Mgmt of Fashion Companies (1) PDF

1. Introduction to Fashion and Luxury Key Concepts: ○ Fashion as Non-Verbal Communication: Fashion communicates social status (what people wear is a way to convey their position in a social situation), cultural values, and individual expression without words...

1. Introduction to Fashion and Luxury Key Concepts: ○ Fashion as Non-Verbal Communication: Fashion communicates social status (what people wear is a way to convey their position in a social situation), cultural values, and individual expression without words ○ Luxury vs. Fashion: Fashion refers to constantly evolving trends, whereas luxury focuses on exclusivity and timelessness. ○ Fashion Trends: Driven by media, arts, and sociocultural evolution, trends reflect how industries evolve ○ Trends can be seen as a form of planned obsolescence-styles that need to be replaced regularly ○ Trickle-Down theory: trends start among the upper class and move down to the masses ○ Trickle-Up theory: trends begin with lower-income or younger groups and move upward to older or wealthier groups (e T-shirts, ripped jeans) ○ Trickle-Across theory: fashion moves horizontally between similar social levels, often spread by social media and influencers ○ Fashion’s “Dream Factor”: the goal is to convey an image that entices consumers through visual and emotional story telling (music, lights, social media influencers) Practice Question: Explain the difference between fashion and luxury. How does each concept influence consumer behavior? 2. Business Models in Fashion and Luxury Differences between fashion and luxury: fashion reflects current trends and is accessible to a broader audience, while luxury emphasizes exclusivity, craftsmanship, and timeless value  Key Concepts: ○ Business Model: Defines how a company creates, delivers, and captures value. Fashion business models can include luxury brands, premium brands, and fast fashion retailers. - Sustainable Fashion is an important emerging trend due to concerns about waste and the environment (40% of fashion goods are sold at markdown due to overproduction) ○ Key components of a business model: - What: the Value proposition- what the company offers to the market (products services, experiences) - Whom: the client segment; who the company is targeting - How: the value chain; how much of the supply chain the company controls - Who: the revenue and governance model; how the company is structured (privately owned, publicly listed, or part of conglomerate) Luxury Brands: Product is King these brands focus on timelessness, heritage, and exclusivity ○ Often have a high degree of vertical integration (control over manufacturing and retail) ○ Governance models vary: privately owned (Chanel), listed on stock exchanges (Hermes), conglomerates (Kering) ○ Revenues/ Competition mainly on product categories other than clothing ○ Key Success Factors in Luxury: - Experience: The details matter - Heritage: Luxury brands often carry historical and cultural significance - Outstanding Quality: Craftsmanship and human touch are central - Timelessness: Iconic products that don’t follow fleeting trends - Bespoke Service: Tailored customer experiences Challenges Facing the Luxury Market: - Economic instability and shifting consumer priorities threaten traditional luxury strategies. - Sustainability and the push for circularity (e.g., recycling, reusing) are becoming increasingly important. Luxury Conglomerates - LVMH (Louis Vuitton Moet Hennessy), Kering, and Richemont are major players in the luxury industry, owning multiple brands - Pros of conglomerates: - Financial assets and economies of scale - Talent attraction and managerial expertise - Global distribution and strong bargaining power - Risk diversification through a portfolio of brands - Cons: - Short-term focus compared to family-run businesses - High turnover of top managers and creative directors  - Risk of brand dilution Fashion Designers: Creative Vision comes first their brands often cover multiple segments (ready-to-wear, diffusion, bridge, haute couture) more flexibility to cater to different price points ○ Governance models: some are vertically integrated family-owned (Dolce & Gabbana), while others rely on licensing or have been acquired by larger groups Premium Brands:It’s all about Marketing These brands are more marketing-driven, often operate in the bridge segment between luxury and mass market like mainly multibrands (ex. Brands like Diesel and Victoria’s Secret), family owned (italian), public (american) Retailers: Consumer shifts enabled by Technology Weekly delivery of new fashionable merch in large stores at convenient price Innovative value chain: focus on quick response and integration of retail and manufacturing (ex. Zara, H&M, and Uniqlo) They use a make-to-stock model, they produce good based on sales forecast Direct-to-Consumer (D2C): companies that sell directly to buyers via e-commerce, bypassing traditional retail stores and middlemen (ex. Ecommerce and digital marketplaces) ○ Advantages: enabled D2C brands to offer products at lower costs and maintain full control over production, marketing, and distribution; unlike traditional retail competitors, D2C brands can experiment with various distribution models, including direct shipping to consumers, partnerships with physical retailers, and opening pop-up shops ○ Example: Glossier- Started as a beauty blog and transformed into a global D2C beauty and fashion brand, leveraging social media and customer insights to shape product offerings. Industry Analysis 1) Define the business: (based on customer needs satisfied by the product/ service) facts & figures, trends, customer profile 2) Define market segments (select key variables for identifying clusters of companies/ brands to whom the same KSKs apply) and build a competitive map  Identify clusters of firms with similar positioning and define growth outlooks, empty spots, and Key Success Factors for each cluster (Which segment is performing better? Why?, Where is there more potential for growth? Why?, What are the most relevant future trends?) To identify Strategic Groups: ○ Identify the key driver for competition in that particular business (price, range, style, geographic scope) ○ Position all competitors according to these drivers (by product category and item and by geographic market), Price: identify the entry, top, core and position based on the core (most frequent) ○ Identify clusters of firms with similar positioning giving each cluster a name related to the way they compete (NO less than 3 and no more than 10 competitors by cluster) ○ Identify the KSF for each cluster (What do the consumers want?, What does the firm need to survive the competition?) 3) Design a marketing mix specifically tailored to each segment’s needs 3. Brand Management in Fashion What is a Brand? A brand is an asset defined by consumer associations: Brand Equity: The value a brand adds to a product based on customer perception. A strong brand identity enhances consumer loyalty. ○ Tangible associations: visual language (name, logo, colors) ○ Emotional associations: the feeling or identity that the brand evokes (status, comfort, joy) A trademark is the legal protection of the brand, ensuring it can be recognized as the company’s unique property Differentiation Advantage: a company achieves competitive advantage by creating unique value that customers are willing to pay more for ○ Ex: Fashion brands use differentiation strategies like unique designs, brand, image, or quality to stand out ○ Primary sources of competitive advantages are: Differentiation of complementary services (particularly in industrial goods, co-design), image/ brand differentiation (particularly in consumer goods), differentiation through variety, style, and atmosphere (particular in retailing business), product innovation, changes in product and market mix A strong brand identity: ○ Allows the company to charge premium prices ○ Increases customer loyalty and makes market positions more stable ○ Facilitates brand extensions (expanding into new product categories) ○ Strengthens bargaining power in negotiations with suppliers or partners  The Brand Signature is the core of brand management, combining heritage, style, communication, and retail identity to create a cohesive and impactful brand experience. A brand signature is the unique set of elements that define a brand’s essence. This includes: ○ Stylistic identity: the brand’s distinctive codes (fabrics, textures, colors, silhouettes) ○ Communication identity: how the brand communicates its message (tone of voice, media, models) ○ Retail identity: the physical store experience (layout, lighting, visual merchandising, service) ○ Heritage: the brand’s traditions, mythology, and history that create trust and loyalty ○ Ex: Hermes uses the color orange, leather craftsmanship, and window displays as part of its brand signature. The Role of Heritage in Luxury and Line Extension vs. Brand Extension ○ The Role of Heritage: For luxury brands, heritage plays a crucial role in establishing authenticity and customer trust; heritage are the values and symbols that create timelessness, trust, and loyalty among customers Dilemma for Legacy Brands: how to balance staying true to their heritage while als innovating and raining relevant in modern times ○ Line Extension vs. Brand Extension: Line extension involves adding products to an existing brand (e.g., new perfume from a fashion house), while brand extension uses the brand to enter a new product category (e.g., eyewear). Benefits of Brand extension: strengthens brand image, opens up new markets and reduces financial risk by leveraging the existing brand equity Example: Chanel’s brand identity is built on iconic pieces like the little black dress and Chanel No. 5, which represent timeless luxury. 4. Luxury and Masstige Types of Luxury: Experiential Luxury: Focuses on the overall experience rather than just the product. Sustainable Luxury: Incorporates eco-friendly practices and sustainability into luxury offerings. Digital Luxury: The transition of luxury into the digital space (e.g., online sales, digital marketing). Uber Luxury: Extremely exclusive, high-end products and services accessible to very few. Attainable Luxury: More affordable luxury, often through diffusion lines or lower-cost products aimed at a broader audience. Luxury Evolution: Exclusivity vs. Diffusion ○ Exclusivity: Traditionally, luxury was designed by exclusivity; limited products, handcrafted items, and high price points (ex Hermes Kelly bag)  ○ Diffusion: overtime, the concept of luxury has broadened, with brands offering lower-prices, accessible products to appeal to a wider audience ○ Paradox: The success of luxury brands has diluted the meaning of “luxury” as more affordable offering blur the lines between luxury and mass-market Why is Hermes a best practice in luxury? Heritage and Craftsmanship: Hermès has a long-standing tradition of artisanal excellence, dating back to its founding in 1837. Iconic products, such as the Birkin and Kelly bags, are handmade by a single artisan, which underscores the exclusivity and uniqueness of each piece. Timelessness and Exclusivity: Hermès focuses on timeless design rather than following seasonal trends. The scarcity model (e.g., long waiting lists for certain products like the Birkin bag) reinforces its exclusivity and desirability. Trading up and Trading Down Trading up: luxury brands upgrading to couture + mass-market companies upgrading to masstige (ex uber premium) Trading down: segmenting luxury (absolute luxury, lifestyle luxury, and attainable luxury); occurs when consumers opt for more affordable or value-oriented products What is Masstige: ○ Masstige (Mass + Prestige): A mix of mass-market and prestige, offering high-end products at accessible prices (e.g., designer collaborations like H&M x Versace). ○ Masstige brands compete through: Elevating product status by associating with designers and celebs Selecting key opinion leaders and influencers for testimonials in advertising campaigns Creating artificially limited editions of products Securing high-traffic location for retail presence Investing in huge retail spaces to enhance visibility Collaborating with designer brands Example of Masstige Brands: Coach, Kate Spade, Michael Kors  Difference between luxury and masstige: Luxury focuses on exclusivity, heritage, and craftsmanship, catering to the elite, while masstige emphasizes affordability, accessibility, and premium styling, appealing to aspirational middle-class consumers. Both models tap into the desire for prestige and quality but approach it from vastly different price points and strategies. 5. Nation Branding in Fashion: French Model France’s Nation Branding: ○ Built on: Art and Provocation: France has long been associated with art, innovation, and provocative designs in fashion. Tradition and Individualism: French luxury balances heritage with individuality, creating timeless pieces while also pushing boundaries. Couture and Accessories: Couture represents the dream and artistry of fashion (creates the brand image and prestige), while accessories generate significant revenue (ex bags, perfumes are the profit drivers). Clothing is an image-builder for French luxury brands, but it's not the core business. Growth comes from brand extensions into areas like fragrances, leather goods, jewelry, and eyewear. ○ The Role of Haute Couture: Haute Couture literally means “high sewing” (more about brand identity than profit) Pieces are one-off garments made specific for clients Requirements for Haute Couture houses include: made-to-order designs for private clients, a full-time workshop in Paris w/ no fewer than 20 employees, presentation of 2 collections annually w/ at least 50 original designs Worth was the first to use label to sign his dresses and to run a show determining the move from tailor to couturier Poiret was the first couturier to propose a total look (freed women from corset) and lifestyle (ext to childwear, furniture and fragrance), display couture in store windows, have advertising campaigns Significance: Haute couture is less about profit (it often loses money); it is a long-term investment in a brand’s image and prestige; most buyers are from Russia, China, and the Middle East Role of Haute Couture Today: It continues to play a critical role in maintaining the identity, creativity, and exclusivity of luxury fashion brands. It represents the ultimate expression of artistry and craftsmanship, anchoring the prestige of the French Model and influencing the entire fashion industry. Chanel: Reasons for its Competitive Advantage  ○ Chanel is privately owned family business (99% of Chanel S.S. is owned by the Wertheimer Family) ○ Key elements of contributing to Chanel’s success: Iconic Pieces: The tweed outfits, the flap bag, slingback shoes, pearl necklace, and the “little black dress” are all signature Chanel items Brand Heritage: Chanel embodies timeless fashion, maintaining exclusivity while staying modern Financial Growth: In 2021, Chanel’s revenue was 15.6 billion euro, with an operating profit increase of 170% Unique Business Model: Chanel has resisted selling fashion, watches, and fine jewelry online to maintain exclusivity and preserve its high-end customer experience The Paradox of a Star Brand (Louis Vuitton) According to Bernard Arnault, Louis Vuitton must be both old and new at once, honoring its past while inventing its future. This balance of tradition and innovation is what makes LV a "star brand." LV maintains its heritage, but continuously rejuvenates the brand through marketing and modern partnerships to appeal to new generations French Model Growing Path: Haute Couture functions primarily as a marketing and branding tool rather than a significant revenue source. The French model prioritizes profit growth by extending the brand into new product categories that align with the luxury image. French luxury houses often grow through the support of conglomerates like LVMH (Louis Vuitton Moët Hennessy) and Kering, which provide resources, management expertise, and financial backing. The French model emphasizes vertical integration to maintain high quality and exclusivity. To stay relevant, French luxury brands engage with younger, digitally savvy consumers while preserving their heritage. 6. The Italian Model Key Values of Italian Fashion: ○ Italian fashion emphasizes beauty, sensuality and craftsmanship ○ There’s a strong focus on innovation and attention to detail ○ It integrates social values, art, and culture into its identity The origin and success of Made in Italy: ○ Designer-Entrepreneurs: many successful italian fashion houses were founded by creative individuals with business acumen ○ Fashion Pipeline: Italy’s industrial districts, textile machinery, and technical schools create a well-integrated pipeline that supports fashion: Italy’s advantage comes from its ability to control the entire supply chain (from raw materials to finished luxury goods) ○ National Identity: Italy’s landscape, art, culture, and trade fairs play a major role in building the “Made in Italy” brand  Dolce & Gabbana: Competitive Advantage ○ Sicilianity as the Brand Concept: D&G are deeply inspired by italian culture, particularly the traditions/ aesthetics of Sicily ○ Business Model Evolution: By late 1990s, D&G shifted to a vertically-integrated company The company discontinued the D&G diffusion line and now handles all product categories (except eyewear) in-house Zegna: From a Textile Mill to a Luxury Brand ○ Business Model Evolution: Started as a textile mill and expanded into luxury menswear Company is now vertically integrated; managing everything from textile production to retail Zegna has diversified through acquisitions, such as Thom Browne (2018), and Tom Ford Fashion (2023) ○ Sustainability Focus: Oasi Zegna represents Zegna’s commitment to environmental sustainability, blending craftsmanship and technology in harmony with nature Italian model growing path: clothing is the core business; first line extension (diffusion clothing lines), later brand extension (perfumes, eyewear, etc.); from designers focused on style and image into vertically integrated companies (direct control of manufacturing and retail activities); family-run businesses; the value of Made in Italy and Ingredient Branding; leadership in luxury leisurewear 7. Fast Fashion and Its Challenges Make-to-Order vs. Make-to-Stock: Fast fashion relies on make-to-stock, allowing for rapid production and inventory turnover. ○ Make-to-Order: Products are made only after receiving orders from retail clients. Benefits: Minimizes unsold stock, reduces waste, follows a more traditional, high-end fashion model. Make-to-Stock: Products are produced in anticipation of demand based on sales forecasts. Benefits: Shorter lead times, faster delivery, enables fast fashion companies to quickly respond to trends. Fast Fashion Business Model: ○ Key Success Factors: Frequent Assortment Changes: fast fashion retailers update collections throughout the season, with new products arriving weekly Quick Response Supply Chain: Rapid production and delivery cycles, shrinking time to market form months to just weeks Affordable and Fashionable Designs: trendy styles at low prices  Vertical Integration: control over the entire production process (ex Zara’s design-to-shelf strategy) H&M vs. Inditex (Zara + 8 other brands) ○ H&M: H&M focuses on limited editions and mass market prestige Less vertically integrated than Inditex, with a longer lead time and less flexibility in inventory management Collabs w/ designers H&M boots perceived fashionability through high-profile collabs (ex Karl Lagerfeld, Versace) ○ Inditex: Inditex prioritizes scale and responsiveness Highly vertically integrated Emphasizes speed and flexibility in production, allowing Zara to quickly respond to fashion trends Invests heavily in tech and digitalization, integrating physical and online stores From Fast Fashion to Ultra-Fast Fashion: ○ Ultra-Fast Fashion: Brands like Shein and Temu rely on real-time data and social media trends to produce thousands of new styles daily Shein is known for using algorithms to track online trends and churn out new styles at lightning speed Temu focuses on ultra-low pricing, offering even lower prices than Shein ○ Key to Success in Fast Fashion: Control over the supply chain allows for quick adaptation to trends (e.g., Zara’s ability to update collections weekly). 8. Ingredient Branding in Fashion The Fashion Pipeline: identifies the vertical system that starts from raw material (fibers from the agricultural or chemical industry) production and ends with manufacturing and distribution stages Fibers’ classification and trends in consumption: ○ Natural fibers: animal category (wool, camel, dromedary, alpaca, cashmere, silk), vegetable category (cotton, linen, hemp, jute) ○ Man-made fibers: cellulosic or artificial (obtained from organic macromolecules already existing in nature), synthetic (obtained from man-made molecules, produced by chemical means (polyester, nylon, acrylic, spandex) ○ polyester has had a dominant role in fiber demand growth The only way to make an accurate statement regarding the environmental or social sustainability of a fiber, whether natural or synthetic, is to measure it. The Life Cycle Assessment (LCA) provides a systematic approach for evaluating the environmental impacts of a product, process, or activity throughout its entire life cycle  The problem of recognition for intermediate manufacturers (small things like specialized fabric or zippers) lies in their invisibility to the end consumer and dependence on the final brand’s success. Effective ingredient branding requires overcoming these challenges through strategic partnerships, consumer education, and innovative marketing approaches. Ingredient Branding: Creating value by marketing a component of the product (e.g., Gore-Tex in outdoor clothing); this is a strategy where a component brand (usually B2B; intermediate manufacturers who supply components) becomes visible and relevant to end consumers (B2B2C product; where the end consumer is aware and actively seeks out the specific branded ingredient when purchasing the final product) ○ Ex Woolmark Company is the global authority on Merino Wool and owns the Woolmark logo, a certification mark used on pure wool products that meet defined standards How to Promote the Ingredient: ○ Labels, tags, booklets ○ Special projects with customers (F&L brands) ○ In-store events ○ Training to the sales associates of F&L brands Practice Question: What is ingredient branding, and how can it create value in the fashion industry? Provide examples. 9. Sustainable Fashion What is Sustainability? ○ 3/ 5P Model: People: social sustainability, including fair treatment of workers and communities Planet: Environmental sustainability, focusing on reducing harm to ecosystems and natural resources Profit: Economic sustainability, ensuring financial viability and value creation Peace: ethical dimension, concerns ideals and values such as equality, freedom, human dignity and justice Partnership: collective and collaborative approach required to implement the goals and achieve the universal engagement that is essential for the success of the transforming the world ESG (Environmental, Social, Governance) in Fashion ○ Environmental Criteria: how a company manages its impact on the environment (ex reducing carbon emissions, sustainable sourcing) ○ Social Criteria: evaluates a company’s relationships with employees, suppliers, customers, and communities (ex fair wages, labor conditions) ○ Governance Criteria: focuses on accountability, control structures, and ethical decision-making in business  Sustainability in the Fashion Industry ○ The fashion industry is a major polluter, responsible for 10% of world’s carbon footprint and being the second-largest polluter of local freshwater ○ Factors contributing to environmental harm: Overconsumption of fashion items, use of synthetic fibers and toxic chemicals, globalized supply chain leading to higher CO2 emissions from transportation Circular Economy in Fashion ○ Moving from a linear economy (take, make, dispose) to a circular economy (make, reuse, recycle) ○ Upcycling: converting discarded materials into products of equal or higher value ○ Recycling: turing waste materials into new products ○ Downcycling: converting products into lower-value materials The Problem of Greenwashing ○ Greenwashing refers to misleading marketing where companies falsely portray themselves as environmentally friendly Best Practices in Sustainable Fashion ○ Certified Organic Natural Fibers: Wool, cotton, linen that meet strict environmental standards. ○ Highly Renewable Fibers: Bamboo, soy, and other rapidly renewable resources. ○ Low-Impact Synthetic and Recycled Fibers: Reducing the need for virgin resources by using recycled materials. ○ Fair Trade and Ethical Labor Practices: Ensuring fair wages, safe working conditions, and the elimination of child labor. ○ Transparency and Traceability: Outline which element of sourcing happens where Include percent supplied by region Itemized list of each factory, farm or other B2B partner Provide contact info of suppliers Key Sustainability Initiatives in the EU ○ European Strategy for Sustainable and Circular Textiles: By 2030, all textile products placed on the European market must be durable, recyclable, composed of recycled fibers, free from hazardous substances, and produced in compliance with social and environmental rights. ○ Corporate Sustainability Reporting Directive (CSRD): Requires companies to report on sustainability issues using standardized frameworks. ○ Corporate Sustainability Due Diligence Directive (CSDDD): Ensures companies address and prevent negative human rights and environmental impacts across their value chains. 10. Stylistic Identity and Merchandising Key Concepts:  ○ Style: A distinctive form or quality, a manner of expression that can apply to different industries and human expressions (e.g. art) ○ Stylistic Identity: Refers to a brand's permanent set of stylistic codes (e.g., specific products, silhouettes, shapes, logos, colors, and fabrics) that create a recognizable identity. Ex. Bvlgari uses specific symbols such as the lion (symbol of power) and coins (heritage storytelling) in its jewelry; stylistic codes to allow it to be successful in brand extension, from one collection to another it reuses these types of symbols Examples of stylistic codes: Dark hues = formal, business Light hues = casual, leisure Angularity = masculine Curvilinear = feminine ○ Seasonal Codes: Temporary, fashionable elements that refresh a product line while maintaining stylistic identity. ○ Dressing Styles: Clothing styles (silhouette, cut, length, pattern, fabrics, etc); the way style applies to clothing ○  Merchandising: Role and Responsibilities ○ Merchandising: The process of defining the product range and aligning it with market demands and brand identity to maximize sales and profitability ○ Product Merchandiser: Focuses on product planning, trend analysis, inventory management, and pricing ○ Retail Merchandiser: Manages store stocking, sales performance tracking, and coordinating with supply chains ○ Visual Merchandiser: Designs store displays to enhance customer experience and align with the brand’s image ○ Merchandising Manager acts as a bridge between the creative and business sides of a fashion company. Their primary role is to ensure that the product assortment aligns with the brand's stylistic identity, market demands, and profitability goals. Types of Fashion Collections ○ Seasonal Collections: Composed of various product categories (e.g., pre-collection, main collection). Structure: Number of SKUs, innovation level, color stories, etc; for fashion companies to reduce the size of the collection is always their goal, but it becomes difficult for them because they want to appeal globally; one intention is to increase size of collection, place different markets and be more inclusive, but the more options available is not sustainable Basic Products: Entry-price, high-volume products. Core Products: Mid-priced, core to the brand, often carry-overs. Image Products: High-fashion items, high price margin, reinforce brand positioning. The relationship between management and creativity in product development Product Development Process in Fashion ○ Key stages: Trend Research: External (cultural trends, competitors) and internal (past sales data) influences. Collection Guidelines: Defining guidelines for design and product development.  Merchandising Plan: Structure of the product range, price positioning, gross margin targets. Collection Development: Designing and prototyping products. Collection Presentation: Presenting products to clients, key stakeholders, and media. Practice Question: How does a brand balance its permanent stylistic identity with seasonal fashion trends? 11. Guest Lecturer: Luxury Market Insights Polarization in the Market: ○ The luxury market is highly polarized, with certain regions and brands performing better than others. ○ Europe, Japan, and other regions that attract tourism are seeing stronger demand, while the US and China are facing more economic uncertainties. ○ Brand Polarization: Some brands are struggling (LVMH, Kering) due to declining consumer confidence, while others (Prada, Moncler) are positioned better with stronger growth outlooks Impact of Geopolitical and Economic Factors: ○ China: Economic instability, middle-class uncertainty, and slowing growth are negatively affecting the Chinese luxury market. (diverted spending and economic uncertainty) ○ US: Continued macroeconomic pressures, but signs of slow recovery. ○ Europe: European luxury markets remain resilient, benefiting from tourist inflows. However, price hikes by brands post-COVID-19, dubbed "greedflation," are creating consumer hesitancy​Geopolitical Conflicts: Ongoing global conflicts (Ukraine-Russia, Israel-Hamas) and economic uncertainties (inflation, interest rates) are influencing luxury consumption globally​ ○ Mildly positive outlook driven by resilient tourism and local spending, but tempered by declining consumer confidence amid geopolitical and economic challenges Consumer Behavior and Demographic Shifts ○ Gen Z and Millennial Consumers: There has been a noticeable shift in spending power from younger consumers toward older generations (Baby Boomers, Gen X), who are now receiving greater attention from luxury brands (young generations are seeing increase in unemployment, strained consumer confidence) ○ Experiential Luxury Over Tangibles: Younger generations are increasingly spending on experiences rather than tangible goods. This is shaping the way luxury brands market themselves, with a focus on personalized, immersive experiences The Outlook for 2024 and Beyond: ○ 2024 marks the first year of significant uncertainty (after years of steady growth with brief periods of crisis followed by quick recoveries that further expanded the market)  ○ Sluggish 2024, Recovery in 2025 ○ HSBC’s forecast predicts that 2024 could be one of the weakest years for luxury growth over the past two decades, ranking alongside downturns seen in 2020 and 2009. ○ However, the outlook for 2025 is more optimistic, with high single-digit growth anticipated, possibly leading to a double-digit recovery by the second quarter of 2025​ Experience-based sectors (gourmet food, hospitality, yachts, and luxury cruises) are the top performers 12. Khooa Presentation Khooa is pioneering digital personal shopping, leveraging AI technology to provide personalized style recommendations based on face, body, and color analysis. What is Personal Shopping? ○ Focuses on dressing according to what suits an individual best. Involved the analysis of three major components: Face Analysis: Determines the most suitable hats, eyewear, and necklines based on facial proportions. Body Analysis: Divides body shapes into seven types, independent of weight or gender. Helps select clothing that best compliments a person’s proportions. Color Analysis: Determines which colors suit an individual best, using categories such as "Spring," "Autumn," "Winter," and "Summer." ○ Face Shape Analysis: Divides human faces into eight categories (oblong, square, round, heart, etc.) to help personalize choices like hairstyles, accessories, and clothing. ○ Body Shape Analysis: Divides bodies into shapes like hourglass, rectangle, triangle, etc., to recommend clothes that enhance the body's natural form. Issues of personal shopping: expensive, complex, not digital Color Theory in Fashion (From the Khooa Presentation) Key Concepts: ○ Color Analysis: Helps individuals identify colors that complement their skin tone, hair, and eyes. This is divided into seasons (Spring, Summer, Autumn, Winter). ○ Seasonal Color Palettes: Different seasons are associated with specific color palettes that best suit an individual’s complexion. Spring: Light, warm, bright. Summer: Light, cool, soft. Autumn: Warm, deep, soft. Winter: Cool, deep, bright. Khooa’s Expansion and Global Reach  ○ Khooa is working on expanding globally by using AI-based face and body shape analysis to profile users ○ Goal is to fill the gap between customers who can afford traditional personalization services and those who are interested in personalization but lack access ○ The platform is gaining traction among Gen Z and Millennials Impact on the Fashion Industry ○ Khooa’s model represents a shift in the fashion industry, offering consumers a new way to engage with personal styling by making it more accessible and technology-driven. ○ The app taps into the growing trend of personalization in fashion, where consumers seek customized solutions rather than mass-produced products. 12. Collection Development and Structure Key Concepts: ○ Collection Architecture: Defines the structure of a fashion collection, including pre-collections, main collections, and flash collections. It includes decisions on color stories, fabric choices, and product categories. ○ Product Segmentation: Basic: High volume, low margin items (e.g., entry-level products).; these products are NEVER out of stock Core: Products that balance price and volume, usually carry-over items. Image: Seasonal, high-priced products used for PR and brand positioning. Example: A brand may have a core product, such as a black blazer, which is carried over multiple seasons, while seasonal items like bright jackets create excitement. Practice Question: How does collection architecture impact the financial performance and brand positioning of a fashion company? If a company makes a trend to expand you can have a best seller but if it keeps changing the company reduces the possibility to reach economies of scale. 13. Product Development Process in Fashion Key Concepts:  ○ External/Internal Research on Fashion Trends: Companies look at socio-cultural trends, competitors, and past sales data to inform the design of new collections. ○ Defining the Collection Guidelines: Establishing the overall creative direction, including themes, key products, and design elements. ○ Defining the Merchandising Plan: This step involves determining the complexity of the product range, pricing strategy, and sales targets. Contents of the Merchandising Plan: Desired level of complexity (# of SKUs), definition of product range, price positioning, target gross margin, product cost structure, choice of carry over (fabrics, style, color/washes) ○ Collection Development: Prototyping, testing, and refining the collection based on the established guidelines and research. ○ Presenting the Collection: Launching the collection to the market through fashion shows, campaigns, or retail introductions. Example: Zara's product development process is much faster than that of luxury brands like Prada. Zara rapidly researches trends, develops prototypes, and presents new collections within weeks, while Prada focuses on seasonal and high-quality design processes. Practice Question: Explain the structured phases of product development in fashion and how different business models, like Zara and Prada, handle this process. 14. The Retail Evolution Understanding Retail and Multichannel Distribution: ○ Retailer Definition: Retailers are entities selling products directly to consumers (e.g., Louis Vuitton, Zara). Some brands also use wholesale channels (stores that have multi-brands, ex Nike Wholesale at Foot Locker). ○ Multichannel Distribution: Brands reach customers through various channels, like flagship stores, e-commerce, and travel-related spaces, ensuring a consistent brand tone across all formats. Reasons for fashion companies to transform into retailers: to transmit a coherent identity of the brand into the store; to know better the final consumer; to increase profitability  Emergence of Etailers and Their Success Factors: ○ Etailers’ Business Models: Etailers operate on digital platforms, often using a demand aggregation model, where they leverage extensive customer data and create a valuable customer experience through diverse brand portfolios. ○ Success Factors: Etailers succeed by gathering customer insights (data as intellectual property), innovating content, and applying effective pricing and assortment strategies. Shift Toward Retail Integration (vertical integration) in Fashion: ○ Fashion Brands Becoming Retailers: Many fashion brands have transitioned to retail operations to control their brand identity, directly interact with consumers (and identify and gain deeper insights into the end customers), and increase profitability. ○ Retail is a way for a company to expand what its brand offers ○ Consequences: increase of fixed costs (to open and manage stores), shift of selling products to selling experiences Client Advisor’s Role and Responsibilities: ○ Client Advisor: This role involves cross-selling, upholding brand standards, providing personalized customer service, managing CRM tools for customer retention, and building long-term client relationships. The Phygital Store - Bridging Physical and Digital: ○ Store of the Future: Modern stores offer hyper-localized assortments, digital shopping tools, and community events, creating an immersive brand experience ○ Experiential Retail: Retail spaces, from pop-ups to flagship stores, are designed as brand statements, blending both physical and digital elements to attract customers and provide unique experiences (ex Dolce & Gabbana Bar Martini, Milan or Prada Cafe at Harrods). ○ Risks: store can become more of a showroom, where customers come and then purchase online Introduction of Gamification in Retail:  ○ Gamification: Brands like Balenciaga use gamification (e.g., partnerships with Fortnite) to engage customers, allowing them to interact with digital versions of brand products and create exclusive in-game experiences. Adoption of Omnichannel Strategy: ○ What is Omnichannel?: This approach delivers a unified, integrated experience across all shopping channels, merging digital convenience with the brand’s in-store presence to enhance customer engagement. ○ To create hubs in which real people answer the customer by adding the possibility to show them the products during their purchase Customer Journey: represents the overall marketing levers and tools (physical, digital and human) that “contact and touch” the customer before, during and after the purchase Customer Relationship Management (CRM): ○ CRM Basics: CRM involves collecting customer data and interactions to foster long-term relationships and improve customer retention. ○ CRM vs. Clienteling: CRM focuses on service-based relationships (and based on that data customizing customer experience), while clienteling emphasizes personalized, loyalty-driven interaction  CRM Manager Responsibilities: ○ Role of CRM Manager: CRM Managers oversee customer databases, analyze data, implement marketing campaigns, and ensure brand consistency, contributing to a seamless customer experience. Key Takeaways: ○ Brands today focus on selling an experience rather than a product, with omnichannel and CRM strategies reinforcing a personalized, consistent brand presence across all touchpoints. 15. The Role of the Client Advisor - The Rolex Boutique Background of Rocca and the Rolex Boutique: Rocca is the only Italian chain selling prestigious jewelry and watch brands (origins dating back to 1794); in 2008, Rocca was acquired by the Damiani Group, enhancing its high end product offerings Customer Experience Philosophy: ○ Focus on client retention: Rocca aims to create long-term client relationships by understanding what customers seek and striving to keep them as lifelong clients ○ Luxury Experience Elements: Exclusive locations and luxury environments Professional sales approach with a focus on high-end, personalized service Integration of digital and physical experiences, including ecommerce, digital CRm, and institutional advertising Multichannel Approach ○ Rocca utilizes both digital channels (ecommerce, CRM) and physical boutique experiences to guide the customer journey, ensuring a seamless interaction between online and in-store services. Sales and Customer Service Strategy ○ Sales Tactics: Appointment-only policy ensures high-quality service during store visits Advisors help clients select the right products and provide transparent information on products availability  Follow-ups (i.e. birthday reminders and re-contact within 48 hours) enhance client loyalty ○ Personalization of CRM The CRM system integrates customer data (including preferences and purchase history across all Rocca Boutiques) Additional services include insurance, second-hand evaluations, and comprehensive after-sales support ○ Role of the Client Advisor Advisory team: Comprised of both junior and senior advisors to ensure ongoing training and expertise. Advisors also undergo Rolex-specific training at headquarters multiple times annually Client Engagement: advisors used tailored approach to handle store visits and maintain high standards with appointment slots and a structured follow-up process; CRM data is leveraged for personalized client outreach ○ Rocca’s Strengths in the Market Professional sales staff, outstanding customer service, a multichannel marketing approach, partnerships with top luxury brands, and exclusive locations contribute to Rocca’s leadership in Italy’s luxury market. 16. Digital Transformation in Fashion Communications Digital Transformation Goals ○ Creating the “Dream Factor”: establishing a unique, memorable brand identity that captures customers’ imaginations The product is already the strongest communicator (keep it the main focus) The Dream Factor in Communication ○ Visual and Celebrity Influence: Visuals, designer ambassadors, and influencers are central to luxury branding, with constant experimentation on digital platforms. ○ Heritage and Storytelling: Emphasizing brand history, with collaborations, events, and iconic visuals to build brand allure. ○ Italian Aesthetic and "Genius Loci": Leveraging Italian culture, location, and aesthetic to enhance brand storytelling. The Italian narrative in fashion communication: Entrepreneur ambassadors, the glamour of celebrities, genius loci, aesthetic, the making of, and experiencing the culture Designing the Communication Identity: the Message ○ Concept: Each luxury brand builds a unique identity based on a core concept that resonates with its brand story. Examples include: Hermès: Uses fairytale-like, playful themes that evoke a dreamlike experience Gucci: Emphasizes empowerment and self-expression, appealing to a broad audience with a bold and distinctive look. Focuses on a dystopian, boundary-pushing aesthetic that generates online buzz and “breaks the internet.” ○ Tone of Voice: Different brands adopt distinct tones to connect with their audience,, and what positions a brand as more formal or more casual, etc: Luxury Brands: Often adopt a conceptual, challenging tone that invites engagement and thoughtfulness. Mass-Market Brands: Utilize friendlier and informative tones to appeal to a wider audience. Tiffany: Blends wit with elegance, embodying its iconic personality in a fresh and approachable way. ○ Visual Codes: Core elements, such as colors, models, and locations, are chosen carefully to reinforce the brand's identity. Colors and Models: Consistent color schemes (e.g., Tiffany Blue) and the use of high-profile models create strong associations with brand identity. Locations and Atmosphere: Dreamlike aesthetics are common, especially for brands like Hermès that convey an idealized sense of luxury and escapism. ○ Multisensory Experience: Luxury brands are increasingly exploring ways to create not just visual but also multisensory experiences, adding depth to the brand’s presence. Communication in the Digital Age ○ Authenticity Over Perfection: Brands are moving towards "authentically imperfect" content, favoring genuine, relatable storytelling that resonates with audiences on a personal level. ○ Inclusive, Humanized Content: Content aims to be inclusive and human-centered rather than superficially “woke.” The focus is on meaningful representation and empathetic connections.  ○ Humanized AI and Unconventional Interactions: Brands are exploring AI that feels human, as well as unique, less conventional ways to engage with audiences. This may include personalized AI-driven interactions that feel natural and relatable. ○ User-Generated Content (UGC): There is a growing emphasis on UGC, encouraging brand followers to participate and share content, fostering a sense of community and brand loyalty. What to Consider When Choosing a Talent ○ Value Match and Relationship Building: The chosen talent should align with the brand’s values and specific campaign objectives. Long-term relationships with ambassadors are encouraged to foster authentic connections with audiences. ○ How to Assess: Check the talent’s social profiles manually and use social listening tools to ensure they resonate with the brand’s tone and message Impact of Short-Form Videos (TikTok) ○ TikTok as a Gateway: With high engagement in fashion, TikTok drives “shoppertainment” and rapid trend adoption, especially for fashion and luxury products. ○ Challenges for Brands: Authenticity (critical for building trust), speed (brands must act quickly to stay relevant), and brand alignment with trends are essential for success on platforms like TikTok. Moving beyond ROI, brands now measure ROE by focusing on empathy, conscious communication, and meaningful conversations with audiences. 17. The Ray-Ban Disruption Importance of Innovation Defined as converting new knowledge into products, processes, or services for actual use. Types of innovation: ○ Product Innovation: Common in developing industries.  ○ Process Innovation: More frequent in mature industries. ○ Technology Push: Driven by scientific advancements. ○ Market Pull: Responds to consumer demands. ○ Closed Innovation: Relies on internal resources (e.g., R&D). ○ Open Innovation: Involves collaboration between organizations. First-Mover vs. Late-Mover Advantages First-Mover Advantages: ○ Experience curve benefits. ○ Economies of scale. ○ Pre-emption of resources. ○ High buyer switching costs. ○ Reputation-building. Late-Mover Advantages: ○ Cost-saving by learning from first-movers' mistakes. ○ Ability to imitate and refine strategies. Creativity and Innovation Creativity involves generating unique ideas, while innovation is implementing them to create value. The NUR Test for evaluating business-oriented creativity: ○ New: Level of novelty. ○ Unique: Perceived differentiation. ○ Relevant: Alignment with target audience needs Disruptive Innovation Disruption involves challenging conventions and reimagining the business landscape. Categories of companies: ○ Survivors: Adapt to current trends. ○ Exploiters: Pursue incremental growth. ○ Disruptors: Reinvent the industry. Obstacles to change: ○ Resistance due to distorted perceptions or lack of motivation. ○ Forces preventing change implementation. Strategies to overcome resistance: ○ Honest performance monitoring. ○ Learning from competitors and customers. ○ Hiring diverse talent and fostering urgency. Communication Disruption Traditional communication emphasizes: ○ Brand recognition, product attributes, benefits, or value.  Disruption shifts focus: ○ Engages in two-way conversations with consumers. ○ Creates campaigns with emotional, cultural, or innovative resonance. Case Study: Ray-Ban Turnaround Pre-1999: Ray-Ban faced challenges due to low-quality standards, diluted brand value, and lack of innovation. Post-1999: Luxottica (held competitive advantage because it was already equipped with licensing agreements with fashion brands) acquired Ray-Ban and repositioned it as a premium, fashionable brand: ○ Controlled distribution. ○ Introduced pricing strategies. ○ Launched campaigns like Never Hide, emphasizing boldness and individuality,this campaign moves from one-way advertising to two-way conversation with consumers). ○ Transitioned to consumer engagement through innovative, viral campaigns. In 2021 Ray-Ban launched Stories smart glasses (disruption approach) Results: Double-digit growth, iconic branding, and market leadership. 18. MIAMO Presentation Overview of Medspa and MIAMO Medspa’s Evolution: Founded in 2006, Medspa has grown into a leader in cosmeceuticals, combining scientific research with a focus on skin health and wellness. Key Brands: MIAMO (functional cosmetics) and Nutraiuvens (nutraceuticals). Vision: To become a leading omnichannel brand in dermocosmetics and food supplements by leveraging innovation and sustainability. Key Strengths and Values Personalization: MIAMO’s skincare protocols address diverse needs with customizable solutions. Became a market leader by focusing on: ○ Leveraging patented formulations like Epigenage® and ELPA25® target skin health at the cellular level. ○ Introduced a unique six-step skincare routine incorporating exfoliation, stimulation, and treatment phases. ○ Educating both pharmacies and direct consumers through its Academy, providing in depth training to build trust and understanding of the protocol Business Model Distribution: Present in over 1,500 Italian pharmacies, with significant contributions to the anti-aging market.  Omnichannel Strategy: Combines in-store (pharmacies, beauty cabins) and online channels, including e-commerce and personalized consultations. Training: Offers 360° training programs for pharmacists, including courses on product knowledge, digital marketing, and dermatological fundamentals. However, while the innovative decision to sell exclusively through pharmacies in Italy legitimized its positions, it could pose challenges for international expansion. Unique Selling Proposition Protocol-Driven Approach: 90+ customizable skincare protocols addressing issues like acne, aging, and sensitivity. Science of Serum Layering: Allows up to 10 serums to target multiple skin concerns simultaneously. Cutting-Edge Diagnostics: Skin Analyzer technology offers rapid, personalized skin assessments. Community and Communication Miamo Lovers Community: A 130,000-member strong group fostering brand loyalty through events, masterclasses, and exclusive offers. Integrated Marketing: Combines influencer campaigns, in-store promotions, and digital engagement to enhance brand visibility. 19. Stone Island Collection Merchandising Competitive advantage: cutting edge textile innovation and distinctive fashion aesthetic Roles & Responsibilities Analyze: Collect, analyze, and translate internal and external data into market opportunities, connecting commercial needs with creative design processes. Translate & Connect: Manage pricing and margins, optimize opportunities, and map competitors to position products strategically and leverage brand strengths for profitability. Monitor: Oversee collection development, ensuring alignment with the briefing and consumer needs, from initial sketches to prototypes and samples. Align: Collaborate with key departments—design, production, marketing, distribution, merchandising, and finance—to achieve cohesive goals. ○ Goals: Focus on business outcomes (margins and sales) and brand image (product desirability and DNA). Interaction with Other Functions  HQ Collaboration: Engage with key departments like creative & design, product development, marketing, finance, visual merchandising, CRM, and training to implement the company strategy from a product perspective. Channel Integration: Align with retail, e-commerce, and wholesale channels to ensure consistent strategy execution across all touchpoints. Regional Coordination: Work closely with buyers and stores to adapt strategies to local market needs and ensure effective implementation on the ground. Four Merchandising Moments 1. Collection Briefing: Define financial targets, analyze market trends, and customer profiles. Collaborate with channels, CRM, and product development. 2. Collection Development: Focus on product design, pricing, and feasibility with input from design, production, and finance teams. 3. Collection Presentation: Finalize assortment, master orders, and VM (visual merchandising) guidelines. 4. Collection Launch: Execute product training, clienteling, and store communication plans with support from CRM, marketing, and VM teams. 20. The Beauty Industry Defining the Beauty Industry Market size: In 2022, the global beauty industry was valued at $427 billion, expected to exceed $580 billion by 2027, growing at 6% annually. Key Segments: ○ Hair care ○ Skin care ○ Cosmetics ○ Toiletries ○ Perfumes Trends: Shortening product lifecycles and concentration of key players. Relevance of beauty business in global leaders’ portfolio Segmentation in the Beauty Industry Market categories: ○ Mass-market: Wide audience, affordable price points. ○ Selective: Targeted premium segments (e.g., luxury or high-end). ○ Pharmacy: Products with a focus on dermatological efficacy. ○ Direct Sales: Personalized consumer engagement, often door-to-door or online. Specialized locations: ○ Hairdressers ○ Concept and fashion stores ○ SPAs ○ Travel-related locations (e.g., airports, cruise ships) Skincare, makeup, and fragrances dominate luxury beauty. Emerging Niche Segments: ○ Artistic perfumery: Focus on narrative and artisan production. Key Success Factors 1) Strategic Pillars: a) Multinational and multi-brand strategies with localized execution. b) High dependency on R&D for innovation (e.g., Swiss and French pharmacy). c) Pricing strategies tailored for global and local harmonization. 2) Glocal Marketing: a) Centralized global image with localized advertising. b) Cross-national brand testimonials. 3) Industry Markup: a) A typical markup is 10x, driven by branding and R&D. Trends in the Industry 1) Emerging categories: Genderless Cosmetics: High growth (25% annually), embraced by Gen Z. Clean Beauty: Products without harmful chemicals; fast-growing. K-Beauty: Innovation, cost-effectiveness, and natural ingredients. C-Beauty: Chinese brands innovating and expanding globally. Doctor Brands: Skincare developed by dermatologists. Indie Brands: Community-driven, peer-to-peer appeal. 2) Technological Integration: Augmented reality: Enhanced customer experience (e.g., L’Oréal’s ModiFace). Influencer marketing: Beauty thrives in visual mediums. 3) Consumer Behavior: Gen Z driving demand for diversity and natural ingredients. Increasing interest in wellness and sustainability. Key Takeaways Market Characteristics: ○ Fragmented but consolidating under major players. ○ High competition, rapid innovation, and short product lifecycles. Consumer Trends: ○ Demand for sustainable and culturally diverse products. ○ Gen Z as a driving force behind inclusivity and authenticity. Distribution: ○ Importance of e-commerce and experiential retail (e.g., SPAs, concept stores). 21. Changing Fashion Design Side 1) Radical Fashion & Avant-Garde: Rare, high-exclusivity, and high-impact designs. Examples of "radical" include unorthodox aesthetics, disrupted patterns, and flattened, non-functional forms. Japanese avant-garde emphasized textiles over tailoring (e.g., Rei Kawakubo, Yohji Yamamoto). 2) Japanese Designers’ Impact: Revolutionized aesthetics (e.g., wrapping vs. tailoring, no-color palettes, anti-functionality). Innovations were assimilated into Western fashion, but with limited direct commercial success. 3) Chinese Avant-Garde: Emerging designers supported by platforms like Taobao.  Struggles include securing small-quantity manufacturing and shifting perceptions of "Made in China" combined with “Designed in China” as high quality. 4) Why doing business with radical fashion is difficult: Because it is niche, expensive to buy for consumers; difficult to wear because of the stylistic experimentation To become successful Designers often compromise by branching into accessories, casual lines, or collaborations. Go-to-Market Side 1. Digital Platforms & E-Tailers: a. Nowadays innovation in fashion is mainly related to new digital and sustainable business models and tech fabrics Characteristics: ○ Demand aggregation and customer data as assets. ○ Integration of e-commerce with media for customer engagement. ○ Key success factors: pricing, assortment, and personalization. Business Models: ○ Zalando: Online-only retailer focusing on user experience, free returns, and sustainability. ○ Farfetch: Marketplace connecting buyers and boutique sellers, generating revenue from commissions and partnerships. 2. Challenges for Digital Fashion: Brands’ desire to maintain control over their digital presence Consumers’ return to physical stores, prompting a hybrid “phygital” model Difficulties in maintaining loyalty to community values as the business scales up The need to conform to KSFs established by larger brands, potentially diluting specialization and differentiation 3. Secondhand Fashion: Rapid growth driven by sustainability and shifting consumer values. Challenges include maintaining quality and authenticity, as well as risks of overconsumption. Example: Startups like Bazar monetize returned merchandise.