Designer labels find internationalisation and digital focus key to success
Internationalisation, selective distribution, targeted communications operations, a coherent image, and elevated positioning in the market with prices averaging around €500 ($561.53) are some of the keys to success for designer labels, brands with a strong creative identity which inspire fashion trends and are distinguished by their highly desirable products, according to the study ‘New Economic Models in Fashion’ published on June 30 by the French Institute of Fashion and Kea Partners.
Internationalisation, where international sales can make up up to 95% of designer labels’ turnover, is the keystone of their business model. This involves almost exclusive wholesale distribution, especially aimed at Asian markets, and setting their sights straight away on the most select multi-brand retailers established across the world which are able to give them good visibility from the get-go.
By limiting their marketing and communications costs, these designer labels are able to reinforce their notoriety by speaking up on social media, through their e-commerce store, as well as through pop-ups and even runway shows, even though their high cost, which can reach up to €200,000, can be prohibitive, especially in the current climate.
From then on, the main challenge for designer labels, as their commercial development progresses, is to arrive at a place where they can better control their margins as well as their surplus stock rate, the study’s authors stress. This becomes more possible as orders increase as brands are able to reduce their production costs and better exploit raw materials.
“Brands following this winning model experience an average exponential growth in turnover, which can be up to 60% per year depending on their stage of development. They can reach a turnover of €6 million in around five years and the most successful amongst them can cross a turnover of €40 million after being active for 15 years,” said the study.
In the first phase of launching these labels, illustrated by the brands Craig Green, Koché, and Etudes Studio which have turnovers of between €2 million and €5 million, the digital sphere represents an essential marketing tool for positioning the brand and its image. Digital activity also enables brands to build their universe and create a community, which will constitute an important base for their first sales, and also support brands in their development. At this stage, it is important to find financing, going from using one’s own investments to securing the aid of businesses. Participating in a fashion contest and winning can also be a worthwhile investment.
When these young brands reach a turnover of between €5 million and €20 million, like brands including Marine Serre, Lemaire, Officine Générale, Alexandre Vauthier, and Giambattista Valli, the focus becomes centred around increasing e-commerce sales (between 5% and 20% of turnover) with a more structured and fluid site, as well as the continued development of wholesale channels (both physical and digital), with the objective being to increase orders. Collaborations can also help brands to broaden their audience.
This phase may be accompanied by the opening of a flagship or franchise shop, but the current crisis risks jeopardising this stage. “At this stage, designer labels begin to find stability in terms of suppliers and raw materials etc. The balance between production costs and retail prices thus approaches the normal ratios of the segment,” said the study.
When brands arrive at a turnover of between €20 million and €50 million, like brands such as Jacquemus, Ann Demeulemeester, Vetements, AMI, and Jonathan Anderson, they face new challenges. These include the fragmentation of distribution schemes which must be both unique and global, allowing each customer to recognise themselves in the wider brand universe, whatever the country or the retail channel. Brands also need to structure their business with more specialised and expert teams. This is also a good time for brands to diversify their offerings.
“At this level of turnover, designer labels which are identified as having winning strategies have reached a sufficient size to amortise their various production costs. Their gross margin shows rates similar to those found in the luxury industry which are between 60% and 70%,” according to the authors of the survey.
During a period of normal growth, driven by a model of overconsumption as characterised by the pre-Covid-19 fashion market, this winning model enabled a number of designer labels to cross the threshold of a turnover of more than €50 million. This is the case with Off-White, which reported a turnover of €161 million in 2018 (up 286% from 2017); Isabel Marant, which saw sales cross €150 million in the same year, as well as Dries Van Noten and Margiela. However, considering the current global climate, this business model could evolve…
Copyright © 2021 FashionNetwork.com All rights reserved.