Brand leaderKering’s MarcoBizzarri on howto balance appealand exclusivityPage 2

Inside »

Big names fortough timesHigh-profile hiresface an increasinglyintense battlePage 3

What next?Martin Wolf askstop economistsabout prospects forglobal recoveryPage 3

Inside Mayfair’shidden gemWartski’s Fabergéfind puts antiquesdealer in limelightPage 4

FT SPECIAL REPORT

The Business of LuxuryMonday May 12 2014 www.ft.com/reports | @ftreports

After five years of rapidgrowth driven by voraciousChinese demand, the luxuryindustry is experiencing acold blast of reality.

“The bad news is that easy growthon the back of opening stores inChina is over for most luxurybrands,” says Luca Solca, head of lux-ury goods research at Exane BNPParibas.

China’s lower economic growth,anti-corruption crackdown, pollutionin the big shopping cities and amaturing consumer turned off bylogos have all been blamed by luxuryexecutives for lacklustre sales in 2013,which for many have extended intothe first quarter of this year.

Nonetheless, bright spots are emerg-ing as a result of macroeconomic andsocial change. For example, the focus

is swinging back to developed coun-tries where half of luxury’s total glo-bal sales are made to consumers intheir traditional markets.

The US is considered the biggestgrowth opportunity for the luxurymarket over the next decade becauseof spending by locals as well as tour-ists, according to Boston ConsultingGroup (BCG).

Accessible luxury brands led by USgroup Michael Kors, which doubledits European sales at the end of lastyear, are also changing the face of theluxury industry.

Scilla Huang Sun, who runs theJulius Baer Luxury Brands Fund,points out that it is crucial to differen-tiate between the moderation of lux-ury sales in mainland China com-pared with the solid demand fromChinese tourists, especially in the US.

The Chinese are the world’s biggesttourist spenders and increased theirspending by 28 per cent in 2013,according to the World TourismOrganisation. This underpins belief in“the growing purchasing power ofChinese consumers and their appetitefor western luxury brands”, MsHuang Sun says.

It is also driving the opening ofluxury outlets for brands from Ferrag-amo to accessible fashion bagmakerFurla in airports around the world,even in Europe where local demandremains subdued.

Another new focus for luxury goodsbrands, such as Milan’s Prada, is con-verting concessions in departmentstores into directly operated shops,and driving online sales.

Hard luxury brands – with Swatchat the vanguard – are expected toopen more stores selling directly toshoppers.

More than half of total luxury pur-chases are influenced by online mar-keting, according to a BCG survey ofmore than 10,000 customers in 10countries.

Social media and the rise of smart-phones and wearable technology arealso opening a new business frontier –as well as a potential threat.

The fallout has extended to creativedirectors and management at leadingfashion and luxury conglomerates,LVMH, Kering and Richemont, all ofwhich have moved to shake up atleast some of their business.

Louis Vuitton and Gucci, theleather goods brands of LVMH andKering, respectively, are consideredby analysts to have only just emergedfrom intensive care after their logo-heavy styles hit saturation in China,prompting a repositioning.

At Gucci, which accounts for half ofKering’s revenues but where salesremained sluggish in the first quarter,analysts say bolder creative choicesmay be needed, especially since thehiring of young designers by otherKering brands Balenciaga and SaintLaurent led to sharp sales rises.

Meanwhile, Richemont’s decisionnot to sell its underperformingsoft luxury brands, including Mont-blanc and Lancel, means that

Continued on Page 2Not just window shopping: sales in developed markets have started to rise Reuters

Traditionalmarketsbenefit asChina slowsGrowth is still focused onAsia-Pacific but salesin developed nations, particularly in theUS,have picked up, writesRachel Sanderson

Online coverage ofthe Business ofLuxury conferencein Mexico Citywww.ft.com/luxury360

On FT.com »

2 ★ FINANCIAL TIMES MONDAY MAY 12 2014

The Business of Luxury

they now need to be turned round.But while the mega-brands stutter,

the anti-corruption drive in China andreturn to form of US consumers arebenefiting high-end niche players.

Loro Piana, bought by LVMH lastyear, and Brunello Cucinelli and Her-mès, which do not rely excessively onfashion and focus on high-qualitygoods in casualwear, are in bettershape in China where they haveavoided the anti-logo backlash. Thebrands are gaining traction in the US,where consumers prefer a casualwearlook.

Sales at Cucinelli rose 50 per cent inChina in 2013 and 20 per cent in theUS. Bottega Veneta, the ultra-luxebrand owned by Kering, saw firstquarter sales up 15 per cent on theend of 2013.

Meanwhile, valuations of independ-ent Italian brands Moncler, Tod’s andFerragamo remain high amid expecta-tions that they, like Giorgio Armani,will be takeover targets, as the

Chinese slowdown drives consolida-tion. Mirroring the extent to whichthe global economy moves into a sus-tained recovery, luxury will grow too,according to Deloitte Touche Tohm-atsu, the professional services firm, inan upcoming report.

Not unexpectedly, notwithstandingthe slowdown in China, growth isstill disproportionately focused onthe Asia-Pacific region. Althougheconomic growth has slowed latelyin much of Asia, this is to someextent offset by the rise in incomeinequality.

Income available to upper-incomehouseholds is therefore growing fasterthan overall income, Deloitte main-tains.

The near-term future of the luxurymarket will depend, in part, on howthe global economy evolves.

Deloitte considers the more promis-ing markets to include Colombia,Mexico, Philippines, and much of sub-Saharan Africa – where ErmenegildoZegna, Hugo Boss and MAC have beenat the vanguard of opening stores.

Continued from Page 1

Return totraditionalmarkets

In April, Francois Henri Pinault,head of French luxury groupKering, confirmed months ofrumours about a shake up in themanagement ranks and promoted

Marco Bizzarri, president and chiefexecutive of Bottega Veneta, to anew role as head of couture andleather goods for the luxury division.

The move underlined Mr Bizzarri’semergence as a rising star of theluxury industry. At a time whenexecutives are sweating about theslowdown in China and thedisruptive effect of technology onconsumption in mature markets, MrBizzarri has turned Bottega Venetainto a billion-euro brand with someof the strongest growth in the sector.

In his new role, the 51-year-oldItalian former managementconsultant will oversee some of theworld’s best-known luxury brands,including Bottega Veneta, SaintLaurent, Alexander McQueen, StellaMcCartney, Brioni and Tomas Maier.

Kering’s global mega-brand Gucci,which accounts for more than half ofthe company’s luxury sales, willremain under the aegis of longtimechief executive Patrizio di Marco.

Speaking to the FT before he takeson his new job, Mr Bizzarri shrugsoff concerns about a slowdown inChina and the impact of technologyon consumer spending. Instead, hesays, the brands that will thrive willbe those that manage to sellthemselves to consumers as uniqueand exclusive, even if they are beingsold in the millions.

“The winners are those able tooffer a better shopping experiencewith a product that is moreexclusive than in the past,” he says.

As for China, Mr Bizzarri believesit will remain a strong growthmarket for Bottega Veneta, even asother brands flounder.

“The market is approachingmaturity and when you reachmaturity, consumers stop buying

everything. As far as Bottega isconcerned, we don’t see anyslowdown. I will continue to growdouble digit in China. Many brandsare complaining because they wereused to selling everything. But thatwas going to change,” he says.

Mr Bizzarri, former chief executiveof Stella McCartney, started atBottega Veneta – taking over from

Mr di Marco, Gucci’s currentpresident and chief executive – atthe height of the financial crisis in2009. But Mr Bizzarri maintained –and was subsequently proved right –that luxury shoppers in Asia wouldtrade up to Bottega’s style of discreetbut pricey, no logo handbags as theybecame more sophisticated shoppers.

The company’s sales in the firstquarter rose 14.6 per cent at constantcurrency rates to €250.8m, comparedwith the previous year, which wasalso a slight increase on the lastquarter of 2013.

Under the direction of its creativedirector, Tomas Maier, and MrBizzarri, Bottega has become asuccessful lifestyle brand for one ofluxury’s priciest houses. One of itssignature Cabat handbags in wovenleather intrecciato infilato has astarting price of about €4,800.

Alongside other big brands, suchas bigger rival Louis Vuitton,Bottega has also focused onhighlighting the manufacturing of itsluxury goods.

In Bottega’s case, the focus is onits woven intrecciato – a traditionaltechnique from the Veneto regionwhere the company is based. Thebrand has expanded from bags intoshoes, clothes and homeware, but itssignature criss-cross design hasremained constant, patterned onshoes and even on the bottoms ofdrinking glasses.

“Craftsmanship is becoming moreand more successful. But for me,what is even more important is thatyou need to be consistent. The worldoutside is too crowded; consumersneed to know what to look for whenthey enter certain shops,” he says.

Bottega Veneta has expanded inthe past five years, opening a vastflagship store in Milan last year togive it a total of 226 directlyoperated stores worldwide – farfewer, however, than Louis Vuittonor Gucci. Mr Bizzarri also plans toopen fewer stores this year than last.

“Exclusivity will remain the addedvalue. We will slow down theopenings in the coming year,” he

says. Instead, Bottega will increasethe size of its smallest stores.

Three years ago, Mr Bizzarridecided to limit openings in Chinaand raise investment in Bottega’sstores in Europe’s shopping capitals.

“That longer-term approach paidoff, as the tourist flows haveincreased in the past five years.Many more Japanese and Chineseare coming to Europe than they didin the past,” he says.

Does he see anywhere else takingover from China? “Frankly no. Weare present in India, in Brazil, butthese markets are far short of thepotential of China. The decision-making process in China is farquicker,” he says.

Mr Bizzarri believes the tensionsare typical “of an industry that isgoing to undergo consolidationsooner or later”. He believes thatluxury goods companies need to beglobal in order to spread their riskand have a footprint large enough tocatch tourist shoppers wherever theyare in the world.

Another issue arising for theindustry is the suggestion thatluxury is starting to mean more thanjust clothes and bags for consumersin traditional markets such as theUS, Japan and Europe.

Analysts suggest that technology isdisrupting the market, withhankering after the latestsmartphone overshadowing a desirefor the latest handbag.

It might amount to as big aproblem for the industry as aslowdown of sales in China.

Mr Bizzarri believes technology isless relevant for Bottega, where themanual craft that goes into its bagshas become a selling point. Thecompany has invested heavily in thepast couple of years in the men andwomen who make its handbags.

“We wanted to create a cocoon forour employees and our artisans. Werealised that the safer creativepeople and craftsman feel, the betterthe collection they produce. If theydo a better collection, my revenuesgrow. It is not easy to attach figures,but it is what happens,” he says.

As for advice for up-and-comingluxury executives, Mr Bizzarri isclear.

“You always need to be curiousand study,” he says. “The market ismoving so fast, there is nothing setinto the wall. You need to be very,very flexible.”

Kering man has the billion-euro touchInterviewMarco BizzarriChief executive, luxury couture andleather goods, Kering

Talk of a China slowdownfails to ruffle rising star,writes Rachel Sanderson

Moving up: in his new role at Kering, Marco Bizzarri will oversee some of the world’s best-known luxury brands Reuters28%Chinese tourist spending growth, 2013

Curriculum vitae2014 Kering, chief executive, luxurycouture and leather goods2012 Kering, non-voting director,2009 Bottega Veneta, president andchief executive2005 Stella McCartney, president andchief executive1993-2004 Mandarina Duck Group,general managerPre-1993 Accenture, strategyconsultant

FINANCIAL TIMES MONDAY MAY 12 2014 ★ 3

The Business of Luxury

What does the worldeconomy hold in store?Looking into their crystalballs at today’s Business ofLuxury Summit in MexicoCity are Willem Buiter,chief economist ofCitigroup, and GuillermoOrtiz Martínez, formergovernor of the Mexicancentral bank. I asked bothof them three questions.

The IMF forecastscontinued recovery in theworld economy over thenext two years,particularly in the high-income countries. Do youagree that this is the mostlikely outcome?

Willem Buiter Yes, I do.

Guillermo Ortiz MartínezOver the past year,analysts have turned morebullish on developedeconomies – and rightly so.

In the US, waning fiscaldrag, continued householdbalance sheet repair, anduptrending corporateearnings have set the stagefor a long-awaited returnto above-trend growth incoming quarters.

In Europe, the UK’s andeurozone’s recoveries seemless well balanced.However, as they overcomedifferent challenges, theyare likely to feed off eachother, to positive effect.

In the UK, concerns havebeen raised about thesustainability ofconsumption growth andbubbly real estate prices.But broader improvementin fundamentals reveals arobust recovery.

The eurozone continuesto exhibit an unevenrecovery between its “core”and “periphery.”

While Germany andother northern membersare performing well,peripheral economies mustrely on “internal

devaluations” to close theregion’s competitivenessgap – raising the risk ofdeflation. In this regard,the ECB’s hints at targetedadditional stimulus downthe road are a welcomedevelopment.

In Japan, the signalsregarding the success ofAbenomics have beenmixed. The reformprogramme still has someway to go. But the Bank ofJapan seems more thanwilling to support activityin the meantime.

Emerging markets, onthe other hand, show aless rosy picture, but notone so pallid as to reversetheir expansion.

During the “tapertantrum” of 2013, severaleconomies did seem on thebrink of crisis, but thevulnerabilities proved lessdrastic than feared.

Acceleration in demandfrom developed economiesshould support exportgrowth, while furtheradjustment – tight fiscaland monetary policycoupled with structuralreforms – should improveprospects for the mediumterm.

The wild card is China’seconomy, to which theperformance of severalemerging economies istied. In the base case,Chinese policy makerspursue economicrebalancing andliberalisation efforts, whilefinancial excesses arecurbed and growth settlesat close to 7 per cent.

What do you see as thedownside risks?

WB First, an unfudgeableRussian invasion of easternUkraine followed bystringent sanctions againstRussia, a cut-off of gasshipments from Russia toEurope and a recession inEurope. Second, arecession in Chinatriggered by the burstingof its credit bubble and theend of the constructionboom. Third, unsustainablepublic debt dynamics inthe eurozone’s peripheryand an honest assetquality review and stresstest of banks by theEuropean Central Bank,

leading to a credit crunchin the eurozone.

GOM First, half a decadeof zero policy rates indeveloped economies mighthave engendered financialrisks that are not yet onofficials’ radar. In the US,growth might challenge theFed’s commitment to agradual normalisation ininterest rates. Policy couldthen tighten more quicklythan expected.

Emerging economies arebetter prepared thanbefore. But one cannot ruleout balance-of-payments orfinancial crises. Apotentially disruptivedevelopment has been themassive expansion ofcorporate debt in emergingeconomies, some of itdenominated in foreigncurrencies.

A second risk to theglobal economy is a sharpgrowth slowdown in theChinese economy. A crisisin China could haveseverely negative effect forthe global recovery.

Third, we might observea “jobless recovery”,particularly as robots andautomated processesreplace human labour.

This should be a positivedevelopment in the longrun. But, in the short run,it might cause highunemployment, highercorporate profits andweaker demand

Finally, geopoliticaltensions between the westand Russia might raiseuncertainty and riskaversion in global markets.

What are the short- tomedium-term prospects forMexico and also for therest of Latin America?

WB Mexico: good and evengreat, if it can raisedomestic capital formationto at least 25 per cent ofgross domestic product.Chile, Peru and Columbia:good; Ecuador, Paraguayand Bolivia: reasonable;Brazil: mediocre;Argentina: poor; andVenezuela: disastrous.

GOM For the first time inseveral decades, theprospects for the Mexicaneconomy are strongly

positive. This year, the USrecovery will spill overinto Mexico through tradeand remittances, andgrowth will also start tobenefit from some of thestructural reformsapproved in 2013,particularly in finance andenergy.

Given the current outputgap (output that is wellunder potential), the pick-up in growth is unlikely togenerate inflationarypressures. This will allowmonetary policy to remainaccommodative.

As demand accelerates,structural reforms willexpand the economy’sproductive capacity.

Mexico is also lessexposed to global risksthan other emergingeconomies. Orthodoxmacroeconomic policiesstill in place serve todistinguish Mexico frommost other emergingeconomies. Sound financialregulation and a free-floating exchange ratehave kept maturity andcurrency mismatches atbay. China risk posesrelatively little threat. Thenext presidential electionsare a comfortable fiveyears away, while currenttrends in polls for themidterm elections signalcontinued progress onstructural reform.

The country still facesmany challenges. But, ifofficials can implement theapproved reforms, Mexicowould be at the start of avirtuous circle of economicdevelopment with nearlyunlimited potential.

The rest of LatinAmerica is generally moreclosely linked to China andhas displayed less resolveon structural adjustment.

Even though there isspace for expansionaryfiscal or monetary policiesin certain economies, thebest days of growth andreform might be behindmany countries.

There is, however, asharp contrast betweencountries favouringmarket-oriented policyframeworks and those of amore interventionist bent.

The outlook for theformer is significantlybetter than for the latter.

Experts broadly positive on globalrecovery but warn risks remain

Economists’ Q&AMARTIN WOLF

The once stellar growthenjoyed by leading luxurygroups has slowedconsiderably in the past 12months, hampered by

waning enthusiasm from Asiancustomers, volatile exchange ratesand a bitter battle for the attentionof emerging market consumers.

This has led to a stream of C-suiteappointments, as brands look foradditional sources of growth,continue to flirt with initial publicofferings or buyouts, and take high-risk experiments with pricing,licensing and costly product rollouts.

Here are the 10 latest – andhighest-profile – hires.

Jean-Frédéric DufourChief executive, RolexRolex has experienced ahigh executive turnover inrecent years.

Its latest chief executive,Mr Dufour, will be itsfourth since 2008 and wasappointed in April.

Mr Dufour, who replacesGian Riccardo Marin,hails from LVMH-owned Zenith,where he executeda much-admiredturnround,includingrefocusing productlines,implementingshrewd marketingstrategies andreturning toclassic modelsto rejuvenatesales.

With China’scorruptioncrackdown andincreasingcompetition fromSwatch andRichemontcontinuing toweigh onSwiss watchexports, manyindustryobservers willbe watchingRolex closely

to see what this young, charismaticmoderniser will do.

Marco BizzarriChief executive, couture and leathergoods, KeringIn April, Kering announced that itwould be restructuring its luxurydepartment into two divisions:couture and leather goods; andwatches and jewellery.

Taking the helm at the formeris Mr Bizzarri, the much-laudedchief executive of BottegaVeneta – and currently the starperformer in Kering’s brandportfolio.

Henceforth, Mr Bizzarri will beexpected to guide the group’s

other niche brands – theseinclude Stella McCartney andAlexander McQueen – alonga comparable path togrowth.

Delphine ArnaultExecutive vice-president,Louis VuittonTwo years after her brotherAntoine took the reins at

Berluti, Ms Arnaultwas installed lastJune at LouisVuitton after stintsat McKinsey andChristian Dior.

Overseeing allproduct-relatedactivities, BernardArnault’s daughter

has been quick tomake her mark on the

brand.After suffering

softening sales in2013, last month the housereported its best fashionand leather goods growthin more thantwo years.

She has been thearchitect behind thepioneering LVMHYoung Designer Prize, aclever means offorming ties withemerging talentswho will be neededto define the futureof luxury.

Christopher BaileyChief executive, BurberryFollowing the high-profile defectionof Angela Ahrendts to Apple lastyear, the luxury world will bewatching closely to see whether newchief executive Mr Bailey is cut outfor taking on both creative andcommercial control. The affable anddigital-focused Yorkshireman was thedriving force behind Burberry’srebranding success.

Sales momentum has been steadysince the announcement in Octoberof the appointment of Mr Bailey,who will retain his presentresponsibilities as chief creativeofficer, but shareholders will bewatching closely to ensure he hasthe financial and managerialwherewithal to sustain theselevels at the British luxurygiant.

Marigay McKeePresident,Saks Fifth AvenueThe former chief merchantof Harrods, Ms McKeetransformed theKnightsbridge storeinto one of themost profitableluxury shoppingmeccas in theworld.

She was hiredby Hudson’s Bay,a Canadianretailconglomerate, inSeptember tooversee anoverhaul ofSaks FifthAvenue, whichit has boughtfor $2.4bn.

Capitalexpenditure of$1bn has beenearmarked totake the US chainupmarket, asdepartment storesseek to countermarket share erosionby ecommerce andown-brand luxuryflagships.

Stacey CartwrightChief executive, Harvey NicholsMs Cartwright’s arrival at HarveyNichols in January promptedheadlines that the recent flat figuresof this prestigious British chainmight enjoy a boost, after it hasbeen largely eclipsed by rivals.

Much-touted by City financiers, theappointment of the former chieffinancial officer of Burberry also ledto rumours of a possible sale. Nosign has emerged of any deal yet,but a spot of window dressing isclearly in train.

Ms Cartwright’s revamp includes afresh brand assortment, a HarveyNichols in-house label, and anexpansionist drive overseas.

Steve ShiffmanChief executive, Calvin KleinFollowing the announcedretirement of longtime chiefexecutive Tom Murry inMarch, parent group PVHpromptly turned to MrShiffman, who has workedacross the company for morethan two decades.

Most recently chiefcommercial officer, MrShiffman will begiven theresponsibility ofshoring up thebrand’s positionin maturemarkets at thesame time asdeveloping itsfootprint innewer regions.

He hopes totake the label –best known forits jeans andunderwearbusiness – furtherupmarket, inkeeping with abroader industrytrend.

Mr Murry,meanwhile, willmaintain aposition asadviser until theend of thefinancial year.

Nicolas GhesquièreCreative director, Louis VuittonFollowing Marc Jacobs’ exit from thebrand last year to focus on theimminent initial public offering ofhis eponymous label, Mr Ghesquierejoined LVMH’s flagship in November.

After an unceremonious exit fromBalenciaga – and bitter public falloutwith its parent group Kering – theFrench designer received ravereviews for his first Louis Vuittoncollection in February.

Its “strong creative momentum”was praised by LVMH in its latestset of earnings in April. MrGhesquiere will be pivotal in taking

the brand further upmarket.

Francesca AmfitheatrofDesign director,

Tiffany & CoThe US jewellerappointed its first designdirector last October. MsAmfitheatrof is known to

industry insiders for herprevious collections for

luxury fashion labelsincluding Chanel, Fendi andMarni.

Stuart VeversCreativedirector, CoachFollowing ReedKrakoff’s exitlast summer tolaunch his ownwomenswearline, MrVevers arrivedat Coach inSeptemberafter beingpoached fromthe LVMH-

owned leatheraccessories

brand Loewe.Mr Vevers takes

on the task ofbreathing new lifeinto the USpowerhouse amidstagnant sales andsuperior competitionfrom the likes ofMichael Kors andKate Spade.

High-profile hires face increasingly intense battleC-suite Brand executives face problems inAsia, volatile exchange rates and a tough fight towin in emergingmarkets, writesElizabeth Paton

On the move:from left to right,Delphine Arnault,Louis Vuitton;Marigay McKee,Saks FifthAvenue;ChristopherBailey,Burberry

Rolex’s latest chiefexecutive, Jean-FrédéricDufour, will be its fourthsince 2008

4 ★ FINANCIAL TIMES MONDAY MAY 12 2014

The Business of Luxury

Jewellery buyers head to Lon-don’s Bond Street for interna-tional superbrands such asChanel of Paris or Tiffany ofNew York. But if they turn

into Grafton Street, they find anincongruous alternative: Wartski ofLlandudno.

The antique dealer, founded nearly150 years ago by Morris Wartski, aRussian émigré and jeweller, wasuntil the 1970s run from the Welshseaside town. A London branch wasadded in 1911. Mr Wartski’s descend-ants own the business today.

Modern Wartski does not advertise,nor does it pay attention to publicrelations. But it made headlines thisyear with its discovery and sale of thelost “third imperial Easter egg” – oneof 50 created by Carl Fabergé in thelate 19th and early 20th centuries forthe Russian tsars Alexander III andNicholas II.

The third was among eight thoughtto be lost after they were sold by theBolsheviks in the 1920s and 1930s,until it turned up recently in thehands of a US antiques dealer. He hadtried – and failed – to sell it for scrap,before realising his acquisition mightbe worth more. A Google search led toWartski’s experts in London.

In April, the imperial egg was exhib-ited at the shop for four days – thefirst time it had been seen in publicfor 112 years. To the surprise of staff,more than 2,000 people showed up.

“You can sit here for days and notmuch will happen, we are so slow andEdwardian,” says Kieran McCarthy, adirector of Wartski and an expert onFabergé. “Then all of a sudden, wehad queues stretching towards BondStreet. People from St Petersburg andpeople from Tunbridge Wells, pullingup in Bentleys and getting off thebus.” By the time it was exhibited, theegg had a buyer in a deal brokered byWartski for an undisclosed sum,

reported in the Daily Telegraph to be£20m. Wartski did not confirm thesale price, but Mr McCarthy says thedeal was worth “many millions”.

What makes buyers part with vastsums for such rarities? The answer,Mr McCarthy says, lies in the urgewealthy people have to mark theirtriumphs.

“Life is very short, and the morepowerful and rich you are, if yourpresence and ego are going to berecorded, you do it through works ofart. You live forever by your owner-ship of these objects.”

Collectors view and handle thoseobjects in Wartski’s shop. Grade IIlisted and with a bronze exterior, itstands out among Mayfair’s glass-and-steel retail outlets. “It may [be] out offashion, but it has credibility thattranscends. And we like it,” says MrMcCarthy.

“Often shop owners see [listed sta-tus] as a burden,” says CatherineCroft, director of the Twentieth Cen-tury Society, an architectural conser-vation group. “But Wartski are genu-inely interested . . . They [also] seemreally interested in the stories behindthe things they sell. I went roundthere to look at the architecture andended up trying on tiaras.

“So many [Mayfair shops] are retro,would-be Regency or ‘historic-inspired’ façades,” she adds. “ButWartski’s shop is determinedly not-flash.” That reticence is reflected in awindow display that shuns vast dia-monds in favour of curios such as a

jewelled stickpin featuring a devil’sface and a gold brooch in the shape ofa kitten’s head.

Inside, 300 items of jewellery, gold-smiths’ work and glassware aredisplayed. As well as imperial Russiantreasures, the business specialises inSaxon jewellery.

In the 20th century, Wartski was acult destination for international col-lectors. The British royal family, Jac-queline Kennedy and Hollywoodactors were among its customers.

Today, it sells to collectors, dealersand museums, including the BritishMuseum in London and the Metropoli-tan Museum in New York. The shop,says Mr McCarthy, is a place for cus-tomers to learn about the items – fewmake spontaneous purchases. “Per-haps one every year; it’s very rare.”

Its clientele is international –“industrialists, royals, film stars,musicians” – and includes wealthyRussians. “We get historically minded[Russians] who are focused on [theircountry’s] past,” Mr McCarthy says.

Tensions in Ukraine are causingworry among international auctionhouses about this summer’s sales,amid concern that the fallout willdeter Russian collectors. “So far, ourcommunications with Russia haven’t[changed], although maybe we won’tnotice until the summer, becausethat’s when Russians descend,” saysMr McCarthy.

Will Wartski ditch its associationwith Llandudno, where the shop doorsclosed more than 40 years ago? MorrisWartski’s nomenclature made sensewhen the then-wealthy resort was aholiday destination known as ‘theNaples of the north’. But is the fadedtown relevant today?

The Wartski business believes it is.“We are very proud of being fromLlandudno,” says Mr McCarthy. “It’san eccentricity . . . that allows thebusiness to thrive.”

Mayfair gemholds a trove ofeccentric curiosWartskiFabergé discovery has put spotlight onvenerable antique dealer, writesHelen Barrett

Sold: Fabergé’s imperial Easter egg

He had tried – and failed –to sell it for scrap . . . AGoogle search led him toWartski in London

Nigeria has 16,000millionaires – andcounting. The heftyspending power of thisever growing demographichas caught the attention ofthe luxury goods industry,but to date, most brandshave remained wary ofentering the country.

Last year, however, onegroup took the plunge. USbeauty giant Estée Lauderopened a boutique in Lagosfor MAC, its 29-year-oldcosmetics line, becomingthe first western prestigebeauty brand to open there.

That gamble has clearlypaid off. MAC has soaredpast rivals to become thecountry’s number onehigh-end cosmetics brand,an accolade it also holds inother emerging markets,including India and Brazil.

So, what did the team atEstée Lauder see thatothers did not?

William Lauder,executive chairman, says:“It’s been embedded in ourDNA to enter new marketsright from the start, from1946 when my grandmother

came to the US frompostwar Europe andfounded our beautybusiness.”

The affable 54-year-oldserved as Estée Lauder’schief executive for fiveyears until Fabrizio Fredatook over in 2009.

He believes that thispioneering spirit is fuellingthe company’s rapiddevelopment across China,echoing his fatherLeonard’s rollout acrossthe US in the 1960s.

Now, Estée Lauder has30 brands in 150 countriesand about 500m consumers.Net global sales hit the$10bn dollar mark lastyear.

The trick to achievingthat level of success, saysMr Lauder, is recognisingthe “core client”.

“She is often a middle-class consumer with newlyhigher disposable income,and we strive to offer herproducts and awarenessthat enhance herconfidence in her ownbeauty.

“The beauty of beauty –excuse the pun – is that itis the approachable entrypoint and first step intoluxury spending formillions of women.”

He adds that adapting tonew environments andtastes is essential, as whenfor example the companycreated lighter foundationsfor Asia to combat hot andhumid weather.

“We are constantly

mining new markets foropportunities and havebeen early to market onnumerous occasions,especially in and beyondthe Brics,” says Mr Lauder.

Results for the firstquarter of this yearshowed that combinedsales in the company’s 12emerging markets outsideChina exceeded that ofChina alone – although thelatter remains thecompany’s “largestemerging priority”.

Brazil is also showingparticular promise. EstéeLauder introduced MAC tothe market in 2002, taking

over distribution in 2011and has since been rapidlyopening stores to keep upwith demand. Yet again,MAC is the company’sjewel in the regional crownas Brazil’s best-sellingprestige cosmetics brand.

Its recent performancethere has counterbalanceda softening of sales fromdouble-digit to single-digitgrowth in some of China,South Korea and Thailand.

Mr Lauder believes thekey to balancing volatilemarket dynamics isfocusing on today’s mostpowerful beauty consumer:

the global traveller.He says 42m Chinese

consumers who buy beautyproducts at home also buyproducts abroad and “50per cent of visitors to ourMAC store in TimesSquare hail from Brazil”.

“The shops with the bestsales growth in Sydneyhave Mandarin-speakingassistants. The facts andfigures speak forthemselves and we need tocontinue adaptingaccordingly,” he says.

After studying thefavourite destinations ofChinese citizens, thecompany created theconcept of “travelcorridors” for product-launch decisions afternoting they were mostlikely to pass through –and shop in – airports inHong Kong, the Republicof Korea, Paris and NewYork. Inventory was thenshaped according to theirproduct tastes.

About 12 per cent of 2013sales derived from thetravel retail channel.

Yet despite huge growthpotential in newer markets,Mr Lauder believes someof Estée Lauder’s biggestgrowth could occur closerto home. “Our evolutionabroad remains incrediblyexciting, but it’s alsoimportant not to overlookNorth America and ourloyal consumers here,given that this is whereour story began,”he says.

Foreign forays go hand in handwith focus on home marketInterviewWilliam LauderExec chairman, Estée Lauder

Global travellershelp counterbalancemarket volatility,says Elizabeth Paton

Mr Laudersays he iskeen not tooverlook thegroup’s USbirthplace

Helen BarrettCommissioning editor,special reports

Elizabeth PatonUS fashion and luxurycorrespondent

Rachel SandersonMilan correspondent

Martin WolfChief economics commentator

Hugo Greenhalgh, LeylaBoulton, Ian MossEditors

Andy MearsPicture editor

Steven BirdDesigner

For advertising details,contact: Victoria Roberts+44 (0)20 7873 3226,

victoria.roberts@ft.com oryour usual FT representative.

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