‘The secret of successful fashion management is a complete blend of Creative Genius and Business Management acumen, skill and resourcefulness.’
Daniele de Winter, CEO, Daniele de Winter Cosmetics, Monaco
Anyone who thinks fashion is inconsequential and doesn’t deserve serious attention must think again. Fashion is a strong force that has always played a significant role in the evolution of mankind’s society. As far back as the Egyptian, Greek and Roman Empires, fashion was a key social element that reflected the society through apparel, accessories and cosmetics. Fashion also had an influence on decisions regarding politics, economy, education and art. In the ancient Roman Empire, the visual representation of fashion was so ingrained within the society that the ruling government decreed the models and colours of shoes worn by the members of each social class. Also during the early years of industrialization, wealthy Americans and Asians travelled to Europe to acquire luxury goods, boosting international trade and the expansion of the global economy. In addition, the Grand Nobles of the Renaissance period and the aristocrats of the past centuries all stamped their significance and contribution to society’s evolution through fashion. The fashion tradition remains prevalent today, albeit in a modern way.
Luxury fashion played a prominent role in the social and economic order of previous centuries and continues to influence our modern societies, economies and governments. The global luxury fashion sector is estimated to be worth US$130 billion. The sector is one of the few industrial segments that have remained a constant world economy contributor with an annual growth rate of approximately 20 per cent. In addition, the industry has made noteworthy contributions to national economies. The luxury fashion sector is the fourth largest revenue generator in France; and one of the most prominent sectors in Italy, Spain, the USA and the emerging markets of China and India. The sector is currently one of the highest employers in France and Italy. In the USA, the fashion apparel industry is the fastest growing sector, while several Asian economies have witnessed a boom as a result of the entrance and expansion of luxury brands in the region. The clothing and accessories retail business is also among the fastest growing industries in several parts of the
world. Fashion has become so influential in the current global economy and world affairs that the United Nations recently launched a program of fashion shows, called ‘Catwalk the World’, as a platform for raising humanitarian aid. Fashion is now also directly linked with film, music, literature, arts, sports and lifestyle as never before. The contribution of fashion and its growing influence has also permeated into other aspects of the business sector as has never before been witnessed.
Despite the high influence of fashion in our society, its analysis from a business strategy viewpoint lacks consensus and structure. This is perhaps a result of the assumption that the intellectual analysis of fashion is an impossible challenge. Or because fashion creativity and business intellect have been viewed as two parallel lines with no meeting point. In luxury fashion, where there’s a heavy emphasis on design and creativity, this perspective is more underlined. Well, the days of these assumptions are gone because, today, the business of fashion requires sophisticated management techniques in addition to a high level of creativity and innovation. The rapid development of the business strategy aspect of fashion management and its balancing act with the creative world are some of the factors that prompted the writing of this book on luxury branding.
The marketplace would be colourless without luxury brands. Luxury fashion brands are unique, intriguing and special. This is not a biased statement from someone who has an innate affinity for fashion branding. It is rather a statement of the fact that luxury fashion provides a means to a lifestyle that is triggered by deep psychological and emotional needs, which is expressed through ingenious products.
A respected writer and branding expert recently told me that he believes that luxury brands deceive customers by selling over-priced branded goods that are produced at a fraction of their price tags. I disagree with this view (excuse me, Mark). I subscribe to the apparent fact that luxury brands provide a complete package of significant benefits to consumers, the social environment and the global economy. When people purchase a luxury fashion item, they don’t just buy the product but a complete parcel that comprises the product and a set of intangible benefits that appeal to the emotional, social and psychological levels of their being. It is quite challenging to find another sector apart from luxury goods, that can claim an emotional connection with their consumers to such an extent that the desire for a product increases as the price tag increases.
Our society thrives on fashion as a form of identity and expression and a source of progression. Fashion, especially luxury fashion, has seeped its way into the lives of consumers, whether they’re wealthy or not. Luxury brands have affected the way consumers think, act and live, both directly and indirectly. Take a moment to reflect on this. When you make a choice of clothes, shoes or other products related to your appearance and grooming, you are making a statement choice based on how you want to appear to yourself and to others. These choices may comprise of what makes you comfortable or what provides you with a means to other forms of satisfaction like belonging to a specific social group. Your choices might be based on brands or not, but the underlying fact is that your choices are influenced by fashion. One thing is certain, and that is the undisputable reality that fashion has become a permanent part of our lives, including the lives of those that consciously decide to distance themselves from fashion in order to avoid falling into the
So why write about luxury fashion branding?
The luxury fashion industry is a global multi-billion dollar sector comprising of a multitude of brands with high relevance. Among these are brands like Louis Vuitton, Hermès and Gucci. They are also among the most valuable and influential brands in the world. Despite the large size and income generation of the global luxury fashion industry, the sector has witnessed a slow growth in its strategic business direction. This is because for a long time luxury brands were managed through traditional business methods where decisions were made based on intuition and sometimes on a trial basis. These traditional methods also featured a strong focus on product development and publicity generation through conventional advertising methods. However, the rapid development and complexity of the global business environment currently requires modern and sophisticated business practices in luxury goods management.
In a bid to find a synergy between its origins in tradition and the requirements of modern business, the global luxury goods sector is currently undergoing an important evolution and several management shifts. These changes range from the use of business concepts such as brand equity and brand asset valuation, to e-business; and the development of consolidations and private equity financing. Also, several factors have contributed to the lowering of the sector’s entry barrier, giving way to increased competition. In addition to these, other aspects of the luxury market are also changing. These include the expansion of the luxury consumer market to include a broader mass market; competition from mass fashion brands; the reinterpretation of the luxury concept by the consumer society; the emergence of new luxury markets like China, Russia and India with new opportunities and
outlook; and the increase in the number of the world’s wealthy and changing attitudes in their spending patterns.
The different evolutionary stages of the luxury market in several parts of the world also create a challenge for luxury fashion brand management. For example, the European luxury scene is in its mature stage and consumers in this market approach luxury and fashion as concepts that can be adapted to their lifestyles. This contrasts with US consumers who view luxury as a means to a lifestyle because the US luxury market is still in its growth phase. In the Middle East, where luxury fashion is in its full-bloom growth phase, consumers acquire luxury goods to make a statement of their wealth and Western know-how. Japanese consumers also have a similar attitude to luxury fashion goods, albeit with a twist of affinity to specific French brands. In the rest of Asia, the luxury scene is in its introductory phase while in Africa the concept of luxury fashion is in its early introductory phase. Luxury brands face the challenge of finding a balance in the requirements of each of these markets through their products and service offerings and business strategies.
Changes in the luxury goods sector and the consumer market have also dispelled several old notions of luxury. The Internet has altered the way luxury products are accessed and contributes to the changing consumer psychology and perception of luxury. For example, the retail cliché that assumes that buyers buy and sellers sell, is no longer valid. Buyers now sell in addition to buying, through websites like ebay.com. Buyers can now also borrow luxury goods from several companies like bagborroworsteal.com and milaandeddie.com. These possibilities are creating new attitudes to luxury and more challenges to managing luxury brands.
Further changes in the luxury fashion industry include rapid market expansion and competition as a result of easier entry into the industry. Brands can now be launched and achieve global awareness and credibility within a short timeline of only five years. Also the increase in wealth and mobility of luxury consumers and the emergence of new luxury markets is fuelling the sector’s expansion. This has led to a shift in the focus of the luxury market from ‘products’ to ‘consumers’ and the ‘competition’. The rife competitive business environment calls for a strong concentration on developing cuttingedge strategies through relentless innovation. The time has come for new brands to act like old brands; for consumers to be reached through new media like Internet Shopping and Mobile Shopping; and for luxury brands to represent something substantial and valuable to customers through their brands’ offerings.
The branding aspect of luxury goods management is integral to a luxury brand’s sustainability. The brand is the reason that consumers associate themselves with a luxury company. It is what creates and sustains the attraction and desire for products. The strong attachment that luxury consumers have to brands, which often defies logic, is the result of branding. Brands are not products and should not be managed like products. Brands are a complete package that provides a source of identity for products. This identity becomes a springboard for the associations and perceptions eventually developed in the minds of consumers. This is what draws consumers to luxury brands and remains their source of satisfaction.
Although Brand Management is the most influential business aspect, the concept remains in its introductory phase in the luxury goods sector, despite the fact that the ‘brand’ is the core competence of the industry. Luxury fashion brands are yet to absorb the full implication of branding and its management systems. In most cases, the brand is managed through the view of product development and the brand portfolio is seen as the same as the product portfolio. The sequence is often to first develop products and then make branding decisions afterwards. This is a wrong approach. There’s no easier way to say it. Branding decisions ought to be at the core of all the corporate decisions that a luxury brand makes, including product development. The journey of branding begins from crafting a clear brand concept and brand identity and projecting it to the public through an equally clear brand personality and brand image. What the public sees and interprets through the brand image leads to a positioning of the brand in their minds through perceptions and associations. This further leads to the allocation of a space for that brand in their minds according to their sentiments towards the brand. This is called the brand share and influences future purchase decisions and subsequently brand loyalty.
The total branding concept (and not just the brand image) is the source of a luxury fashion brand’s wealth. When the sum of all distinctive qualities of a brand results in the continuous demand and commitment to the brand by consumers, the brand is said to have high brand equity. The brand equity is what translates to brand value, which is the financial gain that a luxury company eventually accrues as a result of its brand strength. The brand equity ought to be painstakingly managed and nurtured to retain its value-creation ability. Brands are invaluable creators of wealth for companies and luxury brands that aim to attain competitive edge ought to be fanatic about their brand-strategy management. This is the most important tool the luxury fashion sector has.
Developing and effectively managing a luxury brand is a painstakingly long process. It requires a consistent integrated strategy, innovative techniques, rigorous management control and constant auditing. This is the reason that there are few existing brands that can claim true ‘luxury’ status. Although several brands aim towards attaining a ‘luxury and prestige’ rank and every talented designer aspires to creating their own luxury brand, only a few brands eventually succeed. The successful brands are those that understand the challenge of finding a balance between being timeless through a firm brand concept and heritage; being current and relevant for the moment through strong brand positioning; and being innovative in crafting a future, all at the same time.
The aim of this book is not to tell you what you already know about fashion branding and management, business strategy or the luxury goods market. It rather provides you with highly relevant analytical information about the luxury goods sector and, most importantly, a framework of business management techniques that can be applied to the sector and beyond. It also reviews strategies that can be used to interpret current and future market changes and ways that luxury brands can be alert to face competitive challenges. The information and business strategies presented in this book are the results of both sound research and confirmed practice. They are sources of new approaches towards the business of smartly bringing objects of desire into the marketplace.