Last year when the global Fashion Industry was badly hit by pandemic several fashion brands had only two options .one was to either file for bankruptcy and second was to completely shutdown At this adverse time there were two legendary brands that just did not survive the pandemic but they also made incremental profits.
The most fascinating thing about these brands is the preparation that they did many years ago that safeguarded their business from pandemic. Today we are going to know about those strategies so that you all can apply them to your business.
From today’s case studies you will also learn that fashion industry is revamping itself by eliminating traditional players and creating enormous space for young fashion entrepreneurs with modern mindset.
When we think of the richest people of the planet we think of tech giants like Jeff Bezos , bill gates , Elon musk , Mark Zuckerberg or google founders – lary page or lary Ellison …. it is understandable that they deserves this hot seat since most of these are making very popular products that billions of people use every day … Amazon , Google , Instagram , Facebook , Microsoft .
BUT there is one more industry, which serves to all the people of the world.
This industry is so essential for humanity that, even if you don’t have food, you will be still be using this the product from this industry.
I am referring to the clothes we are wearing, I am talking about the apparel industry …
In 1984, the significance of fashion industry was understood by a civil engineer who eventually became the richest man on this planet in 2021. #Bernard Arnault was a young real estate developer who had the vision for conquering the fashion industry .In 1984, Bernard acquired the company that had control on luxury brand #CristianDior .He is also known as Terminator because as soon as he acquired this company, he laid off 9000 workers in order to strategies expenses and bringing the company back to health .It took him 5 years to make the company profitable again.
In 1988 , he invested in the biggest fashion conglomerate LVMH – louis Vuitton Moet Hennessey and became the chairman in 1989 . Now visualize this that it was only 5 years that a civil engineer has entered in to the fashion industry and he had the most valuable luxury brand Cristian Dior and Louis's Vuitton under his control.
His vison for conquering the fashion industry was so strong that right now LVMH controls around 60 subsidiaries and each manage a small number of prestigious brands, in totality it is
So if are wearing Christian Dior or Givenchy or Marc Jacobs or Stella McCartney or Kenzo, Celine or Fenty, or Bulgari – it is all controlled by a single company.
And here I want to mention that this is not the first time when someone from fashion industry has become the richest person on the planet. A similar event has happened in the recent history …This second story is about a man which is very similar to Dhiru bhai Mabani of India .
legend has it that Dhiru bhai used to sell Polyester fabric on his cycle and from there he established one of the biggest Indian company Reliance which had a net worth of over 3.8 lakh crores Indian rupees which is almost half of the GDP of Indian Capital. New Delhi which is 7.8 lakh crore.
So coming back to our second story , in 2016 world was surprised to see that a the richest person who overtook Microsoft founder Bill Gates , was from fashion industry.
This man was Spanish billionaire businessman – Amancio Ortega, the founder and former chairmen of Inditex group. This otherwise introvert business genius started from a humble beginning by working in a tailor shop learning shirt making and in few years build a global empire of fashion clothing with net worth of– seventy five thousand crores .
In 1975 , This genius started his business by starting fashion retail store Zorba which was later changed to ZARA. In 10 years Ortega During the 1980s, Ortega disrupted the whole structure of the company and changed the design, manufacturing, and distribution process to reduce lead times and react to new trends in a quicker way, which he called "instant fashions".
This visionary stressed on the use of information technologies and assigning groups of designers instead of individual’s designer. Where other brands were making 4-8 collection in a year Zara offered more than 112 collections .Because of this enormous success of ZARA, other brands tried to imitate ZARAs operational strategy but no one has yet succeeded yet.
There is a reason special reason for me to speak about these companies. In 2020 -21 , 95% of the business of the world are adversely affected by pandemic and fashion industry is also hit very badly .But there comes the surprise ….both of these companies – LVMH and Inditex have actually made profit during this pandemic which clearly outlines that strong foundation and future readiness of these companies . Both these brands also represent two different segment of fashion market where LVMH is about Luxury clothing , Inditex represents mass Market .
The main reason that stopped this companies to replicate ZARA model was their gigantic Supply Chain which was based on traditional models that was based on past consumer who were less exposed to fashion trends and smaller number of styles could satisfy them …
This requirement was drastically changed with the onset of Social Media, which gave easy access to latest trends to billions of people …. The new consumer wanted more style and more frequently but unfortunately the older model of supply chain were designed to make less number of style but more production e.g A company like GAP will produce somewhere between 50 thousand to 200 hundred thousand pieces of 1 style . This system which not able to fulfill the new consumer requirement. But ZARA’s supply chain was designed in an absolutely opposite manner ….
Where they would make more number of styles and less production where Zara produces 200-5000 pieces of 1 single style …but they will produce 12 thousand designs in a year which is almost 7 times higher than any other existing brand. More number of styles Allow ZARA to change their product every 2 weeks, which gives them 3 advantages –
No 01- Since every style has very few pieces available, if a consumer doesn’t buys style instantly, then they might not get the styles on the next visit. This creates an urgency in the mind of the consumer to buy a product quickly .With other brands there are many pieces per style which prompts customer n to delay their buying.
Number 02 –Frequency of customer visiting the shop is way more than any other stores. Eg. A typical fashion shop in Spain just expects one customer to visit three times a year. For Zara, it goes up to 17 times!
No3 - Zara gets 85 percent of the full price on its clothes, while the industry average is 60 to 70 percent. Only about 18 percent of Inditex clothing doesn’t sell well and must be discounted which is half the size of other brands which has an average of 35 percent.
This philosophy was bang on with the requirement of the new consumer and ZARA brand became successful internationally …
The other companies with traditional supply chains are trying very hard to create more product variety but since size of their supply chain is massive and changing that massive system is almost impossible. This creates huge opportunity for new companies to learn the Zara model and establish their supply system imitating Zara’s Supply chain..
But this supply chain advantage is only limited to ZARA and not LVMH..
Now let me tell you common features that both these company shares.
Both the companies had robust online presence with highly efficient logistics and t was able to providing a unique digital experience to their customer. Let me give you a personal example. I ordered a jumper from an International brand which is the main competitor of ZARA. The product reached me 7 days, which itself is such a boring experience, but the problem started in the return procedure.
when I applied for its return, it was immediately approved on the site, but no one came to pick it up ….then we called the customer case who gave us an email address to write a mail for return so, even if I hated it , I mailed .Next day I received the reply saying that someone is going to come to collect the return.. No one came for a week… so I wrote back.. I got assurance that someone is going to come to pick it up … but for a month no one came neither did I received my money for canceled items …..after that I got a revert that there was shortage of staff so I have to wait ….from November 2020 to July 2021 , nobody has come for a pick up and that cancelled order is in LIMBO …
In comparison to the previous experience , I had ordered 3 shirts from Zara , which I received next day and the one shirt that I wanted to return was picked up next day …The whole transaction was so quick and smooth that it uplifted the brand image of ZARA in my mind … I was narrating about my bad experience with the other company to my students and I got so many student who experience the same while doing online shopping from that brand … and many agreed that they too had that smooth online experience with ZARA .
So ZARA and LVMH brands have made sure that not only that their online sites are updated with consumer friendly immersive interface abut also strong systems for rapid delivery and returns.
Next winning strategy of 21st century is the social media presence – Even if LV is 170 years old company and Cristian Dior is 75 year old, these companies have heavily invested in their social media presence. LV has More than 44 million followers on Instagram , Cristian Dior ha s37 million and Zara has 44.6 million followers … To compare this to other brands – United colours of Benetton has 700k, Forever 21 has 14.7 million.
This clearly showcases their supremacy in the social media space too. They understand the importance of Social media and make sure that they create a powerful presence.
It is well known fact that during the pandemic, the business that had an online presence were able to survive or make profit. Both Ortega and Arnold are so futuristic that they had invested in their e-commerce at a time when 95% of their sales was only from their brick and Mortar stores. And yes , during the pandemic both these brands had to shut down hundreds of their retail outlet, but that loss was compensated by their online sales but if you look at other brands with weaker digital presence had to bear exponential losses during the global lockdown.
I said in the beginning of this video that fashion world is eliminating companies with traditional mindsets and creating huge space fashion businesses which are calibrated for modern and future consumer. The consumer who is more aware of their buying choices and are pressuring mega companies like ZARA and H&M to become more sustainable and be mindful about unethical practices.
So what are the takeaways from today’s video-
Number 01 – There is a lot of room for new fashion players in the fashion industry as in the last 5 years almost 100 fashion brands have either shut down or filed for bankruptcies
Number 02- The fashion world will be ruled by new players with robust digital retail and social media presence. Now if we look at millennials and genZ, both these things are a natural gift … For them learning this is a piece of cake
Number 3 – Because of social media connectivity the fashion world will embrace brands that have been build on ethical practices and would really pressurize unethical brand which can result in their elimination.
So if you are someone who envision having a fashion brand, you should start research in two things:
Number 01 - the current and future consume behavior and second is to investigate the business model these successful fashion companies and incorporate their best practices into your orginisation