The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
NEW YORK, United States — Oscar de la Renta was early to Twitter, early to Tumblr and, yes, early to Instagram. So in July 2013, when the American fashion house debuted its fall advertising campaign via the app, the industry was hardly surprised, right? It was a little thing. An experiment. After all, the Norman Jean Roy-shot images would still run in the September issues of every major fashion magazine.
Actually, it was a “really big deal,” recalled Jason Wagenheim, a former Condé Nast publishing star who was, at the time, Teen Vogue’s chief revenue officer. “That was a real tipping point for fashion,” said Wagenheim, who left the legacy publisher in 2015 and is now chief revenue officer of Bustle Digital Group. “Here is this expensive luxury brand and their fall campaign, which everyone looked forward to seeing in the print pages of Vogue; and yet everyone is talking about the engagement — the bajillion likes within hours — that the campaign got on Instagram. It foreshadowed that this could be bigger than any fashion magazine.”
In reality, each of the Oscar de la Renta advertising images attracted not much more than 1,000 likes within the first hour of their posting. But the campaign was indicative of a much wider shift that has transformed fashion, changing how publishers publish, how brands brand themselves, and how consumers consume. Brands have closed, stores have shuttered, magazines have folded — and both survivors and upstarts alike are fighting for consumer dollars in a new world where the formula for success is not nearly as clear as it is once was. And no single entity has had as lasting an effect on the fashion ecosystem as Instagram, the photo-sharing service let loose on Apple's App Store on October 6, 2010.
Three years later, when Oscar de la Renta drip-dropped those images down its feed, traditional print magazines like Vogue were still the arbiters of style. It feels like a long time ago. But back then, their authority remained intact and largely unchallenged, despite the rise of independent publications that operated outside of the traditional publishing industry and the emergence of digital brands that sold directly to consumers.
Instagram is to fashion what Napster was to music.
But it’s 2018 now, and times have changed. Instagram, which was acquired by Facebook for $1 billion in 2012, is where people now go to discover fashion content and, increasingly, to shop, with 72 percent of users saying they have made fashion, beauty or “style-related” purchases after perusing the app, according to a 2017 study of 2,000 Instagram users published by Chicago-based jeweller Dana Rebecca Designs. Instagram claims that more than 90 million users tap to see tags on shopping posts each month.
In some ways, it was inevitable. Consider this: Americans spend only 4 percent of their media-technology consumption hours with print, compared to 20 percent on personal computers and 28 percent on mobile, reports research firm Activate. Many of them are spending their mobile phone screen time on Instagram.
In June 2018, the app surpassed the billion-users-a-month mark, up from 800 million users in September 2017. More than 400 million people use Instagram Stories — the app's more casual slideshow feature — every day. Rival Snapchat had 186 million daily active users in its most recent quarter, down from 191 million at the beginning of the year.
As of August 2017, Instagram users under the age of 25 spend more than 32 minutes a day on the app. But the number dips only slightly to 24 minutes for those older than 25. That’s length of a sitcom...or a scan of your favourite magazine.
Of course, fewer and fewer consumers are buying those magazines. And brands have responded by following consumers online and shifting their marketing budgets from print to digital. In 1998, US print advertising revenue was $61 billion, as tracked by marketing intelligence firm Magna Global. In 2008, it was $54 billion, just a 12 percent decrease despite rising internet usage. But in 2018, it’s set to clock in at under $15 billion — down a staggering 75 percent from 20 years ago.
Brands are increasingly using Instagram — via both organic and paid posts — to communicate directly with consumers. “Given the rising importance of social media for luxury brands — especially in the context of millennial's growth — we believe Instagram data can no longer be ignored as a data point for luxury investors, to help them pick the winning brands,” Swiss investment bank UBS said in a recent note, going on to say that high Instagram engagement was a dependable reflection of brand heat. There is an unmistakable correlation between the size of a brand’s Instagram following and its retail sales, added the authors of the report.
So it’s no surprise that, in the second quarter of 2018, global advertising spend on Instagram was up 177 percent year on year, significantly ahead of Facebook, which saw 40 percent growth in the same period, according to Merkle, a marketing agency.
While Facebook still generates the majority of the company's revenue, which hit nearly $41 billion in 2017, analysts estimate that Instagram will generate $8 billion to $9 billion in 2018. Andy Hargreaves, a research analyst with KeyBanc Capital Markets, projects that Instagram will account for about a third of its parent company’s overall ad revenue — and 70 percent of its new revenue — by 2020.
In some ways, Instagram is to fashion what Napster was to music. You still can’t download a dress, but Instagram has fundamentally rewired the industry, replacing print magazines as the primary way in which people discover fashion. It's the foundation on which the industry has built everything from new labels to an influencer economy worth $1.6 billion in 2018, says marketing agency Mediakix.
Chiara Ferragni | Source: @chiaraferragni
All of Fashion Uses Instagram
Consumers were quick to embrace Instagram, thanks to its simple user experience and flattering, colour-washed filters that made even grainy images look a little bit more perfect. They posted photos of their food, their travels and, yes, their outfits. Fashion brands picked up on this quickly, realising that creating content on Instagram — a highly visual platform — would allow them to reach more customers, and soon found themselves locked in a race for followers.
Even luxury houses like Chanel, which has resisted selling core products online, took it seriously, using the service to post runway looks, campaign outtakes and inspiration boards. Some — from Proenza Schouler to Kith — have used the platform to tease their latest collections instead of waiting for a live Fashion Week moment. Earlier this year, Dior used Instagram as the main vehicle for the promotion of the relaunch of its classic saddle bag, tapping more than 100 influencers to spread the word.
While the campaign proved controversial — several of the influencers did not disclose that they were gifted bags by Dior — it was a blockbuster success. In the days following the launch, there were more than 6.2 million reactions in the form of comments, likes or follows, according to calculations by Dior.
The #DiorSaddle hashtag drove $3.4 million in earned media value in the third quarter of 2018, beating #PFW, which garnered $2.6 million in earned media value for the same time period, reports the analytics firm Tribe Dynamics. (To determine earned media value, Tribe analyses both follower and consumer engagement on each post.)
A representative for Dior said that, after the launch, sales of the bag through Google search rose by 300 percent, and that earned media value has amounted to $21 million overall.
But it goes beyond the legacy players. “Instagram brands” — mostly independent startups with minimal capital — have caught the eye of major retailers looking to woo increasingly discerning customers. Why? Because their audiences are highly engaged, using Instagram stories to shop and direct message — "DMing", in Instagram parlance — with the brands themselves.
Labels like Doen, Cult Gaia and By Far boast little-to-no presence at major fashion weeks or within the traditional fashion system, and yet they are the brands industry insiders are most curious about because of the communities that they've built on Instagram.
While Los Angeles-based bohemian apparel line Doen has just about 140,000 followers, it DMs with members of its community every day. The result? The brand regularly sells out of its peasant blouses and prairie dresses, creating an online frenzy. Cult Gaia, another Los Angeles-based label, may only have 317,000 followers on the platform, but the company says that it is on track to generate $15 million this year: far more than many independent high-end fashion brands with, in some cases, millions of followers.
Through Instagram, we've built our own community.
Instagram influencers are also launching brands, many with great success. Arielle Charnas, the influencer behind the account Something Navy, sold more than $4 million worth of product on the launch day of her collection with Nordstrom. In fact, the American department store has released multiple influencer collections, all of which are promoted via Instagram.
Then there is the creative community, including relatively unknown artists, illustrators and photographers — from Gucci collaborator Jayde Cardinalli to artist Suzanne Jongmans, who has worked with Valentino's Pierpaolo Piccioli — whose work now has global reach.
But for Charles Porch, Instagram's head of global creative programs, the platform's crowning fashion moment came in October 2015, when American Vogue editor-in-chief Anna Wintour held a dinner during Paris Fashion Week in honour of Instagram co-founder and chief executive Kevin Systrom. Together, they celebrated the "Instagirls," or models who earned or boosted their fame through Instagram, including Kendall Jenner and Gigi Hadid. Donatella Versace was there. So was Pat McGrath. They, too, were hooked.
Chen with Systrom, Jenner, Kim Kardashian and others at the Met Gala | Source: @evachen212
“To see the biggest designers, models, people in the industry talking about how much they love the platform, giving their feedback and, actually, huge people being able to talk about the product in depth ... seeing their passion for a tech product ... that really clicked for me,” Porch said. “They’re in so deep.”
Earlier that year, Porch had wooed Eva Chen, an Anna Wintour protégé and the former editor-in-chief of now defunct Condé Nast shopping title Lucky, to lead fashion partnerships at the company. If Instagram is the modern equivalent of a fashion magazine, then you could call Chen its de facto editor-in-chief. Her personal brand — warm, friendly and, yes, democratic — aligns almost too perfectly with that of the platform itself. With more than one million followers, she has developed her own hashtag (#evachenpose), written a children's book, set to be published later this autumn, and earned a seat on the YNAP's board of directors.
Part of Chen's job is to convince fashion industry stars like Kate Moss and Donatella Versace to join and use the app. But most importantly, she helps brands, image-makers, publishers and influencers get more out of their Instagram accounts.
Chen travels the world to help fashion brands, holding master classes — filled with executives from brands like Madewell, Birchbox and Ralph Lauren — where she offers step-by-step instructions on how to take a good photo, how to get the most out of Instagram Stories, how to use hashtags without spamming people. All things that, if done well, can help improve engagement — and potentially increase sales. She also advises them on how to spend their advertising money on the app, although, like a traditional editor-in-chief, she is not cutting the deals and is more focused on organic marketing.
"Instagram has made fashion more accessible," Chen said recently one late Friday afternoon at the company's New York city offices, wearing a pair of brown Gucci loafers and a checked blazer, the sort of off-duty look preferred by many of her friends who remain in print media.
The Collateral Damage
In many ways, Instagram has helped to modernise the fashion industry. But what about the collateral damage left in the wake of its success?
Brands are not only pulling advertising from print, but also from legacy publications in general. (Remember, Condé Nast reportedly lost $120 million in 2017.) While traditional publishers are still earning a part of the digital pie, brands are splitting up their marketing spends differently than they used to. Today, they might devote a certain percentage of budget to influencer marketing, and another slice to advertising directly on Instagram and other social media platforms.
Instagram is where our customers expect to find us.
Consider Oscar de la Renta. The company has been using Instagram as an organic marketing tool for years, but it wasn’t until recently that it began spending a significant amount of its budget there. Three years ago, less than 5 percent of the overall budget was dedicated to digital advertising. For the spring 2019 season, it will be at least a third, said chief executive Alex Bolen, a portion of which will be spent on Instagram.
Some brands are taking even bigger swings. About 55 percent of Gucci’s total 2018 media spend will go to digital efforts — mostly native advertising and paid social — per a report released by the Kering-owned brand in June. (That’s up from 44 percent in 2017 and 33 percent in 2016.)
And digital retailer Net-a-Porter has eliminated all national print advertising for 2018. (A few ads will still run in local publications.) Critically, the retailer also has its own newsstand-available magazine, Porter, that serves as a several-hundred-page advertisement. But moving away from print was not a small decision.
“Instagram is where our customers expect to find us,” said Net-a-Porter managing director Matthew Woolsey. “Social media platforms certainly rise and fall, and while our outlook is agnostic, we are going to the platforms that enable us to have the brand conversation that we want to have and emotionally connect. Instagram does enable that.”
Then there’s the talent drain. Image-makers and writers who would have normally held positions within legacy publications are now fleeing to digital-first publishers as well as brands, which are creating more content in-house to populate social channels. Many are also working independently as free agents, using Instagram to promote their projects.
What’s more, declining advertising revenue means that there is less job security within traditional editorial. Today, editors might have to work across multiple publications within a company without any sort of raise or recognition. Going it alone often makes more fiscal sense.
Legacy publications that cater to an older, affluent audience — such as WSJ and Town and Country — still have clout. As do those that still resonate with the industry. Doen — known for dreamy imagery and romantic silhouettes, created in limited-edition batches that often sell out — credits Instagram with much of its success. But it uses traditional media as a way to communicate to the trade. “Those are more of a tool to establish us as a brand within the fashion community,” said Doen co-founder Katherine Kleveland. “Through Instagram, we’ve built our own community.”
But what happens if that community goes away?
Testing Instagram's Staying Power
Eventually users will abandon Instagram. The question is when. Digital consumers can easily switch from one platform to another, making loyalty low. How long can Instagram keep them entertained?
In September, the company made two significant announcements that could impact that answer. First, there was the introduction of new shopping features that make it easier for users to transact via the app. Then, just a week later, co-founders Kevin Systrom and Mike Krieger, who had carefully guided the business since its inception, announced their resignations. Reports in The New York Times and technology site Recode suggested that the two founders felt that parent company Facebook was moving too fast to change — and commercialise — the product, sacrificing the simplicity that made Instagram so popular in the first place.
Chen with Donatella Versace at the Instagram offices | Source: @evachen212
As Instagram has become the ultimate browsing tool, it has also become increasingly transactional. The company encourages this behaviour by making it easier for paying advertisers to link out and run targeted advertising both within the feed and Instagram Stories. Business accounts can also link out through Instagram Stories and tag products within posts. (External links still don’t work in the captions or comments.)
The addition of these tools is a natural — and welcome — progression, said Lauren Price, director of client strategy for luxury and special retail at research firm Gartner L2. “It doesn’t feel like it’s a huge divergence from the way that brands and consumers have used Instagram from the get-go,” she added. “The intention [to shop] has always been there.”
After rumours that it would launch a standalone shopping app surfaced, Instagram announced that it would instead introduce a shopping channel on its “Explore” page, populated with products from brands the user follows, but also brands surfaced by its recommendation engine.
While it is not yet possible to shop within the app, the company has linked up with major e-commerce providers including Shopify to ensure that the transition from post to check-out cart is as frictionless as possible. "Personalisation is a key principle," said Layla Amjadi, Instagram's product lead on Shopping. "In Explore, we want to make sure it's your personalised mall."
Amjadi takes her role as a new-wave editor seriously. When she moved to New York City to lead the Shopping efforts — IGTV, its long-format video feature, is based in the San Francisco office, while other "big bets" are out of Menlo Park — she found an apartment close to Soho's main shopping strip for easy channel checking. "I like talking to the people at the flagships," she said, wearing a pair of double-C Chanel stud earrings, a gift to herself. "It's a great way to immerse."
Instagram insists that its focus remains on the user. That discovery is still the soul of the product. “Shopping is an inspiration-first product,” Amjadi said. “It maps to your interest, leans into relationships that you have… and is fantastic opportunity to help with consideration.” By "consideration" she means, “Should I buy this?”
But as Instagram becomes more transactional, does it risk losing some of its magic?
“I think it’s fine [for shopping] to be a part of the functionality,” said L2’s Price. “If you’re following a brand, you’re aware that it’s a brand.” The trouble comes in if Instagram integrates too deeply with Facebook and turns more into a pay-to-play platform. Right now, 93 percent of brands that advertise on social media advertise on Facebook, which prioritises advertising and organic posts from friends and family over organic posts from brands in its algorithm.
“I advise the brands that we work [with] to get the most value out of that organic growth on Instagram in case it does change,” Price added.
New Instagram head Adam Mosseri, the former vice president of the Newsfeed at Facebook, one of the platform’s most successful — and polarising — products, is said to have been Systrom and Krieger’s choice to lead the app into this next phase.
But Mosseri has quite a bit of work ahead of him. Social networks fade as users grow tired of relentless promotions and frustrating user experiences. “You could certainly argue that there is an inherent scaling to the point of collapse in a social network,” said Benedict Evans, a partner at Silicon Valley-based venture capital firm Andreessen Horowitz. “But there isn’t an obvious next thing.”
In Explore, we want to make sure it's your personalised mall.
On the fashion front, competitors like YouTube and Snapchat are also hip to the success Instagram has seen with Chen, hiring fashion insiders Derek Blasberg and Vogue editor Selby Drummond, respectively, to head up fashion partnerships. And brands are likely to find it increasingly difficult to stand apart on Instagram, where they are competing for attention not only within their peer group, but with brands of all price points, quality and missions. The cost of advertising on the app will likely increase, as will the investment brands need to make on quality organic content. What if Facebook's drive to squeeze more revenue out of Instagram makes it a less-fun experience?
What’s more, if this “time well spent” movement actually catches on, how will this affect the new world order? Special interest groups like the Center for Humane Technology, created by Tristan Harris, a former Google “Design Ethicist,” are lobbying the government and private companies to better regulate the technology that powers social media. Instagram itself has contributed to this conversation, testing a feature that allows users to monitor their time on the app.
Overall, fashion is still bullish on Instagram and eager to see what an easier shopping experience can do for its top line. For instance, the app’s bookmarking tool could be used, like Pinterest — a platform many brands still spend marketing dollars on — as a shopping list.
"I think lists are super interesting when it comes to digital behaviours," said Jon Jackson, a partner at digital product agency Work & Co, whose clients included LVMH, Target and Aesop. "To make that shopping experience even faster — seamless — that could influence behaviour."
If consumers continue to seek out Instagram for the fun stuff, and if Instagram can contain more of that fun stuff within the app, it could lead to more content creation, more talent discovery and more sales.
“I don’t think Instagram is going anywhere,” Bustle’s Wagenheim said. “I feel like there’s a big opportunity to open the gates.”
Of course, right now, fashion doesn’t really have a choice but to hope that’s the case.