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Management of Fashion and Luxury Companies

  1. Management of Fashion and Luxury Companies
  2. What is Fashion?
  3. Everyone has their own definition for Fashion “Fashion for me is Creativity”
  4. “we live not according to reason, but according to fashion” - Seneca, Philosopher “Fashion is a form of ugliness so intolerable that we have to alter it every six months” - Oscar Wilde, Poet “Fashions fade, style is eternal” - Yves saint Laurent , French Fashion Designer “ I don’t design clothes. I design Dreams” Ralph Lauren, American Fashion Designer Some famous people stated fashion as:-
  5. Fashion is about Dream Factor Companies only sell products, they sell a way of expressing themselves through their products.Customers buy emotional associations with the world that fashion companies create ● Wasp lifestyle for Ralph Lauren ● Sicilianity for Dolce & Gabbana ● Art of Journey for Louis Vuitton
  6. What is Luxury?
  7. Luxury comes from lux, that is a Latin word. Lux is Latin meaning something like light, or brilliant. We have an Italian, word that is “lussato” that means when your shoulder comes out of the original place, and something wrong. So, luxes means something excessive, something, that is not on the right track. And we will see how, the combination of these two meanings, so lux as light, brilliance, splendor, together with the second meaning of something wrong, something extravagant, something excessive, is the true nature of luxury.
  8. “Luxury goes beyond basic necessity and is there to indulge our personal happiness and pleasure” “Luxury is Quality and Exclusivity” “Luxury is Prestige” “Luxury is a comfort in our life, it's time saving, but money spending” “Luxury is expensive” “Luxury means something more than necessities”
  9. Luxury Segments Beauty: Cosmetics, Hair, Perfumes Fashion: Accessories Apparel Eyewear & Jewelry Sunglasses Prescription glasses Costume Watches
  10. The Fashion Segmentation Pyramid +Quality +Creativity +Price
  11. Luxury Brands Price: Most expensive, it could be 10 times higher than the average market price Creativity: Maximum level, always made-to-measure Quality: great attention to details, maximum level of craftsmanship, pieces of art Use: Mainly special occasions especially in the evening Target: Very few people, celebrities international clients Idea: Build the image of brand and sell the dream
  12. Ready-To-Wear Price: high price,5 to 3 times higher than the average market price Creativity: high level of creativity, designer’s expression through the fashion show Quality: attention to details Use: wider occasions of use,from daily to important events Target: wider selection of people, celebrities international clients Idea: Develop the image of the brand
  13. Diffusion Diffusion or second young lines Price: Priced 3 to 2 times higher than the average market price Creativity: inspired from ready-to-wear Quality: wider volumes of production, production outsourced,country of origin is not a key success factor Use: casual, “sportier” Target: younger audience,wider than RTW,mix of retail and wholesale distribution Idea: Expand the target audience
  14. Bridge born in the USA with department stores Price: right value for money, 2 to 1.5 times higher than the average market price Creativity: trendy not too radical Quality: production outsourced, right delivery in stores Use: mainly daily occasions Target: usually a mix of wholesale and retail distribution, both international and local brands with local customers Idea: Connecting the high end to mass market,Right marketing mix (product, communication, service)
  15. Mass Market Price: below the average market price Creativity: basics or fashionable items depending on business model Quality: importance of costs control Use: different occasions Target: different targets, from teenager to sophisticated women Idea: Supply chain management is key Segmentation is the new trend Masstige communication
  16. Four Business Models Luxury brands Fashion designer brands Premium brands Vertical retailers in the mass markets These are organised by : Who, What, How, Revenue Model
  17. The Four Pillars Who(Customers) T he value proposition (exclusivity, value for money, fashionability, status) that is also identifying the segment of clients targeted by that value proposition (affluent, fashion victims, connoisseurs) What(Product Offer) The product offer that is delivering a certain value proposition (timeless/ iconic leather goods, fast fashion apparel, designer shoes) How(Infrastructure) The way the value chain is organized (degree of vertical integration, role of key suppliers, international scope) Revenue Model How a company will earn income and generate profits (margins versus volumes, licensing fees)
  18. Business Models Framework
  19. Market Segments and Business Models Market segments and business models from bottom to top > Mass Market: Mass Basic Retailers and Mass Vertical Retailers > Premium: Premium Brands and Fast Premium Brands > High-end: Luxury and Fashion Designer Brands Value Proposition defined by: Price Creativity Exclusivity Image Responsiveness of supply chain to fashion trends and seasonality Classic > Less Responsive, Fashion > More Responsive
  20. Luxury Brands Luxury Brands are probably the oldest kind of business model in the world of fashion , because the were the first to be established and originates from france. Value Proposition/ Customer Expectation : 1. Timelessness 2. Heritage of the brand 3. Uniqueness 4. Exclusivity 5. Craftsmanship
  21. Value Chain 1. Design 2. Manufacturing 3. Retail French brands: Vertically integrated in production and distribution. > Louis Vuitton,Hermès Italian brands: Focused on design and manufacturing, not totally integrated in distribution, mix of retail and wholesale channels. > Tod’s, Ermenegildo Zegna, Salvatore Ferragamo American brands: Referring to accessible luxury, Focused on design and retail Not integrated in manufacturing. > Coach, Michael Kors
  22. Premium Brands Premium Brands also called Contemporary Brands. Most of them born with a fantasy name, also some designer brands with a more affordable concept, but not too extreme in terms of fashion with a right value for money, a good customer service and a strong communication strategy,extensive use of digital media. They mainly occupy the Bridge segment and represent a very fast growing cluster today because: 1. Offer the right mix and match products , 2. Are perceived less as a commodity compare to the Mass Market , 3. Are more affordable than designer brands.
  23. Fashion designer brands are anticipating and creating new trends in the market, their core business is clothing . Role of the designer : 1. Assure the brand a consistent positioning in the market place. 2. Creates new collections. 3. Usually is the final decision maker for every single aspect of the brand. Designer Brands
  24. Fashion Designer Brands usually Include : > RTW line, which is highest in term of price positioning and seasonal creativity . > Diffusion line, that’s the second line which is more affordable and more casual. With the increasing competition of fast fashion retailers, in the last years some of the designer brands decided for one of the two choices: > Shut down the second line despite the big success > Transform the second line in a RTW brand with a strong and autonomous personality as the master brand .
  25. Vertical Retailers The vertical retailer is a called vertical because actually they are not limited to the distribution and retailing activities. But integrate also design process, brand image and communication . The value chain can be more or less responsive to the market trends, that means incorporate different levels of fashionability Example: 1. Mass basic retailers : offer a wide products range with many iconic styles and carry overs in large and welcoming stores at convenient price. They control only some activities and do not own factories, but have production offices next to the main suppliers in local countries, 2. Fast fashion retailers : offer a flow delivery of new fashionable merchandise in large and welcoming stores at convenient price with new fashion products every two weeks. They have a high degree of vertical integration as in manufacturing, design, distribution and retailing.
  26. Complexity in Fashion Products Development Fashion has some peculiar characteristics that make it unique and complex: 1. Seasonality 2. Variety of styles, occasions of use, sizes 3. A short product cycle and a long industrial pipeline 4. High number of activities and people involved Trends in Fashion do influence everyone. Trends might last just a season, or even less named as fad, or last for many years becoming a classic.
  27. Stylistic Identity All companies follow in fashion trends. But at the same time, they need to maintain a certain individual character, and maintain their positioning, preserving their individual style. Here comes the concept of stylistic identity. The individual style that each company has on the market and makes it recognizable. Stylistic identity is made up of some aesthetic elements including the brand logo, colors, fabrics, patterns, details, lines and the shape of a piece that make a brand unique.
  28. Some examples of Stylistic Identity >The Sicilian baroque for Dolce & Gabbana > the Milanese fog for the “greige” shades of Giorgio Armani > The bold style recalling the Italian “Calabria” region for Versace > the American East Coast style and native Americans for Ralph Lauren > Canada for Dsquared2 > Bottega Veneta’s intrecciato woven leather and the knot, > Missoni’s zigzag pattern on colorful knitwear, > Céline contemporary minimalism with couture-like finishing.
  29. The Product Development Process Roles and Activities : 1.Collection Planning : It's usually based on past season performance analysis, Where the Brand Manager, Merchandiser, Commercial Network is involved in Collection briefing, presentation and discussion. 2.Collection Creation : It consists of Developing collection theme and product where the Design Director and Product designer are involved to define the overall inspiration of the brand. 3.Sampling : The product manager and supplier work hand in hand to collect sample of production, Purchasing material, deciding the color card and pricing and lastly creating a prototype.
  30. 4. Collection Presentation : the main work is done by the sales force. Best case for the stylistic identity of a fashion designer brand : Dsquared2 Best case for the stylistic identity of a luxury brand : Bottega Veneta
  31. Fashion Communication Communication is what transforms the product into a brand. Fashion communication mainly focuses on the so called dream factor. There are different levels of communication: 1. The product, that in fashion is the seasonal collection 2. The brand, that is the personality, the essence that goes beyond the single collection and makes the company recognizable and identifiable 3. The company, the corporate level.
  32. Key Characteristics of Fashion Communication > The importance of images, fashion communication is very visual. > For designer brands images show only the seasonal products, the models and the logo, they don’t have the pay-off. > Thanks to the use of images fashion is a very direct and also universal language. > The fashion product is a communication code in and of itself. Through the product the designer represents the evolution of brand style.
  33. > Images let the customers interpret the communication and in turn give them the freedom to give their own personal interpretation. > Fashion companies do not only want to be informative, they also want to be emotional and inspirational. > Non-verbal communication is much more effective and memorable than verbal communication. “Communication in fashion is a very powerful language”.
  34. Objectives & Tools of Communication Brand Awareness : Sell-in (wholesale) & Sell-out (retail) >Advertising & Editorials > Fashion show & events > Videos about seasonal products. > Catalogues > Web site and social media
  35. Objectives & Tools of Communication Brand Image : Image Identity > Logo > Heritage > Designer/Entrepreneur Spokesperson > Celebrity marketing > Videos about craftsmanship, heritage, iconic products > Website and social media
  36. Objectives & Tools of Communication Reputation: > Internal Communication > Investor Relations > Charity and foundations > Exhibitions > Website and social media
  37. Communication Identity Brand Image depends on the message and the media. The message is based on two factors : > Concept, what is the one thing we want to communicate? > Tone of voice, how does the brand convey the message? Media is key to “position” the message. Fashion KPIs are focused on checking brand perception, target affinity, and qualitative features, such as special positions.
  38. Fashion companies want to reach both the target of opinion leaders and the final customers. In order to do so they use a mix of following tools: 1. Fashion shows and events 9. User generated content 2. Glossy magazines and editorials 10. Videos 3. Billboards 4. Celebrities 5. Windows installations 6. In-store events 7. Social media, Bloggers 8. E-magazines
  39. Global Retail Trend 1. Online and offline retail are coming together.
  40. 2. Sustainability is more important than ever. For fashion retailer Timberland, sustainability is key to its purpose as a brand, and its overall identity. 3. Social media is a key part of the purchase journey. Over 40% of internet users in the U.S. and UK use Instagram to engage with influencers – making it the most popular platform to do this. As Instagram is currently experimenting with in-app purchases, influencer partnerships are set to earn retailers some serious rewards.
  41. 4. Efficiency is changing retail from the inside out.
  42. Retail Distribution channel The key issue in managing distribution is how to build or maintain your brand identity and image through a variety of channels and formats. Following are three main channels: 1. Retail Channel 2. Wholesale Channel 3. Transnational Channel
  43. Distribution channel formats Formats within the channel Retail Channel Wholesale Channel Transnational Channel Flagship Store Corner Travel retail, Duty free Self Standing Store Wall Unit E- Commerce Shop- in-Shop Store Open Scale Factory Outlet Outlet
  44. Retail Channel Flagship Store, usually a huge space, in a top global fashion capital, street level only, really the theater of the brand, owned and managed directly by the company. Offers the brand’s global image and lifestyle concept(s) through the offer of all brand products categories. Maybe there’s even a coffee shop and/or leisure areas. Self Standing Store, a boutique of the brand in the main street, smaller than the flagship store, with a large selection of the brand’s assortment Shop-in-Shop Store, the store is inside an independent retail entity, shopping mall, or department store. The brand offers the main product categories and has dedicated sales people Factory Outlet, directly owned and managed by the brand
  45. Wholesale Channel Corner, an area in department stores or multi- brand stores where the assortment and the brand image is recognizable, but the management is in the hands of the wholesaler Wall Unit, a space where you can usually find shoes, leather goods, and/or accessories Open Sale, a retail space at the lower level of department stores with a multi-brand offer focused on one product category such as accessories, jewels, interior design, etc. Outlet, managed by the retailer
  46. Transnational Channel Travel retail, Duty Free Stores represents a booming business, becoming the new shopping destination. Fashion and luxury companies are investing a lot here. E-Commerce, company website managed by them or a third party
  47. Conclusion:- Major learnings from the course are how management of fashion and luxury companies are evolving,What is Fashion?, What is Luxury?, Luxury Segments in Retail, Fashion market segmentation, Business models, Business model framework, communication of brands, Global Retail Trends, Retail Distribution channel and its types.