Sunday, 24 July 2011

Rag Trade

"Rag Trade" is the rather ironic name of the business of high fashion and designer wear. The fashion industry is dynamic, erratic, extremely competitive and the perfect setting for entrepreneurs. The business is not driven by design or style, but by information. It thrives on individuals' needs to identify themselves with certain social groups, with their need to project a particular image and a status. It is this hallmark of human behaviour that the industry strives to understand, predict and cater to. Successful business combines an effective strategy on this front with a robust business model.

The business can be segmented into design, manufacture, distribution and sales. The design stage is critical as it must identify the leaders and the followers in the social fashion order and bring the style of the the former to the latter. It is never easy to know which particular trend will capture the imagination of others, but it might be fairly simple to identify the groupings. For instance, music and movie stars typically assert a great degree of influence on the fashions of an age. I came across an excellent example of this in the razor blade accessories that were immensely popular a few years ago. A razor blade is used to cut up cocaine crystals and spread the powder into thin lines. In the early '70s, cocaine was mostly consumed by popular artists and stars. A razor blade worn on a chain around the neck became an easy way to be identified with these groups and spread from them to those following the trends set by these groups. The trend itself lost the link to its notorious origins but influenced a large section of society.

Good business must be able to identify these sets and those styles that it might propagate. Perhaps even more critical in the fashion business is time. In an industry as dynamic and unpredictable as fashion retail, it is imperative that new designs are delivered and made available in the market with very little time lag. Any unnecessary delay might see fashions fade and production wasted. Several companies opt for vertical integration to control the entire process and ensure efficient distribution. Zara, a garment company based in Spain, adopts a highly vertically integrated business model with an average term of two weeks for the manufacture of new models and their availability in their stores worldwide. Garments manufacture in-house as well as those purchased from external suppliers arrive at their hubs in Spain for dispatch to stores twice a week, to ensure a continuous renewal of their retail stock. It is this incredible time to market that has led to the success of brands like H&M and Mango.

There are several other risks involved and strategies adopted to manage them. A major challenge in this business is to manage seasonality risk. Companies have done this by introducing several pre-collection and intermediate lines along with their Spring/Summer and Autumn/Winter collections, increasing the number of collections to about six a year. The design function is of vital importance. The bottomline depends on the design, and brands put in a lot of effort to attract and retain bright, upcoming creative talent. Creative departments might be integrated or exclusive for each collection.

The greatest challenge, perhaps, is to know when to let go of successful fashions. Fashions tend to re-invent themselves and it is not always possible to know when one has become outdated. It is important for businesses to identify new trends, but equally important to know when a style, particularly their own successful lines, are no longer as popular and move onto fresh offerings. Only some get this right, and even fewer make it to riches in this business. 

1 comment:

  1. Its good to see a fashion blog that discusses the business side and not just the latest trends! :)