A Marriage of Economic Convenience

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.