Techno Luxury & The “Reality Check” on Branded Social Media

29 11 2009

While I did get to check out the whopping 10 minutes of this week’s Milan Global Fashion Summit that was dedicated to technology, I was really bummed out not to be able to to to the International Herald Tribune’s Techno Luxury conference held in Berlin last week (the Twitter archive can be found here). It was really a trilogy of disappointments, because the conference encompassed 3 of my favorites: the Luxury+Technology factor (which is a given- being surrounded by fellow geeks and listening to Suzy Menkes and other experts talking about my favorite subject for 2 days is like having died and gone to Heaven); the involvement of my favorite Women’s Wear Daily editor, Melissa Drier, who also happens to have significantly influenced the direction of my career; and Berlin, a city I love for many reasons, including the fact that it so brilliantly embraces its history while barreling into the future.

So I’m both green with envy and thrilled to read the tidbits of info that are coming out of this conference, and am desperately waiting for more details (and video feed, anyone?!).

On Monday, Ms Drier posted an article on the conference in WWD, but for those of you without access, I’ll include some highlights here:

Seen as both an opportunity and a threat, technology is now an unavoidable factor to be reckoned with in the luxury market. And whether it’s virtual retailing, social networking or any manner of digital or cyberspace advance, luxury brands no longer have the option of sidestepping technology.

Amen to that! Of course, the day after this piece was written, many of the traditional industry titans were gathered in Milan to ask themselves the fleeting question of whether the internet has a place in luxury. Let’s hope they were all in Berlin last week, and that‘s why the topic barely made a blip on the Milanese radar.

Mirroring my experience with industry leaders here in Italy, both through work and my experience back in business school when I interviewed dozens of CEOs and Marketing Managers of brands ranging from fashion to fine wine and motorcycles to understand their insight into the future of the luxury market, in the WWD article, Suzy Menkes had the following to say:

“The luxury market hasn’t embraced early enough or completely enough the opportunities of new technology,” IHT fashion editor Suzy Menkes told WWD shortly before the conference kicked off. This year’s technology focus was spurred, in part, by her experience of chief executive officers’ discomfort when queried about a company’s online activities. “All I’d get is a grimace, compared to the tremendous enthusiasm to how they embrace a new store,” she said.

I am very familiar with that grimace, but I personally think that a lot of the problem has to do with the fact that a great deal of the luxury-industry managers aren’t familiar with how the web can help them. With all due respect to Mme. Menkes, I believe it’s actually the luxury industry and not the luxury market – the customers are already there – which has failed to fully embrace the opportunities of new technology. Industry leaders don’t seem to view the internet as an ideal place to build a branded environment, tell your story, build a community and engage in cutting-edge customer service, but rather a murky danger-zone.

In an industry where simply knowing your way around Excel is considered a form of wizardry, it’s hardly surprising that the industry leaders might be intimidated by a technology they don’t understand, both online and off. There is definitely one industry leader out there who gets it- Burberry’s Christopher Bailey is revolutionizing the brand through technology in both marketing and internal processes, building a great digital brand presence with the added benefit of a sustainable impact.

“Technology shouldn’t be scary,” stated Burberry chief creative officer Christopher Bailey. Together with CEO Angela Ahrendts, Bailey has powered Burberry into the virtual and digital forefront both online and in-house via the use of blogs, Twitter, Facebook, Burberry TV, its own social networking site, consumer e-brochures, digital look books, digital and e-commerce links to fashion shows, digital design tools, global videoconferencing, motion sensor lights, a monitor and iPod on every desk, Wi-Fi, Skype, a digital photo studio that can get images online in two hours and so on…

And the payback? Connectivity with ateliers and offices has reduced company air travel by 17 percent, digital look books have saved 32 tons of paper, online sales are growing rapidly and Burberry’s broad online presence provides the brand “with a much broader insight into the consumer and you can build more of a story,” Bailey said.

Sustainability, high ROI and social media brilliance… (I’m in love.)

And, speaking of consumer-insight and the building of the brand story, Ms Dryer goes on to introduce FASHIONAIR, a new multimedia fashion social network/e-commerce aggregator (still in the Beta phase) which seems to have the capability of dominating the online fashion forum through brand representation and creating a killer environment where consumers want to hang out. I’m so excited about this project, but it’s going to require a separate entry (most of which I just wrote and erased for the sake of “brevity”).

Back to the Techno Luxury conference… among the attendees were some of the most prominent fashion bloggers, in addition to the editor of The Business of Fashion and founder of the Luxury Society, Imran Amed. I was just reading this article from The Business of Fashion blog about the recent frenzy of staged social media activity surrounding Fashion Week, which was apparently discussed last week at the conference. I say staged because many brands today are eager to appear “on-trend” with our virtual lifestyles, without realizing that 1) it’s not a trend, and 2) you can’t always “fake it til ya make it” and consider yourself a leader.

While the article is definitely worth a full read and a spot in your Evernote files, I thought these two points were especially on-point:

It’s not enough to be seen to embrace social media. Brands and retailers must also build real long-term symbiotic relationships with bloggers, not short-term exploitative ones. Excellent examples of this are Lane Crawford, who from the start have supported and worked with Tommy Ton on their ad campaigns, and Burberry and DKNY who hired Mr. Schuman for his photography skills to appear on their website and in their advertisements, respectively.

Finally, consider the point made by Yuli Ziv, a New York-based fashion blogger who said to brands last week: “If you are looking for sales, make sure to provide [bloggers] the detailed product info, pricing and availability, if  SEO optimization is your top goal – make sure you use the right keywords in your pitch, if publicity buzz is what makes you satisfied – give them juicy stories, and if you simply want love – give them the reasons to love you.” It’s as simple as that.

Without beating a dead horse, it’s critical for brands to incorporate digital outreach into their full strategy, and not just dabble in social media in some back office. Yet for many brand leaders, there just isn’t an understanding of technical capabilities, much less of implementation and execution, and without an acceptance that the future is now (how cliché is that?!), they are going to keep throwing money into one-time-only buzz campaigns with no depth or continuity.

PR Diagram

As anyone who’s skilled in PR will tell you, the goal of a communications investment today is not to create an event that only provides a short burst of attention, but to create something that can grow and spread on its own. Even if it’s a PR event, there should be a build-up and then an follow-through which can maintain buzz over a period of time far longer than the initial event. Web marketing is the same… and I’m struggling to think of a better medium in history that could ever provide such long-term attention after an event, especially when considering digital video and other multimedia and social content.

This is important… and as one of those “digital natives,” I couldn’t have said it better myself:

I regularly hear reports of major online fashion properties who “can’t find the budgets” to hire young digital natives to help them amp up their online content. This is pennywise, pound foolish, especially as these young talents can be hired for a fraction of the cost of major photo shoot or big-time editor.  –Imran Amed

Finally, what strikes me as perhaps the most insightful part of this analysis is a comment left by Allistair Allen of AnOther Magazine. Put simply:

Hire more Geeks.

Thanks, Allistair.

Reading Material:

Defining Moments: Blog Around the Clock | WWD

From Couture to Conversation | NYT

Once Wary of the Web, Luxury Brands Embrace It | NYT

Luxury Brands and the Case for $4,000 Sunglasses | NYT

My Techno: A Designer Viewpoint | NYT

Nick Knight: Techno King | NYT

Gritty Glamor in Berlin | NYT

You can follow the International Herald Tribune Twitter archive of the Techno Luxury conference here.

References & Reading Material from Jefferson Hack’s Presentation:

Fashion Film on Dazed Digital:
——————————
Lady Gaga Exclusive: http://dazeddigital.com/features/LadyGaga.htm
Swarovski State of Grace: http://www.dazeddigital.com/projects/astateofgrace/Default.aspx
Westwood: http://www.dazeddigital.com/Fashion/article/846/1/Backstage_With_Vivienne_Westwood
Alexander Mcqueen A/W 09: http://www.dazeddigital.com/Fashion/article/2656/1/Alexander_McQueen_AW09
Tim Richardson – Transition : http://www.dazeddigital.com/Fashion/article/1742/1/Rotation
Armani: http://www.dazeddigital.com/Fashion/article/651/1/AX_and_Dazed_present_a_film_by_Matt_Irwin
Carolotta Managio – Mutate: http://www.dazeddigital.com/Fashion/article/2349/1/Mutate
DKNY Turns 20: http://www.dazeddigital.com/Fashion/article/1687/1/DKNY_Turns_20
Martin Margiela: http://www.dazeddigital.com/Fashion/article/2367/1/Instant_Instinct

Authors:
——–
William Gibson : http://www.williamgibsonbooks.com/
Marshall Mcluhan: http://www.marshallmcluhan.com/

Social Media
————
Charles Leadbeater: http://www.charlesleadbeater.net/home.aspx
Mashable: http://mashable.com/author/barb-dybwad/

Augmented Reality:
——————
Total Immersion:  http://www.t-immersion.com/
Layar: http://layar.com/layers/
Bruce Sterling: http://www.wired.com/beyond_the_beyond/

Interactive Design:
——————-
Uxbooth Blog: http://www.uxbooth.com/blog/the-future-of-interface-design/
This Happened:  http://www.thishappened.org/talks/

Future Publishing
—————–
Apple Tablet: http://www.wired.com/gadgetlab/2009/09/apple-tablet-everything
Sony Flexible Full Color Paper Screen: http://www.youtube.com/watch?v=k6bkmPjVF-k&NR=1&feature=fvwp
E-Paper
: http://www.youtube.com/watch?v=oq_2LiTxhls

Presentation Formats:
———————
Neil Perkins Presentation from IPA Social October 09: http://www.slideshare.net/The_IPA/neil-perkins-presentation-from-ipa-social-oct-09





Luxury & the Internet: Milano Fashion Global Summit 2009

25 11 2009

Last night I had a brief moment to slip out of the office and into the Milano Fashion Global Summit in the center of Milan, where the industry leaders of Italy were gathered to talk about “Who Will Survive” the Global Financial Crisis, and more importantly, how.  Of course, with most speakers getting between 5-10 minutes on the floor, it goes without saying that there was not much depth (or height, in this case?) to the Summit.

Unfortunately, I couldn’t get away in time to hear Matteo Marzotto speak about his plans for reviving the Vionnet brand, but I was able to make it there towards the end of the day, when one of my favorite topics was being highlighted: Web & Mobile Luxury. However, upon arriving at the venue, I was disappointed to find that the presentation was entitled: “Is Luxury Compatible with the Internet?”

Seriously?! …After writing about this for more than a year, and studying and working in the field for longer, I sometimes can’t believe that we are still hearing this question asked among those considered to be the industry elite.

But I digress.

The presentation was delivered by Jacques-Antoine Granjon, French CEO of vente-privee.com, a members-only online retailer of some 850 brands, typically selling end-of season products through 3-day flash sales. It’s kind of like the European version of Gilt Groupe, with what appears to be a much smaller selection of merchandise and fewer high-profile brands.

The presentation was brief, but in his defense, with only 8 minutes to deliver a message to convince business leaders that luxury and the internet do belong together, he made an entertaining synopsis.

Without further ado….

My Brief Notes on the… Brief Presentation

Following are the notes I took from the presentation. I tried to keep it as verbatim as possible, so read this with a French accent. To begin to illustrate his point, Granjon started with an analogy to online luxury…

Question: What is the most exclusive toy in the world of luxury today?

Answer: The Luxury Jet

  • It saves time & offers control (controlling the when & where in life = freedom)
  • It provides the best service (with highly skilled staff, pilots, maintenance & 1-to-1 travel care)
  • It offers the utmost in innovation & know-how (provided through superior R&D, highest quality materials, technology & design)
  • It is exclusive (traveling alone, in privacy = power)
  • It provides the dream (exploration, imagination)

These five points represent the luxury codes, which the internet can provide for brands. BUT, these codes are not enough for luxury online. There are several more points:

  1. The internet is not just a new format of boutique. It requires a new distribution strategy.
  2. It accelerates growth and visibility of brands everywhere around the world, but only if controlled.
  3. There can be no mistakes, because the internet is permanent, and it takes time to build a presence.
  4. The internet is a world that requires new skills and entrepreneurial determination. In addition to the luxury codes mentioned above, in order to be successful on the internet, luxury brands need the following:
  • Tech skills: must evolve as quickly as they emerge
  • Digital factory: create graphics, coding, etc
  • B2C distribution centers
  • Award-winning customer relationship services
  • Knowledge of online marketing

I see your point, but…

For those of you out there who are, like me, thinking, “That’s IT?” after reading this… yes, that’s it.

They still don’t get it. While it may seem obvious if not insufficient to those of us who eat, sleep and breathe this stuff, I have personally met CEOs and marketing managers of major luxury brands within the last year who are reluctant to start developing a branded web-presence because they fear losing control of the brand image. On the other hand, I have also met online wizards who are eager to take advantage of this lack of luxury presence online, but fail to realize that they need savvy logistics and distribution systems as well as a killer CRM program before even contemplating the notion of luxury e-commerce.

But, back to that presentation. There are two primary associations to luxury that are critical, and are blatantly missing here. When a branded online environment is created, they should definitely be addressed.

The first, and perhaps the most important of all luxury codes is connectivity (this can mean a lot of things, among them the connection a customer feels to what a brand represents, like American Aristocracy with Ralph Lauren, or to a brand’s history of jaw-dropping elegance and sex, which is what a customer is buying in a modern Vionnet dress). Some people will call this “history,” but I think it’s also important to indicate that the luxury customer is  buying into a community, connecting that history with their own.

Most luxury brands have a profound history, and if they don’t start with one, it’s often fabricated, as was the case with the Tod’s brand under Diego Della Valle’s brilliant marketing strategy (he had shoes from the new Tod’s brand superimposed on famous images of Audrey Hepburn and other classic icons). Just as the luxury jet connects us either to a location from our past, or to an exciting future, so does the luxury brand. There is a story behind it- something both intimately familiar and excitingly new. The internet is the perfect vehicle to convey that history, to tell the story about how a particular brand developed and why that brand is loved, and to build a connected community of “lovers” around it, like a family that shares the same values.

Finally, an unfortunate association to luxury that is certainly present with the private jet, and a term which occurred in my graduate research on the topic more than any of the other luxury codes, is waste or excess. Happily, the internet can help to eliminate waste in so many ways, from streamlining the supply chain on the back-end to providing the transparency that allows consumers to understand and choose what tradeoffs they are willing to make between such hot points as carbon footprints, “Made in…” issues, labor conditions, and production materials, versus price and quality.

Moving on to the other points of the presentation, I disagree with a couple of things:

  • His point: The internet accelerates growth and visibility of brands everywhere around the world, but only if controlled.
    • My point: The internet accelerates growth and visibility of brands everywhere around the world, regardless of whether or not the brand controls the message. It’s always better to establish your own online presence than to entrust it solely to outsiders and amateurs, who could accelerate brand growth and visibility in an entirely undesirable way.
  • His point: There can be no mistakes, because the internet is permanent, and it takes time to build a presence.
    • My point: No one is infallible. Tell a brand manager that she has to be perfect in every way on the internet, and she will never build a presence there. The beauty of the internet is that you can address mistakes right away: you apologize, publicly correct the situation, and in the process it’s likely that you actually increase your fan-base because people trust you.

So, for those of you out there who are fashion/web geeks like me, take heart: we’ve got a lot of fun work to do!

And, by the way, I noticed that the Vionnet site is not developed. If anyone knows Matteo Marzotto, let him know that I’d love to help!





The History of Fashion Diffusion in Pictures

9 06 2009

In the spirit of Dan Roam’s book, The Back of the Napkin, which Guy Kawasaki and I have been tweeting about today, I decided to see if I could put into pictures what I’ve been describing in this blog. Turns out, it’s pretty fast and I had more fun with markers than I’ve had since I was little! So here’s my first attempt (thanks Dan and Guy!):

Fashion Cycles

Fashion cycles can be long (for classics) or quite short (for fads). Most items that are introduced into the fashion world barely register as a blip. If an “opinion leader” picks up the look and it gains a steady following, a trend is born. It becomes a classic if it sticks around for a while without losing followers. If it never gains substantial momentum, we see a fad. (Yes, that is my Anna Wintour stick figure for the Opinion Leader.)

Fashion Cycles

Fashion Diffusion

Throughout the history of fashion, different Opinion Leaders have prevailed and the means of transmitting popular trends throughout culture have shifted accordingly.

History of Fashion Diffusion

Those trends that do register now have more followers worldwide than ever before, and that is due to the system of fashion diffusion. This mass following makes it difficult for the fashion system to keep up, when it has to both churn out new looks every 4-6 months and produce enough items to supply a global market.

The every-increasing speed of fashion diffusion has led some to question the future of the industry, and to question whether or not high-end fashion can be considered a part of the luxury industry today (as luxury is typically defined as something unique).

“It has reached a period where fashion moves so fast that it is detrimental to the fashion business – people not buying because they know in five minutes they’re not going to like it any more, because it won’t be new… It’s too fast. Either it’ll keep on getting faster, or we’ll get fed up and stop buying.” ~ Tom Ford in Pop Magazine, SS 2002

What Now?

We have to up our game and evolve the fashion business model again. New systems of diffusion have been transforming the fashion industry since its birth, and the digital revolution is no different.

I think this is actually a great opportunity to bring fashion back into an art form by using digital communications to bridge the gap that now exists between the designer and the consumer and by using the medium to demonstrate the more creative processes of the design houses, which are limited on the sales floor by mass market constraints. We’ve got a long way to go…





Armani: King of Italian Fashion

2 06 2009

Giorgio Armani and the business he developed provide the perfect example of the evolution of the Italian Fashion System from the perspective of the designer. He began as a pure designer, and then gradually acquired various production facilities into his company on his route to becoming a fashion and lifestyle powerhouse.

The Man

Giorgio ArmaniThe following is a general timeline of the designer’s life and business achievements through the end of the 20th Century:

1934: Armani is born in Piacenza, Italy, where he grows to study medicine

1957: Armani abandons his medical studies and begins work as a visual merchandiser and buyer for Italy’s leading department store, La Rinascente

1964: Armani begins working for Nino Cerutti, where he learns tailoring and materials in menswear

1970: Armani and Sergio Galeotti establish a freelance fashion design studio, doing contract design for various manufacturers including Gibo, Sicons, Boulevard and Montedoro. Armani learns what works and what doesn’t work for industrial production.

1974-5: The first Giorgio Armani menswear collection is produced under license from GFT, followed by his first womenswear collection. Jackets and evening dresses were an instant hit.

1975-82: Armani establishes vast line extensions, including Giorgio-Armani-Borgonuovo 21 (men’s and women’s); Giorgio Armani-Le Collezioni (men’s worldwide and women’s N. America); Mani (men’s N. America and women’s ROW); Armani Junior; Armani Underwear, Swimwear and Accessories; Emporio Armani; Armani Jeans; and, Armani Bridal Collection

1982 TIME cover1982: TIME Magazine dedicates a cover to Armani, who is the first designer to be featured on the cover since Christian Dior

1984: Armani ventures into brand extension through the launch of Armani Fragrance, the license of which is ongoing with L’Oreal

1987: Armani continues brand extension in Armani Eyewear through a licensing agreement with Luxottica, which was canceled 3 years ago and moved to competitor Safilo

1991: Armani offers further brand extension on the US market through the launch of Armani Exchange

1990-2000: Armani practices business consolidation and vertical integration by acquiring production facilities and direct retail ownership, and establishing additional Joint Ventures in production and distribution

2000: Armani launches his first online store, www.armaniexchange.com, on the US market, as well as his line extension into housewear with Armani Casa

2005: Among his numerous line extensions, Armani launches Armani Prive, his first haute couture collection. He provides live online streaming of the collection’s first runway show via MSN.com

2006: Armani gets ahead of the game in Corporate Social Responsibility by joining (RED), an organization committed to fighting AIDS in Africa

2007: Armani launches another online store – this time for the Emporio Armani line – on the US market, along with associated blogazine and soundtracks at www.styletraxx.com

2008: Armani launches one of the first online luxury stores for a singular brand on the European market with Emporio Armani

Armani’s Brand Signifiers

Roots

In the 1970s and 80s, as Armani’s sisters and female friends were heading into the business world, he noticed a common complaint that there was no practical business wardrobe available for women. Since Armani was coming from menswear and tailoring, he took the men’s jacket and deconstructed it from a rigid and straight form into a soft form, fitted for women. This seemingly gender-ambivalent form was exactly what professional women were looking for. Now with businesses in men’s and womenswear, Armani continued to develop his brand through product and line extension, always focusing on his brand codes and the roots of the brand for consistency.

Female Prototypes

Marlene DietrichArmani, like many designers (and marketers), had an image of the ideal customer whom would wear his clothing, and later buy his additional products. Actresses Marlene Dietrich, Lauren Bacall and Greta Garbo were referenced for their supreme confidence and understated beauty bursting with sexuality, in addition to more modern actresses such as Lauren Hutton, whom he dressed in American Gigalo, along with Richard Gere.

Of course, his ideal woman is also very tall and slim. Nothing typical there, right?

Home Town Colors

milan's galleriaLike Dolce & Gabbana to Sicily, Armani drew inspiration from the business center of Italy, the City of Milan. In addition to the classy dress code of the Milanese, Armani used a color pallet derived from the industrial, polluted, Gothic city.

He incorporated the drab colors of black, white, blue, grey and beige (and his favorite blend, dubbed “greige”) to create a distinct selection that would unify his various product categories and lines.

In later years, Armani would take more than influence from another adopted home: he used a chemical composition from the Obsidian native to the Italian island of Pantelleria, where he has long kept a vacation home, for his cosmetics line.

An Evolving “Core Business”

Brand Extension (Moving into other product categories- remember this began in France)

Over the decades, Armani has amassed capabilities for the design, production and retail arms of his company, allowing the core of his business to expand while maintaining control over the total brand image. Throughout the years, brand extension has grown the company as follows:

armani chocolate1975: Ready-to-wear (RTW)

1980s: RTW + Accessories

1990s: RTW + Accessories + Men’s Accessories + Home

2000s: RTW + Accessories + Men’s Accessories + Home + Home Expansion + Watches & Jewelry + Hospitality (Hotels & Resorts) +Restaurants + Nightclubs + Chocolates (!)….

Line Extension (Moving into other retail channels, target markets or price ranges; this began largely with Armani)

Armani has developed more than ten different lines under his brand. Some have been very successful (like Emporio Armani, which has the same target market as Dolce & Gabbana or Gucci), while others were less successful (Mani, which was a lower-priced line, now essentially replaced by Armani Exchange). Below you will find a graphic I made to illustrate the quality/style differences in the main Armani lines, based on a discussion I had with the marketing manager of Emporio Armani.

Armani brand architectureContesting the King

As Armani developed his brand structure, he continued to add only lower-level lines to his portfolio, with his original Giorgio Armani line (ready-to-wear) at the top. In order to avoid diluting the line too much with the constant reduction of quality, he finally added his haute couture line in 2005 as a balance.

While Armani is the uncontested master of Italian brand and line extension, and there is no question of brand uniformity, he has had a challenging time conveying the unique characteristics between his lines, particularly when dealing with certain product categories.

For example, would you know the difference between the two lines, based on these ads? For some, the distinctions are vague. (For others, not so much!)

ea shades

ga shades

In addition, Armani has had problems developing bags and shoes. He never quite nailed the category’s design, and didn’t find a good licensing partner to assist him. As he has acquired many other production capabilities and know-how from former licensees, this gap in ability presents a major set-back. In the future, with many high-end designers depending on accessories sales, Armani may suffer greatly.

Founder’s Dilemma

Additional problems Italy’s reigning King of Fashion is facing is known as the “Founder’s Dilemma” – how to hand down the brand after retirement, without losing the relevance of the brand. This si a typical challenge seen in businesses where the founder is the life and personality of the brand. As we have seen, many of the French brands have achieved a successful brand transition through rock-star designers with their own distinct personalities (such as Lagerfeld at Chanel, or Galliano at Dior), while other brands have a quieter approach (Maison Martin Margiela silently designs for Hermes).

Financial Independence

As the financial burdens inherent to the fashion industry continue to rise, requiring constant innovation both on product design, business and communication strategy, Armani remains the only major fashion player to be the only shareholder of his company. He has never even taken out a bank loan! This has afforded him total control over his business and design decisions, however, one must question what will happen when he retires or the economic downturn and extensive company expansion catches up with him.





The Italian System for Fashion

2 06 2009

1950s ferdinandi

Italian Fashion Industry – Cycles of Development

Though some could argue otherwise, according to the experts in Italy, there are 4 primary phases or cycles of Italian fashion industry development.

  1. 1950s-60s:  Industrial production systems are developed after WW2
  2. 1960s-70s:  Economic and social change emerges, apparel system reacts
  3. 1980s:  Democratization of fashion and surge of “Made in Italy” around the world
  4. 1990s:  Brand concentration, financing revisions and mergers & acquisitions

The 1st Cycle: 1950s-60s

Prior to industrial developments in Italy, which occurred only after WW2, 90% of Italians were rurally employed. The elite acquired their luxury products from France, and Italian goods were considered “poor”. Most higher fashion was reserved for men, as women did not have as many black tie events to dress for.

At the time, the fashion industry in Italy was largely non-existent. With the high-end consumers buying their fashions from Paris, or having copies made by local tailors, some industrialists noticed a gap in the market supply, which called for functional, durable, high quality garments. To begin to meet this demand,  Italian company Gruppo Finaziario Tessile (GFT) took the first initiative to measure a wide sample of the Italian population to create national sizing system.

Italian Apparel Finds a Niche

giorgini's la sala bianca show of italian designs for the us market, 1951In 1951, an Italian importer for American goods, named Gian Battista Giorgini, realized the the US market was also ready for something new and different from that offered by France. They had mass-produced garments, the elite could buy haute couture from Paris, and yet there was nothing in between. Giorgini used his US contacts for market research and development, and began to organize Italian designers, whom he encouraged to abandon their French knock-offs and pursue an affordable Italian style. With new production technologies from the States being imported into Italy as part of the recovery plan, and a large skilled workforce of women to operate the machinery, GFT and other Italian manufacturing firms such as Marzotto and Lebole developed the production end of the industry. As many of top producers had a background in men’s tailoring, there was still a strong industrial concentration in menswear, but the mass-production capabilities in the States would find their way into Italian womenswear production soon enough.

You could summarize that the beginnings of the Italian Fashion Industry were characterized by:

  • Large manufacturing facilities
  • Economies of scale (primarily the US market)
  • Strong specialization

The 2nd Cycle: 1960s-70s

girl_trioIn most cultures, up until this point, children and adolescents had dressed as their parents dressed. In the States and the UK, pop culture shifted in the wake of the Baby Boom as young people struggled to develop a new identity and used fashion as a means to demonstrate their separation from the values of their parents’ generation. (England was becoming a hub for the new youth culture, inspiring fashion and trends around the world, in addition to American hippies.) Women had entered the workforce in increasing number, and no longer wanted to dress as housewives. Further, as there were fewer and fewer occasions for dressing up, people began to seek more informal clothing. Trends had begun to be driven by market needs, as opposed to the stylistic direction set in Paris.

Big Business Gets Smaller

woolworths union strike 1970At the same time, there were many social and union conflicts that helped create increased labor costs in developed countries, resulting in a surge of apparel imports from developing countries. The combination of these elements together with the oil crisis of 1974 and the Italian economic crisis of 1975 caused the big manufacturers to lose their hold on the mass market. There was no longer a one-size-fits-all model for fashion (and that was only the beginning, as we now know!).

As the big manufacturers in the States and elsewhere had maintained large scale standardized production even after consumer demand had decreased and diversified, the labor costs in Italy were falling and new small/medium-sized production companies were forming. Manufacturers began to outsource production in Italy, and even France began to rely heavily on the cheap yet skilled Italian labor pool for their pret-á-porter lines.

Designers Respond to a Changed Environment

1979 versace for genny adA new generation of designers emerged in Italy, capable of working with industry partners to produce collections that were fashionable and more affordable than their French counterparts. (Consider Armani & Cerruti, Versace & Genny, or Soprani/MaxMara.) These designers had relationships with market-savvy business leaders, who ensured that the Italian form of fashion would meet the demand of developed markets. The Italian Fashion Week cycle, following on the heels of Paris, became increasingly popular to buyers and press who saw the potential of Italian fashion’s middle ground between haute couture (France) and mass fashion (the US).

In summary, this cycle of development in the industry of Italian fashion can be characterized by:

  • New consumer values and lifestyles (youth, rebellion, rock, women in business, etc)
  • Market segmentation (no longer one-size-fits-all)
  • Increased demand for informal wear
  • The decrease of influence from Paris and haute couture
  • The increase of influence from London and the youth culture

The 3rd Cycle: 1980s

DynastyCast-Season6-1985-1986This was the decade where the world found Italy.

By the 1980s, Italy had little competition from other developed countries for quality textile production. However, developed markets were building a habit a rampant consumerism, with a renewed interest in fashion. The Italian style had gradually been gaining consensus, especially in the States, which had become the largest consumer market. Meanwhile, Italian industry was looking for new formulas to stay (or get) on top of the fashion game.

Total Look, Branding & Hollywood

A new type of relationship began to form between industry and the designers, which was more a partnership that a contractual business relationship. With the craze for “Total Look” taking the fashion scene by storm, designers began to throw their labels onto every conceivable product in their quest for notoriety and brand building.

Internationalization, mass media and the help of Hollywood brought Italian industry onto the main markets. For example, Armani exclusively clothed actor Richard Gere for his role in American Gigalo, bringing the brand notoriety throughout the States and abroad. You can see an early example of product placement with Armani’s menswear collection in the closet scene of American Gigalo, in the clip below:

Love for Licensing

Licensing agreements had become the method of choice for labels to expand their designer names into new product categories (including second and third lines, kids wear, athletic wear, homewear, eyewear, fragrances, etc.). The cooperation between industrial companies and designers, mainly based on these licensing agreements, was the key success factor to growth for the Italian fashion industry.

Fashion companies moved from product-specialization to develop multi-product capabilities through their licensees. In addition to manufacturing, licensees were used to handle distribution and retail activities for the licensor brands, while the brands in turn provided the design concept, the brand name and image.

Throughout the 80s, much of the Italian fashion system depended on licensing agreements for growth and for specialized production (after all, what does a ready-to-wear designer know about producing furniture or fragrances if he can’t rely on experience professionals to help him?). However, as the brands amassed capital, and learned from their licensees about best (and worst) practices, it became clear that licensing could be equally beneficial and detrimental.

Brands like Gucci were widely diluted through numerous licensees, all whom had a different idea of what the brand represented and how their designs should appear and retail. On the verge of bankruptcy, they needed to build capital and buy back their licenses, in order to impose a universal brand strategy throughout their comapnies.

Within the decade, four different groups of players on the Italian fashion scene had clearly emerged. They were:

  1. Industrial companies (GFT, Marzotto, Miroglio)
  2. Small to medium-sized industrial companies with product orientation (Max Mara, Zegna, Genny, Aeffe, Ittierre)
  3. Designer/entrepreneurs who both design and produce (Missoni, Mila Shon, Mario Valentino)
  4. Pure designers who take designs to production firms (Versace, Armani, Ferré, Moschino, Krizia)

By the end of the 1980s, Italian designers had entered into a new system of growth:

  • Most remained family industries (Missoni, Prada, Versace, etc)
  • Designers maintained direct control over their “first lines” (the highest line in their brand’s “food chain”  –   typically ready-to-wear)
  • Brands developed second lines and brand extension, typically under general artistic direction of the original designer and through licensing agreements
  • Brands developed direct control of distribution, taken back from licensees
  • Focus was kept on retail, to create a unified harmony across a branded retail outlets

You could therefore conclude that the Italian model for the fashion industry, at this point, consisted of designers sketching models for the primary line, with manufacturing and additional product development farmed out to licensees, with the finished products then brought back under internal control for distribution and sales. Just ten years prior, licensees had handled everything but the initial design, brand name and image direction for the Italian brands.

Unlike France, Italy typically relied on lower-end textiles – not fragrances and accessories – to make the big money.

The 4th Cycle: 1990s

Versace w supermodels 1991 guardianTowards the end of the 20th Century, the fashion system was undergoing many changes. The fashion system had become increasingly global in supply and demand, affecting Italian, French and American firms together.

versace-couture 1994New players were entering the field; for example, the luxury conglomerates. New market segments were being created as well, including the bridge segment, which spoke to a market beneath ready-to-wear but above mass fashion. Entry barriers into the industry had become increasingly higher, with great investments required in marketing (fashion show and advertising extravaganzas, parties, supermodels, etc) and retail. Retail itself was undergoing change through the introduction of the lifestyle concept, pioneered by American designer Ralph Lauren.

Fronting the Tab

In order to meet the new financing needs of the fashion system, many companies opened on the stock exchange. With this move came a market rush by the luxury conglomerates to acquire and reposition the Italian brands with marketable heritage. Much like the French houses before them, Italian brands were gradually having to transfer creative direction from the original designers onto new creatives.

As for the four groups of players on the Italian fashion scene, the 90s saw the following changes:

  1. Industrial companies: begin to acquire brands – typically from past licensors, launch their own brands based on their acquired capabilities, or develop retail strategies (Aeffe/Moschino, GFT/Valentino, Exté, Max Mara, Zegna)
  2. Designer/entrepreneurs: control production and distribution processes with the purchase of production facilities, utilize very few licenses (Versace, Dolce & Gabbana, Armani)
  3. Multibrand Groups: conglomerates acquire brands and designer companies (LVMH, Gucci Group, Prada)
  4. Pure designers: sell their companies to industrial or multibrand groups (Jil Sander, Valentino)

In “Short”

The Italian fashion industry really took off after WW2 with the help of technologies provided as part of the Recovery Plan, the entrepreneurship of business and manufacturing leaders who saw an opportunity, a newly-urbanized population of skilled textile workers, and a burgeoning demand for quality apparel and ready-to-wear.

The first phase of industrial fashion in Italy was made by a few concentrated, large-scale production facilities. As the economy turned south and many new market segments emerged, big business lacked the flexibility to diversify their business model, and small to medium-sized manufacturing companies took the lead.

Designers and their business partners (typically family) recognized the changing market as an opportunity, and developed partnerships with manufacturers who had once contracted work to them. Under this model, the designer became responsible only for the initial designs of his collection, while his business partners managed the brand and image, and licensees took care of the rest – from manufacturing through distribution and retail.

By the end of the 1980s, many brands had gained the capital and the knowledge base to buy back their licenses in specific product categories, as well as their distribution and retail systems. Some were able to purchase their own manufacturing facilities. The typical model now had the design company controlling the initial designs of the highest line and whatever licenses they had brought in-house, as well as their distribution and retail. Manufacturing was still typically licensed out.

During the final years of the 20th Century, the costs of running a fashion business had exploded with a need for mass marketing. Many companies went on the stock exchange to build capital investment. While some brands took control back from their licensees, others were acquired by luxury conglomerates. Some manufacturing leaders developed their own lines or acquired brands they had once licensed production rights from.





Dior & LVMH: The French Business Model for Fashion & Luxury

30 05 2009

Christian Dior (1905-1957) was born in Normandy, France, and in his short 52 years managed to revolutionize the business model for the fashion industry. Years later, his company would become a key holding of Bernard Arnault’s LVMH, the conglomerate that revolutionized the business model for luxury.

There are many available histories of Dior himself online, so let’s dive into the business side of things.

The Brand’s Origins

As many are well aware, Dior became famous with the New Look after WW2, and was integral to bringing French fashion back to the forefront after the occupation years.

Dior was the first to exploit his name with licensing agreements, which at the time tailored products to local markets and offered unique price per value products at varying price ranges. (It is very difficult to do this today- a company must maintain consistency across all markets because information is so easily exchanged over the internet and worldwide travel. People don’t like to see plastic pens being offered by their favorite luxury brands in certain markets when they are paying the big bucks for couture by the same brand at home. If products are to be specialized for separate markets, they must remain within the same quality and price range as all products offered elsewhere.)

new-look-diorDior was the first to give a name to each collection, alluding to future generations of designers, both high and low end, who name their collections based on an inspirational theme. He used garment models and made spectacular fashion shows, which are of course used by everyone today (we’ll see how that keeps up as carbon footprints and insane exchange rates mixed with a faltering economy effect travel plans).

Many copies of the New Look and subsequent collections were made around the world, proving that one man could influence the style of the world while isolated in his studio. This is no longer possible today.

From Single Brand to Luxury Conglomerate

LVMH CEO Bernard ArnaultBy 1984, as a result of diminished stylistic value after the death of the brand’s namesake and a brand image spread thin through various uncontrolled licensing agreements, Dior was on the verge of bankruptcy. Bernard Arnault took a major stake in the textile group Boussac Saint Fréres, to whom Dior belonged, and converted it into the Christian Dior S.A. Holding.  Just 5 years later, in 1989, the holding became a major shareholder of LVMH at 42%. Arnault had become the president and chairman of the largest luxury group in the world in a number of years. Christian Dior was divided into the CD Couture Management Group and the LVMH management group for a brand turnaround.

Reviving Dior

ferre for dior 1991-2Because the French luxury brands are typically older than those borne of Italy, the UK and the US, they have already faced the brand transition that must occur if a brand is to continue after the death or retirement of the founder (“founder’s dilemma”). We have yet to see examples of this in the US market, with a few notable exceptions, but in Italy, two prominent houses are currently undergoing the transition this year: Valentino and Gianfranco Ferré.

dior by john galiano 1997It was, in fact, Gianfranco Ferré who was placed as the Art Director of Dior in 1986, however, he did very little to move the brand forward. After understanding that fashion needs a wow-factor, the company wisely placed wild boy John Galliano at the helm of Dior in 1996. Galliano had a way of making headlines, and advanced through the company as quickly as he helped bring Dior back to the forefront of the fashion scene. He began as the Head Designer of women’s haute couture and ready-to-wear collections, and became the Art Director for all Dior women’s brands by 1999.

John GallianoGalliano created a buzz through his design of outrageous characters on the runway, making his fashion shows a mix of art exhibit and theater. However, in addition to revamping the look of the brand through his couture creations, he also focused on beautiful ready-to-wear and accessories and cosmetics (the real money makers today). This is where the real success of the brand’s renewal came from.

CD fragrancesAs you can see by looking at the CD and LVMH websites, a great deal of the marketing budgets are set aside for fragrances (64%) and only a small portion for fashion (6%). Today’s Christian Dior is therefore not so much a house of haute couture as it is a part of the luxury cosmetics industry. However, without the built-in marketing genius of Galliano and his couture shows, all other lines and products under the brand would be devalued. He is needed to sell the dream.

Conglomerates: The Modern French Model for Luxury

Today the French model gives complete freedom to designers in high fashion only. In the end, even the wildest designer must be able to design the bag of the season and design ready-to-wear that is in fact wearable. This is often done in collaboration with marketing and merchandising teams.

lvmhLuxury conglomerates such as LVMH allow line and brand extension, as well as brand-buying to serve various levels of clients and all the needs of the high-end clients. LVMH carefully manages brands to have the correct balance of cash cows and strugglers. They also work to ensure that there is limited collaboration between brands within the holding to limit the dilution of brand identities (this includes dedicated production staff per brand, often within the same facility). When buying a tired old brand, the holding company must also decide if it’s worth the time and effort needed to revamp the brand.

A Sustainable Element

edun logoThe most recent brand acquisition of LVMH is the ethical fashion label Edun, brainchild of U2’s Bono and his wife, Ali Hewson (LVMH took a minority stake, estimated at 45%).  This brand has been at the forefront of sustainable fashion and advocacy, and has implemented guerrilla marketing tactics and pop-up stores recently. It also provides a great compliment to the LVMH portfolio, at a time when consumers want their purchases to mean something beyond frivolity. Caring is the new black, and philanthropy is beginning to represent status at an increasing rate. One would hope that the brand’s acquisition will not hamper their youthful marketing or ethical initiatives. There is every reason to believe that the brand will be nurtured to continue in this way, in spite of the lackluster economy.

At this month’s annual shareholders’ meeting, Chairman Arnault announced that first-quarter revenues gained 0.4 percent to 4.02 billion euros, or $5.26 billion, and added “April continues this trend, with a very slight improvement” [WWD] Louis Vuitton continues to be the group’s biggest cash cow, continuing to grow with their no-sale-ever policy. The profits from the booming brands are used to further nurture the newcomers, and those brands whom might be struggling.

For me personally, coming from a background in sustainability, it is inspiring to see this recent development within LVMH. The idea that the primary example of French luxury, the powerhouse of LVMH, has made a commitment to advance Edun also suggests that the holding will create synergies between the ethical brand and it’s other holdings. Perhaps the future of luxury may be a sustainable one, after all.

By the way, the LVMH site has included some information on the main page about CSR activities the holding participates in.

A word on digital marketing (because I must): the LVMH site also hosts an online magazine, which is a nice start, but it proves *visually non-engaging* at best. Keep working, guys!





The French System for Fashion & Chanel

24 05 2009

The following is a case study I developed, investigating how one of the leading French Luxury companies fits into the proposed business model framework.

I’m especially interested to see how CHANEL will perform in the digital environment, since they have taken the initiative to dip their toes in the 2.0 waters. If anyone has any thoughts on this, I’d love to hear them!

Some links:

Lagerfeld’s Twitter Feed

CHANEL’s Facebook Fan Page

CHANEL’s Official Webpage

Here is my presentation: