It was while watching the Alexander McQueen documentary at the beginning of the summer - Read TheChicGeek Review here - when I wondered where the subsequent crop of young designer brands were.
The British based designers who were the generation after McQueen and showed so much promise - Christopher Kane, Jonathan Saunders, Mary Katranzhou, J.W. Anderson etc. - and despite some investment, just haven’t been able to scale up their brands in the same way McQueen and Stella McCartney were able to.
Left - Christopher Kane's only permanent store on London's Mount Street
I realised that this was a signifier of how the luxury market has changed and the days of nurturing fledgling brands into ‘Mega Brands’ are over. It illustrates the saturation in the market and it’s all about making big brands even bigger, today. “If you’re not going to be a billion dollar brand, then it’s probably not worth our time", is the new attitude. It probably explains the reason why Michael Kors recently bought Versace. Read more ChicGeek Comment here
David Watts, Founder, Watts What Magazine, says, “I suspect that this is more to do with the parent company realising that these businesses are not scaleable - or to the extent of other portfolio brands and cutting their losses.”
“In the current very challenging retail market and designer wholesale model not being as robust as it used to be, brands need to shore up cash and also give themselves a buffer,” says Watts.
“For the larger groups though, bigger really is better,” says Sandra Halliday, Editor-in-chief (UK), Fashionnetwork.com. “When they take on a brand, they want it to have billion dollar potential, or at least to occupy a strong niche that will guarantee high profit margins. The stakes these days are too high to do anything else,” she says.
When the Gucci Group invested in McQueen, Stella McCartney, Bottega Veneta and Balenciaga in 2001, it signalled the moment the luxury fashion industry was in full expansion mode and opening stores all over the globe. Following that, there was a raft of investment in the generation after, with Kering - formally Gucci Group - investing in Christopher Kane in 2013 and LVMH investing in Nicholas Kirkwood and J.W. Anderson in the same year. Everybody was billed “as the next…” but it just hasn’t materialised. Well, not in consumers’ heads anyway.
Now, brands are going into reverse; fashion’s answer to “Conscious Uncoupling”. Stella McCartney just bought back the 50 per cent she didn’t own from Kering and rumour has it, Christopher Kane, is in talks to buy back the 51 percent stake from the French group after a 5-year partnership.
Right - J.W. Anderson single store in East London
Halliday says, “I think in Stella McCartney’s case there was a genuine desire to run her own show and given the strength of her brand, that’s understandable.”
“For Christopher Kane it’s probably more about Kering focusing its resources and its time on its big winners, and that makes sense with Gucci, Saint Laurent and Balenciaga doing so well and Bottega Veneta needing lots of TLC,” she says.
“It give them a certain freedom and with the knowledge and experience learned (hopefully) as being part of a large group that they know how to be more careful with finances and astute with merchandising and keeping overheads down,” says Watts.
“Staying small, focussed and niche with a direct to consumer model could work for some brands, but it’s also very tough to make serious money at that scale,” says Watts. “Of course, there are possibly different and extenuating circumstances for why these brands find themselves in their current predicament. What does it tell you that LVMH and Kering cannot make Stella McCartney, Christopher Kane, Edun and Tomas Maier work…..gonna be tough for them as independents however the chips may fall,” he says.
Announced this year, LVMH has severed ties with Edun, Bono’s ethical fashion brand, and Kering has closed Tomas Maier, previously the Creative Director at their other brand, Bottega Veneta. These brands will have to regress back to start-up mode and think small again if they are to survive.
“In many ways, the future prospects of small designers hoping to break into the big time are quite depressing as the barriers to doing that are very high.” says Halliday. “But, on another level, the internet offers opportunities that didn’t exist just 20 years ago. The combination of a well-run e-store and a physical flagship can actually be a very cost-effective way of reaching the maximum number of consumers.” she says.
“Even if smaller labels can build profitable businesses, the chances are that the end result will be a hoped-for takeover by a bigger group, or by private equity investors, as that’s the kind of investment that’s really needed to make the transition into bona fide big-name brand,” says Halliday. “And all of that doesn’t even factor in what might happen if the luxury boom runs out of steam at any point,” she says.
Those brands fitting somewhere between these smaller designers and the giant groups are making their play for their futures too. Versace has already taken shelter in a bigger American group and other Italian family brands are sensing this shift and deciding on which side of the billion dollar divide they aspire to be on. Missoni opened its ownership up to Italian state-backed investment fund FSI for a cash injection of €70 million, in exchange for a 41.5 percent stake and rumours continually circle around Ferragamo suggesting they are looking for investment or a new owner.
Belgian designer, Dries Van Noten, recently sold a majority stake in his eponymous fashion brand to Spanish cosmetics group Puig.
“Dries Van Noten is 60 and after 30 years if he keeps creative control and remains chairman of his brand, then cashing in a huge stake gives him financial security, and also Puig brings cosmetics, beauty and fragrance know-how,” says Watts. “It could be huge for a brand such as Dries Van Noten - it’s a win win for him on paper.”
“Most people who are outside of the fashion (production) industry really have no idea both how complicated it as and how hard it is to make money,” says Watts. “Fashion wholesale is broken and fashion retail is in freefall,” he says.
Disappointingly, the focus has moved away from talent to bankability. Young designers who were previously given a leg-up with investment look too high a risk and expensive for today’s investors. It seems that only those brands breaking that billon dollar turnover ceiling are worth focussing on. You can increase profit margins by making less, but in larger volumes and become a more dominant force. It is more of a risk having fewer brands, but you can win bigger and Kering is clearly taking pole position right now.
Read more ChicGeek Comments - here
Am I premature or too late, but does the closure of American Apparel signal the beginning of the end of the hipster?
Left - American Apparel is disappearing from British high-streets
This Terry Richardson-type wank fantasy of sports socks and short shorts, with a dash of the ethically made, didn’t quite make it. It had potential. It rode that early wave of ethical consumerism and sold items people need and use in volume. Basics.
It shoulda/coulda been a Gap for hipsters, but thought itself too cool for that and in the process shot themselves in the foot. If you didn’t wear gold meggings and a towelling headband you weren’t going to quite cut it in an average branch of American Apparel.
Right - Ironic? Were you cool enough to wear these?
You can aim for hipsters, but, ultimately, you want everybody, something that Uniqlo seems to have mastered. And, if you're charging a premium you need to remind consumers what the extra is for, in this case, it was made in the USA. Selling basics is a tough job, these days, as it is so price sensitive. Retailers, like Gap, are struggling to reinvent themselves in this post-hipster market. Maybe they should adopt the best bits of American Apparel and add some contemporary sex appeal to their image.
American Apparel was like one of those scowling cool kids who doesn’t say much, looks the part, but you realise, quite quickly, they have nothing to say.
So, news just in, the global market for luxury goods is heading for its weakest year since 2009. Sales will rise by as little as 1 percent to 253 billion euros ($280 billion) in 2015, according to Bain & Co., which in May forecast growth of 2 percent to 4 percent. The projection, on a basis that excludes currency swings, would be the weakest gain since sales fell 11 percent in the year after Lehman Brothers’ collapse.
Left - All the gear and no idea - The 'luxury' customer, Footballer Balotelli
What does this really mean? Is it the wobbles in China or are people becoming bored of ‘luxury’? Whatever 'luxury' means today. The type of products these companies have been producing plus the never ending escalation in prices has taken its customer for granted. The higher the price, the shorter the shelf life, it seems, for product which just continues to get more and more expensive. Some of the entry prices for these brands are frankly ridiculous.
Brands think they can make more money by producing more product, but in fact it just puts people off. (See ChicGeek Comment - Exclusive Not Excluding)
It has also produced a customer, which while a high-spender, isn’t necessarily the look others aspire to. In other words fashion victims.
So, where is style now? The term ‘style’ is as subjective and has as many incarnations as people. But it does shift. While luxury brands have been busy peddling their wares to the international tourist, the style set has been discovering the high-street: the low-cost disposable side of fashion.
It is simplistic, but the only way I can describe style, now, is the best item from the worst shop.
It’s about being clever: the opposite to obvious. Labels and logos have become less important and it’s about how the individual looks in the clothes. The silly prices has just speeded up this process and because the designers aren’t coming up with anything really new, people are happy to get their things from lower priced retailers.
Look at it as the stylish show off by buying and finding great things in less obvious places. The high-street and lower priced retailers have mastered the fit and who really cares that much about the quality of the material when it will be gone before that becomes an issue.
I predict these luxury retailers to start producing lower entry priced product and become less reliant on these few, higher-spending shoppers. The Russians have disappeared, the Chinese aren’t being as frivolous and those oil rich nations in Africa aren’t making as much from every barrel. It's time for luxury brands to get real.