As Market Shifts, Digital Agencies Restructure

This week, creative and digital agencies focused on the fashion and luxury sector are restructuring as the market evolves.

Marc Jacobs website | Source: Marc Jacobs

NEW YORK, United States — On both sides of the pond, this week, creative and digital agencies focused on serving the fashion and luxury sector are restructuring, as the market continues to evolve and the needs of clients change.

Earlier today, a spokesperson for Createthe Group, the first company to pioneer in the digital luxury agency space back in 2004, confirmed to BoF that it had cut its workforce (rumoured to be about 20 layoffs in total) at its New York headquarters and closed its London office. The layoffs are linked to the company’s decision to exit the e-commerce platform business and shut down its proprietary CTS Platform.

“After much careful deliberation, we have decided to begin the process of retiring CTS Platform and exiting the e-commerce platform business,” said the spokesperson. “This decision was based on a variety of market forces, including the saturated nature of the e-commerce platform market and the allocation of time, resources and funding necessary to assure that CTS Platform remains cutting-edge for the foreseeable future. The exit from the CTS Platform software business will result in changes to our workforce, but this has no correlation to the continued operations and growth of our full-service digital agency, Createthe Group.”

Last August, Createthe Group’s co-founder and former chief executive officer James Gardner was abruptly asked to step down from the business. Burberry and Kate Spade are said to have terminated their relationships with the agency. And, to make matters worse, unnamed sources told Women’s Wear Daily that two designers are considering decamping from Createthe Group to other agencies. This follows reports of a potential data breach that may have compromised the personal information of end consumers.

Meanwhile, London-based agency Wednesday, which recently merged with sister company Saturday (also part of the Saturday Group) is also contemplating a restructuring, according to Jens Grede, co-founder and chief executive of Saturday Group.

“E-commerce redesign is not a growth area. Wednesday, following the merger with Saturday, is not a digital agency anymore, but a creative agency spanning advertising, branding, strategy and digital,” explained Mr Grede when asked to respond to market reports of redundancies in Wednesday’s London office. “Wednesday is steadily hiring — this week we had two new starters in London (about ten all-in-all across both offices since New Year). We expect to hire ten new staff before year end.”

In part, the changes reflect a shifting market for digital services. “It is a challenge for any creative agency to compete with technology companies,” said Grede. “The platform business is very different today; they are global operations with the resources needed to meet today’s extensive demands of our clients. Agencies should resist the temptation to own technology,” he continued, adding that “e-commerce redesign is not a growth area, and I don’t believe that is a growth opportunity. It won’t be for us at least. Createthe Group is a victim of this shift.”

Indeed, the entrance of new platforms and on-going commoditisation in e-commerce means that smaller clients can now deploy these websites for significantly less than what agencies like Wednesday and Createthe Group have been charging. Meanwhile, at the other end of the market, well-financed mega-brands have expanded their own in-house digital capabilities or transitioned their business to more sophisticated generalist agencies who see a growing opportunity in fashion. Burberry has more than 200 people in its in-house creative and digital team.

“I think there is a shift from digital specialists to ideas-driven agencies,” said Grede, commenting on the changing landscape. “So while that might pose a challenge in e-commerce specifically, that is weighted up by clients shifting to integrated briefs. Digital agencies can’t focus on e-commerce redesign as a sole source of revenue. We have gone from an era of fulfilment to an era of design. Now we are in the business of adding value to our clients e-commerce business. If anything, we are in an era of the integration of content and commerce. E-tailers have to compete with any form of home entertainment, not to mention [their direct] competition,” he continued.

“The dying breed of web agencies are simply putting content together and presenting it online in a nice looking design; the new breed are strategising about what the content should be, then actually creating it, then measuring it’s success and adjusting,” agreed Tony King, founder and creative director of King & Partners and co-founder and former chief creative officer at Createthe Group. “We’ve decided to move beyond digital. There’s no reason why a good idea should be limited to digital. We’ve evolved from a digital agency to a [media-agnostic] agency.”

“I will add that I’m still very proud of Createthe Group. It’s been five years since I was there, but in 2004 it was a great idea and for a good amount of time we did deliver on that idea. I sincerely hope they can get it back on track.”

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2 comments

  1. I can see how it would be harder for a digital agency to redevelop its niche, especially when there are so many economical services for website creation and e-commerce in 2014. I work at Worn Creative, a millennial creative agency, and while our work spans from marketing and branding, photography and video, not solely focusing on digital has allowed us to work with really exciting companies and personalities.

    Instead of declaring that these “easy to use” platforms have pushed us out of web design or e-commmerce, Worn Creative has always embedded other creative functions together which only help our clients get their message across and our business in motion.

    Juliet Otoya from Bethesda, MD, United States
  2. The problem is that the fashion industry like many other industry rely on e-commerce as the only value in the digital market. It is not. Digital Marketing on mobile has been swept aside and is only being used as an outlet for on the shopper. Apps… not marketing. There are so many opportunities for technology to step-up inn the very old ways of fashiion. From the designer to the shows. We own a Fashion Design and Manufacturing Agency, Martini Factory, and we implement new technology features and techniques to streamline their needs. We see this on a SMB level only. Net – A-Porter is a true breakout many years ago incoporating streaming technology. More designers, design houses, etc… should follow.

    Kim Barbieri from Los Angeles, CA, United States