The Business of Fashion

Luxury Briefing Conference | Exploiting the potential of new markets

By now, it is well known that Japan, Western Europe and North America are already well into recessionary mode, but emerging markets have not been spared either. In India, so the wisdom goes, people spend for occasions but during this year's Diwali Festival, usually brisk sales of diamonds have stalled, as consumers tighten their belts. In China, at a major luxury goods fair in Shanghai, accessibly-priced merchandise moved, but the most pricey items sat on the shelf.

Perhaps more than ever before, luxury businesses need to seize new business opportunities in emerging markets, but the market context there is changing so fast, it is hard to keep up with it all.

James Ogilvy has convened a great set of speakers to provide their perspectives on the opportunities presented by emerging markets against the backdrop of global economic doom and gloom at the annual Luxury Briefing Conference. Sheikh Majed al-Sabah of Villa Moda, Chris Colfer of Dunhill, and Tyler Brule of Monocle are amongst the experts scheduled to speak.

I am honoured to have the opportunity to present my own points of view on "What work's where?", focusing on case studies from in India and China.

For tickets to the annual Luxury Brieifing Conference, contact Luxury Briefing. For a complete agenda and further information, please click here.

Everybody is talking about | Fashion phones

Something is in the air. Earlier this week, we received a mysterious package in the post from Nokia. Inside, we found a 7900 Crystal Prism phone, complete with a Sapphire crystal and engraved design by French graphic designer Frederique Daubal, who has previously collaborated with Paul Smith and Colette, the iconic Paris fashion concept boutique.

Not only this, the fashion and technology blogosphere has been abuzz about Tag Heuer's branded mobile phone, priced to compete with the Vertu phones, at 3900 euros (or about $6000). Previously, other fashion brands including Prada, Armani, and Levis have launched mobile phones with much hype and fanfare.

To top it all off, I was recently invited to give a Keynote Speech at the ArcChart Handset Fashion and Style Congress in London later this month on, what else, The Business of Fashion.

So, is all this fashion phone buzz just PR hype, or is it something that fashion brands and mobile phone players should be seriously thinking about?

Fashion 2.0 | Luxury Interactive reveals online luxe race

Just digest these figures for a moment:

• Coach's online business now has revenues of over $100m per year -- the same as what Gucci's new flagship on 5th Avenue is expected to sell.  Neiman Marcus has broken the $500m in sales barrier online.
  
• In the last year alone, wealthy consumers' use of social networks such as Facebook and MySpace has rocketed from 27% to 60%, a growth rate of more than 120%.
• And, people are snapping up uber-luxe products online -- DeBeers regularly sells single diamonds worth more than $25,000 on its ecommerce site and 20ltd.com has sold items worth twice this much.

These were amongst the most interesting tidbits revealed at this week's Luxury Interactive conference held in London. The eCommerce opportunity has now become abundantly clear. Some quick math would suggest eCommerce is a very profitable channel indeed, especially when compared to a flagship store. The rent alone on the Gucci flagship in New York is estimated to be $23m, when an Internet retail site can still charge a full retail price, but with much lower fixed costs to cover. (However, returns and discounts are higher in the Internet channel.)

As for Web 2.0, finally, we're beginning to see a shift from a discussion of "if" luxury brands can seize real opportunities for relationship building with their best customers on the Internet, to an exchange on "how" this can be done. Arguably, a brand's Internet site is now the most important contact point for customers -- especially for the customers of the future. One step brands may now take is to set up their own online communities, as we wrote about in a Financial Times article in February.

World Luxury Congress: Looking eastwards

The World Luxury Congress, an annual gathering of luxury and fashion executives from around the world, was held in London earlier this week and I was able to attend due to a kind invitation from Milton Pedraza, CEO of The Luxury Institute, who moderated a panel I participated in earlier this year. A formidable roster of speakers and panelists implored participants to take heed of three themes that came up time and time again during the conference: the need engage with customers as human beings, the lightening speed of luxury development in emerging markets, and the missed opportunity for luxury on Internet.

The conference had its ups and downs, but one of my personal highlights was the inspiring presentation given by Guy Salter, Deputy Chairman of the Walpole Group. He kicked-off the 2-day conference with an insightful look into the future of the luxury goods industry as we approach 2008. He, in particular, highlighted the industry’s failure to grasp the potential of the Internet, both as a tool to grow the top-line, but also to engage with customers in a conversation.

Web 2.0: The industry takes notice

Cathy Horyn recently asserted that that London's fashion renaissance might be linked to the fact that the city is awash with cash. From Russian oligarchs to Arab princes to Indian billionaires, it's true that that London has become a playground for the world's rich and famous. Perhaps this is also why there are no less than three luxury conferences taking place in London over the next few months, each with some focus on the opportunity that web 2.0 technologies presents for the industry.

Next week, The Walpole Group hosts Tech Luxe: Web 2.0 and Beyond, a half day seminar to help companies learn how they can "reharness the creative power of technology." Speakers will include Nick Robertson of the innovative online fashion retailer asos.com.

Fashion 2.0: What the future holds

About a month ago, I attended the Harvard Business School’s annual Retail and Luxury Goods Conference in Boston. It was an interesting day of speeches and panel discussions, bringing together industry veterans and experts from leading luxury goods and retail companies including Neiman Marcus, Loro Piana, and Holt Renfrew. You can read more about the conference in this news article from HBS’s Harbus Newspaper.

I was honoured to speak on a panel with a diverse group of talented people from across the world of Luxury Goods, including the American designer Peter Som, Olivier Cardon, President of Roche Bobois North America, and Roberto Vedovotto, Chairman of Lehman Brothers Global Luxury Goods practice. I thoroughly enjoyed the back and forth with my fellow panelists. We touched on many topics, but the one that seemed to provoke the most debate was regarding the role that the Internet and so-called "Web 2.0" technologies can play in the branding, marketing and commercial strategies of luxury and fashion companies.

I have to say, it felt like being in a time warp. There was a notion that luxury “customers aren’t on the Internet” and that the Internet “is too risky” for luxury brands. All of a sudden, I knew what it must have been like to be Natalie Massenet (of Net-a-Porter) or Ernst Malmsten (of boo.com) back in 1999, making a case for the potential of Luxury and the Internet, to people who were very risk-averse, conservative and stuck in old mindsets; people who couldn’t see the potential for what the Internet could do for their brands and businesses. Of course boo.com and Net-a-Porter have followed two very different stories. (One, which ended abruptly, was discussed in this post.) Massenet, however, has shown (with her company that is now turning over a reported $80m and growing at 100% per year), that as with all businesses, harnessing the power of the Internet for Luxury comes down to basic business acumen, strong marketing skills, and knowing how to properly manage and grow a start-up, while also understanding technological issues such as the adoption curve and limitations of sophisticated technologies.

As for Luxury customers not being on the Internet, this appears to be an assumption made in the absence of basic facts or data. One need only look at a recent article from the Financial Times to see really how many luxury customers are online:

"A survey of  500 of America's richest families published in 2005 by researchers Doug Harrison and Jim   Taylor found that the respondents spent on average 13.7 hours a week online. The Luxury Institute, in a  survey of 1,000 wealthy consumers published in March, found that 98 per cent used the internet for     shopping, and that 88 per cent read product research and review sites.”

Clearly, these are not just young bucks trying to pick each other up on Myspace or Facebook, but also high net worth communities like asmallworld and focused fashion communities like Iqons.com. Big brands and collections are being discussed passionately on all of these highly-trafficked sites, but also on blogs (purseblog.com, whowhatweardaily) and virtual communities (secondlife.com). The amount of content is mindboggling. 

Obviously not all of it is good content. But, my basic point is that since conversations about Gucci, Prada and Burberry are going on, Gucci, Prada and Burberry might as well figure out a way to be part of those discussions, where it makes sense. The fact of the matter is that the conversations will continue, whether they are involved or not. Of course, not all of those places would make sense for every brand all the time, but to disregard the importance of the Internet outright seems shortsighted.

When it comes to the riskiness of luxury brands on teh internet, I can certainly appreciate this point. Big players have the most at stake, given the energy and money that have been invested in their brands, sometimes over hundreds of years. But that said, where there is risk, there is also opportunity. Thankfully, some big brands have recognised this and started to experiment with some of these new communication channels. Armani and Karl Lagerfeld have brought their fashion show videos to the Internet, iPods and mobile phones, showing that being a pioneer has nothing to do with age, it has to do with attitude. Dior has also experimented with the launch of a jewelry collection on secondlife.com.

That said, some of the most exciting ways to really experience what online luxury might feel like in the future is by visiting the amazing virtual worlds created by emerging designers, who are able take more risks and experiment. Boudicca’s site at platform13.com is like walking right into the fantastical (sometimes incomprehensible) world of the designers, Zoe and Bri an, who share all aspects of themselves and their passions. They have also uploaded all of their fashion shows to Youtube. Other fashion designers are also providing a peek into their everyday lives by keeping regularly updated blogs. New York-based Brit Sue Stemp and dynamic British-Japanese duo Eley Kishimoto are amongst those using blogs to create a space to communicate with their customers.

What the future holds for luxury eCommerce in particular is very exciting indeed, because much of the basic foundation has been laid. Competition is just beginning to heat up.  Since pioneers like Massenet successfully brought luxury online, all of the big retail and luxury players have jumped in. You could say, they have been fashionably late. Neiman Marcus’ direct business (which includes the nm.com, bergdorfgoodman.com and the catalogue business) now generates $700m in revenue. Revenue growth rates for the online boutiques of Coach and Gucci are massive, somewhere in the 60%+ range. Interestingly, partially because of the rush to capture online real estate and market share quickly, almost every online luxury site feels the same. Not much time has really been spent in creating a truly unique destination. Just check out  brittique.com, matchesfashion.com, brownsfashion.com, neimanmarcus.com, eLuxury.com , and bluefly.com and you will see what I mean. For the most part, each site is a one-way interaction with the consumer. They also tend to be organized in the same way, with similar aesthetics using similar fonts and layout. Only Net-a-porter has successfully integrated compelling content into their site (with its magazine) and just Yoox has a truly different look and feel.

So now, as with any other business where the product/service starts to become commoditised, the key players will have to take it to the next level and differentiate themselves to keep up with the rapid pace of what’s going on. It's not a zero sum game yet because the industry's growth is so high, but with so many players in the game, its bound to be more competitive. This is where Web 2.0 can play a role. Luxury ecommerce sites which differentiate themselves through unique product assortments, clever editorial and content, and interactive community development, will be the ones that succeed. On the other hand, with retail it always comes down to number of visits and average purchase size, so its also important that the interactivity and community don’t detract from the primary objective at hand, which is to drive sales.

Fashion Business Club, London

For those of you in London and interested in the business of fashion, you might want to check out the Fashion Business Club which was co-founded by two friends, Alison Whelan and Courtney Blackman, in late 2005. The club meets every 2 months to discuss business issues and invites guest speakers from various spheres of the industry to promote debate, shared learning and networking.

Courtney and Alison used the online social networking site asmallworld to build the initial membership base and have now expanded it to anyone involved in the fashion industry. They have really taken this club to the next level with interesting speakers and even a bi-monthly newsletter.

The next meeting is on Thursday 25 January at 43 South Molton St, London W1.

You can check out the club's website here for more info.

Conference envy

I would love to attend this conference. A fascinating and relevant theme curated by a veritable dream team of people from the luxury and fashion space.

http://www.ftbusinessofluxury.com/home.asp?m_pid=0&m_nid=15359