Burberry Mens A/W Show 2011 in Milan | Source: Oki-ni CultureShoq

Today, BoF exclusively brings you Savigny Partners’ blow-by-blow analysis of the rapidly shifting luxury fashion business model which is undergoing transformation due to underlying shifts in consumer values, technology and globalisation

LONDON, United Kingdom — Luxury fashion is a very exciting business which can generate substantial returns if you get the formula right. Not only is there the ability to charge up to ten times the cost of manufacturing a garment and the potential to build a global business; apparel can be the beginning of a page-turning blockbuster, accessories and leather goods are the next chapter, fragrances and eyewear licenses the well-oiled plot. The story can have a happy ending with the promise of many sequels to come.

Success stories in this field are mouth-watering: Burberry’s share price climbed from 175p in November 2008 to 1,116p at the beginning of this year as the brand went from strength to strength and reportedly attracted the attention of a number of acquirers. Lanvin has embarked on a stellar growth trajectory with plenty of potential yet to come. However, not all blockbusters have a happy ending. The latest crisis has claimed a number of victims: Christian Lacroix, Gianfranco Ferré, Yohji Yamamoto, Luella Bartley to name a few.

In this article we will examine how the traditional designer business model has come under threat and what key factors we believe are necessary to ensure the success of a luxury fashion label today. Finally we will take a look at what lies ahead for the luxury fashion sector.

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New York Garment District

NY garment district battling for survival (Reuters)
“New York’s reputation as a global fashion capital is under threat with the city’s once bustling garment district facing extinction, experts say.”

A Minimalist Gets a Makeover (WSJ)
“Under the Bryant Park tents of New York fashion week Tuesday evening, Narciso Rodriguez will show off his typically minimalist evening gowns and day dresses. What the crowd won’t see is Mr. Rodriguez’s own ambitious makeover, as he reinvents himself once again, a year after his relationship with financial backers collapsed for the second time.”

London mayor celebrates LFW’s effect on UK economy (Drapers)
“London mayor Boris Johnson has pledged his support for London Fashion Week and highlighted the money it brings to the UK economy through sponsorship and media coverage.”

EU sanctions on Sri Lanka to hit ‘cheap’ clothing over human rights abuses (Times)
“They were billed as “garments without guilt” — cheap, good-quality lingerie, casual clothes and sportswear made in Sri Lanka and sold in stores such as Next, Tesco and Marks & Spencer. For the past four years, such clothes worth billions of pounds have been imported, tax-free, to the European Union under a trade scheme intended to help Sri Lanka’s recovery from the 2004 Boxing Day tsunami. Within months, however, clothes from the country could disappear from British shops.”

Debenhams Profit Gains, Helped by Own Designer Labels (Bloomberg)
“Debenhams Plc, the U.K.’s second- largest department-store company, said annual earnings rose as it allocated more space to its own designer labels at the expense of less-profitable brands from other retailers.”

Jil Sander and Tadashi Yanai, courtesy of AFP

Jil Sander to join Uniqlo (Drapers)
Jil Sander is set to become a design consultant at Uniqlo, “which will see her take overall creative control of the value fashion chain’s womenswear and menswear ranges.”

Delhi gears up for two fashion ‘weeks’ (India PRwire)
“Term it excess in times of a global economic slump, but two parallel events – the Wills Lifestyle India Fashion Week (WIFW) and the Delhi Fashion Week (DFW) – are again set for a head-to-head clash for their autumn/winter editions later this week.”

The duck that laid the golden egg (IHT)
According to the International Herald Tribune, the Moncler down jacket has come down from the mountains and landed on the city streets and fashionable society.

CFDA Announces Nominees for 2009 Awards (CFDA)
Marc Jacobs and Narciso Rodriguez are among the nominees for the CFDA Awards.

Escada Losses Widen in Quarter (WWD)
“Tough times continue at Escada. Against a backdrop of ongoing restructuring and a weakened luxury market, Escada’s earnings and sales further tumbled in the first quarter…” (Subscription required)

Narciso Rogriguez, designer of Caroline Bessette Kennedy’s wedding dress, and Liz Claiborne, the purveyor of everything from Juicy Couture tracksuits to Lucky jeans, announced today that Liz Claiborne Inc has taken a 50% stake in Mr Rodriguez’s namesake label.

Of late, we haven’t seen that many large fashion conglomerates take an interest in growing small high-end businesses. This particular partnership is also of interest because on the surface, there does not seem to be a natural match between Narcisco’s target market of luxury customers (who buy his collection at Neiman Marcus, Saks, Bergdorf Goodman and Barney’s) and Liz’s connections and expertise with lower priced Contemporary and Bridge labels (which are distributed much more broadly in stores like Bloomingdales, Macy’s and JC Penney). However, with the funding power and clout of a large strategic partner behind him, Narcisco may finally realise his aims to build a global brand. According to an article in today’s WWD, Liz’s strategy for the brand does not  include repositioning Narciso’s label to a lower price point, but rather to stick to the current high-end positioning of his designer collection while leveraging the Narcisco Rodriguez brand in licensing and non-apparel categories, where Liz has a great deal of expertise.

© 2007 Copyright Imran Amed – The Business of Fashion.