Luxury’s consolidation trend is unmistakable. LVMH, for instance, acquired Tiffany & Co. for $16.2 billion in 2019, just before the pandemic. Throughout the pandemic, we saw luxury companies continue to consolidate. Fashion experts attribute luxury fashion’s ongoing consolidation to an attempt to accelerate.
Luxury’s consolidation trend is unmistakable. LVMH, for instance, made its biggest acquisition to date in 2019, acquiring Tiffany & Co. for $16.2 billion just before the pandemic. Throughout the pandemic, we saw luxury companies continue to consolidate.
Fashion experts say that luxury fashion consolidation is an attempt to accelerate digitization in the luxury sector. Farfetch Alibaba and Richemont formed a global alliance in November 2020 to accelerate digitization efforts in the luxury sphere.
Conglomerates, like LVMH, may appear to accelerate their digital advantage through consolidation. This is because each brand in the conglomerate seems to have more control over all markets. Conglomerates are able to resist rapid industry changes because their portfolios offer brands unlimited access to talent acquisition and marketing, retail presence, and supply chain. Conglomerates are huge, but their sheer size may be too much to overcome. Elsa Berry is the founder of Vendome Global Partners’ luxury M&A advisory. She said, “The world [has] become very complex…[and conglomerates] will get too large.” How can smaller brands compete with fashion conglomerates in the face of these complex changes, particularly during this time when brands are racing towards digitization?
Push Pre-Orders
Customers can place pre-orders for items that are not yet available or that have not been released. Pre-orders for e-commerce can be charged to customers when they place the order or ship the item.
Pre-orders are a great way for established brands to experiment, confirm, and gain demand for their next release. Pre-orders can help emerging designers reduce the financial risk involved in manufacturing their products. Pre-orders are a great way to fund production costs for emerging fashion brands, as they have smaller budgets. Pre-orders are a smart alternative to pitching to fashion investors to fund manufacturing costs.
Pre-orders also help to create a balance between supply and demand. Designers can avoid excessive inventory and gather useful data for determining sales projections of future collections. One thing to consider when allowing customers to place pre-orders is that they may cancel or return the order. To avoid these problems, give customers important information regarding their pre-orders, such as detailed descriptions of the products, high-quality images, and frequent updates about their production and shipping status.
Partner with manufacturers that accept lower MOQs for pre-orders. You will have the flexibility to adapt your supply to meet customer demand and to produce collections in smaller batches when needed. Some of the best manufacturers do not require an MOQ because they have high-quality fashion products rather than large quantities of low-quality wholesale items.
Customize your Fashion Products
Why can’t big fashion brands compete with smaller ones when it comes to personalization? Since the pandemic, consumers in luxury, and especially, have undergone a significant change. Fashion experts predict that the new luxury consumer will have high expectations and vast product knowledge.
A survey by Klarna, a leading global payment and shopping service, found that 39 percent of consumers believe luxury brands lag behind smaller high-street fashion brands on the digital and ecommerce front. This lag is partly due to the challenge faced by large fashion conglomerates: how can a large brand offer consumers a personalized experience on a mass scale? Nike refers to this as the “one-to-one” experience, and it was previously reserved only for the top echelon consumers of a particular brand. McKinsey notes that “fashion brands need to make each customer’s experience more unique by combining artificial intelligence with human recommendations, and allowing direct contact between salespeople and clients using customer relationship management software and client communication apps.” In order to scale mass customization, fashion brands need to integrate technology and creative executions that seem authentic strategically. Smaller brands are more likely to offer personalization than larger brands for two reasons.
Smaller brands can react quickly to consumer needs. Smaller brands are able to respond more quickly to shifting customer sentiments by creating products that reflect cultural trends. Smaller brands can respond to these changes on a smaller level, making them appear more organic and authentic to consumers who are “more sensitive to false marketing,” as McKinsey says.
Smaller brands create more “human” interactions in the digital world. McKinsey reports that the ecommerce sector experienced six years of growth in just eight months during the pandemic. This momentum is expected to continue. McKinsey says that to thrive in the digital world, companies need to create a “natural, friendly” atmosphere. They want to be able to relate to the brand’s social mission and vision. Nomasei, a small but mighty brand, focuses on reducing its carbon footprint. The brand promotes sustainability through localizing its manufacturing process. They only work with local Tuscan producers from start to finish. Nomasei’s green manufacturing process and its successful way of involving its consumers in its sustainable vision demonstrate how small brands can personalize their digital shopping experience.
Foster Family Culture
McKinsey reported that employees and customers are demanding fashion brands to create a culture “more family and culture-driven” and “less corporate.” It is not enough for brands to offer consumers a customized shopping experience tied to a social vision. Consumers are demanding that brands reflect their social values both internally and externally. They are voting with their wallets, says Alison Bringe, CMO of Launchmetrics. “They are more engaged, more informed and can find the information that they need to support and abandon brands who do not align with their values.”
Fashion brands must foster family culture at all touchpoints. Manufacturing partnerships are a significant touchpoint. Brands that strategically partner with family-owned, smaller factories, rather than large manufacturing sites susceptible to mistreating workers, will cultivate a family culture both employees and consumers demand. Smaller brands can show consumers they care for their employees by publicly partnering up with family-owned facilities. This will build trust and loyalty with their customers.
Post-Pandemic Projections
Smaller brands will have to leverage their pre-orders and personalization advantages, as well as the ability to foster a family, in order for them to compete with larger conglomerates. Due to the fact that successful smaller brands listen to their customers and respond in thoughtful ways to those needs, all brands have been forced to be more innovative. In this digital age and especially after the pandemic of swine flu, brands will be judged on their creative responses to customer demand.
