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:

  1. Luxury brands (LB)
  2. Fashion designer brands (FB)
  3. Premium brands (PB)
  4. 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.

The Fashion Market Segmentation Pyramid

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  1. Haute Couture&Couture  – the top, luxury brands, high fashion, pieces of Art.
  2. Ready-To-Wear – designer brands
  3. Diffusion – designer and premium brands
  4. Bridge – premium brands
  5. 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 Prêt-à-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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