the luxury wholesale model is broken PradaThe idea of paying to have something made, passing it on to someone else to sell, who will then pay you in a few month’s time, sounds like the cashflow diagram from hell. Unless the profit margins are huge, and even then it’s not ideal, wholesaling in fashion is difficult. Small brands, especially, need the constant stream of cash, traditionally have tighter margins, and need the crucial feedback of information with regards to successful products that can inform future decisions and where to put their limited resources. 

The fashion wholesale model is broken and, now, even the big boys are deciding to step back. Luxury brands are also realising, finally, that the true value of selling directly to consumers is growing a database of customers and understanding exactly what they want in a shorter amount of time and being more reactive to those needs. Realising something is or isn’t selling in 3 to 6 month’s time is pointless and is what will suffocate even the biggest of brands. 

Many luxury brands sat back and twiddled their thumbs over the past two decades while huge fashion corporations like YOOX/Net-A-Porter and MatchesFashion.com have grown with enviable customer lists and used huge amounts of information to improve their offer and grow further.

Now, the wholesale middle man is being pushed back to a point where brands want more control, know they will make more money directly and won’t be at the whims of a fashion buyer every season as to whether they’ve made the cut or not. 

Prada announced last month that is would reduce its wholesale network in Italy and Europe in a push to have uniform prices for its products across different outlets and reduce markdowns. Before that, in March, the Milan-based company said it also would stop offering end-of-season promotions at its own shops in a bid to boost margins and protect its brand. They’ve obviously been watching the success of Gucci’s no-sale model and product that continues over seasons and doesn’t seem to quickly date.

In a short filing with the Hong Kong stock exchange, where the company is listed, the company's chairman Carlo Mazzi stated, “The Prada Group considers it essential to ensure greater consistency in pricing policies across retail and digital channels. This strategic review is intended to further strengthen the Prada Group brands with the aim of supporting sustainable long-term growth.”

Prada said it would end relations with some Italian and European wholesale partners and gradually replace them with new digital and e-commerce players. 

While they’ve tried to improve their website, added a broader selection and launched onto sites like Mr Porter, Prada is doing it at a time when the brand has lost momentum and isn’t quite as in demand as it once was. It said the leather goods category will be the most impacted with the changes and this is their biggest segment with the greatest margins.

This DTC (Direct To Consumer) approach is something born from the internet and social media. The brand owns the customer and has a direct relationship. It knows their e-mail and address. It also knows what they have bought before and, most likely, things that may interest them in the future. As personalisation increasingly becomes more sophisticated, this will also help to offer more choices and brands can follow their customers through their actions.

Physical retail third party wholesale accounts allow you less control and inject potential disruption in your cherished luxury supply chain to the customer and, as Prada says, you can keep the prices constant and consistent (probably higher) throughout one geographical region.

Kering, owner of Gucci, Saint Laurent and Balenciaga, has announced it will take back control of its e-commerce operations, focusing on own branded sites where it can control its image and client data. Excluding Gucci, the YOOX/Net-A-Porter group operated e-commerce websites for most of the brands within the Kering group. The joint venture will now end in the second quarter of 2020. While not completely cutting off their nose to spite their face, Kering wants to turn more of its collaborations with third-party, multi-brand retailers such as Farfetch or Matchesfashion.com into what it calls ‘online concessions’, where it controls everything from the product assortment to their presentation. "Each time we move from wholesale to a concession we see our top line increase in a material way,” said Grégory Boutté, Kering’s Chief Client & Digital Officer, and former vice President of eBay. Kering has stated it was ‘not against wholesale,’ and did not plan to end its relationships with third parties altogether.

This is will be a play of power and something that I think will be difficult especially with the complexities of something like FarFetch coming from multiple retailers in different locations. This sounds like wanting your cake and eating it; we want your database, but in our own way. I’m not sure that many retailers will relinquish that amount of control, especially when you consider how many brands they sell and also the loyalty they now instil in these hard won customers.

Kering's total online sales — when including the business done through third party platforms, calculated at retail and not at lower wholesale prices — came to 9.4 percent of the group's 2018 revenue. Web sales through its own brand websites and online concessions made up 4.7 percent of revenue. This has huge room to grow.

Boutté has built up his digital team from 4 people upon his arrival at Kering in 2017 to over 80 people, today. He has realised the power of data. “The more data we have, the more precise our algorithm is and the better the experience is. The other thing is that it should lead us to excellence in terms of our operations.” he said.

Across the luxury goods industry as a whole, e-commerce accounts for around 10 percent of business today and should reach 25 percent of sales by 2025, consultancy Bain estimates.

This is about information and control. Controlling discount, controlling points of sale and controlling presentation. You can control more online, even with third parties. You can see it from anywhere. It's those pockets of physical wholesale boutiques or department stores in small towns that are harder to police and often unsold stock disappears into the grey market and ends up on discount sites and with other retailers.

Where once luxury retailers didn’t want to get their hands dirty, they are now rolling up their sleeves and have their eyes on the online prize; higher prices, more full price sell-throughs and control of that all important ‘data’. This will get more ferocious as the market becomes more saturated, growth slows and customers get increasingly more expensive to acquire. 

I predict many brands will try to be exclusive to their mono-brand websites if they don’t get what they want with their third party partners, or possibly try the LVMH 24 Sèvres, now rebranded as 24S, route, but it will be hard. And expensive. 

Retailers like FarFetch and MatchesFashion.com are decades ahead and thrive on new and small designers adding that colour and point of difference online. Luxury mono-brand websites often look boring, sterile and empty. People don’t shop in single brands, particularly when they are browsing. While the idea is logical and makes sense to reduce wholesale and take back more control, it will be far more complicated than that and add multiple costs to their business models.

Published in Fashion

The real reason luxury fashion companies are no longer using real furThis article isn’t a discussion on the pros and cons of real fur and offers no moral viewpoint on its use. I acknowledge that this contentious issue/material is divisive and has passion on both sides. 

The real ‘fur’ industry has seen massive growth, since the beginning of this century, driven by international consumers and trims on accessories and coats. It is now a $40 billion industry. It was inevitable that it would have a backlash and there would be a reaction to it, most notably from younger consumers. 

I put ‘fur’ into speech marks because it’s a very broad term and while some brands may no longer use mink they continue to use the skins of other animals and there’s no definitive reason for the choice of some animals making the used list and not the others. Read more here - ChicGeek Comment Fur Debate: You Either Use Animals Or You Don’t

Brands such as Gucci, Versace and Martin Margiela have decided to announce they will no longer use real fur. Donatella Versace recently said, “Fur? I am out of that,” she said. “I don’t want to kill animals to make fashion. It doesn’t feel right.”

“Naturally we were disappointed to hear that Versace has said it won’t use real fur in collections. However, the majority of top designers will continue to work with fur as they know it is a natural product that is produced responsibly. When Donatella Versace says ‘I don’t want to kill animals to make fashion.’ presumably her company will soon stop using silk and leather?” says Andrea Martin from the British Fur Trade Association.

“It is disingenuous to claim that leather is a by-product of the meat industry, a cow still had to die to provide the product. Silk cocoons are placed in boiling water to help unravel the thread with the silk worm inside,” says Martin.

Italian accessories brand Furla has formally declared that it will be banning fur from its collections from November of this year, which would coincide with the launch of its Cruise ’19 collections. This follows decisions by Michael Kors and Yoox Net-A-Porter, which has declared that all its stores and websites would be real fur-free zones.

“I think some of the brands have gone fur free under pressure from anti-fur trends, and some are genuinely concerned. If brands don’t want to use animals for fashion then they need to consider leather, exotic skins, silk, sheepskin, makeup and products, all of which use animals. I also think human welfare is important to consider when producing fashion, and this often gets forgotten.” says Rebecca Bradley, a London based fur designer.

So, why are luxury brands really dropping the use of real fur? 

I think it is pure economics and the high margin greed of today’s luxury industry. It’s the same reason many restaurants are pushing vegetarian and vegan options: the margins are higher and therefore the profit. By charging slightly lower prices for something which is much cheaper to make, the margins increase. There are only so many €25,000 full-fur coats a brand will sell and the ceiling price is sensitive, so you can’t factor in the same margins you would on your other products. If you make it in faux-fur you'll get a higher margin and a bigger percentage of profit. You’ll also sell more and probably generate more money overall.

The irony is, the reason a real fur coat is so expensive is because of the high welfare standards of the European producers. Luxury brands wouldn’t be able to use cheaper real-fur from other sources witout criticism and scrutiny.

“Fur coats may seem expensive, however the price of a fur coat should reflect a high standard of animal welfare, and therefore with a beautiful, high quality fur, many skilled people are involved with production, including a furrier, and finisher to create a fur coat that will last for many generations, ” says Bradley.

Fur, for the majority of brands, is a very small part of their businesses and therefore it’s not difficult to heroically declare you’re no longer going to use it. It’s also easily replaced by a cheaper, synthetic alternative while not altering the price very much or at all. You can paint the use of a fake fur trim as an ethical choice rather than a cost saver to the consumer. It’s cynical I know, but it’s working.

PETA’s Director, Elisa Allen, says, “Fur is dead, dead, dead. As well as making sense for designers' conscience, ditching fur makes business sense, as today's consumers are demanding animal and eco-friendly clothing for which no animal has been electrocuted, strangled, or caught in a steel-jaw trap. From Armani to Versace, the list of fur-free designers is growing every day, and innovative vegan fashion is on the rise. The tide has turned irrevocably, and there's no going back.”

Many brands used the word ‘sustainable’ when announcing their decision to no longer use real-fur, but again, this is another term in fashion that is very broad and has little full meaning until you see the detail. I’m not sure a fake fur coat is particularly sustainable, but then again it does depend on the material.

But, you also have to acknowledge that nobody needs to wear a real fur coat. We could easily survive without real fur, but it’s interesting how, out of all the animal products we use, this is one of the most offensive to some and creates the biggest reactions and protests.

The real fur industry continues to grow in China and with other newly rich consumers and markets. It is now a US$17 billion-a-year industry in China and Haining, near Shanghai, is its hub.. Fur companies will be a bit like tobacco companies: the falling sales in established markets will be replaced by growing sales in new and even bigger markets in Asia.

Chinese animal welfare standards are very different from European standards. European producers have very strict regulations and it’s an industry which has to be transparent in order to ward off criticism.

“We respect the fashion industry’s attempts to become more responsible for the products they produce. Animal welfare is of critical importance and the fur produced is farmed to the highest welfare standards.” says Martin.

“With growing concern about the environment and plastics we believe it is more responsible to move back to the use of natural, biodegradable materials. Fur is the natural and responsible choice for designers and consumers.” says Martin.

Ditching fur is quite a lazy way for luxury brands to try to be more ‘sustainable’ and look like they care about the environment. 

“I think that companies and consumers becoming educated and aware of origins of products and materials is a fantastic thing, but the focus needs to be across the board, ensuring standards of human, or animal welfare and environmental impact.” says Bradley.

Many brands are seeing real fur as something they live without and it’s more hassle than it’s worth if the profit and quantities aren’t there. You can pick holes into both sides of the fur debate. While a positive move for many, the decision to no longer use real fur is really a cleverly spun business decision and driven by their continued obsession for huge margins.

Read more expert ChicGeek Comments - here

Published in Fashion

Andrew Cunanan Yellow Get The Look Gianni Versace Assaination

The first episode of The Assassination of Gianni Versace: American Crime Story premiered last night, and, while we already who know whodunnit, we don’t know why? Will we ever know? Andrew Cunanan killed himself shortly afterwards.

Left - The Andrew Cunanan character in The Assassination of Gianni Versace: American Crime Story

Andrew Cunanan Yellow Get The Look he Assassination of Gianni Versace: American Crime Story

One of the highlight looks from the first episode was a Sara Lee yellow, full look of slouchy 80s-style trousers, polo shirt and matching cap. Yellow can frighten many guys and is therefore quite difficult to find in the shops. This is a softer, more pastel hue.

Right - All about Sara Lee yellow this Summer

Look at it like a dose of wardrobe vitamin D. Okay, so this did have the backdrop of Art Deco Miami, but just imagine the palm trees when you’re rolling down your local high-street with your jacket slung over your shoulder and your big serial killer shades on.

Andrew Cunanan Yellow Get The Look he Assassination of Gianni Versace: American Crime Story ASOS adidas

Left - adidas Originals - Trefoil Cap In Yellow - £15 from ASOS

Below - Don't want to be recognised? Go for serial killer sized shades

Andrew Cunanan Sunglasses Yellow Get The Look he Assassination of Gianni Versace: American Crime StoryBelow - Lacoste Live - Unisex Slim Fit Petit Piqué Polo - £85

Andrew Cunanan Sunglasses Yellow Get The Look Lacoste Polo Shirt The Assassination of Gianni Versace: American Crime Story

Andrew Cunanan Yellow Get The Look he Assassination of Gianni Versace: American Crime Story

 

 

 

 

 

 

 

 

 

 

Left - Versace - Sunglasses - £96

Andrew Cunanan Yellow Get The Look he Assassination of Gianni Versace: American Crime Story

Left - DSquared2 - Light Yellow Suit - £521 from YOOX

See Get The Look - Call Me By Your Name

Get The Look - Wild, Wild Country

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