THE scene last Tuesday night at a shopping party to preview the new Versace for H&M collection was fairly predictable, if you didn’t count the midnight concert by Prince. When the racks of gold-studded dresses and tropical-print shirts were finally unveiled, in a temporary store on a Hudson River pier, the invited fashion editors, celebrities and Nicki Minaj quickly picked them clean. “Many of the women in the crowd made beelines for the collection’s men’s clothes,” Style.com said. There was still a line outside the shop at 2:30 a.m.
More than a decade since Target first popularized collaborations between high-end designers and mass retailers, and seven years since H&M introduced a collection with Karl Lagerfeld, there is still allure in the concept of cheap and chic.
Based on news media coverage to date, there is every reason to expect huge crowds and long lines when the Versace clothes go on sale Thursday at international H&M stores (Donatella Versace is to attend the opening in London) and Saturday in the United States. Items from the collection like a cropped baseball jacket with vivid leopard-spotted sleeves, for $129, will undoubtedly sell out, and many of them will then likely reappear on eBay at a higher price. (Actually, that jacket is already there, with an asking price of $179.99.) Despite concerns that the commonplace appearance of designer names at stores like Macy’s, Kohl’s, Wal-Mart and even Payless ShoeSource would eventually lead to shopper fatigue, such collaborations are proving to be both a reliable business model for retailers and a business in themselves.
And designers, even those who have far less name recognition than Ms. Versace, are finding these collaborations to be increasingly lucrative. While few details about financial relationships have ever been made public, the typical fees paid to designers have generally more than doubled over the last five years, according to several participants in recent deals, though each seems to follow its own rules.
Mr. Lagerfeld and Stella McCartney, who designed an H&M collection in 2005, were each reportedly paid $1 million for their services; and Madonna, whose M by Madonna collection was sold there in 2007, was said to have received $4 million. (Billboard reported in 2007 that sales of Madonna’s collection, which was broader than most, reached $20 million.)
Ms. Versace’s payment is expected to be closer to that of the other designers, according to company executives, who spoke on the condition of anonymity because the terms were confidential. But Ms. Versace’s deal is based on a percentage of sales. It also includes a higher financial commitment from H&M for advertising and promotions. A spokeswoman for H&M said the company would not comment on any sales or compensation figures for the collaborations.
Marc Beckman, a founder of Designers Management Agency, a talent agency that has worked with labels like Proenza Schouler, Derek Lam, Christian Siriano and Sophie Theallet, said that deals with the biggest players in the fast-fashion sector now typically include cash payments of over $1 million. In 2007, many of those payments, particularly for Target’s Go International program for emerging designers, were reported to be around $250,000. Mr. Beckman negotiated a long-term contract for a Jay Manuel collection at Sears Canada, connected Rachel Roy with Amar’e Stoudemire for a collaboration and paired the handbag designer Monica Botkier with Swatch.
“The deals we have done, as long as they are for designers at the high end, are seven digits, and at the low end they are six digits,” Mr. Beckman said.
While the mechanics of such collaborations have become more sophisticated, just how they work has remained somewhat mysterious to shoppers, who may not realize that sales of Ms. Versace’s collection for H&M, or the wildly popular Missoni line that was sold at Target this fall, will barely have an effect on the retailers’ overall sales volumes. In fact, their success is not measured in dollars, but in overall media impressions, the metric used to determine how many times consumers read or saw a mention of the collaboration in the news media. The Missoni for Target collection, for instance, was covered in the September issues of more than 40 magazines and amassed impressions in the billions.
Looking at Target’s Go International and Designer Collaborations programs, during which new designers were introduced at the store in the last five years, the most successful, by one measure, was Alexander McQueen in 2009. A year before his death, the designer, through his lower-priced McQ label, made a small collection for Target that received mixed reviews from fashion critics, and was flat in comparison to those of Proenza Schouler in 2007 or Rodarte, which was introduced later in 2009. But it nevertheless created a lot of buzz for the store.
Right Angle Research, a luxury-goods market research company based in New Rochelle, N.Y., estimated that editorial coverage of that McQueen collection in crucial American magazines was worth $2.1 million to Target for the time period it was in stores. That figure is based partly on the cost of comparable ad space in those magazines, but also considers other factors like the prominence of placement on a page.
Judging long-term effects of collaborations is complicated by how much mass communication has changed. Larry Hotz, the president of Right Angle, said that the Lagerfeld line arrived before the retailer had an online presence, and still, he said, “it was very significant in terms of the press it did generate at the time.” By comparison, the Versace collection has been so exhaustively promoted, with the elaborate fashion show and in social media and videos, that it has been unavoidable on fashion blogs the last two weeks.
For smaller designers, it is not just about the exposure. The income can finance a runway show, or help sustain a high-end collection.
Mr. Siriano, who started his signature collection after winning “Project Runway” in 2008, has since designed accessories for LG, makeup for Victoria’s Secret, a capsule collection for Spiegel and a sponge for O-Cel-O. (“Don’t judge me,” he said. “It was funny and hilarious.”) His most lucrative collaboration has been with Payless, which sponsors his fashion shows and, as a result of an expanded contract signed last year, pays a royalty for every pair of shoes sold. “Not only is it financially great for me, but there were a lot of customers who couldn’t afford a $3,000 dress,” he said.
Payless plans to have at least a couple of central styles of Mr. Siriano’s shoes in most of its 4,000-plus stores next spring, said LuAnn Via, its chief executive. Customers now see Mr. Siriano like a national brand, she said, so Payless wants to consistently offer new product from him.
“A one-time hype is not going to bring a long-lasting halo to your brand,” Ms. Via said.
While attention now is focused on the Versace collection, which will be in H&M stores for only a short time, there is more interest among designers, and deal-makers, for longer partnerships. It may not have happened yet, but there is always a fear that at some point, the buzz will fade.
Target, which introduced its first fashion collaboration in 2000, with Mossimo, and followed with Isaac Mizrahi in 2003, raised its cool factor by luring younger, hipper designers, and the company reportedly paid handsomely to attract some of the coolest early on. Proenza Schouler’s contract, according to executives familiar with the deal, approached seven figures, but its Target collaboration inspired other young designers to break the traditional industry taboo of crossing over into mass.
And the exposure helped some critical darlings who have no real backing, like Kate and Laura Mulleavy of Rodarte, to maintain the impression they are bigger than they really are. The strategy appears to have paid off for Target, though the collaboration has not been without its bumps, as when Jack McCollough and Lazaro Hernandez of Proenza Schouler accused the retailer of knocking off their signature bag this spring. (Target also does not discuss specifics about relationships with designers.)
Predicting just how big or successful each designer rollout is going to be is part art and part science, said Trish Adams, the senior vice president for apparel and accessories at Target. Executives take into account the historic performance of other lines, how the name is perceived among its customers and even the price differential between the designer merchandise and what will be sold at Target. Still, demand for the Missoni clothes and home designs exceeded expectations, leaving some customers disappointed when many products were not available.
But the company wants its collaborations to maintain a sense of the unexpected. On Sunday, Target introduced children’s clothes designed by Gwen Stefani, called Harajuku Mini for Target, that will have an ongoing presence in the store. Ms. Stefani said she found it appealing that Target gave her no creative restrictions beyond what was required to maintain safety standards. “I love the idea they are letting me do punker pants for kids,” she said. “We’re going to be doing swimsuits next.”
Among its guest designers for the holiday season is Josie Natori, who is creating two intimate-apparel collections, one now in stores for Christmas shopping and a second forValentine’s Day. The reasoning was simple: Half of Target’s sales in the intimate apparel category happen in that period. “A lot of it comes down to what is the business objective, is it right for us, and is it right for the designer,” Ms. Adams said.
To hear it from designers, these collaborations offer a fast infusion of cash while helping to expand their awareness and making them seem almost populist in the eyes of many consumers. In the early days of fast fashion, retailers needed a big name to entice consumers, but consumers are now much more aware of a broad spectrum of designer names. Perversely, selling clothes at Target has become a status symbol for up-and-coming designers.
“The model has changed in a way,” said Gaby Basora of the Tucker label, who designed a collection for Target last year. “It used to be that you went mass toward the end of your career. Now it’s more of a legitimizing moment for younger bands.”
