Lux Marketers Find Way Into Club Stores, But Don't Tell Anyone

Most Huff They're Not in Costco by Design; Some Admit Dirty Little Secret

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It is a truth universally acknowledged (and evident on that luxury fashion and apparel is increasingly appearing at Costco. But it's also true that no prestige-seeking brand will admit it.

Many luxury marketers, among them Prada and Patek Philippe, are quick to point out that the discount club store is by no means authorized to sell their high-end handbags, watches and what-have-you, and those that are there have been obtained from secondary sources. While that may be the case for some brands, other industry insiders acknowledge they've indeed made such "deals with the devil" to rid themselves of overstock from traditional retailers.

The list of high-end items on certainly reads like a veritable who's who of upscale brands, among them Hugo Boss, Fendi, Kate Spade and Antik Denim. But none want to even talk about it, much less promote the fact that their prestigious products are showing up in fluorescent-lit warehouses.

"Working with Costco is part of the business that you do very discreetly because you certainly don't want to have your brand perceived as down-market, but everybody's doing it," said a high-level marketing executive for a top menswear designer. The executive noted that fashion brands often will turn to Costco to sell current-season items that haven't sold well in department stores. "If designers could go without selling Costco, they would do it, but in today's day and age, it's not very easy to do."

Costco admits the reticence of high-end marketers to enter the club channel, especially out of fear of alienating crucial department-store customers. But, according to Joel Benoliel, senior VP-membership and marketing, that battle continues to be fought-and won. The number of "finer" labels at the chain is far greater than a decade ago.

'Damage to image'

Costco's interest in borrowing the prestige of luxury brands has drawn the ire of marketers such as Patek Philippe. Hank Edelman, president of the privately held luxury watchmaker, said Costco has been asked to cease selling a handful of Patek Philippe timepieces-including the Gondolo Calendario 18K white gold men's watch offered for $31,999.99 on were snapped up, he said, from the "gray market."

"Nothing against Costco-I'm a customer-but being there is damaging to our image," Mr. Edelman said. The watches, which range in price from $10,000 to $800,000, have been billed for 167 years as handcrafted in small quantities vs. the bulk image Costco has been built on.

Certainly some brands-even the better designers-have club stores in their sights as a strategy to grow sales (see story, above).

Warnaco Group, for one, is using Costco and other club stores as regular distributors of specially produced lines under its Calvin Klein, Nautica and Speedo brands. Promoting that fact, however, is not something it's interested in, especially as it pours more money into marketing and advertising to elevate its brands' prestige.
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