This lecture is about Business Models, their place in Fashion market and why BM are so important. So, get your cup of coffee, sit comfy and prepare to get involved in this fashion research 🙂
Business Model (BM) is a representation of organization in fashion market, that is based on different arrangements to achieve its strategic goals and objectives. It represents the main logic in which company creates, delivers and captures its value to unlock its potential at innovations, technologies, products and convert it into sustainable advantage, market outcomes.
Fashion Market Segmentation is based on 4 Business Models:
- Luxury brands (LB)
- Fashion designer brands (FB)
- Premium brands (PB)
- Vertical retailers in the Mass market (MM)
“Business model is a logical story explaining who your customers are, what they value, and how you will make economic returns in providing them that value” – Professor Joan Magretta, Harvard Business School
Value/price is he most common criteria to segment a market, because BM creates a value: product enables business strategy (a choice how to compete in business), business strategy defines BM, and BM creates the value/benefit/utility.
Which are value propositions in fashion market? Lets see examples:
- H&M – fashion and quality at the best price;
- Zara – instant fashion.
- Haute Couture&Couture – the top, luxury brands, high fashion, pieces of Art.
- Ready-To-Wear – designer brands
- Diffusion – designer and premium brands
- Bridge – premium brands
- Mass market – retailers
Value proposition offered to customers is:
- price
- creativity
- quality
*each of this elements is increasing by going to the top of pyramid
Haute Couture
Price: Most expensive, it could be 10 times higher than the average market price
Creativity: Maximum level, always made-to-measure
Quality: Great attention to details, maximum level of craftsmanship, pieces of art
Use: Mainly special occasions especially in the evening
Target: Very few people, celebrities, international clients
Idea: Build the image of the brand, sell the dream
Companies:
- Chanel
- Dior
- Givenchy
- Ellie Saab
Ready-to-wear, also called as PrĂŞt-Ă -Porter
(invented by italian companies)
Price: High price, 5 to 3 times higher than the average market price
Creativity: High level of creativity, designers expression through the fashion show
Quality: Attention to details, industrialization, usually “made in…”
Use: Wider occasions of use, from daily to important events
Target: Wider selection of people, celebrities, international clients
Idea: Develop the image of brand
Companies:
- Ralph Lauren
- Laura Biagiotti
- Chanel
- Dior
- Saint Laurent
Diffusion or Second young lines
(mostly are american and italian companies)
Price: Priced 3 to 2 times higher than the average market price
Creativity: Inspired from ready-to-wear
Quality: Wider volumes of production, production outsourced, country of origin is not a key success factor
Use: Casual, “sportier” (denim, t-shirts, sneakers)
Target: Younger audience, wider than RTW, mix of retail and wholesale distribution
Idea: Expand the target audience
Companies:
- See for Chloe
- Versus for Versace
- DKNY for Donna Karan
- Marc for Marc Jacobs
Bridge
(born in the USA with department stores)
Price: Right value for money, 2 to 1,5 times higher than the average market price
Creativity: Trendy not too radical/extreme products
Quality: Production outsourced, right delivery in stores
Use: Mainly daily occasions
Target: Usually a mix of wholesale and retail distribution,both international and local brands with local customers
Idea: Connecting the high end to mass market. Right marketing mix (product, communication, service)
Bridge connects High End market to Mass market. Bridge is updated but not as avantgarde as tops. Was born in USA in Department stores. There are many fantasy names and it connected more to a lifestyle than to a creator. many american designers are positioned in the Bridge segment.
Companies:
- Max&Co
- Emporio Armani
- Diesel
- Coach
- Massimo Dutti
Mass Market
Price: Below the average market price
Creativity: Basics or fashionable items depending on BM
Quality: Importance of costs control
Use: Different occasions
Target: Different targets, from teenagers to sophisticated women
Idea: Supply chain management is key. Segmentation is the new trend. Masstige communication. Role of the store. Entertaining shopping experience. Low price and efficiency.
Companies:
- Bershka
- Zara
- H&M
- Inditex
- Mango
Mass market sets a good combination of affordable prices with a fashion experience, typical of the high end of the market.
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