The New South China Mall has been almost completely empty for most of its 6 year existence. Many luxury flagship stores report a similar lack of foot traffic.

Many Western companies are excited about China’s rapidly growing middle class, and the consumer opportunity they present, but for luxury brands (not including luxury automobile makers) the most profitable path to capturing Chinese consumer spending power has been to market to the mainland, and sell abroad.

Why? For mainland China, import duties typically make the same goods 50-70% more expensive than they would be in cities outside of China. In France alone, a survey by Global Refund estimated that Chinese shoppers were responsible for nearly $1 billion in purchases. {Reuters} Perhaps in response to those type of statistics, China is preparing to reduce or eliminate the high import duties that drive consumers outside of mainland China for shopping.

Luxury Society covered some of the ins and outs of Chinese retail strategy for luxury brands. Essentially, flagship stores in mainland China are little more than street advertising to entice consumers to shop abroad, and on occasion private showrooms for a few high net worth shoppers who can keep the stores profitable with one or two spending sprees each year. The sales? Those are happening in places like Hong Kong, Singapore, Paris, London and New York.

In spite of the high taxes, and the fact that a good amount of Chinese luxury shopping is done outside of China, the country recently overtook Japan as the world’s second largest luxury market. Restrictions on luxury advertising in Beijing demonstrate the opposing views of communist capitalism, but China’s goal to increase domestic consumption and reduce their dependence on exports seems to be gaining ground over state sanctioned ideals.

After all, even though the current economic boom can create jobs building malls and flagship stores,  if doesn’t matter if none of that money makes its way back into the store.

In spite of the fact that Facebook is the number one site for wealthy Internet denizens in several countries, some luxury brands continue to be holdouts when it comes to getting involved with the largest social media site in the world. For those who have decided to be part of modern marketing, rather than hoping it goes away, who’s getting their social strategy right?

L2, the NYU think tank that tracks social media and online efforts among luxury brands, recently published a Facebook IQ report with data from Buddy Media that attempts to answer that question.

The "Genius" brands of L2's Facebook IQ Report

Unsurprising to us, only one fashion brand made the top 10 (well done, Tory Burch). BMW took the top spot, and among the “Genius” level brands, automobile makers in general had a strong showing. While fashion brands are still struggling a bit, spirits & champagne brands had a respectable showing as did beauty brands like Clinique, Bare Escentuals, Benefit and Bobbi Brown. Those brands not only allow fans to post to their pages, most do Genius things like actually responding to create a 2-way conversation as opposed to a broadcast.

Hint: that’s what makes social media different from traditional media. Fortunately Facebook realizes that there are enough brands who will ignore that important differentiator for as long as possible, so in August brand pages will be forced to *gasp* allow their fans to post comments, making social interaction mandatory. That should be fun to watch.

The ranking was based on 4 primary criteria: size and velocity (how large the brand community is, how fast it’s growing); content (types of content, variety, e-commerce integration); engagement (if a brand posts and no one is paying attention…); and integration (no Facebook page should be an island).

All good criteria that help to identify which brand efforts are making the most of Facebook beyond fan counts. It’s not that Burberry’s millions of Facebook fans isn’t impressive: it’s definitely an achievement from a company that’s made online marketing a priority. In a case study in the report though, Tory Burch’s end-to-end integration with “Like” buttons on each product page of their e-commerce site, header and footer links that actively drive people to their Facebook page, and f-commerce Facebook store to complete the circle pushed them further ahead in spite of a fan count that’s a mere 6% of Burberry’s.

We take a similar view of influence: reaching large numbers of people on the web, on a social network or anywhere else is great, but how those people respond is even more telling. It will be interesting to see how upcoming fan page changes that push brands into two-way interaction will affect future rankings, but now is as good a time as any to benchmark the brands already getting things right, and which are luxuriously anti-social.

Download the L2 Facebook IQ report here.

We’ve seen $1400 collectible toys for adults. If you thought the $3,000 price tag on T-shirts that popped up in Valentinoâ€s Rodeo Drive, Los Angeles boutique this summer was ridiculous, get this: following strong second quarter sales, Hermès now offers a childrenâ€s coloring book going for $130. {The Cut}

Thatâ€s $130 for something a toddler is likely to draw all over in disarray. If a parent handed this pricey art toy to their youngster, the pages would likely be torn out and hung on a refrigerator before inevitably fading and being tossed out. Not to mention that in this economy many shoppers are unwilling to pay that much for clothes, much less temporary entertainment for their kids.

Parents can also score a $600 pull-along wooden horse from Hermès for their little ones. A wooden horse is at least a bigger item with more longevity, but similar ones are available for much lower prices at Toys ‘R Us. In fact, a better-looking, pink and green horse can be purchased for $26.99 at toysrus.com.

Hermès†collection of pricey kid toys does not stop there, though. The luxury brand also offers a $390 plush horse, a $405 silver-plated music box and a $435 sterling silver rattle. The rattle and music box are nice decorative pieces, but is anyone really going to give their newborn a sterling silver rattle to play with? The weirdest part of all is that children inevitably grow out of their baby toys, so itâ€s not as if the price tags can be justified with the potential for lifetime use.

Is there something weâ€re missing here? Let us know in the comments if thereâ€s ever a convincing reason to spend so much money on childrens toys!

The Chanel 2.55, now .2x more expensive?

Hermès posted second quarter sales results that were up 20% (must be the magic number), noting increased demand in Asia and the US, where a weaker Euro may have worked in the company’s favor. Groupe Laurent Perrier, a champagne maker, had a sales increase of 17% compared to the previous year, and Swiss watchmakers outpaced both for a 35% increase in exports compared to the previous year. {WSJ} Chanel recently opened a Korean store that set a one-day sales record of nearly $375,000. {JoongAng Daily}

Still, is now the best time to hike prices – particularly at a double digit rate? We’ll have to wait a few more weeks to see if the Chanel rumors pan out, but a recent report from MasterCard Advisors’ SpendingPulse showed a 3.9% decrease in spending compared to last June. With a few notable exceptions, even the good news isn’t entirely good. While sales are up, for many retailers this is an increase over sharp declines last year, so it’s not straight line growth.

What’s more, consumers with household incomes over $150,000 per year – the approximate entry level to be included among the top 20% of US households, account for almost 40% of spending. Luxury sales, which likely rely on $150k+ shoppers for a more significant portion of sales tend to fluctuate with the stock market. {Google News} Lately, the Dow Jones hasn’t been doing so well and may be an early sign of wealthy spenders becoming more conservative with their purchases in coming months.

The good news? Well, for the luxury retailers finally coming around to e-commerce, it may be better late than never. Online sales were up 9.7% overall. Apparel was the best performing category with growth of 18.6%, marking the seventh month of double digit gains. {Internet Retailer}

We know that Chanel has plans to finally offer a wider range of products to online shoppers – expanding on their existing beauty e-commerce area, and giving real competition to web savvy counterfeiters for the first time. Yet somehow we’re not sure if that will be enough if luxury shoppers start questioning why the same bag that was 20% less 2 weeks ago is suddenly more expensive. The Euro hit significant lows against the dollar this year, after laying off hundreds of workers at the height of the crisis we know they’re operating with a leaner workforce, and many brands cut production to respond to lowered demand. While Chanel is certainly one of the brands that can rely on its heritage to lend its products “investment” status, we’ll have to see if shoppers accept a price hike tied more to image than actual costs – or if they decide to invest elsewhere.

The PR CEO start of Bravo TVâ€s “Kell on Earth” spoke to a small group of editorial interns, fashion-obsessed youngsters and public relations entrepreneurs at the Bryant Park Reading Room Series Wednesday, and she had a quite frank earful on the future of fashion, replying to a girl asking about where to look for a career in the field by saying:

“Style is in; fashion luxury, forget it. It’s over. Gucci, Vuitton, Hermes … all those places are really great, go for it. That business exists in a city called Paris, France. That’s where that is. Those businesses will continue. Retail business, pretty much over. I think people who sell to retail companies are people who can’t afford their own stores … Old Navy, J.Crew, Gap … they already knew that and aren’t wholesaling. Editorial, magazine, we are going to say buh-bye to them as we know them. They will still exist but everything is on the internet.” {The Cut, Racked NY}

On the one hand, tell us how you really feel, Kell. On the other, Bravo Kelly! She may be over dramatizing a tad in regards to luxury and retail being “pretty much over,” but it is about time someone spoke up about the hard realities facing fashion, especially in the editorial department. Times are changing, and if the dominant players in the industry want to continue to grow their businesses, they need to learn to adapt.

Persistent efforts on the part of luxury retailers to understand the youth market is a great start, but New York Magazine says the fashion industryâ€s biggest mistake is its strange fear and avoidance of the Internet, specifically social networks and blogs, citing the long series on the “future of fashion” Style.com runs in which they ask important fashion businesspeople like Barneys’ Julie Gilhart about the Internet.

We agree. Even when the big brands try, they don’t always get it right. Considering that the Internet has been a major force to be reckoned with for years now in many industries, fashion magazines and businesses still have a lot of catching up to do. Until revenue from web advertising catches up to revenue from print advertising though (they’re still miles apart), we suspect the wait won’t end soon.

Yesterday, we told you what luxury retailers are doing to remain relevant and marketable into the future. Namely, high end brands are figuring out how to market to generation Y, which will surpass baby boomers as the largest consumer group in the United States come 2017.

Today, the New York times reports on the hot spot for New York luxury fashion labels to sell their products in years to come – Brooklyn, a.k.a. the “new bastion of cool for many New Yorkers.”

Barneyâ€s Co-op, a younger, more accessible division of Barneyâ€s New York, will open its first store in the Cobble Hill section of the borough, with Swarovski Crystal, North Face and Anthropologie reportedly scouting the scene in Brooklyn.

The question is whether this is a smart move in keeping with the push for high end brands to appeal to a younger crowd.

“Someone needed to be first, and now that Barneys Co-op has done it, others will follow,” said Karen Bellantoni, an executive vice president for the retail brokerage firm Robert K. Futterman & Associates. Executive Director of Retail Services at Cushman & Wakefield Joanne Podell adds, “Brooklyn has the demographics to support this kind of retail, but until now, no national store was willing to take the chance.” {New York Times}

Therein lays the key: demographics. Dawn Brown, vice president of publicity for Barneyâ€s, said the store chose Cobble Hill because surveys showed many of their current customers lived there.

Cobble Hillâ€s economics compared to that of the wealthy neighborhoods in Manhattan where Co-Ops currently reign, with the average apartment/home price topping $1 million and household incomes well over the $100k mark aren’t extremely far apart. This isn’t as much as the $177,000 and $181,000 HHIs of the Upper West Side and Soho, respectively – the locations for Barney’s current NYC Co-op locations, but definitely a desirable group.

But it would be really innovative if Barney’s pushed the envelope even further in terms of the retail model (a la Neiman Marcus’ new “laboratory” store). With retail just starting to rebound, and location planning taking years to come to fruition, we understand going with the safest new option. However, bringing a Co-op into a neighborhood filled with the same audience that high end retailers have targeted for years could overlook the change in habits of future shoppers. Keep in mind, this is the same audience that declined to shop as regularly at luxury fashion retail stores throughout the troubled economy. Indeed, it is the same audience that may very well have realized it can get on just fine without current season (read: full priced) designer clothes even once the economy has improved. While most of the Co-op brands – Marc by Marc Jacobs, Diane von Furstnberg and Opening Ceremony among others, are already in a more affordable range than the labels at Barney’s flagship, there’s still likely to be a demand from shoppers still bent on getting the best value. Given the popularity of discounters and sale sites among $100,000+ shoppers, would a Barney’s outlet make more sense?

Donâ€t get us wrong: the Barneyâ€s Co-op in Cobble Hill will probably do just fine, and we hope that it becomes a strong anchor for Brooklyn retail. But in terms of looking ahead and marketing to current and future, younger shoppers, the retailer could have brought in more unique  retail options that reflect the signs of the times.

We think Neiman’s has an interesting approach to surviving the hardship. The new Dallas branch is built in a not-so-wealthy neighborhood, and the company has cut down on staffing to appeal to the broader demographic of middle-class shoppers.

Steven Dennis, a former Vice President of Marketing and Business Development for Neiman Marcus has wondered if there will be enough discount designer merchandise to satisfy the insatiable demand that’s been created by offline discounters as well as online sale sites like Gilt and RueLaLa.

“Industry incumbents suddenly woke up to the fact that there is a large segment of affluent consumers who really like to get a deal and donâ€t necessarily want to head out to the sticks to the factory outlet mall (Nordstrom–you get a pass because you figured this out a long time ago with your Rack stores).  So Neimanâ€s and Saks started experimenting with their own “flash” sales (though, shockingly, neither has yet to mount a serious online counter attack) and announce plans to accelerate the opening pace of their clearance stores,” says Dennis. {Steven P. Dennis blog} “The consumer offering is going to look a lot different in the future: fewer unbelievable deals on true designer product and more faux clearance.”

While other luxury retailers wait out the storm, Neiman Marcus will now offer merchandise in a range of $45 to $300 , which is estimated to be priced at a discount of 40%  or more. With Gilt moving into full priced sales, it will be interesting to see who ends up claiming the premium designer discount market. Dennis predicts that more of those $45-300 “deals” will actually be manufactured specifically for that price point, rather than true discounts on $90-600 merchandise.

For those of us who love great fashion and are on a budget (think Michael Kors, Badgley Mischka, DVF, BCBG and more) this still sounds promising. While there have been misses, there have been plenty more hits for stores like Target and H&M who regularly offer designer lines in a more affordable price range (see: Zac Posen’s blowout shopping bash). For stores and designers, becoming a regular source for mid-range collections (even if disguised as designer discounts) could be key to not only surviving tough economic times, but thriving among consumers who want to shop, but still aren’t comfortable making extravagant purchases.

“I doubt you’re going to see a lot of new stores opening on the full-line side,” said Stephen Sadove, Saks’ Chief Executive. “It’s going to be making the current stores more productive.”

Sadove was speaking about stores that would be closed, which include those that have a lease expiring and those that are losing money. {Wall Street Journal} There’s no specification of which category the Portland Saks stores, announced for closure this year, fall into. But considering both the stand alone men’s store and women’s store are getting the axe, it’s likely they’re in the latter.

Scaling back on extravagant spending is something all too common these days, with some even considering it chic. Online isn’t immune, as wealthy shoppers there turn to mid-market retailers like Macy’s and discounters like Gilt and Bluefly for designer purchases. Other luxury retailers like Neiman Marcus and Tiffany & Co. all saw declines this year in holiday sales, and struggle with clientele affected by the market.

A reflection of this subdued shopping mood is seen on the runways of some of the top designers who are using more basic colors and prints, {All Business} simpler silhouettes and the use of layering and interchangeable pieces to emphasize making the most of what you buy.

Advertising costs may also have something to do with company sales loss. Advertising pages are scarce among the most influential fashion magazines like Vogue, whose ad pages were down 36 percent last year, even though the magazine had a 6.3% increase in circulation during the first half of the year. With luxury fashion houses still so heavily reliant on magazine advertisements as their primary communication method, the decreased exposure there coupled with consumers severely tightening their purse strings make it clear that companies looking to regain momentum still have a long road ahead.