Updated: Sep 7, 2020
Fashion is a global business.
Fashion represents a global business. For a comprehensive view of Fashion Law, the commercial aspects of the business are key. A fashion lawyer must recognize that fashion business must be profitable. This does not mean the lawyer should, also, be a financial professional. However it is important the lawyer understands the fundamental economic forecasts on that.
Modern fashion is a fast-changing and volatile business, and the success of fashion law as a new discipline remains in the versatility, the legal-strategic and commercial vision of the business to produce timely and global legal management efficiency to players at diverse stages of the fashion value chain.
This post shows these commercial aspects of fashion and its influential connection to the law. For this, it is necessary to identify the economic projections of the sector.
Economic projection of the fashion business for the period 2019 - 2020
According to the annual report The Stage of Fashion, managed by The Business of Fashion and McKinsey & Company, industry projections are:
Critical estimates of downward movements in economic indicators and other key factors defined a destabilizing perspective in the fashion business. Which tends a more careful attitude among fashion business investors. With the possibility of a global economic slowdown by 2020, companies are more cautious and pursuing opportunities to increase productivity more compared to previous years.
¿What risks are we talking about?
The trade war between the United States and China, and with other countries. Immigration restrictions.
Foreign direct investment and technology transfer could have profound implications for global supply chains, increasing the threat of stagflation.
The risk of a slowdown in growth in the United States has sharpened now that the stimulus of 2017 tax legislation has run its course.
Risks associated with the rise of new forms of debt, including many emerging markets, where many loans are in foreign currency.
Economic, financial and political risks in Europe.
In the fashion industry to offset the impact of slower growth and rising costs, companies must set a strategic agenda to boost productivity in the next period.
According to this report, to offset the impact of slower growth and rising costs, companies set a strategic agenda to boost productivity in the next period, and several companies have already taken steps implementing cost-cutting and restructuring programs. For example, H&M, said that in 2017 it aimed to reduce costs by 5-6 percent, or recently, Under Armour announced plans to remain focused on boosting productivity.
Therefore, with this scenario, the priority is the growth in sales and improves the customer experience in stores, so omnichannel and e-commerce are the focus of attention of fashion brands, evolving the Customer Relationship Management, (CRM) or customer relationship management, optimizing the experience in establishments and investing in brand building.
With so much uncertainty, companies will reduce capital expenditure and investment. The caution has been the premise of fashion this year and will continue in the same way for the next one.
New business models
Commercial repair and rental models continue to change ... Fashion brands will gradually take advantage of this market to gain access to these new consumers who seek both affordability and the estrangement of permanent clothing ownership.
While reputable brands have turned a blind eye or belittled second-hand retail, they are now entering second-hand and rental markets. For example, Stella McCartney launched a partnership with The Real in 2017, offering a $100 credit to consumers who consign their products on the platform.
This is a trend between the younger generation while embracing sustainability.
While reputable brands have generally turned a blind eye or belittled second-hand retail, they are now entering second-hand and rental markets. For example, Stella McCartney launched a partnership with The Real in 2017, offering a $100 credit to consumers who consign their products on the platform. This trend is driven in part by the longing for the novelty of the young generations, while these increasingly embrace sustainability.
Many brands and retailers, including Nike, Levi Strauss and Gucci have taken a clear stance on the social issues around fashion.
Now or never
On the mobile consumer journey, the gap between finding a product and buying it has become a turning point for the most impatient fashion consumer. The consumer mindset is changing rapidly, and technology leaders such as Amazon, Uber, Netflix, and Deliveroo have raised customer expectations in terms of speed and convenience.
With its Prime offering, Amazon has created the expectation that deliveries will take place the day after the purchase or even the same day.
For companies to build more consumer confidence, they will need to provide a higher level of transparency along the value chain. They must be transparent in production, avoid child labor or other problems related to recruitment in unfavorable or often inhumane conditions. They should be more clear in the value for money from the product; using fewer polluting materials or processes on the planet; they must maintain creative integrity; respect the public in terms of data processing and protection. In general, industry players are now required to conform to more ethical, sustainable and environmentally conscious fashion principles.
In response to this concern of sustainability and ethics in the fashion industry, several brands have already moved towards “radical transparency” in manufacturing, hoping to regain the trust of disillusioned customers. This could include information about the origins of the product or the environmental impact of manufacturing.
Brands such as Reformation, People Tree, and Stella McCartney implement environmentally friendly and ethical practices, as well as transparency in their direct and indirect emission waste throughout their supply chain. Not only that, but they have also set an approved, science-based goal to reduce their greenhouse emissions.
Traditional brands are altering their own business models. They refresh the brand’s image and offer fresh products in response to a brand-new generation of emerging brands that are growing rapidly in the fashion market, as a result of declining consumer loyalty and the growing appetite for the new. consequently, this new scenario has generated new competition to traditional brands, reducing the consumer market, forcing the reinvention and continuous disruption of pre-established schemes in the fashion business, generating the maxim that it is only stable in the industry is change and uncertainty.
An interview with Cédrit Charbit, CEO of Balenciaga, he says that today the most important thing in the fashion industry is to consider that brands are not only to sell products to the customer; customer; it is also about communicating and transmitting messages and values to the entire brand community. I think we need to be community-focused, audience-focused.
Automation and data analysis have allowed a generation of new companies to achieve agile production according to the demands of consumers, achieving a more controlled production, reducing waiting times and large stocks.
The above helps to understand that the fashion industry has many opportunities, but also many risks that come from evolving macroeconomic environments or from the potential disruption or changes in the trade or legislative relations of Countries.
Division of the fashion market
The fashion industry has a responsibility to continue improving its environmental and social performance. As a large and creative industry, it has a vital interest in ensuring a prosperous and sustainable future. Environmental, social and economic tensions are enormous and continue to grow, in line with customer demand. In addition, consumer behaviors and technology will soon shape and challenge the industry in unpredictable ways. It is undeniable: the industry must adapt and although the law always arrives later that technology, the growing concern of protection and legal adequacy for the industrial fashion plaintiff is increasingly palpable with the different decisions of the courts in the case of iconic fashion brands.
In the next post, we will discuss legal remedies for the protection of fashion brands.
The fashion market is divided into the following segments.
Its protagonists are the best brands of luxury, haute couture and works of art. It is the most expensive market as it could be ten times higher than the average market price. Therefore, it is addressed only to a specific group of people (i.e. celebrities, who wear haute couture clothing and accessories on the “Red Carpet” or international customers).
Haute couture creations meet the highest level of inspiration, creativity, and craftsmanship and are always "tailor-made."
Haute couture is to build the image of the brand, sell the dream.
Some brands in this sector are:
Pleated Valentino dress with Asian velvet and silk appliques. Behind this dress there are over 2,200 seamstresses, 20 of them working full time in their making, it has taken almost 400 hours to sew, shape and fold all the design. Approximate price: $70,000. https://www.magazinehorse.com
In this category, we find a high level of creativity and industrialization, and the prices are three to five times higher than the mass market. Prêt-à-porter fashion, also known as ready-to-wear fashion, describes the collections of ready-made designers and brands, i.e. not tailor-made. In this segment, we find it in detail in established sizes. (Example, size 38 or M).
Some brands in this sector are:
Dissemination ("second young lines")
In this segmentation, have been higher than average prices (2 or 3 times more than the mass market), but the products are quite affordable. The diffusion market aims to expand fashion companies, producing with lower quality and inferior price, in order to attract a wider group of buyers (i.e. Marc for Marc Jacobs, Versus for Versace, DG for Dolce and Gabbana, etc.).
Some brands in this sector are:
See by Chloé
Versus by Versace
DKNY by Donna Karan
Marc by Marc Jacobs
This category was born in the United States. Connect the upper end to the mass market. Product prices are 1.5 to two times higher than mass-market products, but they are very affordable. It out sources production a lot and there is a lack of craftsmanship. Products in this category are very easy to use, so they cover a wider cycle or even days of the occasion. We find a mix of wholesale and retail distribution. It is deeply significant to note that the locality element is very important here, as it concerns local brands and attracts local people. Designers in this segment use fancy names for brands and not their own (i.e. Diesel, Coach, The North face, etc.), but it is also common to use their name with some differentiation (i.e. Max and company for Max Mara, Emporio Armani Giorgio Armani, etc.).
Some brands in this sector are:
Max y Co
The main characterized of this sector is below-market average prices, creativity with basic elements or fast fashion, in terms of quality cost controls predominates, are everyday garments the target audience is diverse. The supply-chain management as the key, segmentation is the new trend. Mass communication. The store’s role is important for feedback from shoppers as a trending element.
In this category, prices are very low, but there are different price ranges between brands. (i.e., the Inditex Group has several brands such as Zara, Massimo Dutti, Bershka, Pull, and Bear, with different product quality and prices, but all are affordable).
Some brands in this sector are:
The fashion industry has a responsibility to continue improving its environmental and social performance. As a large and creative industry, it has a vital interest in ensuring a prosperous and sustainable future. Environmental, social and economic tensions are enormous and continue to grow, in line with customer demand. In addition, consumer behaviors and technology will soon shape and challenge the industry in unpredictable ways. It is undeniable: the industry must adapt and although the law always arrives later that technology, the growing concern of protection and legal adequacy for the industrial fashion plaintiff is increasingly palpable with the different decisions of the courts with iconic fashion brands.
In the next post, we will discuss legal resources for protecting fashion brands.