Nadelson, “Out of the Box,”p. 146.In 2003: Pascale Renaux,“L’Ange Guardian,”Numéro, October 2003, p.302.

“We are frightened”:Nadelson, “Out of the Box,”p. 150.Whereas Gucci Group’s:Lisa Lockwood, “Polet’sPrescription for ChangingGu c c i , ” Women’s WearDaily, November 16, 2005,p. 45.In 1995: ChristopherDickey, “C’est Chic, C’estF r e n c h , ” NewsweekInternational, March 17,1997, p. 38.This persecution:Nadelson, “Out of the Box,”p. 177.As he likes: Dickey, “C’estChic, C’est French,” p. 38.Sales were so slow:Bridget Foley, “Full Galop,”W, March 1998, p. 230.He found the rue: HelmutN e w t o n , Autobiography(New York: Doubleday,2003), pp. 241–42.

The modern handbag:Chenoune, Carried Away,passim.“Listen, Diana”: DianaVreeland, D.V. (New York:Knopf, 1984), p. 89.It had no monogram:Johnson, Handbags, p. 7.“We’ve got into the”:Chenoune, Carried Away,p. 32.In 1986: Palmer White,The Master Touch ofLesage: Embroidery forFrench Fashion (Paris:Editions du Chêne, 1987),p. 134.As Holly Brubach: HollyBrubach, “In Fashion:Forward Motion,” NewYorker, June 25, 1990, p.77.It became: Andrea Lee,“Bag Lady,” New Yorker,September 25, 2006, p. 80.Market sources: Miles

Socha, with contributionsby Jennifer Weil, “LVMHProfits Pass $1 Billion,”Women’s Wear Daily,March 10, 2005, p. 9.Between 1994 and 1998:David B. Yoffie and MaryKwak, “Gucci Group N.V.(A),” Harvard BusinessSchool, case 9–701–037,September 19, 2000;revised May 10, 2001, p.11.That year, Frankfort:Barbara Woller, “First-Class Coach,” JournalNews, May 23, 2005, p.1D.From 2001 to 2006: ClaireA. Kent, Mandy Deex,Rachel Whittaker, AngelaMoh, and Andy Xie,“Luxury Goods in China: ALong-Term Investment,”Morgan Stanley, February27, 2004, p. 13.

A brown leather tag:Alessandra Galloni,Cecilie Rohwedder, andTeri Agins, “ForeignLuxuries: Breaking aTaboo, High FashionStarts Making GoodsOverseas,” Wall StreetJournal, September 27,2005, p. A1.In May 2005: Adam Jones,“Prada PondersOutsourcing to China,”Financial Times, May 20,2005, p. 10.

CHAPTER SEVEN: THE NEEDLE AND THEDAMAGE DONE

It has been used: NinaHyde, “Silk, the Queen ofT e x t i l e s , ” NationalGeographic, January 1984,p. 48.Back in the 1920s: PietraP i e t r o g r a n d e , AnticoSetificio Fiorentino

(Florence, Italy: Le Lettere,1999), p. 71.Back in the factory’s:Ibid., p. 95.On some farms: Hyde,“Silk, the Queen ofTextiles,” pp. 14–19.The Chinese began: Ibid.,pp. 27–30.One recounts: Ibid., p. 36.Another tells:P i e t r o g r a n d e , AnticoSetifico Fiorentino, p. 21.One of the early centers:Ibid., pp. 33–43.In 2004: AlessandraGalloni, CecilieRohwedder, and TeriAgins, “Foreign Luxuries:Breaking a Taboo, HighFashion Starts MakingGoods Overseas,” WallStreet Journal, September27, 2005, p. A1.One-fourth of HongKong’s: Ted C. Fishman,

China Inc. (New York:Scribner, 2005), p. 88.By the mid- 1990s: Ibid.,p. 89.In September 2006: “InBrief: Actor Appeals toBurberry,” Women’s WearDaily, November 27, 2006,p. 2.In November: DavidCracknell and JonathanLeake, “Charles Joins theBurberry Revolt,” Times(London), November 26,2006, p. 4.Peter Hain: SamanthaConti, “Burberry to CloseFactory,” Women’s WearDaily, January 11, 2007, p.15.Today, there are:“Swatches: CantonC o n n e c t i o n , ” Women’sWear Daily, January 3,2006, p. 8.China’s textiles: John

Zarcostas, “China’s TextileExports Soar 23.8Percent,” Women’s WearDaily, January 10, 2006, p.8.In late 2005: GeorgeWehrfritz, “A River inR e v e r s e , ” NewsweekInternational, January 30,2006, p. 53.The constant pressure:John Zarocostas, “GlobalLabor Study Cites HumanRights Violations,”Women’s Wear Daily,October 19, 2005, p. 19.“Chinese factories”:Jane Perlez, “VietnamArrives as an EconomicPlayer in Asia,”International HeraldTribune, June 20, 2006, p.2.“China is no longer”:Luisa Zargani, “ChinaTrains Eye on Italian

F i rms , ” Women’s WearDaily, February 22, 2006,p. 13.

CHAPTER EIGHT: GOING MASSAmerica Online: AnnieGroer, “The New GildedA g e , ” Washington Post,August 1, 1999, p. F1.According to aUniversity: Juliet B.S c h o r , The OverspentAmerican: Why We WantWhat We Don’t Need (NewYork: HarperPerennial,1999), p. 14.According to a Roper:Ibid., p. 16.Since 1970: Michael J.Silverstein and Neil Fiske,with John Butman, TradingUp: The New AmericanLuxury (New York:Portfolio, 2003), pp. 25–26.By 2005: Sharon Edelson,“Chasing Big Spenders:

Stores Step Up Servicesfor Key Luxe Customers,”Women’s Wear Daily,August 1, 2006, p. 1.Between 1979 and 1995:S c h o r , OverspentAmerican, p. 12.According to a 1997study: Ibid., 159.Between 1990 and 1996:Ibid., p. 72.Yet it wasn’t enough:Ibid., p. 6.In 2004: “AccessibleLuxury—What It Is andWhy It’s Working,” LedburyResearch, November 8,2004.“When we look”: DavidD. Kirkpatrick, “The LuxuryW a r s , ” New YorkMagazine, April 26, 1999,p. 24.And MGM Mirage: SharonEdelson, “Taubman Plansfor Big Names at Vegas

Center,” Women’s WearDaily, September 21,2005, p. 5.“It was jolting”: KarenHeller, “On Deep Discount,Prada Has Never LookedW o r s e , ” PhiladelphiaInquirer, January 6, 2006,p. M3.“The 1980s”: BoothMoore, “Outlet for ThatE n e r g y, ” Los AngelesTimes, September 1, 2005,p. 28.“I once got home”: LauraLandro, “Style—Hunting &Gathering: Catwalk Chicon the Cheap,” Wall StreetJournal, September 17,2005, p. 11.But, says LindaHumphers: Moore, “OnDeep Discount,” p. 28.But the average: Ibid.“The winning formula”:Ibid.

“The luxury industry”:Vanessa Friedman, “AnOnline Business ModelDressed to Kill,” FinancialTimes, May 30, 2006, p.10.It ran a huge overhead:Karen Lowry Miller, “Hittingthe Wall at Boo,”Newsweek AtlanticEdition, July 17, 2000, p.42.Analysts believe: CathyHoryn, “Point, Click andStrut,” New York Times,December 15, 2005, p. 1.Furthermore, Forrester:Luca S. Paderni, with JaapFavier and ManuelaNeurauter, “Louis VuittonTakes Online LuxuryShopping Mainstream,”Forrester Research,November 8, 2005.The primary culprits: LisaBertagnoli, “To Catch a

Thief: IndependentRetailers Forgo High TechGizmos and Gadgets inFavor of Old-FashionedSecurity Measures,”Women’s Wear Daily,October 13, 2004, p. 58S.Luxury’s most famous:Adam Tschorn,“Hollywood’s Walk ofShame,” Women’s WearDaily, February 24, 2004,p. 34S.“It’s not normal”: GuyTrebay, “Shoplifting on aGrand Scale: Luxury WearStolen to Order,” New YorkTimes, August 8, 2000, p.B1.In Minnesota: Schor,Overspent American, p. 40.Andrew McColl: Trebay,“Shoplifting,” p. B1.At times, robberies:Rosemary Feitelberg,“Two Nabbed in Versace

Hold-Up; Boston BoutiqueSite of Armed Robbery,”Women’s Wear Daily, May12, 1997, p. 23.The pros: Trebay,“Shoplifting,” p. B1.“They obviously”: GregLindsay, “Sticky Fingers,”Women’s Wear Daily,January 27, 2004, p. 23.Chavs are: Rob Walker,“The Good, the Plaid andthe Ugly,” New York TimesMagazine, January 2,2005, p. 20.As Kim Hastreiter: KimHastreiter and DavidHershkovits, Twenty Yearsof Style: The WorldAccording to Paper (NewYork: Harper DesignInternational, 2004), p. 34.Logos—particularly: TeriA g i n s , The End ofFashion: How MarketingChanged the Clothing

Business Forever (NewYork: Quill, 2000), p. 111.Gianni Versace: Ibid., p.139.“What can we do?”:Gideon Rachman,“Bubbles and Bling,”Economist, Summer 2006,p. 20.“I view”: George Rushand Joanna Molloy, “DailyD i sh , ” New York DailyNews, June 15, 2006, p.26.In 2001: Scott, Huver andMia Kuczinski Dunn,Inside Rodeo Drive: TheStore, the Stars, the Story(Santa Monica, Calif.:Angel City Press, 2001), p.34.

CHAPTER NINE: FAUX AMISIn 1948: Stanley Karnow,Paris in the Fifties (NewYork: Random House,

1997), pp. 260–61.In 1982: International Anti-Counterfeiting Coalition,white paper, January 2005,p. 3.In 2004: Ted C. Fishman,“Manufaketure,” New YorkTimes Magazine, January9, 2005, p. 40.In 2002: IACC whitepaper, p. 20.Prada CEO: RobinProgrebin, “Reality Check,”Connoisseur, n.d., p. 140.As Jasper Becker: JasperBecker, The Chinese (NewYork: Free Press, 2000),pp. 74–75.A month later: EvanClark, “U.S. Report Callsfor Action on IntellectualProperty Laws,” Women’sWear Daily, May 2, 2005,p. 16.That same month: “U.S.Charges 17 with

Trafficking in CounterfeitGoods, Money Laundering,Attempted Bribery of aPublic Official,” UnitedStates Attorney SouthernDistrict of New York, pressrelease, June 4, 2004.The street value:Progrebin, “Reality Check,”p. 140.The same is true: Peter S.Goodman, “In China, aGrowing Taste for Chic;But Fakes Also VexDeveloping Market,”Washington Post, July 12,2004, p. A1.Many of the street-level:Marcus Mabry and AlanZarembo, “Africa’sCapitalist Jihad,”Newsweek AtlanticEdition, July 7, 1997, p. 42.During a two-day: JuliaPreston, “U.S. Charges 51with Chinatown

Smuggl ing,” New YorkTimes, November 13,2004, p. B2.

CHAPTER TEN: WHAT NOW?In 2006: Emily FlynnVencat, “Shaping the NewL o o k s , ” NewsweekInternational, May 15–22,2006, p. 82.In 2004: Paul Klebnikov,“Russia’s Richest People:The Golden Hundred,”Forbes.com, July 22, 2004.The Chinese didn’t:Claire A. Kent, MandyDeex, Rachel Whittaker,Angela Moh, and AndyXie, “Luxury Goods inChina: A Long-TermInvestment,” MorganStanley, February 27,2004, p. 4.“It’s cheaper”: LisaMovius, “Shanghai’s Bund18 Luring Luxury Brands,”

Women’s Wear Daily,January 11, 2005, p. 18.By 2004: Kent, Deex,Whittaker, Moh, and Xie,“Luxury Goods in China,”p. 6.“In other provinces”:Sarah Mowar, “Dressed toS h a n g h a i , ” Vogue,October 2004, p. 336.“We are still”: LisaMovius, “China’s LuxuryRush: Expanding VuittonShows Market’s Growth,”Women’s Wear Daily,December 29, 2005, p. 12.By the end of 2006:Amanda Kaiser, “Tillingthe Luxury Landscape,”Women’s Wear Daily,March 21, 2006, p. 2B.Calvin Klein: Lisa Movius,“Valentino UnveilsWomen’s for MainlandC h i n a ,” Women’s WearDaily, September 26,

2006, p. 17.Since its arrival: Zhu Ling,“Louis Vuitton to OpenThree New Stores inChina,”www.chinadaily.com.cn/bizchina/2006–05/15/content_589908.htm,May 15, 2006.Mainland China: LuisaZargani, “Luxury and theLands of Opportunity,”Women’s Wear Daily,November 29, 2004, p. 4.“Three years ago”: LisaMovius, “Bulgari ContinuesExpanding in China,”Women’s Wear Daily,September 29, 2006, p. 22.“Mainlanders go”: TomMiller, “Shopping Is theLure for Mainlanders,”South China Morning Post,November 7, 2005, p. 16.Mainlanders areenrolling: Howard W.French, “In China, the

Upper-Class Quest StartsLow—at Age 5,”International HeraldTribune, September 22,2006, p. 1.“I have customers”:“Seeking Russian Gold:Despite Turmoil, BrandsRush to Booming Market,”Women’s Wear Daily,September 30, 2004, p. 1.At many of Armani’s:Miles Socha, “Couture’sNew Hope: Russia, Asiaand the Mideast,”Women’s Wear Daily,January 23, 2006, p. 5.Outside of Moscow:Natasha Singer, “Russia’sLuxury Mania: Stores GrabReal Estate to Build NewEmpires,” Women’s WearDaily, October 4, 2004, p.1.After the 1998: RobertGalbraith, “Courting the

New Russian and IndianLuxury Consumers,”International HeraldTribune, September 30,2005, p. 14.For the Dior opening:Miles Socha and BridCostella, “Christian Dior’sNew Flagship on RedSquare,” Women’s WearDaily, October 24, 2006, p.3.Nearby, Mercury Group:Singer, “Russia’s LuxuryMania,” p. 1.“Before we designed”:Ibid.Christian Dior reported:“Seeking Russian Gold,” p.1.In 2005: Galbraith,“Courting the New Russianand Indian LuxuryConsumers,” p. 14.“People have themoney”: Rosemary

Feitelberg, “On to India,C h i n a ,” Women’s WearDaily, December 5, 2006,p. 17.There are more: Ibid.A study by Bain: Ibid.The most coveted: CecilyHall, “Far East Fashion-Forward,” Women’s WearDaily, June 1, 2006, p. 12.“In just the last year”:Betsy Lowther, “TheTreasures of India: AsLuxe Brands Rush In,Prime Space Runs Out,”Women’s Wear Daily,November 7, 2006, p. 1.Analysts at McKinsey:Vencat, “Shaping the NewLooks,” p. 82.“The chance of”: Amy S.Choi, “Eyeing India’sRiches: As Barriers ComeDown, Luxury Brands GoS l o w , ” Women’s WearDaily, March 13, 2006, p.

1.State governments: RituUpadhyay, “BombayDispatch: ExpandingM a l l s , ” Women’s WearDaily, March 13, 2006, p.11.The finance ministry:Choi, “Eyeing India’sRiches,” p. 1.“It’s a PR machine”: “Talkabout Branding,” Time,June 2005, Bonus Section,p. A4.“Our hotels”: J. J. Martin,“Travel with Style,”Harper’s Bazaar, Fall2006, p. 89.Fashion darling: MilesSocha, “Philo SaidWorking with Gap,”Women’s Wear Daily,November 27, 2006, p. 2.Burberry began: ClaireKent, Mandy Deex, ElkeFinkenauer, Rachel

Whittaker, “Luxury &Apparel Retail,” MorganStanley Equity ResearchEurope, March 7, 2005, p.17.Mizrahi calls: Ibid., p. 10.

CHAPTER ELEVEN: NEW LUXURYIn early 2006: AmandaKaiser, “Jil Sander LossHits $46.3 Million in 2005,”Women’s Wear Daily, May30, 2006, p. 3.“All these big”: SarahRaper, “LVMH’s Arnault:The Tower and the Glory,”Women’s Wear Daily,December 6, 1999, p. 8.Burberry CEO:“ContinentalCompensation,” Women’sWear Daily, July 17, 2003,p. 14.according to Forbes:www.forbes.com/lists/2006/12/Rank_1.html.“A mobile phone”: Luisa

Zargani, with contributionsby Alessandra Ilari, “PradaCalling Via Venture withLG,” Women’s Wear Daily,December 13, 2006, p. 11.“She says”: HollyBrubach, “In Fashion:Forward Motion,” NewYorker, June 25, 1990, p.79.The wealthiest: SharonEdelson, “Chasing BigSpenders: Stores Step UpServices for Key LuxeC u s t o m e r s , ” Women’sWear Daily, August 1,2006, p. 1.Danielle Morolo: Ibid.“My best customer”: Ibid.Saks Fifth Avenue: Ibid.

BIBLIOGRAPHY

Ackerman, Diane. ANatural History of theSenses. New York:Random House, 1990.Agins, Teri. The End ofFashion: How MarketingChanged the ClothingBusiness Forever. NewYork: Quill, 2000.Arnault, Bernard. LaPassion Créative:Entretiens avec YvesMessarovitch. Paris: Plon,2000.Becker, Jasper. TheChinese. New York: FreePress, 2000.Bindloss, Joseph; SarinaSingh; Deanna Swaney;and Robert Strauss.Mauritius, Réunion &Seychelles. Victoria,Australia: Lonely Planet,

2001.Bloch, Phillip. Elements ofStyle: From the Portfolio ofHollywood’s PremierStylist. New York: Warner,1998.Bonvicini, Stéphanie.Louis Vuitton: une sagafrançaise. Paris: Fayard,2004.Brubach, Holly. ADedicated Follower ofFashion. London: PhaidonPress, 1999.Burr, Chandler. TheEmperor of Scent: A Storyof Perfume, Obsession andthe Last Mystery of theSenses. New York:Random House, 2002.Celant, Germano, andHarold Koda. GiorgioArmani. New York:Solomon R. GuggenheimFoundation, 2000.Chenoune, Farid. Carried

Away: All About Bags.Paris: Le Passage Paris—New York Editions, 2004.Ferragamo, Salvatore.Shoemaker of Dreams: theAutobiography ofSalvatore Ferragamo.Florence, Italy: GiuntiGruppo Editoriale, 1985.Fishman, Ted C. China,Inc. New York: Scribner,2005.Forden, Sara Gay. TheHouse of Gucci: ASensational Story ofMurder, Madness,Glamour, and Greed. NewYork: HarperCollins, 2001.Forestier, Nadège, andNazanine Ravaï. TheTaste of Luxury: BernardArnault and the Moët-Hennessy Louis VuittonStory. London:Bloomsbury, 1992.Fox, Patty. Star Style:

Hollywood Legends asFashion Icons. SantaMonica, Calif.: Angel CityPress, 1995.Galbraith, John Kenneth.The Affluent Society, NewYork: Houghton Mifflin,1998.Hall, Marian, with MarjorieCarne and SylviaS h e p p a r d . CaliforniaFashion: From the OldWest to New Hollywood.New York: Abrams, 2002.Hastreiter, Kim, and DavidHershkovits. 20 Years ofStyle: The WorldAccording to Paper. NewYork: Harper DesignInternational, 2004.Hata, Kyojiro. LouisVuitton Japan: TheBuilding of Luxury. NewYork: Assouline, 2004.Huver, Scott, and MiaKuczinski Dunn, Inside

Rodeo Drive: The Store,the Stars, the Story. SantaMonica, Calif.: Angel CityPress, 2001.Johnson, Anna.Handbags: The Power ofthe Purse. New York:Workman, 2002.Karnow, Stanley. Paris inthe Fifties. New York:Random House, 1997.Kennedy, Shirley. Pucci: ARenaissance in Fashion,New York: AbbevillePress, 1991.Krannich, Ronald L. TheTreasures and Pleasuresof China: Best of the Best.Manassas Park, Va.:Impact Publications, 1999.Levine, Joshua. The Riseand Fall of the House ofBarneys. New York:Morrow, 1999.Madsen, Alex. Chanel: AWoman of Her Own. New

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Rawsthorn, Alice. YvesSaint Laurent. London:HarperCollins, 1996.Riva, Maria. MarleneDietrich: By Her Daughter.New York: Knopf, 1993.Schor, Juliet B. TheOverspent American: WhyWe Want What We Don’tNeed. New York:HarperPerennial, 1999.Sebag-Montefiore, Hugh.Kings on the Catwalk: TheLouis Vuitton and Moët-Hennessy Affair. London:Chapmans, 1992.Silverstein, Michael J., andNeil Fiske, with JohnButman. Trading Up: TheNew American Luxury.New York: Portfolio, 2003.Smith, Sally Bedell.Reflected Glory: The Lifeof Pamela ChurchillHarriman. New York:Simon & Schuster, 1996.

Twitchell, James B. LivingIt Up: Our Love Affair withLuxury. New York:Columbia UniversityPress, 2002.Veblen, Thorstein. TheTheory of the LeisureClass. New York: Penguin,1994.Vreeland, Diana. D.V. NewYork: Da Capo Press,1997.Wallach, Janet. Chanel:Her Style and Her Life.London: Mitchell Beazley,1999.Watson, Albert. Prada aMilano, Milan: Grafica diItalia Lupo.White, Palmer. The MasterTouch of Lesage:Embroidery for FrenchFashion. Paris: Editions duChêne, 1987.

INDEX

AAA ReplicasAbdul, PaulaAcademy Awards

Armanishowcasedcelebrities, paidby luxury brandsdesigner salonsswag

Ackerman, DianeAdrianAdvertising

embarrassing adsluxury products

Agache-Willot, Arnault buy-outAgalarov, EminAgnelli, GianniAhrendts, AngelaAlaia, AzzedineA. Lange & SöhneAlexander the GreatAlice CadolleAllen, Joan

Allure perfumeAmazon.com, counterfeitsAmerican GigoloAmic, LouisA. MichelAmie, JeanAmiot, FélixAntico Setificio FiorentinoAnya HindmarchAoki, JunAquae vitaeArchitecture, luxury

ChinaIndiaJapan

ArlequinadeArmani, Giorgio

background ofBarneysexclusiveChina andproductionChina shopson going publicin Hollywoodhotels

soft suitArmani JeansArnault, Bernard

background/personalitybusiness tacticsofeLuxury.comon luxuryproductson production andprofitrenovation ofbrandsverticalintegration, use ofSee also LVMHMoët HennessyLouis Vuitton

Arnault, JeanArpègeArte della SetaAspreyAtlantic PhilanthropiesAvedon, RichardAykroyd, Dan

BaccaratBacci, CarloBach, JustineBaciocchi, RobertoBader, ThéophileBaguette handbagBalenciaga

closing ofperfumePPR acquisition

BallantyneBalmain, PierreBaltard, VictorBanton, TravisBao-Wen ChenBardot, BrigitteBarneysBarrymore, JohnBarton, MischaBasinger, KimBaume & MercierBazar Femme perfumeBeaux, ErnestBecker, Jasper

Beckham, VictoriaBeckinsale, KateBellagio, luxury shoppingBellucci, MonicaBenois, NicolaBergé, PierreBergére, EricBerkshire Knitting MillBerman, RodgerBerry, HalleBertelli, Patrizio business tactics of

on counterfeitingand Fendi buy-outas Pradachairman

Betancourt, BruceBETC LuxeBeverly HiltonBhaskar, PrasannaBianchi, GabriellaBianchi, GeorgioBianchi, GiambattistaBianchi, LuigiBinoche, JulietteBirkin handbags

Birnbaum, DavidBismarck, MonaBlack, LibbyBlair, SelmaBlake, BrianBlanchette, CateBlige, Mary J.BlissBloch, PhillipBloomingdale, BetseyBlow, IsabellaBohan, MarcBois des Isles perfumeBonaparte, JosephineBonaparte, NapoleonBonvicini, StéphanieBoo.comBorn to Kill GangBottega VenetaBoucheronBoussac, MarcelBoussac GroupBow, ClaraBranding

first, Louis Vuittonand franchises

Bravo, Rose MarieBrazil, Daslu. See Daslu.Brodie, CarolBrooks, BonnieBrown DerbyBrubach, HollyBrunschwig, SergeBuckner, KrisBucol silk factoryBugatti, EttoreBulgari

Bulgari GroupBulgari Hotelmiddle marketexpansionperfume

Bulgari, PaoloBulgari, SotirioBullock’sBurberry

and ChavsChina, productioninfast fashion

Burnett, Carol

Cadolle, HerminieCadolle, PoupieCaesars Palace, luxury shoppingCahn, MilesCalvin Klein

adsflagship store,Marino designHollywood salon

Cambodia, textile productionCanal Street, counterfeitsCanepa, Michele, Taroni silk factoryCanessa, AlfredoCannes Film FestivalCantrell, VictoriaCapel, Arthur “Boy”Carcelle, YvesCargo theftCarl, MichaelCaroline, princess of MonacoCaron, LeslieCartier

counterfeitslawsuit

in Hawaiiin Japanperfume

CarvenCasagrande, AdeleCelebrities

perfume brandsSee alsoHollywood andluxury

CélineArnault buy-outChineseproductionin Hawaiion Rodeo Drive

Celux clubCerrutiChalayan, HusseinChan, JackieChanel

acquisitions ofbeauty businessprofitabilityflagship store,Marino design

handbagsin Hawaiiin IndiaLagerfeld ready-to-wearluxury building,Japanorigin ofperfumes of. Seealso Chanel No. 5on Rodeo Drive

Chanel, Gabrielle “Coco”background/personalityin Hollywoodperfume creationand Wertheimerfamily

Chanel BeautéChanel No. 5

bottleflower farms foringredients ofmarketing oforigin/developmentofquality control

and Wertheimerfamily

Chanel No. 19 CristalleChanel No. 22Charles, prince of WalesChateau MarmontChavez, RobertChavsChelsea Premium OutletsChelsea Property GroupChenal, MartheChen ChangChen GuohuiCheng Wai KeungChenoune, FaridCherChevalier, AlainChild labor, ChinaChina and luxury goods

Armanibestsellingbrandsand Handel Leehaute couturebuyersLouis Vuitton

luxury brands,scope ofnouveau chicorigin/developmentofsales figuresshopping areasThree on theBundWestern buy-outs

China and productionanticounterfeitingmeasuresArmaniproductionBurberryproductionchild laborcounterfeit goodshandbagshuman-rightsissuessilktextiles

Chirac, BernadetteChloé

and Net-a-PorterChoel, PatrickChoi, SandraChoo, JimmyChopardChou, SilasChristian Lacroix

Arnault influenceperfumein Russia

Christian Louboutin. See Louboutin,ChristianChristie’sChurch & Co.Churchill, WinstonCinderella shoesCitterio, AntonioCleopatra, perfume useCoachCoco perfumeCohen, MarcColbert, Jean-BaptisteCollasse, RichardCombs, Sean “P. Diddy”Comme des GarçonsCommittee Colbert

Computerization, Gucci handbagproductionCook, AnthonyCost-cutting measures

and China. SeeChina productionperfumequality, loss oftextile production

Costumers, filmCotyCounterfeiting

anticounterfeitingmeasuresand child laborChina andproduction/sale ofGucci legal actionhistory ofand humantraffickingInternet sales offakeslegal measureslosses attributedto

and Mouridesorganizedcrime/gangcontrol ofprofitability ofpurse-party ladiesraids/seizuresale in U.S.storesSantee Alley, LosAngelesand September11 attackswillful blindness

Coupe d’Or perfumeCourrègesCourtière, JeanCourtyard art galleryCrampton, MaureenCrawford, CindyCrawford, JoanCrawford, LaneCristalCrocus CityCruise, TomCrystal, Billy

Cuir de Russie perfumeCunningham, BillCurry, AnnCustoms-free zonesCutrone, Kelly

Dasluda Vinci, LeonardoDavis, LoyalDavis, Sammy Jr.de Bazelaire, MenehouldDebt, consumerDecades vintage clothingDeclaration perfumede Dreux, Alfredde Havilland, Oliviade la Renta, OscarDelpy, Juliedel Rio, Deloresde Medici’, Cosimode Medicis, MarieDeMille, Cecil B.Democratic luxuryDeng Xiaoping

De Palma, BrianDepartment stores

couturereproductionrightsready-to-wear

de Pompadour, MadameDescampsDescourtieux, CatherineDesert Hills Premium OutletsDe Sole, Domenico

Guccireorganizationleaves Gucciand takeoverattempt

Dewavrin, AnneDFS GalleriaDiana, princess of WalesDickinson, JaniceDiddy, P. See Combs, Sean “PDiddy,”Dietrich, MarleneDincklage, Hans Gunther vonDior

Arnault buy-out

Arnault make-overfashion showsflagship store,Marino designin Hollywoodlicensingmiddle marketexpansionNew Lookonline siteperfumes ofon PrincessDianain Russia

DiorellaDiorissimoDi Risio, GiancarloDoctoroff, TomDolce & GabbanaDonna Karan, flagship store, MarinodesignDoyle Dane BernbachDriver, MinnieDubai, designer hotelsDucasse, Alain

Duchin, PeterDumas, Jean-Louis

background/personalitybusiness tacticsof

Dumas, RenaDumas, RobertDunhillDunne, IreneDupree, GeraldDuriez, Jean-MichelDuty-free shopping

Arnault makeoverofDuty FreeShoppers (DFS)Hawaiiorigin/developmentof

Eau de cologne, versus perfumeEau FraîcheEau d’HermèsEau de Merveille perfume

Eau parfumée au théEau de la reine de Hongrie (Queenof Hungary Water)e-Bay, counterfeitsEgyptians, perfumesEllena, Jean-Claude

background/personalityperfumeproduction

Ellwood, CraigeLuxury.comEmporio Armani perfumeEncore hotel/casinoEnfleurageEscada, fast fashionEsplanadeEternity perfumeEugénie, French empressEvelyne ShoesExtraction, perfume production

Fairbanks, DouglasFakes. See CounterfeitingFalic Group

Fang, KennethFang Bros.Farmer, FrancesFashion magazines, ChinaFashion Show (Las Vegas)Fashion shows

early, Diorfirst

Fast fashion, H&MFeeney, ChuckFendi flagship store, Marino design

handbagsin IndiaLVMH buy-out

Fendi, EdoardoFendi, Silvia VenturiniFenixFerragamo

fast fashionFerragamo Grouphotels

Ferragamo, SalvatoreFerrè, GianfrancoFerret-SavinelFilthFirmenich

First perfumeFitzgerald, F. ScottFlagship stores

Marino renovationofprofitability aftermakeover

Floating-rate systemFlower farmsFord, Tom

at Guccileaves Guccion middle marketexpansiononline shoppingpost-GucciactivitiesRachel Zoe onRive Gauche

Forestier, NadègeForum ShopsFoster, JodieFrance

luxury goods,historical viewperfume, history

ofFranchisesFrank, Jean-MichelFrankfort, LewFratelli PradaFrederiksen, KathyFrench, PaulFruit Défendu perfumeFukienese gangFurnish, David

Gable, ClarkGalanos, JamesGaleotti, SergioGalliano, JohnGangs, counterfeiting operationsGarbo, GretaGardenia perfumeGarner, JenniferGaultier, Jean-PaulGautier, VéroniqueGere, RichardGiacometti brothersGiammetti, Giancarlo

Gieves & HawkesGimpel, RenéGiorgio Beverly Hills

development ofperfume

Gish, LillianGivaudan RoureGivenchy

Arnault make-overin Chinaand LVMH groupperfume

Givenchy, Hubert deconflict withArnaultin Hollywood

Glantz, EdGlobalization and luxury goods

Asian marketcollapsebeginning ofBrazilChina production.See China andproduction

designer hotelsflagship storesandhomogenizationIndiaJapanMauritiusproduction. SeeMauritiusniche retail stageRussiaSee alsoindividualcountries

Glow perfumeGodé, PierreGoldblum, JeffGoldsmith, OliverGoossens, RobertGopal, MookeshwarsingGrant, CaryGrauso, MarioGraves, MichaelGruffudd, IoanGrumbach, DidierGruosi-Scheufele, Caroline

GucciArnault takeoverattemptFlora handbagFord atgoes publichandbagsin Hawaiiin Hong Kongon Madonnaonline siteorigin/developmentofprofitability andadvertisingreorganizationon Rodeo Driveverticalintegration

Gucci, AldoGucci, GuccioGucci, MaurizioGucci, RodolfoGucci Group

acquisitionsformation of

Guerlain, Jean-PaulGuerlain, perfumes ofGuerrand, JeanGuerrand, PatrickGuessGursky, StevenGutfreund, SusanGuy Laroche

H&Mdesignercollections

Haarmann & ReimerHain, PeterHall, JerryHalstonHandbags

ChanelChineseproductionCoachFendiGucciHermès. See

Hermèshandbagshistory of“It” bagsLouis VuittonPradaprofitability ofwomen’sobsession with

Harmon, AngieHarvey NicholsHassamal, Sunil M.Hastreiter, KimHata, Kyojiro, Vuitton in JapanHaute couture

Arnault influenceonfashion showsfather offittingsand Hollywoodmoviesreproductionrightssize of market1950s

Hawaiiduty-freeshoppingKalakaua Avenueshopsluxury goods andJapanese

Hawn, GoldieHayek, SalmaHayman, Fred

Rodeo Drive,development of

Hayman, GaleHayworth, RitaHead, EdithHeller, KarenHepburn, AudreyHermès

acquisitions ofduty-free saleshandbags. SeeHermèshandbagsin Hawaiiluxury building,Japan

museumonline siteorigin/developmentofperfumesaddlesscarvessilk/silkproduction

Hermès, AdolpheHermès, Charles-ÉmileHermès, Émile-MauriceHermès, ThierryHermès handbags

BirkinConstancegrowth, pace ofKellyordering versusbuying

Hermès SellierHershkovits, DavidHerzog & de MeuronHighland RapeHilfiger, TommyHilton, Conrad

Hitchcock, AlfredHitmanHöller, CarstenHollywood and luxury

Academy Awardsnightand Armanicelebrities, paidby luxury brandscostumersFerragamo shoesluxury productsalonsmarketing powerofand Paris coutureRodeo Drive,development ofstudio erastylists

Hollywood Anti-Trust CaseHollywood Boot ShopHomogenization of luxuryHong HuangHong Kong

luxury brands in

manufacturingPlatinum Suiteproduction,decline in

Hopper, DennisHorner, MicheleHotels, designerHoubigantHuang, DeniseHuman traffickingHumphers, LindaHuston, AngelicaHydrodistillationHypnotic Poison

I. MagninIndia and luxury goods

infrastructureissuesluxury brands,scope ofmall constructionplanssales figures

Industrial Revolution, luxury duringIn Love Again perfumeInsolence perfumeIn StyleInterior design, Marino renovationsInternational Flavors & FragrancesInternational Watch Co.Internet. See Online shopping

outlets, guide toIsaacs, JoelIssey Miyake, perfume

Jacobs, Marc on counterfeitingon luxuryLVMH buy-outVuitton ready-to-wear

J’adore eau de parfumJaeger-LeCoultreJagger, MickJames, LucianJapan and luxury goods

Celux clubDFS Galleria

duty-freeshoppingHawaii, luxurypurchases inand Japaneseeconomyand Louis Vuittonluxury, obsessionwithluxuryarchitecturemarket,origin/developmentofoutlet shopping inU.S.Parasite Singlespercentage ofluxury marketquality, demandfor

Jardin en Méditerranée perfume, UnJardin sur le Nil perfume, UnJay-ZJCPenneyJicky perfume

Jil SanderJoaillier, FredJohansson, ScarlettJohn, EltonJohn Lobb shoesJohnsen, LeslieJoseph MagninJoy perfumeJuel ParkJuicy Couture

Kaempfer, J.W.Kalinsky, JeffKaran, Donna. See Donna KaranKelley, David N.Kelly, GeneKelly, GraceKelly, RaymondKelly handbagKempner, NanKerléo, JeanKidman, NicoleKlein, Calvin. See Calvin KleinKnightley, Keira

Knockoffs. See CounterfeitingKnowles, BeyoncéKokosalaki, SophiaKolsun, BarbaraKoo, WilfredKopelman, ArieKors, MichaelKrakoff, ReedKrantz, JudithKrasna, NormanKumar, Karen Wilson

Labeille, StephanieLaboratoire Monique Rémy (LMR)Lacroix, Christian

leaves PatouSee alsoChristian Lacroix

Lady DiorLagerfeld, Karl

Chanel adsChanel handbagredesignChanel logo

accessoriesH&Mcollaborationon handbagsready-to-wear

LaliqueLancelLandrop, LauraLandry, TomLane Crawford Joyce GroupLang, HelmutLange, RenaLa RedouteLas Vegas, development ofLas Vegas luxury shopping

Big Shoppers,perks tocenters forexperience oforigin/developmentofrational for

Las Vegas Premium OutletsLauren, Ralph. See Ralph LaurenLazard FrèresLeather goods. See Handbags;

individual companiesLe Bon MarchéLedbury ResearchLee, HandelLee, SojinLegeai, NanLeiber, JudithLeighton, FredLelong, LucienLe Mond, BobLe Pen, Jean-MarieLesageLes Must de CartierLessage, AlbertLevine, JoshuaLicensing

development ofperfumescope of products

Lindorff, ClausLinea RossaL’Interdit perfumeLogos

counterfeitsfunctions of

Lohan, Lindsay

Loper, DonLopez, JenniferLoren, SophiaLorenzo, AlainLos Angeles. See Hollywood andluxuryLoubier, Jean-MarcLouboutin, Christian

background/personalitybusiness,approach toon luxuryproducts

Louis, JeanLouis VuittonArnault buy-out

Arnault makeoverin Chinacounterfeitingas democraticluxuryflagship store,Marino designgoes publicGuccihandbags

in Hawaiiin Indiain Japanand LVMH. SeeLVMH MoëtHennessy LouisVuittonMurakamihandbagMuseum of Travelonline siteRecamier, growthunderin Russiasteamer bagstrunkdesign/productionverticalintegrationand World War II

Louis Vuitton: The Birth of ModernLuxury (Pasols)Louis XIV, king of FranceLouis XV, king of FranceLouis XVI, king of FranceLovely perfume

Loy, MyrnaLuna RossaLuxLook.comLuxuryFinder.comLuxury groups

Boussac GroupCEOs, earningsFalic GroupFerragamo Groupfinancial secrecygoing publicGucci GroupLane CrawfordJoyce GroupLVMH MoëtHennessy LouisVuittonPradaPuig FashionGroupRichemontValentinoFashion Group

Luxury products advertisingcost cutting. SeeCost-cutting

measurescounterfeitsflagship storesFrance, historicalviewfranchisesglobalization. SeeGlobalization andluxurygoods goingcorporate. SeeLuxury groupshandbagshaute coutureand HollywoodhomogenizationofLas Vegas luxuryshoppinglogos, purpose ofluxury refugeesmass marketing.See Middlemarket expansiononline shoppingoutlet shopping

perfumepersonalizedservicefrom quality toprofitabilityshoesstar brandsundergarmentsvintage fashionwealthypurchases,current trends

LVMH Moët Hennessy LouisVuitton

acquisitionsArnault buy-out ofArnault aschairpersonChineseproductioncreation ofDior take-overDuty FreeShoppers (DFS)eBay counterfeitslawsuit

Fendi buy-outflagship stores,Marino designGucci takeoverattemptLVMH MoëtHennessy LouisVuittonprofitability andadvertisingand Recamiersell-offsSeptember 11,impact onsize/scope of

McArthur-GlenMcCartney, StellaMcColl, AndrewMcDaniel, WandaMcDonald, HeatherMcGee, BarryMackie, BobMcMillan, ChrisMcQueen, AlexanderMcQueen, Alexander, Givenchyready-to-wear

Madame GrèsMadonnaMahoney, MichaelMalls

and middlemarket expansionoutlet shopping

Manetero silk factoryMangoMankiewicz, JosephMantz, JacquesMao Tse-tungMarc Jacobs, LVMH buy-outMaréchal, MonsieurMargiela, MartinMarie-AntoinetteMarino, Peter

Chanel JapanbuildingDaslu boutiquesflagship stores,design of

Marks, RandyMartin, SteveMassaroMassenet, Natalie

Mass marketing. See Middle marketexpansionMauritius

history ofShibani KnittingCompanytextile production

Max MaraMayer, Louis B.Mayer, MichaelMehra, RachnaMello, DawnMellon, TamaraMendes, MônicaMercier, HélèneMercury GroupMetchek, IlseMeyer, JenniferMGM MirageMichael KorsMiddle market expansion

Bulgariclumping ofshopsdemocratic luxuryconcept

department storesand couturefast fashion andH&Mand financialinstabilityLas Vegas luxuryshoppinglicensingLouis Vuittonmall developmentorigin/developmentofoutlet shoppingperfume, focus ofpyramid modelapplied tosecondary citiesfortheft problemunsoldmerchandiseproblem

Miller, RobertMiss DiorMitterrand, François

Miu MiuMizrahi, IssacMobile phone designMoët-HennessyMonroe, MarilynMonsour, TerriMontblancMontenay, FrançoiseMoore, DemiMori, MarikoMorolo, DanielleMorrash, JoeMostert, FrederickMouret, RolandMouridesMoya, HectorMul, Joseph

Nankin, TroyNegri, PolaNeiman MarcusNelson, MarthaNet-a-Porter.comNew Look

Newton, HelmutNight for Her perfumeNina Ricci perfumeNoble, Ronald K.Noé handbagNoord, JanNordstromNorsa, MicheleNouveau chicNu perfume

Oberfeldt, AndrewObsession perfumeOgilvy, DavidOgliastro, JeanOkano, JoyceOld EnglandOlin, LenaOnassis, JackieOnline shopping

counterfeits, saleofeLuxury.comNet-a-Porter.com

profitability ofOoi, JoanneOrditoioO’Regan, BrendanOrganized crime, counterfeitingoperationsOrganza perfumeOrtarix, FrançoisOsmothèqueOtto, KarlaOutlet shopping

Desert HillsPremium Outletsorigin/developmentofand wealthy

Paco RabannePalazzo resortPalazzo VersacePaltrow, GwynethParaffectionParasite SinglesParfums Givenchy

Parfums de RosineParker, Alan M.Parker, Sarah JessicaPasols, Paul-GérardPaster, JessicaPatou

custom ordersLacroix leavesperfume

People’s RevolutionPerfume

advertisingcelebrity brandsChanel No.cost-cuttingmeasurescustom-madeversus eau decologneeau de parfumhistory oflicensingas luxury brandnecessitymiddle marketfocus

new perfumelaunch

profitability ofPerfume production

absolute andessence inconglomerateproductionextractionflower farmshistory ofhydrodistillationLMR labnatural versussyntheticmaterialsof new perfumenose, role ofperfumelaboratories

Perry EllisPersonal shoppersPersson, ErlingPersson, StefanPétain, PhilippePetit, Roland

Petit Campadieu, Le flower farmPfeiffer, MichelePhilippe, EricPhilo, PhoebePiagetPiano, RenzoPickford, LottiePickford, MaryPierre Cardin

licensingperfume

Piette, DanielPiguet, perfumePilaro, AnthonyPinault, FrançoisPinault, MaryvonnePinault-Printemps-Redoute (PPR),acquisitionsPinkPiva de Albuquerque, LuciaPlatinum SuitePochna, Marie-FrancePoggiolini, AlessandroPoiret, Paul, perfumes ofPoison perfumePolet, Robert

Polge, JacquesPolo perfumePompidou, ClaudePopcorn, FaithPorlezza, GiampaoloPower, TyronePrada

acquisitionsBertelli aschairpersoncelebrity publicityChineseproductioncost-cutting/qualityissueshandbagsin Hong Kongluxury building,Japanmobile phonedesignperfume

Prada, FernandaPrada, LuisaPrada, Mario

Prada, MartinoPrada, Miuccia

background/personalityon handbagson luxuryproducts

Prada SportPressman, FredPreville, PennyPringlePrintempsProcter & Gamble, perfumeproductionProject City-CenterPucci

origin/developmentoftextile production

Pucci, LaudomiaPucci di Barsento, Marchese Emilio,211 Puech, BertrandPuiforcatPuig Fashion GroupPurse-party ladiesPyramid model, middle marketexpansion

Quality, versus profitabilityQuest InternationalQXL online auction

Racamier, Henry and ArnaulttakeoverLouis Vuitton, rebuildingRadziwill, LeeRalph Lauren

adson Rodeo Drive

Rania, queen of JordanRanstorp, MagnusRap culture, luxury, obsession withRatti silk factoryRavaï, NazanineReady-to-wear

development ofGivenchyVuitton by Jacobs

Reagan, Nancy

Recognition MediaRem KoolhaasRémy, MoniqueRenault, LouisReproduction rightsRichemont

acquisitionsorigin/developmentofRupert aschairperson

Richie, NicoleRitts, HerbRiva, MariaRive Gauche

Pinault buy-outready-to-wear

Robert, HenriRodeo Drive, development ofRodriguez, NarcisoRoger, MauriceRomanoff’sRomanov, Dmitri PavlovichRomans

counterfeitinghandbags

perfume usesilk/silkproduction

Rose, HelenRosekrans, DodieRoss, TraceyRossi, SergioRothmansRouët, JacquesRoure Bertrand DupontRouzaud, FrédéricRoyalties, and licensingRuddy, AlbertRupert, AntonRupert, Johann

background/personalitybusiness tacticsofRichemontchairman

Russia and luxury goodsluxury brands,scope ofsales figuresshopping areas

Ryan, Meg

Ryder, WinonaRykiel, Sonia

Saab, ElieSabo, MarlaSachs, TomSaddi, CristianeSaddles, HermèsSaint-Gobain DesjonquèresSaint Laurent, Yves. See YvesSaint LaurentSaint-Louis crystalSaito, RyoeiSaks Fifth AvenueSalons, HollywoodSander, JilSands CorporationSantee Alley, Los AngelesSantee Alley, Los Angeles,counterfeits, sale ofSanyo Shokai Ltd.Savorgnan de Brazza, PierreScarves, HermèsSchiaparelli, perfume

Schiek, LisaSchlumberger, São, size of market2000sSchor, Juliet B.Schrader, PaulSchumacher, MichaelScorsese, MartinScott, JeremyScott, L’WrenSears Roebuck catalogSell JewelrySephoraSeptember 11 terrorist attacks

and counterfeitingoperationsluxury market,impact on

Sericulture. See Silk/silk productionSert, MisiaSevigny, ChloeSèvresSforza, Gian GaleazzoShakur, TupacShaw-Lan WangShearer, NormaShibani Knitting Company

Shields, BrookeShoes

ChooFerragamoLouboutin

ShopliftingShoppesShriver, MariaSilk AlleySilk RoadSilk/silk production

ChinaISA S.P.A.Pucci textilessilk screeningsilkworm cocoonsTaroni silk factory

Silver, CameronSimmons, RussellSimon, DavidSimon Property GroupSimons, RafSimpson, DonSimpson, JessicaSinatra, FrankSinger, Robert

Smith, KentSmith, PaulSnow, CarmelSorbelli, AlbertoSorenson, KathySorvino, MiraSpagoSportswear Holdings, Ltd.Stamp, JonathanStar brandsStaubach, RogerSteele, DawnSteib, MichaelStevens, FisherStewart, JimmyStewart, KrisStewart, MarthaStinoxStone, SharonStreet culture, trends inspired byStreisand, BarbraStylists

bribes/paymentstoJessica PasterRachel Zoe

role ofSun Yat-senSwagSwank, HilarySwanson, GloriaSwarovskiSwarovski, NadjaSybillaSymrise

Taine, HippolyteTakasagoTanabe, ChiakiTandy, JessicaTargetTaroni silk factoryTaubman, WilliamTaylor, ElizabethTaylor, Lady HelenTelsey, DanaTemple, ShirleyTendre Poison perfumeTerrorism. See September 11terrorist attacks

Textile productionChinaMauritiusPuccitextile quotas,elimination ofSee also Silk/silkproduction

Thatcher, MargaretTheftTheory of the Leisure Class, The(Veblen)Theron, CharlizeThomas, H. GregoryThomas, PatrickThree on the BundThurman, UmaTierney, GeneTiffany, eBay counterfeits lawsuitToledano, RalphTomei, MarisaTopper, VirginiaTopshopToulemonde, BernardTranchesi, ElianaTrapani, Francesco

Travolta, JohnTrésor perfumeTretyakovsky Proyezd (TretyakovDrive)Tri-Border MarketTrump, IvanaTsuzuki, Kyoichi

Undergarments, Alice CadolleUnited States, household incomeprofile

Valentinoin ChinaEgypt,outsourcing toValentinoFashion Group

Valentino, RudolphValéry, PaulVan Cleef & Arpels

perfume

Veblen, ThorsteinVenturini, Silvia FendiVera WangVersace

licensing, scopeofPalazzo Versaceprivately held

Versace, DonatellaVersace, Gianni

adsbackground/personality

Vertical integrationDiorGucciLouis Vuitton

Very Irresistible perfumeVeuve ClicquotVia BellagioVietnam, textile productionViktor & Rolf

perfumeVilleneuve, Arnaud deVintage fashionVionnetVipiana, Céline

Vipiana, RichardVivier, RogerVogel, Rolfvon Furstenberg, DianeVreeland, Diana

on BalenciagaclosingonBloomingdale’shandbaglesscampaignon haute couture

Vuitton, Benoit-LouisVuitton, Claude-LouisVuitton, DenyseVuitton, Gaston-LouisVuitton, GeorgesVuitton, Henry-LouisVuitton, Louis

See also LouisVuitton

Vuitton, OdileVuitton, Patrick-LouisVuitton, Pierre-LouisVuitton, Renée

Wal-Mart, Gucci counterfeits caseWalt Disney CompanyWang LianyiWarhol, AndyWarner, JackWashington, DenzelWatts, NaomiWayne, JohnWebby AwardsWeber, BruceWeinstein, HarveyWertheimer, AlainWertheimer, JacquesWertheimer, PaulWertheimer, PierreWest, KanyeWestbrook, DaniellaWestwood, VivienneWhite LinenWilliams, PharrellWinston, HarryWintour, AnnaWood, NatalieWoodbury Common Premium

OutletsWorld KnitsWorld War II, French luxury goodsduringWorth, Charles FrederickWynn, ElaineWynn, Steve

Yendo, MasayoshiYGM Trading LimitedYves Saint Laurent

handbagslicensingperfumePinault buy-outpop artminidressesRive Gaucheon Rodeo Drive

Zadig & VoltaireZanardi-Landi, Christopher

ZaraZoe, Rachel

background/personalityonbribes/paymentstrademark style of

PHOTO CREDITS

Flavia de Oliviera of the Viva modelagency in the Elie Saab Spring–Summer 2007 fashion show inParis. © 2006 by MarcioMadeira/Zeppelin.Gaston-Louis Vuitton’s luggage. ©1933 by Roger Schall.Bernard Arnault. © 2003 by PatrickDemarchelier.A Japanese collector of Anna Suiproducts. © 2001 by KyoichiTsuzuki.Greta Garbo as Mata Hari. Courtesyof Photofest.Hermès perfumer Jean-ClaudeEllena’s laboratory. © 2006 by YvesDuronsoy.A Longchamp advertisingcampaign. © 2006 by MarioSorrenti.Burberry workers protesting theirimpending factory closing in front ofBurberry in London. © 2006 by PA-

Empics/Abaca.Wynn Las Vegas. © 2006 by AlfredBuellesbach/VISUM/ASK Images.Child workers in a counterfeitfactory in China.Cartier unveiled a new flagshipstore in Shanghai. © 2004 by ChinaPhotos/Getty Images.Daslu. © 2005 by Eduardo Gira˜o.

Table of ContentsINTRODUCTIONPART ONE

ONE: An Industry Is BornTWO: Group MentalityTHREE: Going Global

PART TWOFOUR: Stars Get in YourEyesFIVE: The Sweet Smell ofSuccessSIX: It’s in the BagSEVEN: The Needle andthe Damage Done

PART THREEEIGHT: Going MassNINE: Faux AmisTEN: What Now?ELEVEN: New Luxury

ACKNOWLEDGMENTSNOTESBIBLIOGRAPHYINDEX