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Name of the event : Management of Fashion and Luxury Companies
Date, time, location : Online
Brief description of the content:
This course will examine why fashion and luxury companies have to
operate under some of the most unique conditions in the business
world. Not only do they have to predict what consumer’s preferences
will be but also shape them in their view and then market themselves
as fitting those ideals. They have to stay modern whilst also nodding
to the previous history of style and fashion, staying innovative but
still timeless.
There are 5 modules which discuss what is fashion, business models,
stylistic and brand identity, communication process and e-commerce.
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Reflection on learning objective 1: ‘cognitive skills’
Week 1: What is Fashion?
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What does fashion really mean?
Understanding this question is fundamental in order to understand what makes
fashion companies so successful, and why the fashion business logic is different
than any other industry’s.
Ideas about fashion and definition:
 To me fashion is creativity.
 To me fashion is a business.
 I think fashion is a format born to create trends.
 To me fashion is being different.
 Personally, I think that fashion is a way to show who you are.
 I think for me, fashion is the ability to create styles that last.
 I think fashion is the ability to feel comfortable with yourself and with your
personal style.
 Fashion is a way of expressing inner beauty.
 For me fashion is about self expression and it is very similar to art I think.
 Fashion, for me, is a way to express your personality.
 Fashion is what we want other people to believe about us, so it's a sort of status.
 Creativity and also business; trends, something that most of people share, but it is
also a way to express our personality.
 As for all important complexes it seems that everything and their opposites could
be said.
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No consensus about what fashion is.
It can be about glossy magazines and fashion shows, but also about creating jobs
and wealth.
It is about designers, but at the same time, everyone can create their own fashion.
Now we must try and identify what makes a company fashionable or not. In order
to do so let us ask a little help from some friends: Very important people that
throughout centuries have elaborated on what fashion is.
Philosophy:
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Main philosopher Seneca; 2,000 years ago he wrote, “We live not according to
reason, but according to fashion.”
Somehow Seneca created an association between fashion and emotions.
Fashion is not just about functionality.
We do not dress ourselves just because we need to, we buy into fashion because
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we desire so.
Thanks to Seneca we understand that this is because fashion is about impulse and
desire.
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Geoffrey Chaucer, an English poet: “There's never a new fashion but it's old.”
Fashion is a balancing act between the past and the future.
The majority of the time, trends refer to the previous decades. One season is the
salon atmosphere of the 50’s, next season is the flowers of the 70’s, then the disco
glitter of the 80’s and so on and so forth.
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What makes a company fashionable is its capability to take inspiration from the
past, and then to give this past a contemporary flair.
You need a heritage, you need an archive, but then you need to adapt the product
to the contemporary needs.
You need to use different fabrics: lighter and more comfortable. You need to
evolute it, maybe not revolutionize the shapes of what you are doing.
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Oscar Wilde: a poet, a writer, and as well, a very elegant gent. He wrote, “Fashion
is a form of ugliness so intolerable that we have to alter it very six months.”
He gave the perfect explanation of a very important theoretical concept; the one of
planned obsolescence.
Fashion companies succeed in persuading us to buy new products every six
months because they are able to associate the idea of change not to the physical
usage of the product, but to the idea that aesthetics should vary accordingly to the
new season because there are new aesthetics and we should express our
personality in a different manner.
The artificial shortening of the product’s life cycle is what explains why fashion
companies are able to sell more and to sell better than other industries.
So, to have an increase of their revenues and profitability in the short term and of
the brand equity in the long term.
Coco Chanel, one of the most talented designers ever, a very inspiring powerful
woman and yet, a very successful brand.
“Fashion is not something that exists in dresses only. Fashion is in the sky, in the
street, fashion has to do with ideas, the way we live, what is happening.”
Coco Chanel understood that fashion as a business logic is a treatment that can be
applied to many different industries.
Fashion is not only clothing, and by the way, not all clothes are fashionable.
Increasingly, fashion companies do not only sell products, they sell experiences.
So they open hotels, clubs, and many other different territories.
The possibility to extend the brand into many categories is what makes these
companies very profitable.
Fashion as a treatment is not limited to a specific price range.
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Fashion is a concept that applies from the luxury at the top of the market down to
the mass market.
“Fashions fade, style is eternal.” Yves Saint Laurent, another very talented
designer made the difference between a trend and a style.
A style can be defined as a permanent combination of materials, colors,
proportions, and occasional views; as such it may apply to many different
industries. For example, in art we can differentiate between Baroque art and Pop
art.
In the car industry there are station wagons and city cars. In the clothing industry
there is the minimalism style: whose designers prefer geometrical-clean shapes
and understatement; and there are other designers that are more in the exuberant in
their style, more into showing off and more characterized.
Somehow those styles stay the same for a very long time. They become
fashionable just in the specific moment in which they are adopted by the vast
majority of people.
Style is always there while trends are short-term and because of that they change.
Now, a very important challenge for the fashion companies is that on one hand,
they have to build their own, unique, recognizable style.
They need to have a personality, have some stylistic cause the customers will
forever associate with the brand whereas on the other hand, in order to stay
fashionable, they need the style to evolve.
The challenge is to be able to adapt and filter the trends throughout their own eyes,
throughout their own personality. If you want to be fashionable, you definitely
must be contemporary, you must be relevant for consumers as they are today.
“Fashion is like a fruit, you couldn't eat it a day before and you can't eat it a day
after; it is just about today.” Albert Elbaz said and it very clearly explains why
fashion is about today.
“I don't design clothes, I design dreams.” Ralph Lauren, an American champion in
brands, he clarifies the difference between the product, the company selling, and
the brand the consumer is buying.
In his words, fashion is about youth, it is about aspiration, it is about change. It is
about creating emotional worth people may refer to.
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Week 2: Business Models
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In order to understand business models, we firstly need to understand, which are
the different market segments, in which fashion and luxury companies compete.
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The most common criterion to segment a market is price.
This leads to the so-called fashion pyramid, which is the reference for everyone in
the industry to position its brand.
Emphasis on brand more than company, because the same company may have
different brands; like Armani having Prive, Giorgio Armani, Collezioni, Emporio
Armani and Armani Exchange.
Different brands occupy different market segments in the fashion pyramid.
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The fashion pyramid identifies five price segments.
On the top we have couture, then we have ready to wear, diffusion, bridge, and
mass market.
The higher on the pyramid, the higher the price gets, but also greater levels of
creativity and quality and therefore, the higher the value proposition that is offered
to the customer.
The top of the pyramid, thiis segment is the so-called haute couture which means
high fashion. Here we find dresses mainly for special occasions such as parties
and ceremonies, with prices that are outrageously expensive. So they may go from
20,000 up to 50,000 euros or dollars.
So you will wonder, who is buying those expensive dresses, and why are they so
costly?
Who is buying them? Very few people. Today there are very few customers that
may afford to by haute couture dresses, and those are the very few customers that
can have the opportunity to participate in the events of acquiring those fabulous
pieces of art. However, we still have customers for haute couture and we also have
many celebrities that for the red carpet, probably don't buy the dress, but receive it
as a nice present from the company. And by doing that, they also promote the
brand.
So few customers; but products that are very important in order to build the image
of the brand. It's thanks to haute couture, that companies really sell, the dream.
You will see in a magazine, on beautiful celebrities, a super-beautiful dress, that
maybe you cannot afford, but because of that, then you will buy from the same
brand lipstick or sunglasses.
This is the reason why fashion and luxury brands keep haute couture, because it's
where they can really express the dream, the magic. Why are the dresses are so
expensive? Because they are made-to-measure pieces, so they are done on the
body measurement of the woman that is going to wear them.
There is a maximum level of craftsmanship. There is the use of most precious
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materials. So, as I said before, they’re pieces of art. So to summarize, haute
couture is small business, but a very important image builder.
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A step below haute couture, we have the so-called, ready-to-wear. In French prêtà-porter. This is a market segment that was invented by Italian companies, when in
the 70s, they started combining the creativity of high fashion with the
industrialization that was granted by our textile pipeline.
So, in terms of price range, ready-to-wear is, from 3 to 5 times the mass market
price. So the dresses are still expensive but you can take off a zero, so maybe you
won't spend 20,000 euros for a dress, you’ll just spend 2,000. And they are
industrialized, so they're not unique pieces.
Yet, here you have a lot of creativity, most of the time you have “made in Italy,”
or “made in France.” And, the ready to wear is where the designer expresses
himself throughout the fashion show. Ready-to-wear is also more widely
appropriate in terms of occasions of use.
So while haute couture is especially suitable for evening occasions, ready-to-wear
goes from daily, work wear occasions, to very important parties and other special
events.
But companies, we have to remember that fashion companies are companies, and
need to grow. So, they need to expand their market range.
So, what Italian and American brands did, especially in the 80s, was move from
the top of the pyramid, the ready-to-wear, down to market ranges that were more
affordable.
So they introduced the so-called second young lines that occupy the segment that
is named diffusion. For example, Versus for Versace, Marc for Marc Jacobs C for
Chloe, DKNY for Donna Karen, and so on and and so forth.
So, those levels are relatively more affordable, because the production is made in
wider volumes, most of the time they are outsourced. So here, the country of
origin, is not really a key success factor. The distribution is more wholesale.
So it is even wider than the ready-to-wear lines, and they're also sportier in terms
of occasion of use. Within this segment more sneakers, denim, and t-shirts,
because their aiming at targeting a younger audience.
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So far we spoke about the high end of the market, which is mainly occupied by
luxury brands, and fashion designers with very few premium brands, and where
companies mainly have global exposure, also because it is a niche.
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Very few customer can afford those dresses, and therefore the companies need to
be present all over the world. A very interesting market segment is the one that is
connecting the high end of the market with the mass market, and indeed this
market segment is called the bridge.
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This mid-range was born in US within American department stores, where it was
key to offer the customer a product with the right level of creativity but whilst also
the right value for money, the right delivery in the store, in a word the right
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marketing mix. So companies competing in the bridge market segment are more
expensive, than companies competing in the mass market, but they're definitely
more affordable than companies and brands, to be more precise, in the high end of
the market.
And basically the set of products which are updated and also trendy. They are not
as avant-garde or fashionable as the ones of ready-to-wear. But because of this,
also offer the customers better fit and better delivery, and therefore they’ve
satisfied the needs of all those who want to have, a product that is very suitable for
daily occasional use. A good example is Emporio Armani or Max & Co but it can
also be brands as the premium brands that immediately position themselves into
this mid-range. Many American designer brands are positioned in the bridge
segment.
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Something that you may notice is that, in this market segment, we have a lot of
fantasy names. So while in the top of the pyramid the sponsorship, the
endorsement of the designer is key. So, you will find most of the brands carrying,
the name of the founder. In the bridge segment we have brands such as Coach,
Diesel. We have brands such as North Face. Brands that convey values that are
more associated with a lifestyle, rather than the personality of the couture.
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And because of that, here companies tend to be a mix in terms of distribution
between wholesale and retail and to outsource their product in order have the right
value for money.
It is different than the top of the pyramid, as the bridge segment is very local, so
we have some global brands, especially the American designers, but in each
country, we still have very interesting local concept.
Also because, these market segments particularly appeal to the local customers.
Then, we get into the mass market. The mass market used to be a very
homogeneous market segment. This used to just be based on the lowest price for
the customer, and therefore the lowest cost for the company. So efficiency was,
and still is, one major key success factor.
But what happened in recent years is that groups such as the Inditex but also
H&M, started segmenting the mass market. Offering different brands, targeting
different customers, different occasional views, as well with different price ranges.
For example, within Inditex, we have Bershka, that is more suitable for teenagers.
We have Zara that is more sophisticated women, formal wear and we have
Massimo Dutti that is definitely a bridge brand.
An effective management of the supply chain, is still fundamental to be
successful. But today, it is also key to offer the customer a glamorous
communication, an entertaining shopping experience, somehow combining the
affordable price with the fashion content, which is typical, of the high end of the
market.
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Week 3: Stylistic and Brand Identity
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All companies follow in fashion trends.
But at the same time, they must maintain a certain individual character, and
maintain their positioning, whist preserving their individual brand style.
Here comes the concept of stylistic identity.
The individual style that each company has on the market and makes it
recognizable. The concept of stylistic identity is related to the collection of
stylistic and aesthetic codes that belong to a certain brand.
So, each company should have the original and unique stylistic identity in order to
interpret the styles and trends on the market. Otherwise, they would all look the
same, more or less.
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The interesting thing is that not only designer companies do have a stylistic
identity, but increasingly, also in the medium and premium market, more and
more brands do have their own style on the market.
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A retailer such as Gap has a certain American classic with a twist. The Denim.
The Color Blue. Another example being a fast fashion retailer such as Zara which
has a very specific point of view on the market proposing a concept of collection
that usually is very cool, very refined, for a certain kind of customer.
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A very important element of stylistic identity is origin in terms of country of
origin and heritage of the brand.
The idea is that the country of origin of brands and designers are influencing the
way they see style. The Baroque, the Sicilian Baroque for Dolce Gabbana, the
Milan's fogs for the greyish color of Giorgio Armani, the colorful bold style of
Calabria for Gianni Versace.
So, the country of origin is a very powerful and strong inspiration for many
designers in the world. The lifestyle behind countries, even if it is a stereotype, is
still something very aspirational that many customers are willing to buy in.
Think about Ralph Lauren and his idealized vision of the East Coast style of the
US or the fantastic world of Native Americans and Indians with their colors that
are part of Ralph Lauren DNA.
Another element that belongs to the heritage and therefore, to the stylistic identity
is the country of origin in terms of competences and know how.
When companies such as Tod's and Bottega Veneta are talking about
craftsmanship and hints behind their style, they also claim that, for instance, made
in Italy. The value of made in Italy.
The country of origin in that case works very much as a guarantee of authenticity
for these brands. Within the style and stylistic identity of each brands, there are
usually some iconic products. As we said, iconic products are more relevant for
luxury brands rather than for fashion brands. But increasingly, icons are a part of
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product strategies of these companies because, let's say, quite easy to sell, and they
make brands very recognizable.
Icon products do embody the heritage and the DNA of the brand, are re-proposed
season after season in the collection, maybe reinterpreted according to the
seasonal trend, and often icons are also made in collaboration with bloggers,
celebrities, or even retailers.
All brands in many product categories and price ranges do have icons. From the
Kelly bag of Hermes to the business jacket for Armani, the Chanel purse, the
Burberry trench, or the D bag for Tod's.
Brand Identity:
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Brands are important in any industry, because they carry values and meanings.
In fashion and luxury brands are key, are crucial, in order to deliver benefits.
Brands are competing in symbol-intensive industries when we talk about fashion
and luxury.
So we buy products, not only for what the product does, but mainly for what the
product stands for, for the meaning. This meaning is given by brands.
A brand can give a meaning through functional benefits: performance, safety,
durability.
Emotional benefits: status, fun, pleasure, coolness.
This second level of meaning that are benefits given on a more emotional side and
level.
And then, we will investigate how the product strategy, can be formulated and
implemented according to the different missions that brands have in the
marketplace.
According to a scale proposed by the American Professor, David Aaker, emotional
benefits can be segmented into emotional auto-directed benefits.
They do respond to a need, for a personal gratification of the individual.
As suggested by Aaker, you can identify this category of benefits if you can
answer the question: “when I buy or use this brand I feel…”
A second type of benefit is the so-called hetero-directed emotional benefits. They
meet the need of the customer to express its personality into social context. They
answer the question: “When I buy or use this brand I am…” This is the typical
field of luxury and fashion brands.
There is a third kind of benefit introduced by Aaker defined as social. Social
benefits are those that allow the person to express, more than just individual aspect
of their personality, the membership to a certain lifestyle. Responding at the end to
the human need of self actualization. Feeling part of a community, a group or a
part of a society, sharing common attitudes, opinions, and interests.
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What is the brand’s scope?
The brand’s scope is the actual number of market segments a brand covers. A
brand can have a narrow scope, when it actually specializes, let's say, in one
target, for instance, just kids, or just youth; or just in one product category
specialized by product, specialty brand in shoes or in apparel or maybe in sporting
goods. So the brand can be specialize narrow scope, or it can cover a wider scope
becoming more diversified.
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Authority brands do have a narrow scope. Usually they are specialized, considered
as real authorities in their business. They often focus on patents, innovation and
distinctive styles or products. And they are also usually enriched by some
experiential product benefits.
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For example, consider an Italian brand, Loro Piana, that now is part of a French
group. Loro Piana is considered to be an authority in adopting in their fashion
products the best raw materials. Actually more than fashion, I would say that it is
really a luxury brand.
Authority in the best raw materials means that have the ability to deliver the top in
the market for instance in cashmere, where it’s the number one western
manufacturer of cashmere and baby cashmere, a trademark that they developed,
thanks to the direct relationship Loro Piana has with government agencies in
China, and the fully owned operations they have in Mongolia.
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Icon brands; icons are religious signs; therefore, iconic brands are like entities,
personalities. They become carriers of universal values and stories expressed
through a wide range of products.
What is the product strategy for icon brands?
Products are usually very much recognizable defined by their iconic codes. Think
about French brands such as Hermès, Chanel, Cartier. They made iconic products
part of their strategy right from the beginning.
The so-called lifestyle brands. Lifestyle brands in the mapping is delivering social
benefits with a quite wide range of products.
First, what is a lifestyle? It's a way a person or a group lives, and this includes
patterns of social relation, consumption, entertainment, and, last but not least,
dressing styles.
A lifestyle brand is a brand that clearly and deeply represents an individual of a
group. Its way of living, the way he or she wants to look to other people. These
brands are usually associated, in terms of scope, to a variety of products.
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Week 4: Fashion Communication
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If products incorporate the tangible dimension of fashion goods, it is through
communication that companies create emotional association, consumer benefits, a
lifestyle.
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Communication is what transforms the product into a brand. Fashion
communication mainly focuses on the so-called dream factor.
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In their message, companies always convey imagery that is made of very beautiful
women or men, who wear the most beautiful clothes in the best location with the
best makeup and artist, hairdressing, and sometimes also the best Photoshop.
The message always reminds us of the world of the happy few. However,
communicating at the same time also has the aim of making this dream accessible
to everyone.
It's through communication that companies create the desire of this world. Maybe
we have never entered a luxury brand store; but for sure, we have seen their
advertising campaigns, the billboards, the windows industry.
Communication has to balance exclusivity of the message with the accessibility of
the medium.
Communication also depends on brand positioning very much; so communicating
a mass market, sport, or casual product is not the same than communicating a
luxury one. And as well of the different objectives the company may have.
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Generally speaking, we differentiate different levels of communication. We may
communicate a product that in fashion is the seasonal collection. We may
communicate the brand that is the personality, the essence that goes beyond the
single collections and makes the companies recognizable and identifiable; or we
may communicate the company itself, the corporate level.
Companies may also have different objectives they want to pursue through their
communication.
The first thing they have to create is brand awareness. They need to be well known
among consumers. If I create my brand from scratch I want you to associate my
first name to the product I'm selling. I want to have the top of mind effect.
To be known is a necessity but not a sufficient condition. Companies also have to
seek for brand image. They have to be relevant. They don't need it to speak to
everyone, they have to speak to those that are able to understand and are willing to
share the lifestyle they propose.
They have to communicate to the trend setters and to the pool of aspirational
customers that can really understand the company's value proposition. In order to
build their image they use their logo; they use their heritage; they use storytelling
about the history, the place, the founder— but as well, they may describe the
characteristics of the product like the craftsmanship involved through videos or
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other tools.
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Last but not least companies are companies. They also need to communicate at the
corporate level.
The aim here is to have all the stockholders and the internal employees first; but
then also the clients, the suppliers, the banks, and the local communities aligned to
the strategy of the company.
What the company needs is to have the best financial resources invested in the
company and the best people willing to work in the company itself. They have to
communicate their numbers. They have to communicate their strategy. They have
to communicate what they do for profit but as well the planet and the people.
In fashion and in luxury especially corporate social responsibility is becoming
more and more important. As you may understand these different levels of
communication require different competencies and attitudes.
We have said that communication is a complex activity with different levels and
different objectives, but what makes fashion communication different than any
other industry’s?
How was fashion able to be such a powerful language?
There are some key characteristics to highlight.
The first is the importance of images. Fashion communication is very visual, it's
based on pictures with the product and the logo, most of the time, that's all.
If you think about even the most important designer brands, they do not have a
payoff. They don't have a slogan that as a customer you may associate to the
brand’s value proposition. There is not an equivalent of L'Oréal’s, “Because you're
worth it,” or Nike’s, “Just do it,” etc….
They just have the product, the seasonal product, the model that is embodying the
product, and then the logo. That's all. Why images? Because fashion is a very
direct and also universal language.
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Fashion products are a communication cord on their own because through the
product, the designers represent the evolution of the style as it is connected to
society itself. And due of that, the product itself is the best protagonist to talk
about the lifestyle that it conveys.
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Also, images let the customer, the person interpreting the communication, the
freedom to give his or her own personal interpretation, his or her own personal
view. Sometimes words frame the communication too much. Fashion companies
do not want to be informative. They want to be emotional. They want to be
inspirational.
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It has been proven that non-verbal communication is much more effective and
memorable than verbal communication.
This explains why fashion companies deciding to use pictures are much more
effective than other industries that prefer to accompany the art the image part of
their creativity with a comment.
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We said that pictures play an important role, that the product is at the center of the
communication, and this makes fashion communication very recognizable.
But it is also important to underline the role that is played by the designer him or
herself. The designer is the ultimate decision-maker as far as the creativity of the
communication of fashion companies is concerned.
The reason is that the product conveys it's own name. Most of the designers do not
accept other creativity overlapping their own vision. That's why they prefer to
work with external professionals like art directors, stylists, casting directors, rather
than traditional advertising agencies.
The fact that the designer is making the ultimate decision also makes fashion
communication very consistent.
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It is about the importance of the product, the visual, the designer, but as well about
celebrity connections.
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Fashion companies have to create aspirational desire and therefore, they relate
themselves to people that are most influential in terms of image. On their own
side, celebrities need to be seen as attractive; which is something that fashion
companies can provide them. It's a kind of mutual relationship that helps to make
these dreams become tangible, that help the customer to associate the brand with
the dream of the red carpet and the magic of it.
Another very important thing is the importance of detail. Not everyone is doing
well on this but it really makes a difference. Communication in fashion is about
taking care of many different small details, with all of them making a cumulative
difference.
It is not sufficient to have the best advertising. You need this best advertising to be
in the right magazine. It is not sufficient to be in the right magazine. You need to
be in the right space. That's why fashion brands are fighting to occupy the first
positions. It's not sufficient to be in the right magazine in the right space. You
need to be in the right issue as well. Every single detail may help build the brand’s
personality or on the contrary, if the messages are not aligned, create confusion
and difficulty for the customer to really perceive the image as the company who
like to be understood.
So the devil is in the details.
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Last but not least, communication in fashion also has the scope of creating the
mask. So from time to time companies need to be disrupted. They need to be
fractured to innovate the language.
A good example is when Dolce & Gabbana decided to invite to the front row of
the fashion show the fashion bloggers. Nowadays this is very conventional,
everybody's doing this. But when they did this it really created a breakthrough,
and you know how difficult it is to seat people in the front row.
So if you have the fashion bloggers in the first row, it means that someone else has
to occupy a less nice position.
Communication in fashion is a very powerful language. This is also granted thanks
to the direct control of most of the activities.
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This high level of internal control assures consistency and the attention to details
that is key.
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Understanding what a communication office does is therefore fundamental for
understanding what makes communication in fashion different than in other
industries.
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Week 5: Retail Identity and Management: The Future is E-Commerce
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Luxury companies and high end fashion companies have resisted the online
channel for a long time.
For many years they associated digital with discounting and counterfeiting.
The thinking behind this was that the brand could be diluted.
This is not the case anymore, a recent study by McKinsey and Altagamma found
out that the evolution of pure e-retail sales will be from, 4% of total sales in 2012,
to 6% of total sales expected for the year 2017.
They have predicted a greater impact on offline sales, something like 25%. 25% of
offline sales is influenced by e-commerce and by the digital journey of the
customer.
Another key fact to be aware of is to know is that about 65% of the business
online is made up of two categories: luxury accessories and beauty.
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The best format of e-commerce and e-tailing is the monobrand store online, in
particular that of brands and department stores.
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Who are the players in the fashion digital world?
We can break them down in to three typologies:
The first being the full price players
The second being those players that are selling off-price, let's say on-line outlets.
And lastly the event or flash sales.
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Let's talk from the first: Full price sales.
In this category we have two business models.
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The first is the business model of brand websites.
Branded websites that might be managed by luxury or fashion brands. Managed
by them or powered by the e-tailers.
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The second business model is the business model of multi-brand websites.
In this case we have other two sub typologies. And that type is so-called hybrids
meaning those players that started offline , for example think about department
stores like Niemen Marcus. Or multi brand boutiques, Luisa Via Roma. That at a
certain moment in time they engage in e-tailing quite successfully. So they have a
hybrid model.
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A second business model in the full price arena is that of the pure play e-tailers.
This is the case of brands such as, a platforms, such as ASOS, Net-a-porter, or
Zalando.
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Going to the second typology, off price. This is the case of online outlets where
the leader is the italian group Yoox.
The third case, the third typology is that of event or flash sales. In this case,
players are competing on timing, making available to the customer on the platform
a certain assortment on a limited time. This is the case of Vente-Privee.
Let's ask ourselves how are fashion and luxury companies competing in the digital
arena?
We group the strategies into three.
Three main approaches to the digital channel.
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The first case is that of those players, usually big, with a digital multichannel
approach, meaning that present both on their website or on multi branded
platforms. Usually they make a full use of social media and are really engaged in
this strategy. Gucci, Louis Vuitton, Diesel, Ralph Lauren are all examples.
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We have a second group of players that are approaching the digital channel being
more focused on their own store, and digital store. And they use the digital as a
marketing tool or as an entry point for aspirational customers. This is the case for
instance of italian brand Tod's or Ferragamo or Celine.
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The third case is that of those players that are usually small companies quite niche
or specialized in terms of product category. Think about Tom Ford, Berluti who
actually use the digital world as a showroom.
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The future of the digital world is rapidly evolving. We expect that actually, the
digital channel will become just a channel among the many others, with a lot of
importance.
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And companies will develop more and more their branding strategy, and the
branded customer experience for the online. There are also interesting examples of
collaborations cooperations among players online, offline with the aim to better
establish the brand awareness and the brand identity of the branded companies.
This is, for instance, the case of Vente-Privée. That is a French company who
introduced for the first time, the innovative model of online flash sales in Europe.
Reflection on learning objective 2: ‘organizational and social skills’
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 What kind of organizational and/or social skills have you acquired from this
activity?
Whilst I am not the most fashionable person I know, I chose this course because I thought
it was interesting to see how an industry which at it’s core is very creative combining that
with being profitable by offering value to it’s customers. This takes skill beyond other
industries as the items being sold are especially on the lower levels like mass market are
not super profitable items and thus they have to find the sweet spot between skimping on
materials as well as design whilst managing to persuade consumers to keep purchasing
from them.
I have learnt a lot about the world of fashion and how intentional it is as an industry, it is
not just the land of creativity I imagined it to be as they are arguably developing some of
the most innovative business practices with the use of data and insights into consumer
behaviour. They are arguably some of the most behaviourally driven industries as
everything they sell is not essential and times are increasingly tough. You can survive
without a Gucci handbag but not water.
The expansion onto online stores poses an interesting conundrum as luxury brands have to
retain their sense of exclusivity beyond their high price tags as a website can be accessed
by anyone. In some of the case studies, they used a referral system which is very smart as
it retains a sense of exclusivity and also allows their customers to feel special which is all
part of the luxury experience they pay for. Interestingly enough, lower price segments of
the market are also offered similar services (still fairly high end pricing for the average
consumer).
In terms of organisational and social skills I have acquired from this activity, I have learnt
to better manage my time as this course took me longer than initially predicted. I was a
little out of my depth as whilst I had taken marketing as one of my compulsory courses,
the focus of that course was mainly on traditional non-luxury brands and so the general
idea was to increase supply according to an increase in demand which would be
counterintuitive for a luxury brand. As a luxury brand, you want the opposite you want to
generate a very limited supply and want very high demand in order to sell at high end
prices. In addition, due to this course taking longer than I previously thought, it forced me
to find time to go through the often very different style of material than I had gotten used
to (with no numbers and all text) which was tough at times especially around studying on
exchange, sports and general work life balance. Week 4 was the toughest one as it took
me the most time to understand compared to the other weeks and so it took two more
sittings in order to complete the material.
As this was an self paced online course, I was limited in terms of socialising with others
and thus didn’t really gain any social skills from this activity. However, I did learn to
appreciate in person teaching more so, I already appreciated it more after returning to
university for my third year after a year of online teaching but now I really look forward
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to in person interaction.
 In which situations can these skills be useful to you, and why?
I think as a future business professional, the skills as well as strategies I have learn about
will serve me well. For example, there is an increasing premium being paid for
experiences over items and thus, some of the strategies showcased by this course can be
adapted to just about any item, product or service. By making a customer feel special, you
can use an experience to trigger particular emotions such as excitement by offering a
luxurious experience which allows them to make associations between an item and it
being exclusive or high end.
The strategies I have seen can further be useful to me as for example digital marketing is a
growth market and it would serve me well to at least understand the basics of it as I will
probably have to consider the impacts of it as we shift to online shopping, especially after
the pandemic. Brick and mortar shops will always have a place in the customer journey
and experience but it is worth noting that the growth online far outstrips the benefits of a
brick and mortar store. If the luxury brands converted their strategy to be at least partially
digital, it is worth noting overall as they have been very traditional and conservative in the
past regarding using online mediums in order to drive sales.
Furthermore, the management procedures of a local luxury brand differ from those of a
global brand in areas like as price, distribution channels, and production. Cost reduction is
crucial in mass consumer markets, which usually entails industrial relocation. Luxury
management, on the other hand, does not adopt this strategy. When someone buys a
luxury item, they are buying a commodity that is tied to a culture or a country and when a
premium item has local origins, its perceived value rises.
Following Week 2, regarding business models, I realised that another constraint for global
firms unable to maximize profitability is that luxury management methods
recommendation of economies of scale and mass manufacturing have certain limitations
when it comes to luxury products. This is due to the fact that once a luxury item becomes
widely available, it loses its exclusivity and rarity. As a result, executives must strike a
balance between sales volume, brand impression and prestige. Thus this urges luxury
businesses to start by supplying their products and values to local customers in order to
build a customer base and customer royalty. Then strive to expand to become a regional
luxury and push the boundaries until they reach global status. Managers should not launch
'in every direction,' and they should not choose markets merely on the basis of their size.
They must carefully choose new markets, starting with those where luxury purchasers are
more likely to respond positively to the brand and will accept the goods as it is. Whilst
this may seem unrelated to me, I wish to be working in sales in the future and so this is
very useful knowledge for me as if you operate a luxury brand the same way as say a fast
moving consumer good company, you would run into issues very quickly. The fact that
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your products aren’t mass produced are one of the key significant factors for the price
premium your customers will pay for your items. Whereas for a FMCG, the idea is to
mass produce to the specification you forecast in millions of units. Thus, I have learnt that
managing a luxury brand is counterintuitive as the normal strategies for increasing supply
may have detrimental effects overall.
Week 3 and 4 also implies the threat of the comodity trap to luxury companies, which
may occur in three distinct situations when the scale and scope of company expands as a
result of globalization.
The first situation that might lead to a commodity trap for elite companies is degradation.
This term relates to luxury brands' attempts to reach a bigger audience through mass
manufacturing and mass distribution.
Proliferation is the second scenario that captures luxury brands in commodity traps. When
corporations give discounts and various benefit combinations to get a greater part of
market, the proliferation of luxury brands appears to turn luxury goods into ordinary
products. This traditional practices, though, represent a significant challenge to luxury
companies.
The third and last source of commodity trap is escalation, which refers to competitors
using aggressive pricing to gain market share with identical items.
This is not only applicable to luxury brands but any brand that deals with non perishable
goods, anyone that is involved in marketing or sales should be aware of these three
pitfalls as by trying to appeal to the masses you can lose your unique selling points and
this may be the reason that drives your customers to buy. For example, if there are any
only 500 handbags or prints of a piece of art, then that 500 will trigger scarcity as there
will be a finite number of owners who possess it, if there are 50000 of the same handbag
or art piece then it drives down the exclusivity of owning one and thus the price will
reflect this as demand falls for it. Furthermore, proliferation and escalation are strategies
that could be used by other business sectors to generate additional revenues but again
luxury management is a different animal as what works usually tends to devalue the brand
itself here.
All of these scenarios have the potential to turn into a disaster in a short amount of time,
transforming a once-luxury offering into a mass-produced, readily available product.
Managers may escape the commodity trap by using a variety of reactions, but they can
also take advantage of rivals' behaviors. They can, for example, leverage product
awareness that was previously unavailable on the market to reach out to new consumers.
However, in order to achieve this aim, luxury brands must be prepared to enlist the
support of art and fashion, as well as give fresh experiences to consumers, to guarantee
that they are presenting something special and inimitable.
This means that continuous innovation is needed in order to solve the issue of keeping
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exclusivity but also generating greater revenues overall.
Furthermore, in week 3,4 and 5 the future being e-commerce is being discussed as well as
the downsides of luxury branding where businesses that cater to luxury clients confront a
variety of problems and opportunities. Also, when companies collaborate with artists to
help them be more creative and aesthetically aware of their products and services, new
difficulties and opportunities arise. One of the drawbacks of focusing on the luxury
business, for example, is that truly premium brands are resistant to brand stretching. The
primary risk with brand stretching is that by its usage, it undermines the most basic tenet
of luxury itself; namely the recreation of distance. Brand stretching is most often seen as a
direct consequence or fact that a business model has increased utility when earning
additional revenues from lower down the pyramid as opposed to being generated from the
higher levels of the pyramid. When examining the brands that do make use of this
particular business practice, it is uncommon to see brands for whose business model is
centered around earning that revenue from higher levels of the pyramid. The absence of
brands that don’t practice brand stretching can best be typified as true, genuine luxury
brands.
In terms of opportunities, an artist and a luxury business is a goldmine for collaboration.
This can be for a number of reasons, for example, an up and coming or trending artist is
an undervalued business opportunity from a luxury branding point of view, once they are
mainstream and known they will realize their market value and ask for greater amounts,
either upfront or from the backend. In addition, it can help a luxury brand grow its
potential customer base as then they can piggyback off the artist’s fanbase as well for a
lower cost than obtaining new customers through additional marketing channels. Every
business sector knows that obtaining new customers overall is a more costly procedure
than retaining their existing client base and thus anything that allows their potential
customer base to grow for relatively little is a massive opportunity waiting to be seized.
Thus, this policy of collaborating with a public figure can be used by almost any business
if they are smart about their choices, artists or famous people can be used to increase an
existing fanbase for relatively little money compared to the effectiveness of blanket
marketing the traditional way.
In conclusion, I have learnt that for luxury branding the real value is the brand itself and
not the items it actually produces. This goes to show the power of scarcity and also social
proof, e.g celebrities endorsing certain brands and people going out to buy those items
regardless if they can actually afford it. In addition, I have learnt marketing strategies that
would seem counterintuitive for most businesses but can be adapted for any future sales
work I do.