There are certainly winds of change blowing through fashion right now, and there are some who are most definitely going to catch cold! There have been more column inches written during the Fashion Month for the AW16 season on the changing tactics of designer brands than in that entire past six months – or at least it feels like that – and just what is it all about?
How are designer brands going to address getting their fashion offering to consumers faster than ever before? The “see now, buy now” premise is about to be put to the test by a number of brands, such as Burberry and Tom Ford whereby collections that are seen on the catwalk will be dropping into stores within days of the event.
Now this raises a number of concerns for many in the industry, as well as a number of questions. Why would brands do this? Firstly let’s be really clear, it’s all about money, and while sales are the lifeblood of any fashion business, one begins to ask, how much is enough?
Secondly, fashion has become a numbers game, many fashion brands now run by huge corporations with enormous overheads and shareholders who want a return on their investments (larger and faster), therein starts the thread pull.
WHOLESALE & THE DEPARTMENT STORES
Many designer brands do not yet have all of the additional revenue streams for the business such as accessories and leather goods, fragrance or beauty that Burberry and Tom Ford have, and which probably accounts for a huge percentage of overall revenues.
Unlike the major brands who have significant direct retail channels, smaller designer brands are wholly reliant on the current wholesale model. But it must be highlighted that part of the current problem with the fashion industry is also pricing architecture and discounting, something that has come to a head in the USA where department store discounting has spiralled out of control.
This is detrimental to fashion in two ways, firstly it erodes any loyalty, for retailer or brand. If the customers knows they can get it cheaper by going across the street to a rival retailer then why wouldn’t they? Secondly, it removes any sense of perceived value or cachet from the brand and turns fashion into just another “fast moving consumer good”.
KEEPING UP WITH THE HIGH STREET
The high street mega brands like H&M, Zara and Primark have developed their business model with laser pinpoint efficiency. Product drops of new merchandise every 6-8 weeks, keeps the customer returning to the stores to both browse and hopefully shop with almost clockwork precision. Add to this both social media and e-commerce engagement and they are winning in an omni-channel world – job done.
But these billion pound companies have a huge network of manufacturing and sourcing operations that allow them to design, develop, manufacture and ship to stores in a matter of weeks. Even designer brands like Burberry don’t have their own factories (except a trench coat factory in Leeds), and therefore need to book capacity for smaller production runs (well, smaller than the high street) well in advance. These other factories don’t only produce for one brand, but many designer brands at the same time, so it’s not always easy to get space.
Add to this specialist textiles and components that designers use – all which can take weeks if not months to develop and produce – and it soon begins to present a lot of challenges, both logistically and operationally for designer brands.
TIME TO BE CREATIVE
It also begs the question about creativity in fashion and something that has been highlighted by the very public exit of designer Raf Simons from his role as creative director at Dior, citing that trying to make so many collections in such a short space of time left him no time to be creative. Apparently some of the Dior collections were turned around in three weeks (designed) which is even faster than the high street brands can do. So is this also impacting on the level of good design and creativity in womenswear?
Some suggest that there are too many brands all scrambling for the same retail spaces in an already over-saturated marketplace. Churning out so much product has taken the desire and interest out of fashion, and the consumer is just both bored and over-exposed to too much stuff.
DEALING WITH POOR SELLERS
Another big problem for designer brands who are talking about “see now, buy now” as the new model, is that a large proportion of what designer brands send down the runway never even gets produced, which is why those brands have merchandisers who figure out based on wholesale numbers (major part of the business model for many), which pieces are good sellers and worthwhile producing. And yes, while some of the mega brands like Burberry can hive off the “rejects” to outlet stores and in-store mark downs, this is not a long term strategy that’s sustainable. What happens to all the styles they manufacture and don’t sell?
There also seems to be confusion around the different models, that some designers are adopting. Some brands are adjusting to sell directly to the consumer but again, for many designer brands who have historically sold with a wholesale model (to retailers who sell to consumers) that has in the past also acted as a gauge or an edit to what buyers believed would sell in stores. Now having to predict best sellers and produce stock in advance of selling it to the consumer will have a huge bearing on cash-flow, logistics and operations for countless designer brands. Furthermore, if they don’t have own-retail, how do they get rid of excess or unsold stock?
It is argued that the e-commerce has changed the way consumers both engage with brands and shop, which no one argues is untrue. However, retail is so much more complex and one of the current problems with fashion is that the major retailers, those big department stores and independents have seen the footfall ebb away, partly blamed on e-commerce and changing consumer shopping habits. But e-commerce is not now, nor never has been, a magic bullet for sales in the fashion sector.
ETAIL AND FAST FASHION
Net-A-Porter took ten years to become an overnight success or make a profit, and then promptly needed to be sold to luxury group Richemont to prop up the enormous overheads. Farfetch, the first fashion etailer to be valued at $1 billion dollars, still isn’t in profit, apparently, and has recently bought bricks and mortar business Browns Fashion with its multiple retail sites in London. US-based luxury fashion etailer Moda Operandi also moved into bricks and mortar when it opened its mews site in Mayfair, where it hosts private events, which include designer trunk shows for its most well-heeled clientele.
What has hit the independents really hard in recent years is the high street or “fast-fashion” retailers. The Department stores with their huge buying power, namely in the USA, first started to address this with the increasing of buys around pre-collection and resort collections (historically known as cruise) and was two further drops a year in between the main Spring/Summer and Autumn/Winter seasons. These collections usually featured more “key” pieces and slightly lower price points and were supposed to be pieces a “mainline” customer could add to her wardrobe (only womenswear, as menswear is an entirely different beast).
Alas, as sales volumes of pre and resort increased, mainline collections sales started to wane to such an extent that pre and resort collections now account for more than 75% of the total department store buy of designer collections these days, and has added more operational as well as creative challenges to designers who only wholesale their brands (and some might say dented their bottom line).
Some suggest that pre-collections have diluted what was the unique DNA of designer collections, and have moved closer to what the high street brands can produce and so in turn becomes direct competition for the consumers attention. And as the consumer becomes more price savvy and discerning, they want value for money on every level.
The internet and more recently Instagram has made consumers want to buy products when they see them online or being sported by their latest celebrity crush, and not want to wait for them. It’s back to giving the consumers what they want, when they want it, or is it? Diana Vreeland, fashion icon and former editor of Vogue and Harper’s Bazaar once said “don’t give them what they want, give them what they don’t know they want yet”.
This would seem to stack up with what CEO of Kering Group Francois-Henry Pinault who this week said of his brands, “see now, buy now negates the dream” as well as detracts from “creating desire” for his labels. Kering’s brand list includes Saint Laurent, Balenciaga, Stella McCartney, Alexander McQueen and star in the crown Gucci, where newly released show sales figures are up substantially, which is good news as Gucci apparently accounts for more than 30% of Kering’s overall revenues. Kering suggests that it will not change its existing way of presenting collections.
So if fashion has created this problem then the fashion industry has to solve it? It will take some rather determined brands who are going to stand their ground with the department stores (and consumers too) and revert to producing two mainline collections a year (admittedly with a small adjustment to the calendar as it makes no sense for overcoats to arrive into stores in August and beachwear in January) and who, over time, could win back consumers who wish to invest in their brands.
The US department stores ( Saks Fifth Avenue and Barneys) are taking the lead with tackling the problem of dwindling footfall and customer engagement, by upping their game and creating retail environments that engage and excite customers, which in many ways underscores why e-tailers are investing into bricks and mortar stores. Other luxury department store retailers such as Nordstrom and Neiman Marcus are also slated to open in New York City in the next 12-18 months.
It’s often said that if you give consumers a quality product they will buy it, and if those brands have done their job and engaged with their customers (online, in-store and media) then those customers will wait for the product to arrive into stores. Fashion by it’s very nature is elusive, quixotic and ephemeral at times, and perhaps it’s time to recapture some of the magic.