The Business of Fashion

Kid Luxe?

I am on the Eurostar to Paris and came across an article in the latest edition of TIME - Style and Design on the Paris-based luxury children's brand, Bonpoint. Apparently, the company is actively in play to be acquired (possibly by France's Pinault family) after having been nicely prepped and dressed-up by Edmond de Rothschild Capital Partners, who acquired 70% of the company from its founders in 2003. Since then, the company has grown to almost €43m in annual turnover with about 60 Bonpoint retail stores around the world. This is impressive for a brand that has slowly been building itself in a market that is not very well understood.

I have to admit that I have always been sceptical of luxe for kids. Is there really a luxury apparel market when kids grow out of their clothes so quickly? Why emphasise quality when the clothes only need to last a year anyway?  Is it healthy for kids to be exposed to luxury branding from such a young age? What does it say about parents who dress their children in luxury clothes as yet another way to flaunt their wealth?

This article made me think twice about it as a business. First if you can get brand loyalty from the buying decision maker, then you can expect even more frequent purchases of clothing as kids rapidly go through their clothes. The article even mentions mothers who buy the same children's outfit for each home! Yes, kids will eventually outgrow the brand and so new customers will have to be found, but while Bonpoint has the customers, they will be loyal and revenue generating. This is even more compelling when you take into account the demographic trends highlighted in the article. In developed markets where fewer children are being born, later in marriage, there is even more money available to lavish upon these children by their parents and grandparents, who are also richer and living loger.

Second, kids are exposed to all sorts of branding and marketing anyway. McDonald's, Nintendo, and increasingly MySpace, YouTube and MSN, so why not Bonpoint? That said, it does make me think about what potential Bonpoint loses in the "lifetime" value of a customer given that they have explicitly stayed out of the adult clothing business. After building a relationship with the customer (in this case, mother and child), they let them go and possibly won't see that customer again until they have their own children. I wonder whether there is a way to continue to capture value even after kids have outgrown the brand.

As for parents who dress up their kids to flaunt their wealth and status, there are always going to be parents who do that and with or without Bonpoint they will continue to do so. At the same time, not every parent who buys Bonpoint is doing if just for their own image. They may simply want what they think is the best for their children.

I was most struck by the way Marie-France, one of Bonpoint's founders,  spoke about the way she was brought up in an artistic family to appreciate beautiful things -- not necessarily expensive things. "Our mother didn't have a lot of money, but the word we heard most often was REGARDEZ. Look at all the beautiful buildings in Paris. Look at the paintings. Look at the furniture...You were told to train your eye and always there was a dissassociation of beauty and taste from the idea of money..."

So, maybe Bonpoint isn't about conspicuous consumption for children? It could be more about injecting a sense of refinement and taste early into lives of children...who knows. The jury is still out for me, but the idea od luxury children's wear doesn't seem like such a bad idea anymore. I am going to try to check out the Bonpoint flagship the Rue du Tournon on this trip and judge for myself.

[Extracts from TIME - Style and Design, Winter 2006]

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Mind the Gap?

Big fashion business news Stateside last week were the dismal sales results of Gap Inc, the venerable American high street retailer that also owns Old Navy and Banana Republic. December 2006 like-for-like sales were down 8% versus 2005, which in turn were down 9% versus 2004. In the same period, many other retailers saw an increase in sales versus last year. Of late, the Gap has been struggling to recapture the heady days of growth and market dominance it enjoyed in the late 1990's.

So, what gives? How did the Gap lose its way? The arrival of European retailers like Zara, H&M and Mango has surely played a big part. These retailers, who quickly copy catwalk trends and produce them in the store with amazingly short lead times, mean that competing on the high street now requires that fashion be fast - very fast. Make regular visits to the Gap and you will see that the fashion is neither fast nor fashionable.

The first issue at the Gap is the product, which is not as fashionable as what you can find elsewhere. The importance of good design has begun to trickle down from luxury fashion to the high street, meaning that the old business models of basic items at a good price is no longer sufficient . The Gap has been completely behind the eight-ball on this, while Zara and H&M have led the way with consistently fashionable, on-trend collections. The Gap was also late in catching the wave of bringing in big name designers to create high-profile capsule collections as Stella McCartney, Viktor & Rolf, and Karl Lagerfeld have all recently done for H&M. Last summer, finally, the Gap attempted a similar tactic by introducing a small collection dresses by London-based designer Roland Mouret. As far as I can tell, these simply did not seem to create the same level of excitement amongst fashionistas. To its credit, the Gap has reportedly created a European design team to better suit the tastes of international customers and I have noticed some improvement in the product on the men's side, but there is still seems to be a long way to go if these sales numbers are any indication.

Second, and this is anecdotal only, the merchandise at the Gap doesn't seem to change as often, and sometimes seems as though it is sitting there for months at a time. Zara makes regular, frequent drops of brand new merchandise to keep inventory fresh and to encourage shoppers to keep coming back to see what's new. Not only did the capsule collections create massive brand awareness and street cred for H&M, it also brought new customers into the store, including fashionista types who may not have shopped at H&M before. More visits, more often, from more customers drives sales growth. As a McKinsey partner once exclaimed to me in Boston, the biggest drivers of retail success are footfall and basket size. The more visits you have to your stores, the higher your sales will be as each new visit means a potential purchase.

Which brings us to the third issue: heavy discounting. The more your consumer spends on each visit (basket size), the higher your sales will be. I have been to the Gap three times in the last 4-5 months, and each time, I have been offered large discounts on the merchandise that was being bought. I'm not complaining about this as a consumer, but as a manager of the business, I might think about discounting a little bit differently. During the first visit, upon leaving the fitting room, I was offered a friends and family card by one of the employees which saved me 30% on everything that I had in my hand. The second time, a month or so later, when I mentioned that I had been invited to a special American Express discount evening (which was not until the next day), the kind cashier offered my friend a 30% discount anyway, even though we were a day early. And now, if you walk into the Gap post-Christmas, it is covered with 75% off signs, with cashmere sweaters for only £35. Heavy discounting like this creates an expectation and precedent in the consumer's mind about value and pricing. Many consumers will simply wait for items to go on sale, especially if it seems like the merchandise will still be there in a month. I can't remember the last time I bought something on sale at Zara. If I find something there, I buy it right away, knowing that someone else will snap it up if I don't act quickly.