Avenue Montaigne, Paris

PARIS -- On a recent evening, Louis Vuitton, Chanel, Christian Dior and their neighboring boutiques on Avenue Montaigne opened their doors to 2,000 of their most devoted clients. The block party was a celebration of Avenue Montaigne's rise as one of Europe's top shopping streets.

With its flower beds, wide sidewalks and a renowned hotel, Avenue Montaigne has long held appeal for high-end shoppers. But a wave of hip new tenants, such Jimmy Choo and Chloe, are elevating it into some of the most coveted storefront space for major fashion labels. Among the new arrivals are Bottega Veneta and Giorgio Armani, which expects to open a new store there in January. Italian fashion houses Fendi and Versace are also jockeying for space, which costs about $635,000 a year for about 1,000 square feet. Hopeful tenants also often have to fork over an upfront fee of about $2.5 million.

The same forces that are remaking the world of fashion -- the relentless push by less-expensive brands to offer chic looks at lower prices -- are redrawing the map of luxury shopping, too. In Paris, some upscale names are being driven to Avenue Montaigne because of a creeping infiltration of less-exclusive brands on some traditional high-end shopping streets, such as Rue Royale and Rue du Faubourg Saint-Honore.

The same thing is happening in top shopping spots from New York to Tokyo, to varying degrees. The arrival of megastores such as Niketown on New York's 57th Street lowered the neighborhood's chic factor. Luxury brands like Hermes and Celine ventured several blocks uptown to Madison Avenue. Designers such as Stella McCartney and Alexander McQueen were drawn to Manhattan's Meatpacking District, which speciality retailer Jeffrey had turned into a hub for high-fashion shoppers. In Tokyo's Omotesando district, Dior and Celine share the block with J.Crew. And Milan's famous Via Montenapoleone, home to the world's most exclusive brands, features a stock store selling discount Prada heels and Gucci coats.

The appeal of Avenue Montaigne, fashion executives say, is that it hasn't been adulterated by cheap brands. "It's a very homogenous avenue with only the top brands," says Jean-Claude Cathalan, president of the Comite Montaigne block association. "New store locations are already
reserved before the old brands move out."

A similar shift has occurred in London. Over the past four years, Sloane Street, which has always been a posh address, has raised its profile among luxury-goods brands, thanks to a real-estate development program that converted old mansions into sleek shops. Labels such as Pucci, Marni and Chloe, in addition to jewelers Bulgari and Tiffany, have chosen Sloane Street over Bond Street.

Closer to the center of London, Bond Street used to be the city's prime luxury shopping location, but has lost some of its cachet, partly because it is sandwiched between two more commercial and touristy streets: Piccadilly and Oxford Street.

The long waits and high rents to secure a spot on Avenue Montaigne also highlight the resurgent economic outlook of the luxury-goods industry. Companies such as LVMH Moet Hennessy Louis Vuitton, which owns the Louis Vuitton, Celine and Donna Karan brands, and PPR SA's Gucci Group, owner of Gucci, Yves Saint Laurent and Balenciaga labels, had applied the brakes to retail expansion amid a three-year industry downturn that started with the Sept. 11 terrorism attacks and was exacerbated by the SARS virus and the war in Iraq.

Now, with better economic conditions in the U.S., Europe and Asia, fashion houses are building bigger and more glamorous flagships. Gucci is unveiling its first five-story shop in Japan next month in Tokyo's Ginza district. Hermes International recently doubled the size of one of its Paris boutiques. A year ago, Louis Vuitton opened a new five-story flagship store, complete with museum, on Paris's Champs-Elysees.

Boutique location has always been crucial for luxury-goods companies. Finding the right address is such an important strategic decision for Louis Vuitton, the largest and most profitable fashion brand in the LVMH group, that Chief Executive Bernard Arnault personally oversees major real estate decisions. LVMH opened its headquarters on Avenue Montaigne three years ago and has launched boutiques for a number of its brands there.
With its huge presence on Avenue Montaigne, LVMH has enormous sway in negotiating rents. It recently cut a deal to move rival Italian fashion house Dolce & Gabbana out of a store attached to its headquarters, according to people familiar with the matter. The company is considering shifting its Fendi label into the space when Dolce & Gabbana moves up the street in December, these people say.

Paying to have all the LVMH brands together "pays off in terms of publicity and image," says Massimo Bonifacio, the managing director for Italian real-estate company Risanamento, which rents an Avenue Montaigne boutique to Valentino.
"The most important way people connect to our brands is in our stores," says Gucci Group Chief Executive Robert Polet, whose Gucci and Bottega Veneta brands both have Avenue Montaigne outposts.

Even on the same street, there are preferable spots. For example, the even-numbered side of Avenue Montaigne, with its Chanel, Dior and Vuitton boutiques, is more coveted than the odd-numbered side, which has a narrower sidewalk and more traffic.

The arrival of the big guns on Avenue Montaigne, experts say, has forced others out. Calvin Klein and Ines de la Fressange recently left Avenue Montaigne.

Not every cool neighborhood makes a good shopping destination. New York's SoHo area has welcomed fashion brands such as Prada, Chanel and Louis Vuitton over the past decade. But shoppers say its hard-to-find stores, many located on side streets, and narrow sidewalks, crowded with tourists, are a turnoff.

In Paris, Vuitton's new store on the Champs-Elysees draws mainly tourists, while locals prefer the Avenue Montaigne shop. Local "Louis Vuitton fans don't really want to face all the traffic of the Champs-Elysees store," says HSBC luxury-goods analyst Antoine Belge.
Avenue Montaigne has a long and fabled history. It used to be the most exclusive street in Paris's heyday as the capital of haute couture in the 1960s and 1970s. In the 1980s, fashionistas would flock to the Plaza Athenee hotel.

But in the 1990s, the balance shifted toward nearby Rue du Faubourg Saint-Honore. Led by Vogue editor Anna Wintour, the fashion crowd began to rent rooms at the nearby Ritz Hotel when they descended on Paris for the semiannual fashion shows. Rue du Faubourg Saint-Honore also became the home of the trendy, high-end Colette store and swanky Hotel Costes.
Over the past few years, however, Rue du Faubourg Saint-Honore has lost some of its appeal for the high-end crowd. Exclusive names such as Cartier, Hermes and Valentino still have big stores there, but some lower-end names, such as accessories store La Bagagerie, shoemaker Camper and trendy apparel brand Pinko have also moved in.

More importantly, heightened security measures around the nearby presidential palace means clients can no longer double-park their Ferraris on the street while they shop. Rue du Faubourg Saint-Honore's narrow blocks also experience more traffic jams. Among the brands that have jumped ship are Christian Dior and Versace.

Avenue Montaigne, meanwhile, is working to maintain its appeal. The Comite Montaigne has clashed with Paris city authorities over a plan to build a bus lane. Mr. Cathalan says it would be a disaster because parking spaces for Mercedes-Benzes and Rolls-Royces would be cut. Mr. Cathalan also bemoans the block's uneven sidewalks -- a potential hazard for stiletto-clad shoppers.

(Article from the Wall Street Journal)