Luxury: The great American import

Working to a proletarian impulse, US companies are too busy making money to pay attention to fripperies. They leave the $167bn American prestige goods market to foreigners. Stephen Bayley reports.

Last Updated: 31 Aug 2010

Washington's National Museum of American History is an archive of national identity, the country's memory store. Among its more durable exhibits (such as George Washington's camp chest and Jacob Booz's Civil War presentation drum) are some volatile agricultural products, now acquiring a nice bottle age. One is a '73 Stag's Leap Wine Cellars Cabernet Sauvignon and the other a '73 Chateau Montelena Chardonnay.

These two domestic upstarts beat lordly old French aristocrats in a Paris wine-tasting of 1976, now assuming epic quality thanks to the recent publication of The Judgement of Paris (Scribner, New York, 2005), a learned account of the event by ex-Time journalist George M Taber. Second among the whites was a Meursault Charmes '73, and second among the reds a Chateau Mouton Rothschild '70. The Old World was put in its place. Thomas Jefferson had said in 1808: 'We could in the United States make as great a variety of wines as are made in Europe, not exactly the same kind, but doubtless as good'. Well, actually, better.

The famous Paris tasting altered the world's perception of wine. But it did not much alter the world's perception of the US. Wine is a rare - possibly even unique - example of a successful American luxury product.

Americans have an ambivalent, even conflicted, attitude to luxury goods. Last year for the first time BMW sold more than 300,000 cars in the US, while America's two domestic premium nameplates, the Cadillac Escalade (until recently the most stolen car in America) and its rival, the footballers' favourite, the Lincoln Navigator SUV, suffered double-digit sales decreases and the prognosis is worse. No-one is expecting a revival in Cadillac or Lincoln sales any time soon.

There has never been an American luxury car that enjoyed international success. Now even the domestic market is lost to them. Yet American consumers have a vast appetite for imported luxury goods: last year, the world's largest watch shop, the 13,000 sq ft Tourneau Time Dome, opened in Las Vegas' Caesar's Palace Forum. On sale, European luxury brands: Panerai, Rolex, Audemars-Piguet, Patek-Philippe, Breitling ... all with tourbillons, moon phases, grand complications. Top tickets for luxury watches are in the high six figures. Meanwhile, America's favourite domestic watch is a $49 electronic Timex.

But America's imported luxury goods market is booming while domestic manufacturers and entrepreneurs look on, blinking and bewildered. Ledbury Research, a London consulting firm that specialises in this sector, estimates that despite competition from emerging markets, the best prospects for growth of PPR, the French luxury conglomerate that owns Gucci, are in the US. HSBC estimates that this year the American luxury market will expand by 12% compared with 9% in the rest of the world (source: Luxury Briefing No. 93).

At a Harvard Business School Conference last April, Nancy F Koehn, a professor of business administration at Harvard, explained the vitality of the market. She said luxury goods were 'a changing space, a space with extraordinary zip and excitement ... Things are kicking along vigorously.'

Quite so: the annual US luxury business has been estimated at $167 billion (International Herald Tribune, 6 December 2005), but at the same time there is a significant puritanical, even proletarian, undertow. Americans, while exercising their taste for exclusivity and indulgence with Porsche and Prada, have an atavistic determination to reclassify luxury in a local, democratic context. At that same conference, Koehn said luxury was being redefined by the middle and lower markets. 'Eight years ago, Starbucks was a luxury game on the east coast ... Now, Starbucks is daily standard operating procedure - a mass business.'

So? American luxury is half-decaf, a perverse reluctance to acknowledge a full-strength reality where American consumers clamour for goods their native manufacturers cannot supply. The reasons for the conflict are deeply rooted in American culture and in the nation's self-image.

Alexis de Tocqueville returned from the US and became a European celebrity on account of his extraordinary insights published in Democracy in America (1835). His observations are still relevant today: 'The dominant characteristic distinguishing this nation is ... its industrial genius and variability of its characters. Nothing is easier in America than to acquire wealth ... fastening all its thoughts on gain. A people which appears to live only to get rich can hardly be ... virtuous. There are none of the fripperies which belong to idle luxury.'

Fripperies, it seems, had to be supplied by foreigners - Americans were too busy getting rich. The history of the railroads immediately after de Tocqueville provides an insight to a fast-expanding economy. In 1857, refrigerated meat travelled by rail; the next year, centrally heated humans did so in Pullman cars; by 1869, Americans were travelling transcontinental. The railroads demanded steel. Thus the Philadelphia, Germantown & Morristown Railroad, the Madison-Indianapolis line and the Belfast and Moosehead Lake railroad begat Carnegie, Mellon, Frick and all the other primordial industrial capitalists, who gave the world a new concept of extreme wealth - and the expression 'robber barons'.

The situation demanded explanation. Thorstein Veblen was a teacher at the University of Chicago whose satirical Theory of the Leisure Class was published in 1899. In general unreadable, Veblen's book contains two concepts essential for understanding US consumer psychology. The first was the notion of 'conspicuous consumption'; the second was the idea of 'pecuniary canons of taste'. Veblen argued that once an individual rose beyond subsistence, then his acquisitions carried messages about status. For example, when Henry Clay Frick employed pioneer decorator Elsie de Wolfe, new American money was introduced to old French furniture.

But always the ordinary American consumer was drawn to commodity and practicality. Henry Ford's 'any colour as long as it's black' was not a refusal of the luxury of choice in matters of colour but a hard-headed insistence on choosing a paint finish that dried quickly, and therefore economically, in the sunshine. A deracinated and distributed American population, at the same time, found the loyalties it needed not in armorial bearings or family trees, but in the national franchises of Coca-Cola, Hertz and Howard Johnson. These were American heraldry.

The world's first supermarket was New York's King Kullen, which opened in 1930. More recently, Wal-Mart has huge semi-trailers pounding the interstate highways with the hectoring logo 'We sell for less, always'. Its founder Sam Walton had learnt little of luxury growing up in the Depression dustbowl of Kingfisher, Oklahama. Nor was Rogers, Arkansas, where he opened his first Wal-Mart store, a place to experiment with de Tocqueville's fripperies.

Low-cost, no-frills air travel was invented in the US. This was, in its way, a 21st-century extension of the big transport battle of the late 20th century: the contest between the European Concorde and Boeing's 747. Concorde was conceived by European administrative elites to provide expensive, exclusive services to a rich minority. The Boeing 747 (US Patent Office Des. 212,564) was a utilitarian project - in fact, the unsuccessful tender in a 1965 military contract won by Lockheed's C5 Galaxy. But the Boeing design worked. Boeing has made 1,200 747s; BAE/Aerosptiale made a mere 20 luxurious Concordes.

American attempts at luxury are often risible. Morris Lapidus (born Odessa, Russia, 1902) built, with more energy than taste, Miami Beach's Fontainebleau, Eden Roc and Bal Harbour Sheraton in three amazing, rambunctious years after 1954. The immigrant architect achieved bravura standards of kitsch, using a schlockmeister's version of what his developer called 'French Provincial' to entice Joe and Jane America with a simulacrum of luxury. 'Why be exotic in private?' asked Lapidus.

In 1959, when BMC launched the Mini, the most technologically ingenious car ever, Cadillac was still making the Eldorado, a chromed, baroque bathtub whose reference points were comic books.

Today, Ralph Lauren has, after 30 years of consistent effort, solid international presence as a clothing brand, but only by successfully demonstrating a yearning for (a) cowboys, and (b) an English country house style that was wistfully alien to the son of a faux-bois painter from Moshulu Parkway in the Bronx. But no-one thinks of Ralph Lauren as a luxury product. In contrast, Gucci has reinvented itself: no longer a tired old feuding Florentine family of leather bag-makers, but the synecdoche of a modern luxury business; and Prada has come from nowhere to achieve even more.

Americans have an unyielding taste for vulgarity. In 1947, Evelyn Waugh came back from Hollywood and reported that there are 'no secrets under those flickering floodlights; no undertones to which the stranger must attune his ear ... All is loud, obvious, prosaic'

In 2006 we could say the same if we returned from Las Vegas. At the 'Grand Canal Shoppes' at the Venetian Hotel there are singing gondoliers on an indoor canal. Nearby is the Desert Passage, the name of the mall at the Aladdin. Here we are Moroccan-themed, and in order not to miss the desert prompts, a high-tech thunderstorm is manufactured every 30 minutes. Nearby, the Forum Shops at Caesar's are said to be the most lucrative in the US - possibly because features include animatronic figures of Bacchus and Venus.

These zones are crammed with Euro-boutiques. The visitor will find Pucci and Dior here, but the business and intellectual environment that supports such fripperies does not encourage domestic luxury incentives. Last April, Steve Wynn opened the $2.9 billion Wynn Las Vegas, a successor to his 1998 taste catastrophe, the Via Bellagio. At the Wynn Las Vegas, you find a Ferrari-Maserati dealership near the entrance (just as you find chewing gum and batteries at the exit of Sainsbury's). At the Cartier store, they give window shoppers a glass of champagne. They do not sell Cadillacs or Timex.

The current US regime's tax-cutting has had a predictable effect on consumer behaviour. Says Robert H Frank, an economist at the Johnson School of Management at Cornell University: 'There is little reason to expect large tax cuts for wealthy families to have resulted in a more efficient allocation of ... resources.' Accordingly, US newspapers are full of accounts of the newly wealthy conspicuously consuming $10 million in throwing coming-of-age parties.

And in a country where hand-written letters are rare, the market for luxury pens is booming. Defined as costing above $225, the most admired luxury pen in the US is the German Mont Blanc, attracting a favourable response from 58% of correspondents in a recent survey. The domestic Parker won a mere 11%.

In luxury, as in so many things, the principle of exotic validation holds fast and true: in a utopia of ordinariness, consumers have faith in the foreign. America's most celebrated restaurant, run by Thomas Keller in Yountville, Napa, is, after all, called the French Laundry, not the Kansas City Kitchen or the Detroit Diner. In New York, you shop at Abercrombie & Fitch or Paul Stuart, not Horovitz & Rumsfeld.

In the international luxury business, relationship marketing is vital, but American firms have no presence here. There are significant associations, for instance, between Aston-Martin and Jaeger Le Coultre, Ferrari and Girard-Perregaux, Mercedes-Benz and Tag-Heuer, Bentley and Breitling. When a US car manufacturer arranges a commercial relationship, as Ford has done with its Explorer SUV, the partner has been either North Face, which makes hiking gear, or Eddie Bauer, a chain of lifestyle shops. Or, perhaps, 'shoppes'.

But there are signs that American tastes are changing. The most curious merger of recent years was DaimlerChrysler, a deal rich in industrial logic but poor in shared philosophies. It was, anyway, a German takeover disguised as a collaboration to coddle sensitive American egos - a Detroit joke used to go: 'How do you pronounce DaimlerChrysler?' The answer was 'The Chrysler is silent'. But recently, the German partner is the one struggling.

The US market for hyper-luxury cars is so strong that DaimlerChrysler could, it was estimated, recoup the $1 billion invested in its grotesque Maybach by sales in the New York area alone. Yet this stretched, swollen and gussied-up Mercedes S-Class, selling at $300,000, has woefully failed to meet its annual sales targets of 400-500 units, proving HL Mencken wrong when he said you can never go bust underestimating the public's taste.

Meanwhile, the big-car phenomenon in the US is the wholly domestic Chrysler 300C. The sort of car where you might expect to find Joe Pesci hiding in the boot, it is the first US automobile for 50 years to challenge importers on American soil. But it's an exception. American consumers with money want to spend it conspicuously, and that means buying foreign.

James Ogilvy, publisher of Luxury Briefing, a respected industry newsletter, explains America's anomalous position with luxury goods: 'Since the earliest days, American manufacturers have concentrated on the biggest mass market of them all, creating national franchises of high-quality, low-cost merchandise. But now consumers are becoming more discriminating, and indigenous brands simply fail to provide what they are looking for in terms of quality, orignality and design. The situation is exacerbated by a business establishment that is becoming increasingly discredited. When they have discretionary money to spend on items such as cars, clothing, accessories or watches, discerning Americans look abroad.'

America invented the mass market, but its most advanced consumers are fast in retreat from it. The country has no credible brands to stretch: Coke and McDonald's are, most would agree, over-stretched already. By contrast, Armani and Bulgari are in hotels in Dubai, New York, London and Milan. No-one is expecting any time soon a luxury exercise from Marriott or Ramada. At the same time, the Darwinian advantage enjoyed by school-of-hard-knocks Americans has now gone elsewhere. Dubai's most successful property magnate lived without piped water until he was 12.

US manufacturers have sold cheap what they bought most dear: credibility. Dorothy L Sayers said America was 'a society founded on trash and waste'. Luxury is meant to last. That is why they do not understand it.

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