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.
This week, Virgil Abloh’s last show for Louis Vuitton, staged posthumously in Paris, raised questions on how to manage the legacy of a multi-tasking creative genius who brought streetwear to the highest levels of the luxury market and became the only Black designer to not only helm a luxury mega-label but take on a wider role at a major luxury group.
Vuitton chief executive Michael Burke has said the company isn’t in a rush to name a successor, but tapping a designer who can extend the brand’s successful foray into streetwear, increasingly central to the luxury business model, is likely to be a key consideration.
Signs of streetwear’s growing importance to the luxury sector were everywhere this week, not just at the Vuitton show. On Tuesday, as invitations arrived for Japanese streetwear guru Nigo’s debut show for Kenzo, LVMH Luxury Ventures said it had taken a minority stake in New York-based streetwear label Aimé Leon Dore. The same day, Swiss brand Bally named Rhuigi Villaseñor, the founder of Los Angeles-based streetwear brand Rhude, its new creative director.
It’s no secret that streetwear has become a critical part of luxury’s business model, helping to drive blockbuster results in recent years for major brands like Gucci, Dior and Balenciaga.
At the heart of the shift is a new generation of consumers, who grew up with hip-hop, skateboarding and basketball, and have long mixed their Supreme with their Dries Van Noten.
Generations Y and Z are already the main growth engine of the luxury market. By 2025, they are expected to account for 45 percent of total luxury spending. But this underestimates their influence. A “Millennial mindset” has rapidly taken hold in the luxury market, transforming consumer preferences across all generations.
“A style that was rebellious 20 years ago has become totally mainstream now. It isn’t Larry Clark’s ‘Kids’ anymore,” said Thomas Chauvet, luxury analyst at Citi. “That means brands have to rethink their business model.”
On the back of this shift, streetwear has become a key driver of luxury sales growth. In particular, the category has helped to restore luxury’s appeal with men amid declining demand for suiting, watches and formal shoes. And whereas ready-to-wear for both men and women was once largely focused on complex tailoring, office attire and eveningwear — making it far less profitable than the industry’s “golden-goose” handbags with their high margins and attractive retail economics — the new lexicon of logo tees and hoodies has been highly lucrative.
Streetwear has also brought the luxury industry compelling new sales and marketing strategies, from product “drops” that generate buzz and are more in sync with consumer expectations for newness at the speed of social media to new community-building efforts that tap into eagerness, not just for cool-looking clothes, but something to believe in and belong to. Brands have discovered that when the engaged communities built by streetwear designers collide with the clout of a luxury logo, they can sell status hoodies for the price of a suit.
Importantly, the streetwear ethos has also helped to revamp the very meaning of a luxury logo, the sector’s most powerful commercial tool. Whereas monograms had fallen out of favour for many clients in mature markets like the US and Japan, streetwear designers turned logos into expressions of tribal identity, not just markers of affluence. And while exclusivity remains critical to the luxury equation, reframing logos as badges of belonging to the communities fostered by figures like Virgil Abloh has chimed with a growing focus on inclusivity.
In the US market, where a reckoning with racial inequality has rocked society, harnessing creators anchored in America’s urban culture over designers with a penchant for ivory towers has also helped to combat the perception that luxury brands are not only exclusive but exclusionary.
Ultimately, streetwear may one day become as significant an addition to luxury’s business model as a category like beauty, which also came with millions of new consumers, new marketing and distribution strategies, and highly favourable economics.
THE NEWS IN BRIEF
FASHION, BUSINESS AND THE ECONOMY
Richemont, Burberry earnings signal that luxury market is thriving again. Richemont had its fastest holiday season sales growth in at least a decade and Burberry Group forecast 35 percent earnings growth this year.
Prada revenues surge past pre-pandemic levels. The Italian luxury group reported 2021 revenues that grew 41 percent year-on-year to €3.36 billion ($3.83 billion), closing the year up 8 percent compared to 2019′s pre-pandemic levels.
LVMH invests in Aimé Leon Dore. The French luxury giant’s venture capital arm is taking a minority stake in Teddy Santis’ New York streetwear brand for an undisclosed sum.
Hermès sues NFT creator over ‘MetaBirkin’ sales. The French leather goods giant alleges trademark infringement and dilutive use of its iconic Birkin name in its 47-page complaint submitted to New York’s Southern District Court.
Advocacy groups push to toughen New York Fashion Act. A group of 20 human rights and labour organisations are lobbying to extend the reach of the legislation proposed earlier this month beyond greater disclosure.
Puma sales reach record as shoe demand overcomes Covid snags. The German sneaker and sportswear company saw sales rise 32 percent in 2021, reaching €6.8 billion ($7.7 billion). Puma shares have outperformed Nike and Adidas in the past year as the industry grapples with supply chain challenges.
Yoox launches marketplace. The e-tailer, which is part of Richemont-owned Yoox Net-a-Porter Group (YNAP), is expanding its operating model to incorporate a marketplace platform to sit alongside its existing wholesale business — marking a shift towards the business model favoured by rival Farfetch.
Hugo Boss exceeds 2021 sales target after strong Q4. The German fashion house said revenue rose 43 percent in 2021 to €2.786 billion ($3.17 billion) — bringing it to only one percent below its 2019 result.
China sales of luxury goods grew 36 percent in 2021, Bain estimates. Domestic sales of luxury goods reached 471 billion yuan ($74.24 billion), a near doubling in two years, according to Bain & Company’s annual “China Luxury Report 2021,″ released Thursday.
THE BUSINESS OF BEAUTY
Alphabet’s Verily signs L’Oréal in multi-year skin deal as losses grow. The health tech arm of Google’s parent company will study skin health and explore new products with the cosmetics maker. Verily has previously drawn criticism for signing one-off research collaborations in lieu of focusing efforts on gaining recurring subscribers to its software.
TikTok’s parent company enters China’s perfume market. ByteDance’s Emotif line of perfume is said to be testing some products on third party e-commerce platforms in China — its latest venture into consumer products, which have previously included food, beverage and personal care. This comes as reports emerge that the company saw year-on-year growth slow to 70 percent in 2021, said Reuters.
Chinese beauty retailer Harmay raises $200 million in new funding. The up-and-coming Beijing-based beauty retailer has secured $200 million in recent Series C and D rounds of funding, led by QY Capital and General Atlantic, BoF learned.
Beautycounter names new chief executive. Gregg Renfrew, founder of the clean beauty company, will now serve as executive chair and chief brand officer. Marc Rey, former chief executive and global growth officer of Shiseido Americas, will take the reins as CEO. The change comes after Carlyle Group took a majority stake valuing the brand at $1 billion in April 2021.
André Leon Talley has died. The pioneering fashion editor, known for his high-profile friendships, larger-than-life personality and decades-long career at American Vogue and others, suffered a heart attack at the age of 73.
Report: Asos considers former Farfetch executive for chief executive role. Andrew Robb, who previously served as chief operating officer at Farfetch, is among the candidates being considered to become the online retail giant’s next chief, according to a Sky News report published Sunday.
Bally names Rhude founder Rhuigi Villaseñor as creative director. The Swiss luxury brand has tapped the founder of the LA-based streetwear brand to oversee artistic direction starting with the Spring/Summer 2023 season, Bally said in a statement.
SMCP appoints new board chairman following reshuffle. The French fashion group said Monday that independent director Christophe Cuvillier will step into the chairman role following a vote last week to dismiss five board members associated with former majority owner Ruyi Group.
Valentino reorganises structure, creates two new management roles. The Italian fashion house created a chief operations role to be held by Giuseppe De Mori, and a global chief financial officer role to be held by former Chanel CFO Alberto Fasanotti. De Mori will oversee the brand’s industrial strategy, digitalisation and sustainability.
MEDIA AND TECHNOLOGY
Amazon to open fashion store where algorithms suggest what to try on. In the e-commerce giant’s latest move to grow its fashion business, it will open a 30,000 square foot “Amazon Style” shop near Los Angeles later this year.
Shopify, JD.com pair up in China as e-commerce competition intensifies. Through the partnership, the Canadian e-commerce giant will allow merchants in the US to sell to JD customers in China.
Former GQ style deputy editor launches fashion and sport focused magazine. Elgar Johnson will launch CircleZeroEight in April, with contributions from Katie Grand, Saul Nash and photographer Ewen Spencer.
Compiled by Joan Kennedy.