Fashion Management Final Study Guide PDF

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Professor Erica, notes from every lecture...

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Multiple choice & short open questions (straight to the point) Management of fashion companies: key learning  MAIN TOPICS ● WHAT IS FASHION AND WHAT IS LUXURY ● BUSINESS MODELS ● INDUSTRY SEGMENTATION ● COMPETITIVENESS OF NATIONAL MODELS ● BRAND POSITIONING ● PRODUCT, COMMUNICATION AND RETAIL STRATEGIES ● SUSTAINABLE FASHION ● Guest speakers KEY LEARNING ● The meaning of fashion: language, seasonal cycle (planned obsolescence) and trend, “dream factor”, business ○ #1 - fashion is a non verbal communication ■ Form of speech: what we wear & how & when we wear it, provides others with a shorthand to subtly read the surface of a social situation ○ #2 - a continuous succession of stylistic changes = trend ■ MODA: latin= mos, modus (habit) ■ FASHION: french façon (manufacturing following a sample) ■ In vogue (attracting a huge number of persons) ■ Continuous change (seasonality and ‘planned obsolescence’ ) ● Planned Obsolescence → artificial shortening of the product life cycle ● In fashion continuous change is produced by: ○ Seasons, needs, performances ○ The necessity to induce people to buy new products ■ Who makes trends? ● MACRO TREND ○ Socio-cultural trends ○ Pipeline ○ Designer creativity ○ Media & arts ○ Technological innovation ● 1,00 times for season ● From 4 to 6 seasons per year (till weekly collections) ● 80% of product is new

○ #3 - Creating the ‘dream factor” ■ Branding ■ The charm of the fashion show creates it, by the usage of lights, music, direction, & guests ● This is the where the designer introduces their collection ● to later be photographed (the conceptual idea into a tangible & emotional image) ● testimonial wears the dress, suggesting to the ordinary consumers that they are part of a world made for the happy few ● With the advertising campaign the message of the brand reaches everyone ● In the editorials the stylist creates an outfit that show the dress in everyday usage to get closer to the final consumer ■ Designers are turned into image-makers ○ #4 - Fashion is a business ■ The longer the market, the more the price of product will ↑ ● Today people spend more money on accessories (introduce apparel to sell their accessories) DIFFERENCES BETWEEN FASHION AND LUXURY ○ Fashion is about something contemporary (seasonal product) ○ Luxury is about timeless product (do not follow fashion trend) ■ Want to be perceived as contemp. (do not want to be looked @ as OLD) ■ Brands make the most money out of it ■ Push on something that will stay longer BUSINESS MODELS AND INDUSTRY SEGMENTATION ○ Business models ■ (what, whom, how, who): ● WHAT - Customer Value Proposition ○ offer to the market ● WHOM - Client Segment ○ target by the Value Proposition ● HOW - Value Chain ○ Communication & distribution channels ○ Degree of vertical & horizontal integration & international scope

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● WHO- model of corporate governance ○ System by which companies are directed & controlled luxury brands ● Prestige & exclusivity ● Value prop.: timeless, heritage, exclusivity ● Revenues/competition mainly on product categories other than clothing ● Vertically integrated both in retail and manufacturing ● Governance: ○ Privately Owned (Chanel) ○ Listed on the SE (Hermès) ○ Multibrands - Multibusinesses Groups (Kering) fashion designers ● Importance of clothing and fashion show for brand building ● Covers different segments: RTW, diffusion, upper bridge, recently also HC ● Governance ○ Vertically integrated family run businesses (Armani) ○ Designers that rely on licensing (DSquared2) ○ Designers acquired by a private equity (Valentino) premium brands ● Heterogeneous group ● Know-how both industrial and commercial ● Bridge segment ● Marketing is the main value driver ● Governance: ○ Mainly Multibrands - Monobusiness (Diesel Group, Victoria’s Secret and Pink Limited Brands) ○ Family Owned (if Italian), Public (if American) retailers ● Weekly delivery of new fashionable merchandise in large and welcoming stores at very convenient price ● Innovative value chain: quick response through integration retail/manufacturing ● Governance: ○ Mainly Multibrands - Monobusiness (Inditex Group, H&M, COS, &OtherStories) ○ Public

○ Main steps for Industry Analysis; defining business, how to segment the fashion industry: technology (raw materials, product categories); clients; end uses; price/creativity ■ Define the business ● (based on customer needs satisfied by the product): facts&figures, trends, customer profile ● Who, what & how ■ Determine industry segments ● (select key variables for identifying clusters of companies/brands to whom apply the same KSFs) and build a positioning map ● Price is important ○ Customer mix & match ○ Affordability & style (mostly related w/price) ○ formal/occasional uses ■ Identify clusters, KSFs, growth outlooks and empty spots ■ Drive conclusions on the industry attractiveness ● Is this an attractive industry? (can companies achieve sustainable above average profits in the industry) ● Which segment is better performing? Why? ● Where is more potential for growth? Why? ● What are the most relevant future trends? ○ The fashion pyramid (woman’s) provide examples of price segments..? ■ haute couture: dior, chanel, hermes ■ Ready-to-wear: Gucci, Giorgio Armani, Prada, Valentino ■ Diffusion: Zegna, DKNY, Moschino, Michael Kors ■ Bridge: Diesel, Calvin Klein, Guess, Tommy Hilfiger ■ Mass: Levi’s, OVS, Zara, H&M, Bershka ○ Industry trends: ■ story telling ■ street fashion - collaboration of brands ■ Reshoring ■ Sustainability ■ Customization ■ omnichannel (marrying in-store & online) ● Brand management in fashion: ○ Difference between trademark and brand could be an open question ■ Trademark

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● A distinctive sign or indicator used by an indiv. business org or other legal entity to identify product ○ originates from a unique source, and to distinguish its products or services from those of other entities ● Distinctiveness ● Newness ● Legality (registered) What is a brand ■ Brand tangible associations and brand benefits ■ Tangible association - naming, pay-off…in terms of who i am? ■ Reflected into positive/unique associations ● Function ● Experience ○ Sense & feel ● Meaning ○ Given by an individual or a group of ppl Brand identity management ■ stylistic identity: long-term ■ retail identity: permanent set of codes related to interior design & service ■ Communication identity ■ The concept of heritage elaborate on what is ● Create a feeling ● Brand tradition, mythology & story telling ○ Originated from ppl, place, product, year of foundation Difference between line extension and brand extension ■ Line- enlarge the core to different categories ■ Brand- use of same brand to sell different products From a product to a lifestyle brand ■ The more intangible the brand associations, the more distant the product categories open to brand extension

LUXURY & MASSTIGE ○ The evolution of the luxury concept ■ Can be different depending on the the age group ■ Have expanded their segmentation ○ Trading down: segmenting luxury ■ absolute luxury

● Unique pieces, made-to-measure, handcrafted, precious materials, exclusivity ● Same brand/ same company ■ lifestyle luxury ● Series production (limited editions), quality/style, heritage and brand identity, selectivity (target, media, channels) ● Different brands/ same company ■ accessible luxury(affordable) ● High fashion content, price/quality, accessibility (target, media, channels), power communication ● Different brands/ different companies ■ Question on how its segmented nowadays ● according to exclusive, selective, and accessible categories (trading down), with an eye to maximizing growth opportunities ● repositioned even higher (trading up) to ensure that the “dream factor” remains unchanged ○ Trading up: masstige ■ What is masstige ● A retail category that includes brands and products that have high-end, prestigious characteristics but with prices and locations that make them accessible to a mass consumer audience ● The blurring of the distinction between the prestige and mass end of the market across many elements of the marketing mix ● A fashion statement that mixes both mass-produced and prestigious clothes ■ how to achieve it (communication, limited editions) ■ Example of masstige brands: Zara, H&M, VICTORIA SECRET Bershka, etc. ○ Why so popular? ■ Affordable luxury ■ Partnerships w/luxury ■ Selective extravagance (what we chose to spend our money on) ■ Mix and match (expensive items mixed with mass) ■ Fractional ownership (borrowing/renting/layaway)

Difference between luxury and masstige LUXURY

MASSTIGE

→ Excellent quality, no compromises

→ Standardized quality

→ Tradition and heritage

→ “Throwaway” products

→ Distribution exclusivity

→ Too much availability and accessibility

→ Made-to-measure service

→ “Sell yourself” formula

● Not luxury because they offer a MASS experience (not unique) ● Can achieve differentiation by focusing on a single feature THE FRENCH MODEL ○ What is the role of Haute Couture today ■ Level of couture ● Key to sell more affordable categories ○ Different business models: ■ Chanel: a strict private family control, iconic products, relevance of the beauty business (the fragrance) ● Quality, comfort, proportions, simplicity, distinction = FREEDOM ● Adapted man’s sportswear to women dress: jersey, short skirts, no corset ● Applied the cult of gentleman understatement to women: symbolism of the color black ● Movement is the key word :“flexibility is power” ● Chanel matelassé is one of the most famous luxury iconic product ● The Fragrance ○ Chanel N’5 ■ Always top of the best sellers lists ■ Thought to sell one bottle every 30 secs ■ Dior - LVMH a luxury conglomerate. ● Became world’s largest when Moet Hennessy merged w/ LV ● Advantages and disadvantages of multi brand groups

Advantages ● Financial assets ● Talents attraction ● Sharing of managerial practices, especially in the area of brand management ● Worldwide distribution and production ● Experience and bargaining power with suppliers, distributors and media ● Balance of risk through a portfolio of brands (well established and new ones) ● Internal segmentation of the market: different proposals for the same customer

Disadvantages ● Short-term orientation if compared to family-run businesses ● High turnover of Top Managers and Creative Directors Risk of brand dilution (too much pressure to grow) ● Difficulty in replicating successful stories (each brand should have its own way)

● Why Louis Vuitton is the most successful luxury brand ○ Brand selling basic with fashionable ○ Difficulty repositioning the brand higher ○ Combines accessibility with exclusivity ○ Only luxury brand who is a whole retailer (no product is sold outside Louis Vuitton) ○ French model growing path ■ couture as an image platform (not a real business) no second/young lines (brand instead than line extension) ■ growth through brand extension (beauty, leather goods, jewels and eyewear; conglomerate strategy) ■ high level of supply chain control; craftsmanship as a marketing message ■ Conglomerate strategy (big get bigger) THE ITALIAN MODEL ○ Italian main business models in F&L (more variety of business models than French) ■ Industrial companies

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● acquire brands (mostly previous licensors), launch their own brands, or act as licensors ■ Multibrand/business groups ● acquire brands and designer companies, especially at luxury level ■ Designers-Entrepreneurs ● control production and distribution processes, reduce licenses, purchase factories, and open DOS ■ Italian prontomoda ● commercial companies following a business model of quick response, based on the partnership between production and trade ■ Textile Companies ● Move towards end consumer to increase profit margins ○ The niche of textile retailers: Zegna, etc. Have evolved fashion houses (control of style and image), to vertically integrated companies (control of manufacturing and reduction of wholesale) Dolce & Gabbana business model evolution into a vertically integrated company and reasons for integration of diffusion line D&G into the master label ■ Through license partners, manages the production & distribution of the beauty, eyewear & time lines ■ Began by expanding through licensing agreements, turned itself into a vertically integrated company, today they control in house all different business (expect for eyewear & fragrance) ■ Higher fixed of cost : closed D&G ● Wholesale revenues of 40 % of total Group ■ Less resources in the branding Gucci: reasons for business growth ■ In the high-end, availability to communicate to millennials, digital activities Italian model growing path: ■ clothing is the core business ● first line extension (diffusion clothing lines) then brand extension (perfumes, eyewear, etc.) ■ extension is managed through licensing; from fashion houses or “maison” (style and image) into vertically integrated companies (direct control of manufacturing and retail activities)

■ style-driven approach RADICAL FASHION ● The meaning of radical fashion: 1. Change and the search for constant change 2. Strong impact 3. High level of newness and exclusivity ● Key features of Japanese avant-garde: ○ Wrapping vs. tailoring ○ Diagonal vs. straight cutting ○ Versatile garments (can be worn many ways) ○ Flattened forms surrounding the body ○ Colours are either black or “shades” ○ No functionality ○ No occasion of use (statements of art) ● Examples of Japanese designers: ○ Rei Kawakubo ■ Created “Comme des Garcons” brand ■ Stayed successful by collaborating radical designs with big brands (i.e. Hermes, Louis Vuitton, etc.) ● Issey Miyake ■ Moved fashion towards as an interactive craft in which all can participate ■ Now only namely known by high elite and through his famous parfum L’eau D’Issey ○ Yohji Yamamoto ■ Contaminated the brand with different marketing activities, expanded to more affordable products → went bankrupt in 2009 ● Among Belgian designers the most noticeable one is Martin Margiela, whose main innovation is related to the “cult of impersonality” that disrupted the conventional marketing thinking ■ Different marketing approach ■ Not having a logo on the products ■ More understated way to interact with the line ■ Not into cross-selling ● Reasons why a Chinese luxury industry did not develop yet:

○ Economic: lack of capital and talent in China’s manufacturing and creative industries ○ Social: in a society where people are mostly seeking short-term windfall profits, very few are willing to engage in the manufacturing of fine products ○ Cultural: the cultural revolution destroyed the country’s traditional style (no clear consensus on what is “Chinese style”) ○ Legal: In China, intellectual property rights are not effectively protected and in fact, counterfeiters get rich much faster ● Why doing business with radical fashion is difficult: ○ Because it is niche and expensive to buy for customers - given the difficulties to have access to fabrics and manufacturers – and difficult to wear because of the stylistic experimentation ○ To become successful radical designers have to compromise with the mainstream business logic, by extending the brand into accessories and fragrances, doing partnerships with established brands, and launching sporty/casual lines (i.e. the success of Comme des Garcons) FAST FASHION ● What are the challenges in making business? ○ Slow answer to changes ○ Refresh the ○ proposition ● Make-to-order vs. make-to-stock business logic ○ Make-to-order ■ produce only the portion of the seasonal offer that has already been sold to retail clients ■ stages: building the seasonal sample collection, presenting the collection, acquiring of orders, launching production and delivering products ■ minimize unsold stocks that would be out of fashion the following season ○ Make-to-stock ■ produce the offer that is planned for the season on the basis of sales forecasts ■ stages: sales forecasts, production planning, production launch, sales and delivery ■ guarantees a much more rapid delivery time compared with the make-to-order logic.

■ applies both to companies working on basics (styles and volumes can be forecast in advance) and to fast fashion companies that produce mini-packages in order to shrink time to market and lead time ● The evolution of make-to-order: pre-collections, flashes/capsules and replenishments ○ traditional logic of high end fashion designers ● The evolution of make-to-stock: fast fashion retailers (adopting a customer-driven supply chain) ○ To pull&push ● H&M and Zara/Inditex main differences: different levels of geographical expansion, vertical integration and development of brands’ portfolio architecture, masstige for H&M DESIGN AND MERCHANDISING ○ What are the stylistic codes? Classic:bindings,corset Modern era =loose fit Angularity =masculine curvilinear = feminine Dark hue = formal, business Light hue = casual, leisure Straight lines= fluidity curved lines = fluidity Vertical lines = stability horizontal lines = calm Curving = grace diagonal = vitality ■ Stylistic identity, seasonal codes, colour schemes, etc. ■ The role of management and the role of creativity in product development: short and long-term

AESTHETIC VARIABLES COMPETITIVE VARIABLES

Short Term

Long Term

Collection stylistic themes & concepts

Stylistic identity

Collection architecture

Brand identity & positioning

○ Dressing styles ■ Styles common to various designers ■ classic; modern; characterized; avant-garde (radical) ○ What is a fashion collection? ■ Seasonal collections are defined in terms of:

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SIZE: total number of SKUs (stock keeping unit) STRUCTURE/ARCHITECTURE: number of parts/groups LEVEL OF INNOVATION: new patterns and fabrics **Consider “What’s trending?”: colours, product, etc.

Main phases of the collection development process: 1. External/internal research on fashion trends a. Socio cultural trends b. Textile pipeline c. Technology d. Designer internal research 2. Collection guidelines/merchandising plan ● The role of the merchandiser (assessing competitors & analyzing needs of customers) i. Merchandise overview ii. Merchandising mix iii. Where products are being made (“made in…”) iv. Prices 3. Collection development 4. Collection presentation a. the trade fair/fashion shows/trunk shows b. to the sales network c. to key clients and opinion makers (stylists from the fashion press) COMMUNICATION AND DIGITAL TRANSFORMATION ● Key features of fashion communication: ○ visual and product oriented, marketed by influencers who “create the buzz”, and possess a designer spokesperson 1. Brand Awareness  ell in (wholesale) and sell out (retail) a. Objective? → S  dvertising, editorials, videos, social media, etc. b. Tools? → A 2. Brand Image a. Objective? → I mage identity  eritage, designer/entrepreneur spokesperson, fashion shows b. Tools? → H and events, exhibitions, etc. 3. Reputation a. Objective? → Reputation b. Tools? → Internal communication, investor relations, foundations and sponsorships, annual reports

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The evolution of ‘dream factor’ as a consequence of the digital transformation: FROM...

TO...

Glossy magazines

Apps and social media

Pictures (ads)

Videos and influencers

One iconic image repeated

User-generated content

● The communication plan ○ Statistic identity ● The communication  identity consists of: ○ Concept ■ Ex. D&G = sicilian-ness; OVS =inspired by italy, based in italy ○ Tone of Voice ■ Ex. beauty brands tend to have a tone that is friendly and informative ○ The Shooting ■ “photoshoot” (colours, models, location) ○ The media→ fashion shows, parties, videos, billboards, social media, etc. ■ Key image (ex. beaut...