Chanel’s Cuba Show Spotlights Potential, Hurdles For Fashion

Chanel Cruise Cuab 2016
Havana, Cuba.
Courtesy of Chanel.

First it was President Barack Obama. Then The Rolling Stones. And now Karl Lagerfeld and Chanel.

To say that Cuba is undergoing sweeping changes will be underscored again tonight when the French fashion house sweeps into Havana to stage an open-air fashion show on El Paseo del Prado with 600 editors, clients and VIPs in tow. Confirmed celebrities include Tilda Swinton, Vanessa Paradis and Gisele Bündchen, in addition to Cuban artists and local cultural figures.

The event for the cruise season is being greeted with enthusiasm by local fashionistas, and it will surely raise Cuba’s international profile, given Lagerfeld’s and Chanel’s renown, prestige and rabid media following.

Yet it will also highlight the gulf between Europe’s luxury juggernaut — moving at the warp speed of social media and into more corners of the world — and a country whose isolation, poverty and socialist principles have put fashion and retail on the back burner for decades, walled in by regulations and embargoes.

“We are more than excited. For us, it is almost dreamlike to think about Chanel in Havana,” said Leire Fernández, who with Idania del Río operates a fashion and design boutique in Old Havana called Clandestina, a rare enterprise in a country where even basic necessities can be a chore to procure. “But it is necessary to stress that the fashion sector in Cuba is very narrow, almost nonexistent. … There isn’t really a fashion industry. The Cuban system is based on social needs and values and does not put emphasis on fashion, trends or anything of its kind.

“But the state is working on it, especially the Ministry of Culture,” she added. “The presence of Chanel is a signal of it.”

On Monday, the Carnival cruise ship Adonia dropped anchor and delivered some 700 American tourists from Miami — the first in decades, and the latest signal of normalizing relations. Many of them streamed through Old Havana, with its magnificent old buildings — some crumbling, others restored — and some of Ernest Hemingway’s favorite haunts.

One of the main shopping streets, Calle Obispo, offers contrasts on every block, as hole-in-the-wall sandwich sellers and stairwell souvenir hawkers rub shoulders with a few international banners, including a corner Puma location and a Fariani Italy store.

Multibrand boutiques carried such labels as Jordache, Ed Hardy and Ocean Pacific. Rosa, a women’s wear store specializing in flashy chic, boasted windows and a corner dedicated to Jennifer Lopez, with slinky minidresses priced from $36 to $48.

A more boisterous scene played out in central Havana at the Plaza Carlos III mall, where few tourists venture. A food court and children’s rides anchor the complex, with shops arranged on ramps circling the atrium. The busiest was a tiny counter selling rice cookers, while a few young hipsters checked out what Adidas had to offer.

A foreign diplomatic who spoke to WWD on condition of anonymity elaborated on the contrast between a rudimentary retail infrastructure and a highly educated and creative population.

“Cuba always considered consumerism and individualism as contrary to the values of the egalitarian and frugal society it cherishes,” the diplomat said. “At the same time, culture and the arts, including foreign ones, have always been highly valued in society.”

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He noted that since Raúl Castro came to power in 2008, Cuba has been gradually opening up to the rest of the world, allowing personal contacts with foreigners and the importation of certain goods, images and ideas that were long prohibited.

“Global trends have therefore begun to be more visible within the Cuban society, despite the very low standard of living of the large majority of the population,” the diplomat added. “Regarding business, the legal environment is evolving very slowly despite the will of the government to increase foreign investments, but in a very controlled manner.”

The nation’s potential — and drawbacks — have been well documented by Euromonitor International, which considers Cuba one of its 20 “markets of the future” for makers of consumer goods, especially since the end of 2014, when the U.S. and Cuba initiated talks to normalize diplomatic relations.

“Increasing private sector employment, cash remittances from abroad and a paradigm shift away from socialist values will all contribute to growth of consumer expenditure,” the research firm said in a report the same year. “Furthermore, Cuban women are going to be increasingly economically active.”

Cuba has a population of about 11 million and an average monthly salary of $25; personal spending is projected to increase at a compound annual growth rate of 4.6 percent through to 2020.

“Cuba offers immense potential for new retailers and distributors, due to current undersupply of goods and variety of brands,” according to Euromonitor.

That said, free-market reforms in 2010 that allowed private retailing to flourish were short-lived and local regulations on imports remain in place.

Beyond obstacles to retail activity, one of the biggest barriers to development is price. “Cuban consumers are generally brand-savvy and value international brands, but most are unable to afford them,” the report said.

Indeed, one of the fastest-growing consumer products in recent years was soft drinks, with a compound annual growth rate of 12 percent. Apparel is seen having “marginal” expansion potential, whereas beauty and personal-care products are seen logging a CAGR of 4 percent through 2018.

Bruno Pavlovsky, president of Chanel fashion, noted the fashion house does “zero” business in Cuba and that the decision to show the cruise collection in Havana was purely a creative one, with Lagerfeld drawing inspiration from the country’s culture and heritage.

 

The show falls during a Month of French Culture in Cuba organized by the Alliance Française. The festival spans an inaugural design biennale, a Lagerfeld photo exhibition at Factoría Habana, concerts and dance workshops. France is one of Cuba’s most prominent political partners in Europe, with Raúl Castro making a state visit last February.

According to Fernández, the Chanel event will help “legitimize what we are trying to do — launch collections made by and for Cubans — and bring attention to fashion, demonstrate that there is an audience here, along with talented people who can support the industry.”

Asked how important the hurdles are to running a fashion business, Fernández responded, “You cannot imagine. It is crazy and so, so difficult to run a private business in Cuba.”

In Fernández’s estimation, constraints on imports and exports represent the biggest hurdle, following by limited Internet access, a lack of training programs and platforms for sharing, networking and exchanging ideas.

That hasn’t stopped locals from loving fashion and being interested in their appearance. “Cubans love fashion,” Fernández said. “But it is not easy to find good places for shopping.”

Most people find clothes on the black market, in secondhand stores, via illegal Internet trade on El Paquete (a weekly import of digital content) and occasionally at “handicraft” fairs that display clothes coming from China via Ecuador.

“But the black market is the most popular route. It is based on a ‘mule’ system,” she said, describing individuals who import clothes in their personal luggage and sell in private homes. Counterfeit Michael Kors and Dolce & Gabbana are in demand, while Zara, Mango, H&M, Adidas and Nike brands are among brands coveted on the black market, she said.

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While “the tradition of European style is always a reference,” most Cubans prefer slim, bright and shiny clothes, Fernández added.

Cuba boasts a number of fashion designers who create clothes for women and men such as Rolando Ruis & Omar Jimenez, Oscar De La Portilla, Jose Luis Gonzales, Celia Ledon, Roly Rius and Ismael De La Caridad, said Juan Carlos Marrero, a producer at Arte y Moda, a fashion fair that takes place biannually in Santa Clara.

The other main fashion trade fairs are SINAE, which takes place every two years in June, and Exuberarte Fashion, a festival held in Santa Clara that also features Cuban designers and models.

“Santa Clara and Havana are the two most important cities for fashion in Cuba,” Marrero told WWD. “Fashion in Cuba is at an early stage of expansion, but it has evolved during recent years because of cultural exchanges and because some of our models have been recognized internationally. There are many talented artists and designers in Cuba.”

Just ask Kentucky businessman Jonathan Blue, who started traveling to Cuba to buy art several years ago, only to discover a bounty of talent in modeling, music and other creative fields.

Chairman and managing director of the Louisville-based investment firm Blue Equity, Blue recently struck a deal with a Cuban entrepreneur who is to scout talent for Blue Entertainment Sports Television, his talent company that represents broadcasters, models and celebrities. One of the first fruits of their collaboration was a fashion spread in The Voice-Tribune magazine last December featuring Cuban models wearing clothes by local designers.

Syama Meagher, a Los Angeles-based consultant and chief executive officer of Scaling Retail, cited a recent flurry of inquiries from American brands asking when they might be able to open up shop in Cuba. She predicted most retail development in the country will be attached to hotels and resorts, as is the case in places such as Chennai, India, with luxury travelers the first wave of arrivals.

Cuban Americans — of which there are an estimated 2 million — are also likely to be key players in establishing retail businesses on the island nation, she added.

Yet no one expects anything to happen quickly.

“There is a lot of infrastructure and economic development that needs to take place before the retail industry can see any opportunity of doing a viable business in Cuba,” said Rachelle Giroux, president of sportswear brand Paul & Shark for the U.S. and Canada, which operates a 2,000-sq.-ft. location in Plaza de Viejos under a franchiselike arrangement with a local partner. “Brands interested to enter the market have to be resourceful and patient. The pace of decision-making is much different from other developed markets.”

For example, Paul & Shark wishes to renovate and upgrade its Havana store, which is no easy task. “This initiative will take time to accomplish due to the pace of getting plans passed through the various departments in government. We have a good relationship but one has to be extremely patient,” Giroux said.

Lacoste operates two corners in Cuba.

“The business is very small — it’s less than 200,000 euros [or $226,000 at current exchange],” said Thierry Guibert, president of Lacoste Holding. “But we are currently reorganizing the whole region and will manage it together with countries such as Panama.”

Cuba, he noted, has the potential to become a major player in the region. “We plan to drive more sales in Cuba in the coming years — for us in an evident country in terms of weather and their way of life,” he added. “Like in Brazil, which is one of our top five, there is a lot of sun and a lot of joy, which resonates well with the Lacoste spirit. We are working on opening our own store in Cuba, maybe in 2017.”

Euromonitor considers Cuba “one of the least attractive places to do business worldwide” due to strict policies, a poor tax system, inadequate labor relations and an “inefficient workforce.”

The diplomat said he foresees the development of “local brands and design, and progressive similar market development as in emerging countries, in parallel with the rise of some kind of a limited middle class.”

Tourism is seen as a crucial driver of economic and retail development in Cuba, prized for its balmy weather, pristine beaches, colonial architecture and cultural history.

In a separate report from October, Euromonitor estimated the number of arrivals to reach 3.5 million in 2019, up from 3 million in 2014.
Canada remains the largest source of tourists by far, eclipsing the No. 2 country, the United Kingdom, by tenfold. Germany and France are also major source countries, while tourists from Russia, ranked 13th in 2014, are seen as a priority for the Cuba.

Normalizing relations with the U.S. could greatly increase American visitor numbers — within limits.

“Cuba is not ready to accommodate mass tourism,” according to Euromonitor. “Customer service is inefficient, infrastructure is old, Wi-Fi is costly. There is a shortage of good-quality hotel rooms and restaurants, hire cars and taxis.”

Hilton, Marriott and Essencia are among hotel chains said to be planning projects in Cuba before 2019.

Travel retail sales, which tallied $34 million in 2014, are expected to grow to $39 million in 2019.

“Tourists bring a diversity of ideas, new audiences and markets, too,” said Clandestina’s Fernández. “There are many tourists interested in consuming Cuba in a cultural way. We are establishing a dialogue with these clients and we are learning a lot.”

Asked which foreign players might stand the best chance of gaining a foothold, Fernández replied, “Those who respect, learn and understand how we do things here, not trying to impose anything and not pretending to be better or make things better than the Cubans. This is a different country.”