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Written by Eromosele Patrick Eidusi

Designer Fashion was once a real business. Now, high exposure to ready-to-wear is a structural weakness for luxury players, argues Luca Solca.

LONDON, United Kingdom – Ready-to-wear is becoming an increasingly unprofitable niche in the broader luxury gods market, driven by a series of factors.

For one, Fashion has been radically democratized. Shoppers now have access to the latest styles at a wide range of price points.

What’s more, luxury ready-to-wear rarely matches the brand recognition factor of accessories and so falls short as a marker of status, which is so important to consumers.

At the same time, the economics of ready-to-wear are daunting, collection costs are high, fashion shows are horrifically expensive, full price sell-through is poor and eye-catching displays eat into floor space at retail, resulting in low sales – and margins –per square foot. In most cases, when it comes to a brand’s ready-to-wear business, it’s a question of simply not losing too much money.

Of course, the value of ready-to-wear is also measured in terms of the aura it creates for a brand. The power of fashion shows and the impossible beauty of some ready-to-wear creations are an important tool for maintaining perceived exclusivity and brand image. But exactly what kind of aura is being created?

High-end fashion was once a real business, making beautiful garments for real people to actually wear. This is rarely the case today. Many luxury brands stage lavish fashion shows – and then discard their catwalk styles, without even trying to sell them. The emphasis is no longer on products.

Indeed, many designer fashion brands with roots in ready-to-wear are struggling to stand their ground in a market in which their core category is hardly profitable. Multi-layer branding and licenses generate revenue, but dilute brand equity. This creates structural weakness that long-term luxury investors should heed: mega brands rooted in designer fashion trivialize their equity faster than their peers in leather goods or jewelry.

Major publicity traded European luxury groups have limited sales exposure to apparel – and even less so to ready-to-wear.

Kering, Prada and Hermes stand at about 10 percent. LVMH is significantly below this mark. In fact, after burning a few Fingers, LVMH has largely stayed away from Fashion altogether. Bucking the trend perhaps is Brunello Cucinelli which is very exposed to high-end fashion, but its casual DNA sets it apart and shields it from most competition.

Written by Eromosele Patrick Eidusi

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