Is it still possible to grow a big brand in the digital world?
That is the crux of a debate bedevilling the luxury fashion industry, where growth has slowed at a time when digital technologies have allowed other sectors — from transportation to short-term rentals — to expand globally at mass scale.
The mood in the space is sour. Global volatility and stockmarket uncertainty have led to an overall slowdown.
Nearly 70 per cent of surveyed fashion executives, investors and industry observers believe conditions for the industry have become worse, according to a report last month by consultancy McKinsey and London-based publication Business of Fashion.
“The key message is that 2016 was a really bad year for the industry, probably the worst one since the financial crisis,” says Achim Berg, a lead author of the McKinsey report and leader of the firm’s apparel, fashion and luxury practice. “That was especially true for the luxury part of the industry, which was a bit surprising because we all knew 2016 was bad, but we didn’t expect it would be that bad.”
Some brands have turned to new technologies to connect with an increasingly digital consumer who demands immediate gratification, quick service and ever-new ways to interact with old brands.
But the luxury world, by its very nature, can seem out of place with trends in today’s marketplace.
“When we talk about luxury, we have a problem,” says Pauline Brown, former chairwoman of North America at LVMH and senior lecturer at Harvard Business School. When people talk about luxury goods, “we are talking about heritage, about a traditional way of storytelling, and all of that is antithetical to innovation, to technology, to efficiency,” she says.
Many brands are trying anyway, though for now success seems limited. The McKinsey and Business of Fashion report forecasts annual online sales of luxury fashion will increase fourfold to 12 per cent of total sales in 2020 from an anaemic 3 per cent in 2010.
Perhaps no other innovation has garnered more attention in recent years than the “see now, buy now” process in which a designer’s collection is presented on a fashion show runway to the usual select cadre of press and retailers, but also streamed live on the web.
While each designer does it a little differently, the biggest change is that the clothing on display is made available for sale the moment the show goes live — an idea that upends the traditional rhythm of the fashion cycle, in which the designer used to have time after each show, about six months, to hone their collection before it hit stores.
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