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Issue: Fashion Industry Fashion Industry Issue: Fashion Industry Fashion Industry By: Vickie Elmer Pub. Date: January 16, 2017 Access Date: October 1, 2021 DOI: 10.1177/237455680302.n1 Source URL: http://businessresearcher.sagepub.com/sbr-1863-101702-2766972/20170116/fashion-industry ©2021 SAGE Publishing, Inc. All Rights Reserved. ©2021 SAGE Publishing, Inc. All Rights Reserved. Can it adapt to changing times? Executive Summary The global fashion business is going through a period of intense change and competition, with disruption coming in many colors: global online marketplaces, slower growth, more startups and consumers who now seem bored by what once excited them. Many U.S. shoppers have grown tired of buying Prada and Chanel suits and prefer to spend their money on experiences rather than clothes. Questions about fashion companies’ labor and environmental practices are leading to new policies, although some critics remain unconvinced. Fashion still relies on creativity, innovation and consumer attention, some of which comes from technology and some from celebrities. Here are some key takeaways: High-fashion brands must now compete with “fast fashion,” apparel sold on eBay and vintage sites. Risk factors for fashion companies include China’s growth slowdown, reduced global trade, Brexit, terrorist attacks and erratic commodity prices. Plus-size women are a growing segment of the market, yet critics say designers are ignoring them. Overview José Neves launched Farfetch during the global economic crisis of 2008, drawing more on his background in IT and software than a love of fashion. His idea: Allow small designers and fashion shops to sell their wares worldwide on a single online marketplace. The site will “fetch” fashion from far-off places. Despite having no investment backing until 2010, Farfetch has grown dramatically. It employs more than 1,000 people in 10 offices and has secured six rounds of investments. More than 400 boutiques sell on the site. 1 Farfetch relies on creative exclusivity and fashion brands like Dolce & Gabbana and Alexander McQueen . It carries an eclectic mix of new and vintage items, jewelry, bags, iPhone cases, $150 candles, art and fashion books. “The flavor, the fuel of the brand is a boutique feel. It’s all about uniqueness of expression, of individual taste,” said Neves. “But I don’t think that’s incompatible with big numbers.” 2 Farfetch has 410,000 Instagram followers and 2016 revenue of more than $800 million, up from around $500 million in 2015. 3 It’s a bright spot in a fashion industry fraught with change, challenges and criticism—over “fast fashion” ending up in landfills, the treatment of apparel workers, the exclusive nature of fashion that leaves many feeling left out and the accusation that fashion snubs or marginalizes larger women. Fashion lines are easier to start and harder to sustain than ever before. Innovation is upending expectations: Companies employ 3-D printers to create running shoes and recycle salmon skins into wallets and accessories. Fashion, along with the rest of the luxury-goods sector, is contending with what the consulting firm Deloitte dubbed “the decade of change”: new digital channels and platforms, China’s growing middle class and the rise of Millennial buyers. 4 First lady Michelle Obama wears an Atelier Versace dress as she and President Obama greet Italian Prime Minister Matteo With fast fashion from H&M, Zara and others hustling new merchandise to Renzi at the White House in October. (Leigh Vogel/WireImage) market many times a year, the fashion sector has sped up its production cycle —with a see now, buy now approach to runway shows that worries many designers. “Fashion is recognizing the changing desires and rhythms of consumers and figuring how to respond to that,” says Robin Givhan, The Washington Post’s fashion critic, who won a Pulitzer Prize in 2006. Yet parts of the global fashion industry are slow to adapt to new consumer trends and digital selling. Some experts say fashion has fallen Page 2 of 26 Fashion Industry SAGE Business Researcher ©2021 SAGE Publishing, Inc. All Rights Reserved. out of fashion in some cities and demographics. Consumers today may skip shopping for an Italian suit in favor of a trip to Italy or an Italian film festival. They are spending less on fashion in developed countries and more in emerging nations such as Vietnam and India. 5 Fashion is a labor-intensive business that is moving to online sales, fittings and previews. High fashion brands such as Giorgio Armani , Christian Dior and Chanel must compete with apparel sold on eBay and vintage sites such as LuxuryGarageSale.com . Questions persist about whether people will wear the same clothing in different countries. And yet the sector continues to serve as a cultural connector to our past and our identities, a way to show status and a way to fit in with our peers at work. Disruption has been rumbling through the fashion sector, and its cousin the retail chains, for years, as online sales take a larger share and startups create new products or services. “The fashion industry is suffering because it’s not listening to the consumer,” says Pamela Danziger, author of several books on luxury markets and consumers, who leads the luxury consultancy Unity Marketing. She cites “very deep and structural problems,” ranging from ignoring women over 40 and the “experience economy”—consumers’ increasing preference for spending on experiences—to simply making too many clothes. “We’re just drowning in all this [low-quality] apparel,” she says, Nike Leads U.S. Apparel Brands in Revenue Ralph Lauren, Old Navy trail by more than $20 billion Source: Dhani Mau, “The 10 Biggest U.S. Apparel Companies,” Fashionista, July 2, 2016, http://tinyurl.com/zvhkgwy Nike is the undisputed leader of American apparel brands, bringing in well over $20 billion, more than second- and third-place fashion companies Ralph Lauren and Old Navy. Activewear brand Under Armour raked in $3.1 billion and solidified its status as the fastest-growing brand in that category. U.S. clothing and accessories stores sold around $254 billion in 2016, about the same as in 2015, according to the U.S. Census Bureau. 6 (The numbers don’t count fashion sales by department stores, which have declined for years.) Globally, fashion generated $1.69 trillion in revenue, and that is expected to increase to $1.73 trillion in 2017, according to the market research firm Euromonitor International. Despite growth in many developing countries, that’s essentially unchanged from the $1.7 trillion rung up in 2012. 7 Most urban consumers will spend more on clothing and fashion by 2020, but will allocate a larger share of their budgets to other items such as leisure. 8 Fashion includes many styles and price points. At the top is haute couture, typified by Chanel, Christian Dior, Prada and other brands whose prices and focus appeal to wealthy consumers or rising stars. Couture is a half step lower in the hierarchy, followed by “bridge,” a Page 3 of 26 Fashion Industry SAGE Business Researcher ©2021 SAGE Publishing, Inc. All Rights Reserved. fast-disappearing category that is fine fashion but not as elegant and pricey as couture. Ready-to-wear clothing is sold at discounters and department stores for the masses. The newest category is “athleisure,” athletic apparel that may be worn to a pub or the office. Fashion also refers to an array of accessories including belts, scarves, coats and swim suits. It encompasses formal or evening wear, sports and athletic attire, and often includes jewelry and shoes. Fashion industry sales grew by no more than 2.5 percent in 2016, half the level of the previous decade. 9 Slower growth is expected to be the norm, and many major companies are cutting costs or restructuring operations. While 40 percent of fashion executives expect improvements in conditions for the sector, volatility in the global economy plus competition from online companies are their biggest challenges, according to “The state of fashion,” a 2016 report by the consulting firm McKinsey & Company. 10 Among the risk factors for fashion companies are a slowdown in China’s growth, reduced global trade, the United Kingdom’s vote to leave the European Union, the threat of terrorist attacks and erratic commodity prices, the report found. 11 “As volatility becomes the new normal in 2017, fashion companies could see all dimensions of their business affected,” the report’s authors wrote. A prime example is Ralph Lauren , which in June said it would close 50 stores and eliminate 1,000 jobs. One quarter of its annual revenues come from department stores, which are themselves closing many locations and discounting more merchandise. With department stores declining Ralph Lauren will sell less to them in 2017. 12 Keeping fashion relevant may be trickier than ever amid divergent interests, shopping patterns and choices based on consumers’ ages and life stages. “Fashion people are out of touch,” says Danziger, adding that jeans and jackets are fine for most of her business meetings. (See Short Article, “For Many Workers, Casual Is Cool.”) Yet discounting seems the norm, and consumers expect virtually everything to go on sale. “Luxury shoppers used to be embarrassed to compare price or ask about price, and it’s commonplace today,” said Robert Burke, a fashion and retail consultant. 13 Now, when consumers look online to compare prices, they see the Jimmy Choo shoe that interests them—and a variety of knockoffs. This helps to erode brand loyalty. “When was the last time brand was important, really? It might have been right before the recession when aspirational luxury was on the rise,” said Gabriella Santaniello, analyst with the retail research firm A Line Partners. 14 U.S.
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