Fairchild Books

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?2007 Fairchild Publications, Inc.
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The Business of Fashion
Fashion is a business affected by the same
advances and economic forces that affect all
major businesses in the world. We will examine
each separately.

• Economic importance of the fashion business
• Scope of the fashion business
• Variety and competition
• Government regulation of business
• Forms of business ownership

• Business growth and expansion
• Birth of a fashion
• The designers role
• The manufacturers role
• The retailers role

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Global Fashion Industry Flow Chart
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Four Segments

• The Primary Level

• Composed of raw material producers
• The earliest stage of planning textures and color
  palettes
• Furthest from the consumer in terms of product
  and timing of delivery before in store date for
  merchandise, often two years

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Four Segments

• The Secondary Level

• Composed of manufacturers and contractors, and
  designers
• They design and manufacture womens, mens, and
  childrens apparel and accessories
• They work from six months to one and a half years
  ahead of the time goods are available to the
  consumer

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Four Segments

• The Retail Level

• Composed of retailers who buy their goods from
  the secondary level
• Ultimate distributor of fashion to the consumer
• They prepare three to six months in advance to
  receive goods in a timely manner for sale

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Four Segments

• The Auxiliary Level

• The only level that functions with all the other
  levels simultaneously
• Composed of support services for the other three
  levels
• Performs a variety of functions from publicity to
  advertising to trend reporting to private label
  development and market trips

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Antitrust Laws
Government Regulations that affect the Fashion
Business.
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Product and Labeling LawsDesigned to Protect
Consumers
Protects consumers against false fiber content,
packaging, labeling and lack of care instructions

• Wool Products Labeling Act1939 amended
  in1984Protects consumers against unrevealed
  substitutes

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Product and Labeling Laws
Fur Products Labeling Act1951Protects consumers
and retailers against misbranding, false
advertising, and false invoicing

• Flammable Fabrics Act1954 revised in
  1972Prohibits sale of flammable fabrics and
  apparel

Care Labeling of Textile Wearing Apparel
Ruling1972 amended in 1984, 1997Requires all
apparel have labels that inform consumers about
care and maintenance
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Forms of Business Ownership
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Business Expansion and Growth
Internal

• Horizontal
• When a company expands its capabilities on the
  level at which it operates currently, e.g.,
  retailer opens more stores

• Vertical
• When a company expands its capabilities on levels
  other than its primary function, e.g., an apparel
  company begins to produce its own fabric, or
  retails its manufactured goods

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Business Expansion and Growth
External

• Mergers
• Where the sale of one company to another occurs,
  with the purchasing company remaining the
  dominant force, e.g., Federated Department Stores
  purchases Macys and then acquires May Company

• Diversification
• Where a company adds various lines, products, or
  services to serve different markets, e.g., Gap
  purchases Banana Republic and creates Old Navy
  giving Gap three overlapping price ranges

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Business Expansion and Growth
Franchise

• Franchises are purchased operations that conform
  to the franchisers directives, and benefit from
  the franchiser's name, buying power and
  merchandising expertise

• One-third of all retail sales come from
  franchising efforts

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Advantages of Franchising

• Quick start-up

• Franchiser's methods are proven

• Ready market traffic already exists

• Rapid expansion is possible

• Limited liability for the franchiser

• Control over distribution

• No need for additional capital

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Disadvantages of Franchising

• Profits are smaller for the franchisee

• Limited flexibility for the franchisee

• Franchiser may not support franchisee fully
  they just want to sell more franchises

• Franchiser may want to buy back stores under
  certain circumstances that are beneficial to them

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Licensing

• A legal agreement between a designer and
  manufacturer

• Licensing allows the manufacturer to produce and
  market product under the designers name

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Licensing

• In 1950, Christian Dior is the first designer to
  license his name to an outside manufacturer

• The product licensed was mens ties

• Many of todays most popular fashion labels,
  e.g., Ralph Lauren and Donna Karan, license their
  names for a wide variety of goods, encompassing
  not only apparel, but home furnishings and
  accessories, including fragrances.

• Even manufacturers use licenses to manufacture
  clothing

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Advantages of Licensing

• Manufacturers have a highly recognizable name
  attached, literally, to the merchandise,
  connoting high quality
• Licensor does not have to endure the risks of
  production
• Retailers present a fashion image using the
  designer name, appealing to consumers through
  quality and status

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Disadvantages of Licensing

• An ever expanding empire may lose its exclusivity
• Poor quality products reflect on the name of the
  designer, or licensor, not the licensee
• The manufacturer also endures the designers loss
  of popularity

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Birth of a Fashion
Designers, Manufacturers and Retailers

• Must study all trends available

• Be everywhere, see everything, remain current and
  in touch with the consumer

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Birth of a Fashion

• Fashions start with consumers and the charting,
  forecasting, and satisfaction of consumer demand
  is the industrys main concern

• Although many precautions are taken to ensure the
  success of new designs, two-thirds of them will
  fail each season

• Some common reasons for failure are
• Introduction too early for widespread acceptance
• Introduction of styles considered too extreme by
  the general public
• Introduction of styles with appeal to a limited
  audience

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Types of Designers

• High-fashion or name designers are responsible
  for the full range of decisions of a fashion
  house, as well as for establishing the image and
  creating designs for the company. They design
  ready-to-wear lines as well as custom designs,
  and many license the use of their prestigious
  names to manufacturers of accessories, fragrances
  and cosmetics, and home fashions.

• Stylist-designers work for manufacturers and
  adapt the designs of others, typically of name
  designers. Usually they create variations in less
  expensive fabrics to appeal to a market for lower
  priced merchandise at the late rise or early
  culmination stage of the fashion cycle.

• Freelancer designers sell sketches of their
  original designs or adaptations to manufacturers.
  Freelancers typically work out of design studios.
  They are not involved in the selection of fabrics
  and colors or in the business decisions that are
  required to manufacture the products based on
  their designs.

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Types of Manufacturers

• Designer market At the top of the chain,
  produces innovative high fashion apparel that is
  very expensive

• Bridge market Between very expensive designer
  and high-quality better merchandise

• Better market Below bridge with correspondingly
  lower prices and less panache

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Types of Manufacturers

• Moderate-priced market Includes adaptations of
  styles in rise stage of the fashion cycle

• Budget market Creates mass produced close copies
  of goods in the mass acceptance stage

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Types of Retailers
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Buying Cycles