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CAROLINA HERRERA EXPANDS CHIC EMPIRE WITH CH STORES

By Molly Knight

When it comes to expansion, most companies rely on full name recognition. The people at Carolina Herrera are counting on customers’ recognizing the Venezuela-born designer’s initials.

Herrera, known for her chic, cosmopolitan flair, has announced plans to roll out her new CH Carolina Herrera “diffusion” concept, which currently operates in Portugal and Spain, in U.S. shopping centers.

Fashion industry insiders call CH a diffusion line because its apparel and lifestyle merchandise will straddle the ground between Herrera’s ultraluxury couture and her less-expensive bridge collections, says Robert Cohen, executive vice president of Robert K. Futterman & Associates, the New York City-based real estate firm that has completed the leases for all five U.S. stores. “Diffusion is somewhere in between, but CH’s price point is closer to couture prices,” Cohen said. “And it’s like couture because diffusion is still very much about quality, exclusivity and lifestyle.”

CH opened its most recent stores at the NorthPark Center, in Dallas, in September, and at South Coast Plaza, in Costa Mesa, Calif., in August. These two units join existing stores at The Americana Manhasset (N.Y.); The Forum Shops at Caesars, in Las Vegas; and the Galleria, in Houston, to make up the CH fleet. Cohen says the units measure between 2,600 and 3,600 square feet and calls the expansion timely. “There is not so much a need as there is an opportunity,” said Cohen. “The luxury sector has been driving sales downtown and in shopping centers for years. A lot of designers don’t branch out, but Carolina saw a real chance to expand.”

CH’s mother store, Carolina Herrera New York, on Manhattan’s Madison Avenue, has offered women everything from daytime suits to luxury bridal gowns since the designer moved to New York City from Caracas in 1981.

Since then, Herrera has developed a humble but strong audience, says Dr. Robert Passikoff, president of Brand Keys, a New York City-based retail consulting firm. “She definitely has a small core of people who recognize her sense of style and who appreciate it,” said Passikoff. “That bodes well for brand loyalty.”

Cohen describes the Carolina Herrera customer as an educated woman somewhere in her mid-30s to late 60s. “She is very fashion-savvy, she appreciates couture and quality, and she’s very social,” said Cohen. “She’s active in the community, and she’s probably on various committees. She definitely cares about looking her best and projecting a certain image of luxury.”

Cohen says Herrera recognized the chance to diversify her offerings and appeal to a bigger audience. “Most people in high fashion are familiar with Carolina Herrera, and they trust the brand,” said Cohen. “The CH concept is a broader version of the brand. CH is able to get into accessories and men — which aren’t in the regular line.”

In addition to suits, skirts, blouses and bags, CH offers rings, bracelets, necklaces and other accessories as well as suitcases and baby strollers, all adorned with the CH label. Cohen says this is part of the company’s strategy to stand apart. But as luxury brands continue to develop new concepts, some insiders wonder whether there is room in the marketplace for more.

Passikoff says items on the shelves do not necessarily define a store’s identity. “Part of what’s at work here is the whole Field of Dreams ‘If you build it, they will buy,’ ” said Passikoff. “But I think it’s iffy. After you’ve visited one of these stores, walk out the door and ask yourself if there was any difference in that shopping experience other than the label on the clothes. If the answer is no, then the store is going to have problems.” And shoppers who enjoy Carolina Herrera’s high-end exclusivity may balk at couture that’s slightly less haute, insiders say.

Though Cohen declined to give sales per square foot data, he says response to the new stores has been positive. “The clothes are very similar to what’s offered in Carolina Herrera, and so far customers have loved it,” he said.

But Passikoff wonders how well the new concept will float in a virtual sea of new concepts. “It used to be about the four Ps — price, place, product and promotion — but that isn’t enough anymore,” Passikoff said. “There needs to be an added value. There needs to be a spark that elicits an emotional explosion. Luxury for many years seemed to be immune to being tarnished from a lack of differentiation, but there have been a lot of value shifts and a dampening effect in terms of how exciting these new stores are. To go back a few generations: Where’s the beef? Where’s the difference?”

For CH, the proof may be in the poodles. Seeking to capitalize on the Hollywood-inspired trend of treating small dogs like royalty, the store offers a complete line of canine-inspired goodies: wooden feeders and troughs, leashes, carrying cases and doggie sweaters covered with the CH logo. The store has also introduced crocodile and ostrich wallets for men, shoe polish sets and sneakers.

“The women in high society in Florida, Houston and Las Vegas have enjoyed Carolina Herrera for decades,” said Cohen. “Now their husbands can enjoy it. And even their dogs can enjoy it.”

The stores themselves have a homey atmosphere, says Connie Hascher, director of marketing for the Simon Property Group-owned Houston Galleria. “It’s a different touch than a lot of other luxury stores that have a trendy, more industrial feel.”

Cohen says the company is working on finalizing four deals for new CH stores in 2007, and the expansion plans will follow a Southern route across the U.S. “We have great brand recognition in the South, so that’s our main focus right now,” said Cohen. “We’re focusing on high-end shopping centers, and we like to be near Neiman Marcus. We’re tweaking the concept and trying to avoid big downtowns right now, because we want to make sure we’re ready for the big time before we go there.”

In late 2007 the company will seek to open units on New York City’s affluent Upper East Side, on Madison, Fifth or Park avenues, Cohen says. And though at present the majority of units are in Spain, most future development will take place in the U.S.

“We probably won’t expand much in Spain, because the market isn’t that big,” said Cohen. “Our main focus right now is the States. By the time we’re done, we should probably have a total of about 20 to 25 stores here. We are exploring development in Mexico and Panama. We’ve currently got our clothes in various department stores there.”

So the plans have been laid, but the future remains uncertain. “It’s too early to tell whether this store will be a success or not,” said Passikoff. “But there’s always room for a brand that is able to meet expectations. The main question is whether or not they can deliver to the customers they already have. If they do, the sky’s the limit.”