Profit Blog
The profit pillar is an important factor that shapes the fashion industry and contributes to the growth of businesses. The profit of a business changes over time due to, for example, economic challenges, where they would need to adapt, potentially developing new strategies. The fashion industry plays a major role in the world economy, with $2.5 trillion in annual revenue and “employs more than 1.8 million people in the United States” (Maloney, 2015). Over the past years, the industry’s sales have fluctuated, with sales growing in 2016, although certain sectors, such as the accessory, experienced a downfall (McKinsey, 2017).
Due to the growing use of technologies and the COVID-19 pandemic, e-commerce (the selling and buying products online) was introduced to the fashion industry. An analysis carried out by Macchion et al. found that e-commerce, although not bringing a clear correlation with the performances of businesses, does help reduce the time for fashion houses to evaluate their marketplace. For example, through e-commerce, Burberry succeeded in producing a collection that met the latest customers’ preferences and the delivery of the products rapidly (Macchion et al., 2017).
Through the years, fashion brands will likely experience a downfall in their sales and growth when met with economic challenges. At this stage, it is crucial to understand the “brand’s health, which is naturally affected by both internal and external factors” (Mitterfellner, 2023). However, the brand’s lifecycle can continue if they tailor their market and accommodate the new customer’s preferences. As previously discussed, the COVID-19 pandemic was one of the fashion industries’ biggest challenges. Through this time, to stay competitive and continue their profit, luxury fashion brands started adapting to e-retailing. Brands like Louis Vuitton used online live streaming to broadcast exclusive brand launches, such as a “Valentine’s Day exclusive pop-up store” (Xie, 2020). Transparent communication is another key factor when discussing uncertain economic times because it is at the root of a brand’s image and will build/maintain loyal consumer-brand relationships.
Creative directors can balance creativity and commerce by working hand in hand with different teams, for example, marketing, that are part of the fashion house. One of their roles is to deeply understand the fashion brand image and target audience and stay updated with customers’ trends to maintain the “brand’s heritage” and create profit. Their job can also entail working for other fashion houses that are not their own. For example, Karl Lagerfeld was appointed as creative director for Fendi and Chanel whilst still being a creative director at his fashion brand (Mitterfellner, 2023).
References:
- Maloney, C. (2015). The economic impact of the fashion industry. US House of Representatives. https://www.jec.senate.gov/public/_cache/files/ffe17b78-b14d-4b23-8e19-fea4480959a3/economic-impact-of-the-fashion-industry.pdf
- Karl, C. (2017). The State of Fashion 2017. McKinsey Global Institute. https://www.mckinsey.com/~/media/McKinsey/Industries/Retail/Our%20Insights/The%20state%20of%20fashion/The-state-of-fashion-2017-McK-BoF-report.pdf
- Macchion, L., Moretto, A. M., Caniato, F., Caridi, M., Danese, P., & Vinelli, A. (2017). International e-commerce for fashion products: what is the relationship with performance? International Journal of Retail & Distribution Management, 45(9), 1011-1031.
- Mitterfellner, O. (2023). Luxury Fashion Brand Management: Unifying Fashion with Sustainability. Taylor & Francis. Chapter 6: Decline and resuscitation of Luxury fashion Brands.
- Mitterfellner, O (2023). Luxury Brand Management: Unifying fashion with Sustainability. Taylor & Francics. Chapter 2: from creative Director to the fashion Show.
- Xie, J., & Youn, C. (2020). How the luxury fashion brand adjusts to deal with the COVID-19. International Journal of Costume and Fashion, 20(2), 50-60.