The changing shape of The Fashion Industry in the United States: the Future of High Fashion

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Faculté de lettres et sciences humaines

Mémoire de recherche de Master 1 LEA

Négociation Trilingue Internationale de Commerce et Services

Parcours Entreprise

Présenté et Soutenu publiquement le 13/09/2010

Par Aurélia Poumaroux

Enseignant-conseil : Benaouda Lebdai

Année 2009/2010


Content

PART 1:  INVESTIGATION        

Alta costura a precios de ganga        

Keeping Fast Fashion Fresh, and Profitable        

The Future of Denim        

Eco-Fashion: Going Green        

PART 2: RESULTS        

1.        The cause of the changing shape of the fashion industry        

1.2.        The Consequences of the Economic Downturn of 2007-2009        

2.        The reorganization of the industry: Challenges and Opportunities for 2010        

2.2.        The Economy and government initiatives        

2.2.1.        Free Trade Agreements        

2.2.2.        The shrinking number of lobbyist        

2.3.        The complexity of fashion structure        

3.        The Fashion System: Luxury brands versus Retailer’s brands (mass fashion market).        

3.1.        The need of market research for both luxury brands and fast fashion        

3.1.1.        US and International fashion fair trades        

3.1.2.        Online fashion-style information companies        

3.1.3.        Trade publications: WWD and BOF        

3.1.4.        Other initiatives for professionals        

3.2.1.        New seasonal cycles: Fashion weeks and Fashion shows        

3.2.2.        Fast Fashion and Internet: Drawbacks        

3.2.3.        A challenge for the Fashion Press        

3.2.4.        New off Schedule initiatives: Trunk Show, Runaway Show, and Showroom Invitation        

3.3.1.        Department Stores and Celebrities or people of influence        

3.3.2.        Asian Expansion for High end brands: Luxury retailing by wholesaling and licensing        

3.3.3.        Mass market fashion: off-price and value retailers        

PART 3: ANALYSIS        

1.        The power of internet.        


Introduction

Fashion is an interesting subject that is “an exciting area of constant change, creativity and global commercial activity” and it stimulates many questions, such as, how is the fashion industry phenomenon affecting globalization.

Over the past two years, I spent in Spain, England, France, and recently the United States for internships or studies, the most striking aspect noticed in the fashion marketplace, was the growth of national brands stores like Zara, Mango, H&M, New Look, Gap recognized internationally. In the area of “Haute Couture”, fashion houses recognized by the French Chambre Syndicale (the French organization that decides which fashion houses may join the ranks of the “hauts couturiers”) seems like they lost some of their prestige, with the collaboration of famous designers such as Karl Lagerfeld with the retail brand H&M. Moreover, the proliferation of young designers, especially in New York, revealed during the Fashion Week, and the fact that more and more young people of the North America and western European countries wear expensive and famous brands, makes me wondering what happened to this world, considered for a long time to be the property of rich people.

Indeed, until early in the 20th century, fashion was almost only reserved to kings, queens, aristocrats and other important people and by essence, fashion had always been elitist and was used to show that its adopters were above the common people. However this changes observed, encourages me to realize that the fashion industry is adopting a new shape in 2010, especially after the Great Recession of the last two years.

This memoire aims at giving, an overview of the US industry and identifying the strategies adopted by fashion houses for their survival among the international growth of retail brands. Although the memoir will be focused on the US marketplace, I may mention other countries, as fashion has become a global business. Furthermore, I will not deal deeply with the manufacturing issue, but more about the evolving role of the designer (the supposed conductor of a high fashion house) within the industry and his relation with the retail sector. As a result this memoire will answer the question: What are the perspectives of the fashion industry for the Upcoming years?

The subject has been chosen during my five-month internship in New York, in the framework of my first year of Master Degree in International Trade and Services, in a small medium enterprise specialized in embroidery at the service of fashion houses in United States, from February to June 2010. It gives me the opportunity to deepen my knowledge in the fashion area, in which I would like to work and write this memoir that will give an overview of the marketplace in 2010. My investigation is mainly based upon 2009-2010 newspapers articles, added to three reference books about fashion marketing.

In a first part, the mains issues of the memoir will be emphasized through brief reports of exhibitions, and seminars I attended in New York and notes of press articles. Then, in a second part, the cause of the changing shape of the industry will be introduced in order to understand the current challenges and opportunities for the high fashion industry and its current organization.  In the final part, this reasoning will lead to pinpoint the main factors that give a new image to high fashion and answer the memoir issue.

First of all, before starting any development, it would be preferable to define the term “fashion industry” to avoid to get confused through the memoir as there is no standard definition. Indeed, there is a wide range of enterprises encompassed by the notion of fashion industry, which includes: apparel, clothing & garments, footwear, home furnishings and the textile accessories markets. At the same time, each markets are compound of diverse professionals of fashion designing, manufacturing and distribution (or supply chain) retailing and marketing. This memoir, focused on the evolution of “High Fashion”, will endeavor to give the best definition of the term as fashion is subject to constant change.

Part 1:  INVESTIGATION

Notes of Press Articles

  • Alta Costura a Precios de ganga
  • Ropa de Lujo « Made in China »
  • Keeping Fast Fashion Fresh, and Profitable
  • Future of Fashion Magazines

Exhibitions and seminar

  • American Women: Fashioning an National Identity
  • The future of Denim
  • Echo Fashion: Going Green


This document is a Spanish article released in a regionalist newspaper founded in 1866, “Las Provincias”. Maria Gardo, the author published the article untitled “Alta Costura a precios de ganga” (“Haute Couture” at Bargain Prices), on august 28th, 2010.

 This article came in a period of economic recovery for most of western countries, such as France, Germany and Spain after the crisis of 2007-2009 which started in the United States. In the fashion industry, the economy has lead to new commercial activities in the selling of luxury good. In this document, the author related the secret of the success of the firm Arantxa Botella, located in Valencia, which managed to sell High-end products at bargain prices.

By essence, « Haute Couture », represents goods of high quality at expensive prices, usually unaffordable to common people. This enterprise has found the way to sell high-end clothing, accessories and jewelers at bargain prices.  As the article said it, the philosophy of the firm is “Grandes firmas para pequeños bolsillos” (Big firms for small wallets). In reality, the firm has established a secondhand store between two social backgrounds, as Arantxa Botello established contacts with famous and rich people (the upper class), whose goods are sold to their middle class customers .

The Crisis triggered a new way of consumption.

Indeed, the crisis contributed to the success of the firm because the purchasing power of consumers has been eroded. Therefore, they try to shop around and find the best deals, including the acquisition of secondhand goods ‘’which come and are sold in perfect condition” and are cheaper than a brand-new. It presents a double advantage as the firm offers an economic output for the people who sell the good and the opportunity for their customers to wear clothes of their favorite designers. Bargains, which these customers would not find in official designers’ stores.

In the United States, there is a similar phenomenon with the off-price and value retailers which have become famous with the selling of famous brands (such as Tommy Hilfilger and Ralph Lauren) among freelancers designers at discounted price. These retailers, which the most known are TJ Maxxx and K&G sell at permanently low prices, and offer a minimal services on basic garments which are increasingly fashionable due to the economic recession.

Marketing strategy to appeal customers

While the fashion industry starts to show a changing shape, the consumption habits start to change too. Indeed, consumers today are more fashion conscious because the development of marketing strategies by brands have made available luxury goods to a wider range of people. Businesses like the one proposed by Arantxa Botella will thrive in the future, in any part of the world.

The key success of the firm ‘store resides in the fact that there is an unceasing comings and goings of goods every day which brings customers to come around as often as possible. The presence of top-tier brands enables the firm to have a consistent database of customers. Besides, the targeted customers are the couple aged between 30-40 years old, the younger one 18-28 and children, either in women’s or men’s wear. The organization of the store, which has ranged goods by categories of products in dedicated place areas, added to good selling techniques have made the business successful.

Due to the economic recession, downward prices of the sector of luxury goods have foster customers to be attracted and buy these goods. The example of this business, may give an overview of the becoming of high end brands in the future. Indeed, these fashion consumers are looking to wear brands which have left its mark on the history in the long term. That is to say a heritage acquired along the years which has allowed the brand to be famous today and do not need to set up a strategy for brand recognition. It might be the way on which fashion houses will distance itself from the lower price competition.


Ropa de lujo 'Made in China'

Ropa de Lujo “Made in China” (Luxury clothing “Made in China”), has been published in the Spanish national newspaper « El Pais », on December 27th, 2009, and written by the journalist, Amanda Mars. In the article, she deals with the problems triggered by the delocalization activities of luxury goods.

The fashion industry of western European countries has long been used the manufacturing industry of Asian countries for many years, except for luxury brands, known to defend craftsmanship and know-how of their home country. However, as China has weathered better the crisis than any other industrialized country, luxury brands have openly devoted part of their production toward Asia.

This phenomenon has triggered a problem of perception among consumers.  Furthermore, it has consequences for the brands’ national industry which led them to develop strategies.

 

“Made in China”: A problem of  image

The production of luxury goods outside the national territory has long been considered as contrary to the norm of high fashion. The polemic raises, because France and Italy who  are the main leaders in the High-end sector, have started to see their business  overtaken by China. Indeed, the “made in” of these countries have build their international fame in the luxury goods sector and guaranteed the “ know-how” of  their industry.

 However, the economic recession has led brands to cost-cutting budget and sends their production to Asian factories. The “made in china” assimilated to cheap goods of low quality could be a problem for brands, because clients valuated the quality of goods made in Europe. But the industry has an optimistic point of view about the future, according to Jean Marc-Bellaiche (American analyst): “the conflict will disappear gradually”. Customers will be used to it in a long term.

Delocalization: Causes and Consequences

The main cause of the sudden craze of luxury brands for delocalization activities is the economic crisis which triggered a drop in the turnover. More and more companies turn to delocalization activities because it enables them to keep costs low and meet margins. Besides the delocalization has triggered a loss of jobs for the national industry, appoint heavily criticized by the American industry. Another reason is that “consumers want the benefit of exceptional products”: these consumers are usually young (18 -28 years old), educated, fashion conscious and moving to cities to better job opportunities.  Indeed, the crisis has lowered the price of goods and attracted a new category of consumer.

As a consequence, la delocalization have arisen the problem of counterfeit, has the production outside the national territory, and cannot be fully controlled.

New strategy to defend domestic industries

In order to defend the domestic industry, several brands are developing strategies and in some countries the government has set up measures. In France, the government has launched initiatives to promote the know-how and struggle against counterfeit. In Italy, Italy, new rules have been  imposed : for entirely domestic manufactured articles, expressions ”100% made in Italy” will appear or “All Italian” on labels and  sanctions of  EUR 250,000 will be applicated.

The idea of “Made in Europa”, which was supposed to encompass all the countries of the European Union has been put aside  because a part of the production of a good can be done outside Europe and the other one inside the territory. This decision suit the “Made in Spain”, because Spain, the precursor of the fast fashion phenomenon, cannot produce outside the territory as they have to produce and deliver in shop goods as quick as possible.

The changing shape of the high fashion industry is starting with new geographical dimension. This article shows the fact that fashion has become a global business where the well-known craftsmanship industries of countries, such as Italy and France, are jeopardized.  In the United States, a similar debates arisen due to the foreign trade policy lead by the government. Associations and manufacturers are defending the label “Made in USA” through the denim industry which is considered as a source of opportunities for luxury brands.


Keeping Fast Fashion Fresh, and Profitable

This article has been published by the American newspaper “The New York Times”, on December 2009, by Jessica Michault. It deals with the fast fashion industry which has been to remain “fresh and profitable during the recession.

Indeed, the economic downturn has raised unemployment and therefore the consumer purchasing power dropped. However, fast-fashion retailers are thriving better than luxury brands due to the selling of fashionable clothing at low prices.“Keeping Fast Fashion Fresh, and Profitable”, gives an overview of the fashion marketplace and pinpoint the main strategies used by these retailers.

What is Fast Fashion?

Fast fashion retailing has emerged in Spain and is characterized by fast changing fashion designs and styles. The principal retailers and leaders are Gap in the United States, H&M in Germany and Zara in Spain. These retailers’ brands are present in the United Kingdom, France, Spain, Portugal, Germany, Japan, China and Italy.

Those retailers attract consumers who do not really know what they are looking for until they see it, it is the one who shop around and find the best deal. It is usually characterized by young customers with a weak purchasing power.

The success of fast fashion resides in the fact that they provide micro seasonal collection that can change up to 17 times a year. In stores, new fashion products arrived on a daily basis with an permanent change of styles, colors and trends which make the shoppers come often.

The Strategy

The article focused on the success of H&M, which was the precursor of the use of successful strategies for the fast fashion retailing. Indeed those brands thrive thanks to designer collaborations: such as Karl Lagerfeld, Sonia Rykiel or Stella McCartney in the United States. These collaborations enable the retailers to benefit from the fame of the designer, and sell their good at a higher price than a supermarkets, value and off-retailers.

Besides they keep on the opening of new stores all around the world. For example, H&M is already present “across 35 countries with more than 1.900 stores. Added to the geographic extension, they increased the diversification into areas like online retailing and lines, such as innerwear, accessories and home goods.

The success of fast fashion retailers are based on the consumer behavior. Due to the recession, as wages is low customers are looking around for bargains before making a purchase and still expect style as value for money when buying fashion. However, retailers have to think about future strategy to still remain in a strong position after the time of recovery.

Future of Fashion Magazines

Future of Fashion Magazines is a series of three articles written by the author Vikram Alexei Kansara, a New Yorker. This article has been released in the online fashion magazine, BoF (Business of Fashion), between July 6th and July 9th 2009. As the title pointed it, these articles analyze the becoming of fashion magazines threatened by the development of online contents as more and more readers have access to Internet and abandoned the traditional paper format.

The issue arisen the problem: how fashion magazines can survive against the climb of fashion web magazines and other online strategies employed by the industry? The author compares this revolution to the introduction of printing press by Gutenberg in 1450 because today any strategy has been founded to the survival of the paper format meanwhile the development of digital strategy grows and sparks off vocations, like the author itself who also works as a digital strategist.

Join now!

In a first part, the author describes the crisis undergone by the press magazines and pinpoints the advantages of the digital fashion media. In a second part, he reveals the strategies and experiences carried out by the increasing number of social media network. And in a last part, he analyses the functioning of the most innovative online media: fashion films.

The Changing Shape of The Fashion Media Industry.

This article shows that the industry of fashion magazines is fading away due to two main factors. The first one is the economic recession. Most fashion titles during the year ...

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