LONDON, United Kingdom — The fashion business is both an increasingly global industry and one being transformed by technology, and never was that more clear than this week on BoF.
Following our recent analysis on fashion companies' absence from the growing wearable technology space, Credit Suisse published a new report saying that the market for wearable devices — such as Nike’s motion-tracking FuelBand, Google’s Internet-connected eyewear and Apple’s rumoured smartwatch — is set to grow by ten fold, from between $3 to $5 billion today to between $30 to $50 billion in the next five years. These are staggering figures, representing a tangible opportunity for fashion brands who are bold enough to experiment outside their comfort zone.
Elsewhere on the fashion-tech front, things are not so rosy. Is it possible that companies like Gilt Groupe, Moda Operandi, Warby Parker and Bonobos have raised too much money, creating unrealistic expectations for growth and scale? In an op-ed piece that burned up the Twittersphere this week, Lawrence Lenihan, managing director of FirstMark Capital in New York, argued that fashion technology start-ups were being overcapitalised, resulting in failed investments that ruin companies. Lenihan says that fashion-tech investors (and the entrepreneurs who they back) shouldn't expect to create online fashion companies at the scale of Amazon or Google.
From around planet fashion, our friends at JapanConsuming wrote about the rise of ‘Geek Brands’ in Japan. There are more single or childless Japanese men than ever before, leaving plenty of time — and disposable income — for them to immerse themselves in the details and craftsmanship and materials of everything they buy. Take H Tokyo, for example, a tiny store devoted entirely to selling men’s handkerchiefs.
But this burgeoning interest amongst men in the finer details of style and fashion is not limited to Japan. In a tailoring-shows-signs-of-growth.html" target="_blank">transnational tailoring trend that we have observed in cities as diverse as London, New York and Mumbai, we met with bespoke tailors serving a new generation of men, who are interested in sharp suits that fit into their urban lifestyles and have younger, cooler silhouettes.
Crossing over into China, which has been the key driver for growth the global luxury goods market, a slowdown is taking hold which Bain & Company, a consulting firm, says will put the brakes on global growth in the luxury sector in 2013. Growth in China has dropped sharply over the last 12 months, and Bain forecasted growth in China would further slow to between 6 and 8 percent in 2013, following an ongoing crackdown on expensive gift giving to government officials.
Indeed, Reuters reported that more mainland Chinese are heading to Hong Kong on ‘frugal fashion’ trips which take them to outlet shopping malls like Citygate, where products from brands like Levi’s, Coach and Burberry are available at steep discounts. This is a new type of travelling Chinese consumer, in search of bargains and value.
The Bain & Co. report also said that Chinese consumers were scaling backs on trips to Europe, and heading instead to destinations closer to home, like Australia, where I spent some time last week. While many of the Australian fashion industry professionals I spoke to noted the rising traffic from China, they lamented the state of the local fashion industry, citing recent bankruptcies, the decimation of the once-lively Paddington shopping district, and the ongoing market disruption brought about by the arrival of fast-fashion retailers and international fashion e-commerce players, who are aggressively targeting the land down under.
It’s also been a busy week in investment news, which suggests there is further consolidation to come across the fashion and luxury sector. Shares in Saks Fifth Avenue surged after reports emerged that the company had hired Goldman Sachs to explore strategic alternatives. One such alternative was a potential merger with Neiman Marcus, something that was reportedly being mooted by KKR, a private equity firm that specialises in leveraged buyouts. There were also rumours this week that Qatar Holdings was considering taking a stake in Versace, which has been turned around in recent years by chief executive Gian Giacomo Ferraris.
And it was musical chairs at Richemont, leading some observers to question the luxury group’s long-term commitment to fashion. The fashion division of Richemont, which includes Chloe, Lancel and Azzedine Alaia, reported sluggish growth, dragging down the otherwise stellar performance of the group in luxury jewelry and watches. Chairman Johann Rupert acknowledged that brands with disappointing performance should have been disposed of more quickly.
A few days later, Marty Wikstrom stepped down from her role as chief executive of fashion at Richemont. Eraldo Poletto also quietly left his post as chief executive of Dunhill, another Richemont fashion brand, last month. This week, it was announced that Mr Poletto would be replaced by Fabrizio Cardinali, formerly of Lancel.
Have a great weekend everyone and hope you enjoy diving into our weekly review of the business of fashion.
Imran Amed, Founder and Editor-in-Chief
In Japan, the Rise of ‘Geek Brands’ (Global Currents)