Is a Fashion Crisis Brewing?
Though the stock market is hitting record-level highs, press headlines over the last quarterly earnings by retailers continue to express alarm: Birkenstock, Gap, Foot Locker, Abercrombie, and other retailers issue cautious outlooks for the remainder of the year even as they reported strong second-quarter sales. Lululemon cuts its annual forecasts on tepid US demand and rising competition. Capri Holdings continues to report lackluster earnings.
From the high cost of living to price increases across brands, consumers are being financially stretched, while labels are having to negotiate rising costs and less revenues. Independent and emerging brands are dealing with these issues, as well as a contracting wholesale market which makes finding a good wholesale partner harder than ever. Investor consensus is that mid-tier and mid-priced brands – which typically have fewer financial resources than big labels - will continue to struggle and some will inevitably fail with the current economic headwinds.
These compounding issues are forcing investors and industry insiders to wonder if the entire fashion sector is headed for a crisis. If so, what can independent and emerging designers do to navigate the current economy?
Saint Laurent image courtesy of Viewimage / Shutterstock
Lowering Prices Is Not Always a Good Strategy
Much ink has been spilled discussing the luxury sector’s handbag price increases of the last several years. While the houses have defended the steep price hikes based on continuing supply chain disruptions, along with an increase in raw material and labor costs, investors are questioning whether the strategy indicates a lack of new ideas. In fact, RBC analysts say the rise in prices has accounted for half of the sector's organic sales growth over the past two years, despite lower demand.
Perhaps in recognition that some price hikes may have been overly aggressive, a few luxury houses have lowered prices on certain products, like Saint Laurent’s $300 decrease on the Loulou bag. At first glance, this may seem like a sensible fix, but will the client who already paid more for the Loulou feel cheated? Will others think the bag quality has been compromised?
On the other hand, Gucci, while not lowering prices on any products and continuing to push its collections into the luxury segment, is offering more branded products priced under $200 to reach less affluent clients. It’s a smart approach, as it creates new entry-level product to attract a more price-conscious client, while protecting the pricing and margins of Gucci’s main categories.
Find Worthy Wholesale Partners
Three issues contributing to the lagging performance of internet luxury shopping sites and American department stores – key wholesale clients - are that stores are reluctant to take chances on new brands, there is an increasing lack of vision of what a store can be, and buyer assortments are uninspiring. Further compounding the problem is that brand loyalty is a thing of the past and most customers shop across brands, leading many retailers to buy seasonal trend merchandise from every label they carry. This creates customer confusion about why a brand exists and what it’s about - a particularly dangerous problem for young and emerging labels who need to establish their own identities and not allow a wholesale partner to define them - and forces clients to weed through pages or racks of product. It makes for a tedious shopping experience instead of an inspiring one.
Which is why independent and emerging designers need to partner with stores that are forward looking and willing to champion their brand. For example, stores that merchandise unfamiliar names with known brands would better reflect the way customers shop and provide more visual interest for clients. It would also give salespeople additional talking points to engage with clients - especially if they’ve been solidly trained on a brand’s seasonal collection and story.
Likewise, working with stores that curate unique assortments and don’t just buy top seasonal trends across every brand is essential. Curating the best looks or pieces from a brand not only eliminates product overlaps but allows the retailer to communicate a clear – and hopefully distinctive - point of view and one that best represents the brand.
Reach Out and Incentivize Your Client
Brands should tap their top client list (which every label should have) and craft a personalized email to them. Cuyana is a great example of this; the brand’s concierge associates email clients to inquire how their Cuyana pieces are holding up and reiterate the value provided by the brand and its products. They also introduce new items and showcase their best-selling pieces but personalize content to each client. When individuals express interest in purchasing a specific product, brands can respond by sending them a coupon for 10% or 20% off to encourage a sale. This approach allows brands to connect with their most valuable customers and show appreciation for how their products are being used, while also providing an incentive for customers to try out new items.
