Luxury Fashion

Introduction

Luxury fashion appears to be the most profitable industry in the world.  It is an industry that is created to provide clients with the highest quality, and its consumers are willing to pay higher prices for these luxury brands. Furthermore, the marketing and promotion of this industry plays an important role as to where to position its products. As a result, consumers find these brands to give them a higher quality of life or a higher social status. Brands as Burberry, Gucci, and LVMH. Moet Hennessy Louis Vuitton are leaders in the fashion world and rise the fashion market industry year by year.

[pic 1]Luxury fashion industry has been growing during the past 20 years with a valued of 3 trillion dollars and accounting for 2% of the worlds Gross Domestic Product (GDP). The industry is divided in many categories such as womenswear, menswear, children wear, sportswear, and bridalwear. As well, the categories are divided into three sections: couture, ready to wear, and mass produced. Couture and ready to use are usually produced in limited quantities, and the customers can find these brands in exclusive store. The reason is because luxury brands needs to maintain their exclusivity level. Mass produced items are found in the brand stores, but also these companies use distributors such us Nordstrom or Macys to sell these products.

The industry is very competitive, and companies have been using new technology; to increase profitability and lower cost. Companies can be manufacturing, retailers, or both. Having the manufactures the option to sell their products under their name or under private names as companies have to evaluate if the consumer value the fashion and brand.

Pricing

Price differentiation has been always the largest part of increasing value in luxury fashion companies. Pricing is an important factor in marketing and branding strategy. It is the first sign of brand’s positioning to consumers as for the luxury fashion target audience is less price sensitive and expects that goods to be highly priced rather than economically priced. Nevertheless, after the global economic crisis in 2008, Luxury Fashion brands had to implement a price alignment strategy across some markets that were heavily impacted by this crisis. There has been always a price gaps between luxury fashion products purchased in Western Europe and products purchased in other parts of the world, for example; in Asia Pacific. However, with the Euro being depreciated against the Chinese Yuan made it even cheaper for Chinese people to buy luxury fashion in European countries such as France and Italy; where top luxury brands are originated from. For that reason, Luxury Fashion brands like Chanel and Louis Vuitton decided to apply the price alignment strategy and reducing their prices in China as well. This strategy would make a negative impact in the amount of tourism expenditures in Luxury fashion in Western Europe, where the economy depends on tourism. On the other hand, consumers will not take advantage of the currency exchange rate effect. The strategy would not be used in the long run as this adjustment in prices will make worst the problem that Luxury Brands have with the grey market. Consumers will be speculating with the currency fluctuation and purchasing the products at lower price while they wait to sell them when prices are high again. In addition, this can cause the ruin of several brands if the strategy is not used with caution  as the higher prices of this products are directly related with the brand exclusivity.

Product

In Luxury fashion industry, product is the foundation of its brand. This means, higher quality equals higher prices, but in the Luxury Fashion industry products with lower prices will never be part of luxury industry. Luxury brands have to make sure their products are the best available. Apart of quality, uniqueness the other requirement in luxury fashion because if a similar product is available in a mass quantity; it will lose prestige. Also, companies offer personalization on products that help make the difference in luxury experience. Luxury brands need to make sure that anyone that buys their products will be a personal experience for their customers.  Quality and uniqueness are the only requirements a product needs to be a luxury fashion brand.

Luxury fashion industry’s years are divided in two: the spring/summer season and the autumn/winter season, so fashion products tend to have a short life cycle. The moment where the product is launched to where it reaches the mature point is very short. In the life cycle of the product companies need to modify their products extending the life of it. Companies need to modify them to make sure sales doesn’t fall during the saturation stage of the product life cycle. In addition, product modification will rise sales again earning extra revenue and profit. Moreover, that is the reason why companies survive because they are constantly coming up with new product line extensions. These products can be internal or external through purchasing other companies or licensing them. Luxury fashion companies with a recognized name usually license products that do not count with the necessary resources to handle them. Doing this allows companies to increase product line and eliminates competition. In this industry at the mature stage, acquisition and licensing is a good movement to grow sales.

Place

Luxury fashion brands are high end markets, and for that reason their stores need to offer an enjoyable environment to create a bond between the customer and the brand. The customer services are exclusive and very selective in order to make customers feel unique. Location for general market is the formula to success, prime location is the key to luxury fashion branding. Louis Vuitton, Gucci, Chanel, Burberry and Gucci stores are located in high profile street locations that are recognized to be exclusive and expensive. Having a store in those streets make customers feel to be part to an elite group when they make a purchase. The environment of the stores is special with classic tastes creating a comfortable atmosphere. In addition, brands use the displays on the windows very attractive and the sales persons usually wear formal black clothes giving a sense of smart sales people.

On the other hand, Luxury fashion has also emerged in the digital era. Today, most brands interact with their customers through their own online store or by multi-brand e-retailers. Although, online transactions for luxury fashion is only a small percentage of its market, this situation will expect to change for the coming up year. The principal reason for this change is because half of the consumer buying decisions are influenced by what they see or hear on social media.

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Nowadays, global digital sales for women’s luxury fashion covers 3% of the total market; by 2018, the total market is expected to be 17%. This movement will help to grow the market in Western Europe and an incredible expansion in China. The Asia Pacific country will have an annual online sales growth, just in women’s luxury fashion category; of 70 percent. Luxury fashion brands overcame the doubts about selling and marketing in luxury e-retailer partners in select markets, they understood that those channels target different shopping occasions. Therefore, different consumer groups. This strategy gives the opportunity to reach those customers who don’t have time to shop in each different site, and the customers who aren’t easily able to visit the stores. The brand’s sense of prestige is very important, Luxury fashions brands must have a precise strategy of how to market both channels. The failure on this strategy can cause brand over exposure and dilution for luxury brand. Moreover, most luxury fashion brands select which items they sell into multi-brand e-retailing, and the “long-running classics” are only offered in their own brand website.