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Research paper: The future of luxury brands

February 15, 2010

Is focusing on the heritage of a brand the way to fight through this recession? In the following article ‘Fashion Brands Focus on Their Heritage’ Miles Socha  argues this statement. According to Patrizio di Marco, president and chief executive officer of Gucci ‘the audience is not looking for something that can be used and consumed in six months’ time….You actually offer something with substance.’

James: “Heritage is the best anchor
Lucian James, founder of strategic consultancy Agenda Inc, supported the statement with ‘Consumers want something they can believe in, and heritage is the best anchor that luxury brands have. It allows luxury brands to communicate a longer-term value that goes beyond the ticket price, as watch brands know very well.”

Core values after the crisis
The shift of old becoming new again is not exactly a recent focus in the fashion industry. In my opinion the essence of tradition and heritage has been a significant factor for the past 10 years for luxury brands such as Louis Vuitton, Gucci, and Hermes.  It is only now – during the climb out of the financial crisis- such brands put emphasis on their core values.

From sizzle to steak
Why? Such business tycoons have gotten to know their consumers better than ever before the past decade. The hype around the ‘It’ bags and their extravagant advertising campaigns have raised much awareness and a high demand for luxury products. The article states that ’The shift back to heritage has been sped by the recession, but is moreover a “correction” from a “media-centric, celebrity-oriented, glossy approach,” he explained. “The luxury category had been overselling the sizzle and forgetting about the steak.” I love the metaphor in the above quotation but I am also very curious what this shift is going to look like. How far will and can such brands go to move the focus on the sizzling to the steak?

Click here to read the article yourself and click here for a related Essay written by myself in March 2009 on the topic ‘The consequences and implications of the most recent developments in the fashion industry’.

One Comment leave one →
  1. Lis permalink*
    February 15, 2010 2:06 pm

    Pasted below is a related essay written by myself in March, 2009. Have a read, might be interesting!

    The consequences and implications of the most recent developments in the fashion industry.

    For centuries the fashion industry has been impacted by numerous of evolutions. My aim is to argue the consequences and implications of the most recent development in the fashion industry. I have analyzed three recent developments; the recession, sustainability, and e-retailing. As each development at first seems unassociated with one another, research has proven there is a link. Economical, environmental, social, and cultural aspects connect the three topics and make it possible to analyze and argue the present and future implications.

    Slowly the recession is taken toll on the fashion industry. The current recession has led to bankruptcies, credit crunch, deflation, and unemployment. Fashion houses and brands are cutting costs to remain profitable. Consumer behavior is, as a result of the recession, drastically changing. This change in retail behavior has been impacting some segments in fashion negatively, especially the luxury sector. Businesses in the fashion market are undertaking creative and innovative actions to cope with the economic slowdown.

    Attributable to the global recession, governments have been responding by adopting measures. Expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation , have been implemented by global governments. The increase in government spending is aimed to strengthen the country’s exports. The Italian government for example is planning special measures to support the fashion industry through a crippling crisis. Economic Development Minister Claudio Scajola stated special measures are planned to “safeguard the crucial ‘Made in Italy’ sector and to generate the conditions to allow companies to be more competitive on international markets after the crisis.”
    The confrontation between the fashion Industry and the economical slowdown has led many businesses to reduce costs. Many have cut jobs, decreased production and implemented new organizational systems. The rhetorical question is why? It can be argued fashion retailers are currently positioned in an immense competitive market. A pullback in consumer spending has a huge influence on these businesses. Innumerable mainstream fashion chains and stores have adapted a similar strategy to reach out to these recession-hit shoppers. Reducing internal organization and production costs have allowed retailers to offer irresistible low prices for their fashion. These mainstream fashion chains and stores offer fast Fashion.
    Fast Fashion has gained much popularity every since H&M was first introduced and found a gap in the market. The demand for cheap quality/price garments has ever since not disappeared. Even during this financial crisis demand has only kept rising. Despite some slow declines in profit this past year, fast fashion has raised status and awareness. Research shows chain stores such as H&M and Zara have been expanding their empires at an immense speed . The luxury segment in fashion on the other hand has not been experiencing such growth. Numerous of flagship stores of high-end brands have been shutting stores worldwide due to the recession . Fast fashion believes ‘if you’re not going fast enough, you’re going to get run over ’, this is the exact attitude these businesses take on. As a result of their strong strategies and concepts, fast fashion is today conquering a large undetermined number of consumers on a global level.
    Fast fashion, as mentioned in the previous paragraph, claims if you’re not going fast enough, you’re going to get run over. Thus the question, is the luxury segment getting run over? The luxury market was once thought to be invulnerable to the current economical fluctuations. According to the Luxury Goods Worldwide Market Study the sector has slowly begun to feel the effects of the financial crisis. The hype on luxury products started in the 90’s. Large and shocking advertising campaigns, popular ‘It’ bags and the authenticity of these high end fashion brands created a need for luxury which these business tycoons provided. Today’s global recession has started to decline this need for exclusiveness. The price for a piece of luxury is not worth the consumer’s money anymore during this recession. The glamour of luxury is disappearing and the luxury segment does currently not have a strategy to regain its success and compete against the growth of fast fashion.
    The fashion industry biggest concern during this financial crisis is losing its customers. Fast fashion is, as stated, doing a successful job at staying close and attractive to the market. Whether the luxury segment could profit from the recession as fast fashion does is unclear. Government support could give luxury fashion the opportunity to fight its way through this recession and regain its status. The question is if governments will support their fashion luxury exports. Other exports, such as car productions, seem to be much more attractive to German and French governments .
    Along with the financial crisis, sustainability is another recent development, which has created consequences and implications for the fashion industry. Sustainable fashion was first introduced to the market as a charitable cause. Today fashion designers are re-introducing ‘eco-conscious methods at the source through the use of environmental friendly materials and socially responsible methods of production’ . Despite the fact sustainability has integrated into other markets, sustainable fashion has not reached full potential in the fashion industry.

    Sustainability is developing very slowly in the consumer’s mind. Research shows consumers are uncertain about the aim of sustainable fashion. There is a lack of understanding on what sustainable fashion is all about. As a result, sustainability has been misinterpreted as on overpriced and dull concept. Due to the fact the message of sustainability is not clear to the market, many potential customers are simply lost because of miscommunication.

    As the recession is causing the fashion industry to re-invent its structure, future predictions led to the conclusion ethics will be the new elegance . Having the time and money to care about where garments come from is set to be a key feature of the 21st century luxury . Research states ‘the current intellectual ethos on social movements and concerns about climate change has allowed sustainable fashion to evolve’ . The fashion industry has spotted this development and has started to embrace sustainability. Is this the explanation for the slow integration of sustainable fashion? In the May 2007 issue of Vogue it is suggested sustainability is a trend, which could last multiple seasons . In my opinion sustainability will soon evolve from a trend into our lifestyles because the ethical attitude will become a part of our moral way of living.

    Big fashion retailers and designers have become much more involved in the movement towards sustainable and eco-friendly fashion. Katharine Hamnett suggested “It’s got to be fashion and not what people perceive as ‘organic fashion’- those hippie, oatmeal type of clothes- they have to be gorgeous clothes. Otherwise, no one would buy them .” Retailers such as H&M, Zara and Topshop have implemented this idea in their sustainable concepts and are giving sustainable fashion a transformational image. As the world’s trendsetters are becoming more involved in this movement , sustainable fashion has gained recognition as a trend. We will soon end up following this and allow it to merge into our lifestyles.

    Our society is faced with many environmental problems today. Global warming, greenhouse gases, landfills, oil spills, using plastic silverware, leaving lights on, etc. We are all becoming more conscious of our actions and the impact it has on our Earth. The increasing awareness for sustainable living can be seen in the raise of popularity and acknowledgement for Earth Hour on Saturday 29th of March, 2009. More than 2800 cities and towns and millions of homes and people worldwide switched off their lights at 8:30PM for an hour. The acceptance of the current sustainable development is rising. For the fashion industry this will consequently be very profitable and an opportunity to fix losses from the recession.

    E-retailing is a new development which was first established in 1992, by Tim Berners-Lee. As Berners- Lee opened his first online book shop many other businesses started to acknowledge the attractiveness of online retailing and followed. The increase in online shopping has resulted the e-retailing market to grow enormously. Today, ‘online shopping has spread into every corner of life, linking people to the culture of capitalism in frequent and daily ways ’.

    Many businesses have opened an online store. The lower costs, the higher marketing efficiency, and the ability to offer consumers a larger variety has become the ideal retail strategy during this financial crisis. Recently, even fashion houses such as Armani and Gucci have started selling online. Despite the fear of their exclusive image to be ruined, high-end fashion brands are forced to answer to their consumers demands. Karl Lagerfeld argues luxury has to be sold in an “multi-sensory environment’’ he states the internet does not offer “the unique feel and sophistication of luxury materials, refined tailoring and extraordinary attention to detail found in luxury fashion. ” Whether Chancel will ever open its own online shop is unclear

    This past year, online shopping has seen a rise of 19 percent . Especially the fashion industry has been experiencing an increase in sales online. The clothing, footwear and accessories sector has become very popular among online shoppers. The low prices and attractive discounts online is what draws online consumers to web shops instead of their local shopping areas, particularly during this recession.

    As a result of the recession, and numerous of other factors, many consumers lost the experience of shopping. The time and process of shopping has become a burden for many of us. The problem of the retail industry is that many shops, especially chain stores such as H&M and Zara, have become overflowed by consumers. Online shops on the other hand provide the space for personal enjoyment and convenience.

    With the increase in popularity of online shopping, stores have been losing customers. Although this number is currently low, it is in my opinion going to increase as the consequences of the recession will become clearer. Consumer behavior will change severly over the next few years as the attractiveness of low prices will disappear and the market will shift to a demand for quality, sustainable and enduring products. This conclusion can be supported by both developments, the recession and sustainability, analyzed in the previous pages.

    In conclusion, the recession, sustainability, and online retailing are all developments that seem to be currently intertwined with one another. Due to the effects of the recession, e-retailing has increased in popularity and the sustainability trend has raised awareness. Whether the three developments will have long lasting effects on the fashion industry is unforeseeable. It can be proclaimed changes will occur, both positive and negative. In the end it will be up to the market to determine what transformation the fashion industry will execute.

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