The older I get, the more foreign I feel from the center of the mainstream. Moving to a new culture has probably exacerbated my perception of this, but its been brewing for some time.
Involuntarily now, IÂ sniff at a limitedÂ edition sneaker drop. Please, “creative” directors, no more studs or monsters or camouflage. AndÂ what is it with emblazoned sweatshirts (“felpe” in Italian) bearing all caps MSGM, Moschino, Fendi, or HBA? More importantly, why would I want to wear a sweatshirt showing a photo of a barking Rottweiler?
And these aren’t even the systemic problems in fashion today. Tastes, preferences, and trends will always varyâ€”the industryÂ has never been keen on editing (more is more, typically). Fashion is fun, frivolous, and not meant to be entirely serious. I concede this.
I’m referring, rather, to issues you’ll see reported and editorialized in the Business of Fashion, Luxury Daily, and others. How growth outlooks are poor for so many brands (Prada and Burberry are perhaps the most mentioned), how luxury has priced itself into extinction, and consumers in key markets (i.e. US) are addicted to discounts…and how brands may transition to a “see now, buy now” model of season fashion shows (vs. the extensive lead time that follows typical fashion shows)…
…Creative Directors are playing musical chairs or leaving the industry completely…it is endless. The volume of content written about fashion, from Financial Times to Bloomberg, is insane. This is good though.
I have felt for a while that much of what is happening in luxury, fashion, retail, and everything in between, is no good. This must be what growing up feels likeâ€”galvanizing your convictionsâ€”while saying goodbye to Â blissfully ‘going with the flow.’ It would be easier to look no further than my tight grip on a fistful of shopping bags every weekend.
On the luxury pricing itself into extinction: this shouldn’t be any surprise. Incomes everywhere other than the Middle East, China, and other emerging major economies have not grown in line with the price inflation. A mini Saint Laurent handbag costsÂ $1,000, a Fendi furÂ keychainÂ will set you back something like $350, and Tom Ford suede espadrille slippers, you know, for summer,Â aroundÂ $500…it’s all a bit insane.
Product pricing in Europe is less egregious, sometimes as much as 22-23% lower nominally than in the U.S. With a favorable exchange rate, this is a pretty good “deal.” Compare the same Bottega Veneta suede Chelsea bootsÂ so popular right now…â‚¬590 in Milan or $780 in Manhattan. The former costs $675 if you’re lucky enough to be here and counting in dollars (me!). Then, assuming you are just visiting, you can collect the VAT on departure, an additional ~â‚¬77 or $87 subtracted from the final cost (so about $600).
But when I look back at prices in the States, I’m shocked. I wouldn’t pay 590 anything for those boots, and neverÂ come close to nearly $800!
And yet emotionally, there is something both insulting and addictive about fashion, especially luxury. I amÂ offended at how expensive Prada’s rubber mandals are this season. And yet I reaaalllly want them.
Any given leather handbag made in Italy has the following major cost categories: raw materials + manufacturing/labor + logistics/handling + distribution + overhead for store operations + overhead for central administrative roles + overhead for marketing/advertising.
There are two profit margins recovered by brands: the full retail margin, when they sell in their own boutiques, and the wholesale margin, slightly less, when they sell goods to a franchisee, department store, or multi-brand boutique, which then sells it at the same retail price, but takes a cut to fund its own operations. This does not apply to licensed products like eyewear or fragrance. But don’t worry, they make plenty on all of these arrangements.
I’m not an insider, so I’m guessing here. My gut tells me price increases are partly to cover recent capital expenditures (on network expansion), partly to pad against currency fluctuations, and partly an arbitrary response to brands’ fears they will become too ‘accessible’.
*note: studies have shown that high prices for luxury goods can actually increase their desirability and demand, contrary to traditional economic models.* But have they poisoned their own trough?
On addiction to discounts: after the flash-sale craze of 2008-2013 (Gilt, MyHabit) and rampant expansion of off-price channels like Nordstrom Rack, which grewÂ faster than mainline stores for companies like Nordstrom, Saks, and Ralph Lauren in the last five years, consumers are wary of the value in paying full retail for something that (a) might go on sale if they wait or (b) may not be much better quality than what is sold in the outlet malls year-round.
The fact that so many brands make clothing precisely for their network of outlets (e.g. Banana Republic, J.Crew, and some have even hypothesized Burberry and Gucci) is great for people who rely on outlets to afford the clothing they wear to work or school or just like what they find there, but it also dilutes the value of the brand overall. Unless your brand makes a clear distinction (i.e. a completely different brand) between one cotton t-shirt, sold for $80 in SoHo and another cotton t-shirt, sold for $25 in Woodbury (outlet mall), it all gets muddy very quickly in the mind of the consumer.
This teetering of the consumer between subscribing to the ecosystem of full-price retail and extreme discontent with buying anything at full price has allowed disruptorsÂ to fill the niche: Suitsupply, Warby Parker, and Everlane, to name a few.
For a subset of consumers who are conscious of the ecological footprint of consuming, and can’t really afford to, consignment/vintage/resale boutiques online and on the ground offer another channel to partake in fashion without paying full retail. See my post on Bivio here in Milan. Online sites like GrailedÂ are great to browse too.
On public/shareholder-owned fashion companies: ah. Where to start.
Privately-owned brands, like Chanel, Etro, Zegna, and many others, can grow as slowly as they want. Of course, it is in the interest of any business to grow and mature over time, to go through periods of reinvention and revolution.
What we have today is conglomerates (LVMH, Kering, Richemont, and Prada Group are the largest) which each own a collection of brands. They inject them with cash needed to grow fast and grow big. Later on, they (management, shareholders) expect big returns from the ones they’ve hired, in charge of making the products and putting on the big shows we all love (i.e. creative directors). If they don’tÂ commerciallyÂ succeed, this is a problem for the bosses, and changes ensue. Many beautiful, creative right-brains have been exhausted, exploited, and traded interchangeably for one another by numbers-conscious left-brains.
Of course in many brands, we’re not talking anymore about Cristobal Balenciaga or Christian Dior, Yves Saint Laurent or Elsa Schiaparelli. They were artists, and for much of their careers, they were entrepreneurs existing with their own backing. Today, it’s designers who can skillfully strike a balance between real creative direction and commercial lowest-common-denominators.
Of course, many would say that “luxury fashion” is more democratized now…that a much wider range of the total population can partake in experiencing Gucci than could 75 years ago. This is accurate, though the intent of the industry today is somewhat schizophrenic: grow revenues, expand network, reach more consumers, but maintain perceivedÂ specialness through higher and higher price points and regular creative revamps.
On perpetualÂ growth outlooks: Excepting that the world population will continue to grow until we can no longer support it (something I take neither lightly or consider far off), do luxury conglomerates really think that their brands can all grow 1-2-5% every year in perpetuity?
I toss around this idea every so often. Is growth a zero-sum game, i.e. any growth of one brand is at the expense of another? And the business is just a game of slowly siphoning off others’ success to fuel your own? Or is the industry, in aggregate, thinking it can find and develop new consumers (expand the whole pie)?
The only continent left untapped is Africa, and though there are plenty of bodies there, the number of potential luxury buyers is significantly smaller. Without a significant improvement in global economic outlooks (not to mention prosperity), luxury will have fewer and fewer buyers in already-mature markets like the U.S., E.U., and parts of Asia.
On the quality of creative direction / vicious cycle of fashion: As someone who feels compelled to produce creatively (though on a much smaller scale), my own feeling is that some pressure is usefulâ€”lots of pressure is counterproductive.
Already, fashion has seen the exodus of various creative minds from their high-stakes positions at global brands like Louis Vuitton, Gucci, Saint Laurent, Dior, etc. Raf Simons, in his exit from Dior, made specific reference to the breakneck pace of seasons in fashion which require constant inspiration, conceptualization, and perfection on the part of a creative team. Fast fashion players like H&M and Zara have nudged the older, more established model of more expensive brands toward this shortened consumer attention span.
An inevitable result of asking creatives to create on a shorter and shorter cycle is the degradation of the intrinsic quality and thoughtfulness of their outputs. This is where I begin to feel like a curmudgeon…but when did the house of Valentino move from the epitome of red carpet glam to one selling entire lines in multicolor camouflage? Fendi now offers “Monster” motif items, like a leather backpack with triangular eyesÂ stitched onto the front and a fur mohawk adorning the top.
I just don’t see these things as luxury, and certainly not high design, rightfully demanding a price premium for creativity.
Since living in Milan, attending the MBA, with proximity to Italian luxury brands and applying for internships with them (with no luck so far), I’ve come to know a bit about their internal cultures. That is, their parallels with the general culture of Italy, with which I have my gripes, like: tight grip on the past way of doing things, male- and heterosexual-dominated, low-paying, and general lack of professionalism and/or organization one would expect of such well-known names. These are themes present in Italy also outside luxury and fashion.
But because I try to conclude any critique with some optimism, what is going right (giusto!) with fashion and luxury?
- People like Tomas Maier, creative director of Bottega Veneta since 2001, who happily buries his head in the sands of South Florida to do much of his design work, and ignores any requirementÂ of his brand to be recognizable.
- Brands like Stella McCartney and Eileen Fisher, which put sustainability at their core.
- Classical, conservative players like Manolo Blahnik, still self-financed and committed to the craft.
- Small but impactful entities like Bivio, which allow consumers to shop often and impulsively at a much more reasonable cost.
- This desk lamp by Arpel Lighting, which is gorgeously simple, different, and high-tech. I’m obsessed with it and feel refreshed for lusting after something that isn’t shoes or a bag or a wallet for once.
- Bespoke menswear that is affordable and top-quality, as at SATOR Milano (blog post forthcoming).
This feels like a time of great flux in the industries around fashion, luxury, and retail. While some brands seek to service the extremes of wealth, others have realized that reengaging their base customers, who are many but spend less per transaction, is key to long-term stability.
Data and behaviors in the realm of department store retailing, for instance, is also contradictory. Analysts say there are too many brick-and-mortar stores overall, since so much consumption is moving online, but companies like Saks Fifth Avenue and Nordstrom continue to renovate and open new stores (in Toronto and Houston for the former and Manhattan for the latter), signaling a bullish investment in the future of their business model.
It will be interesting to observe, especially from within. If I manage to get an internship in the field for this summer, more posts on this subject will follow for sure.