Fashion By Brands

by Jose Daniel Melgar

The fashion industry can be divided into five levels: haute couture, luxury, affordable luxury, mainstream, and discount. At the highest levels, the fashion industry is relatively insulated from economic changes. For example, recessionary fears in the United States have done nothing to harm haute couture, which is actually seeing an increase in customers in a time when so many other companies are fighting decreasing sales. The luxury market is doing well compared to mainstream, affordable luxury and discount brands, where its customers have less financial security and thus are not spending as much money on clothes and accessories as they used to.

Haute couture is the most expensive and exclusive of all four segments. It is occupied by only a handful of companies that produce custom-made clothing for the world's wealthiest individuals. The term "haute couture" is thrown around a lot in mainstream fashion circles. However, the term actually means something very specific. Haute couture consists of custom-made clothing made from expensive materials for the world's wealthiest consumers. Prices for a couture piece range from $25,000 to millions of dollars and though the market is small it has been expanding due to the explosion of new wealth in emerging markets such as India, China and the Middle East. In France "haute couture" is a protected term and only a handful of companies have the right to call themselves "couture houses." They must fulfill criteria set by the Chambre syndicale de la haute couture(Trade Union of Haute Couture), the governing body of the French fashion industry. Some couture houses are: Giorgio Armani Privé (segment of Giorgio Armani), Christian Dior, Chanel, Givenchy (owned by LVMH Moet Hennessy L.V. (LVMUY)), Christian Lacroix, and Emanuel Ungaro.

All couture houses produce ready-to-wear as well as couture pieces. Despite its high prices, haute couture is much less profitable than mass-produced ready-to-wear collections. However, haute couture serves to preserve a high-fashion, luxurious image of the brand which fuels sales of its other collections, namely ready-to-wear, accessories and cosmetics. It is also important to note that couture includes only women's garments. There is no such thing as haute couture menswear.

The luxury segment is a step down in terms of quality and price, but still serves a wealthy clientele. Luxury goods are a large category and include all clothing, shoes and accessories from designer names such as: Dolce & Gabbana, Prada, Gucci (owned by PPR SA (PP-FR)), Hermès, and Lanvin. Luxury goods are generally regarded by consumers to be of high quality with a price tag to match.

There are no clear-cut criteria for a brand to be classified as "luxury," however one important factor is the concept of exclusivity. A person who can afford anything does not want to own something anyone can buy; they want something special and unique. As a brand becomes more popular, it is not regarded as highly by the wealthy clientele. Many luxury companies walk a fine line between increasing market share and maintaining the elite image that is so important to rich consumers with a lot of money to spend. Some examples of luxury retailers are: Saks (SKS), LVMH Moet Hennessy L.V. (LVMUY), and Bloomingdale's (owned by Macy's Inc. (M)).

Affordable luxury targets "aspirational" consumers, those who are not rich enough to afford luxury brands but will accept lower-priced alternatives. Affordable luxury is an industry segment that is focused on providing high-end merchandise at a lower price in order to attract middle-class consumers. Examples of affordable luxury are: Coach (COH), Tiffany (TIF), Nordstrom (JWN), Hugo Boss AG (HUGSF), and Chanel (lower-priced items such as sunglasses and cosmetics).

These inexpensive items allow access to a brand and a lifestyle that lower-income consumers aspire to but cannot afford. However, fears of recession, in addition to rising credit card debt and gas prices, have hit middle-class consumers hard. While the wealthy continue shopping as much as ever, these "aspirational" shoppers, people who form the backbone of the affordable luxury market have begun to cut back on non-essential goods such as clothing and accessories, leading to decreased sales.

The goal of mainstream brands is mass appeal; they sacrifice an air of exclusivity for popularity. Mainstream brands such as: Gap (GPS), Abercrombie & Fitch Company (ANF), Dress Barn (DBRN), Macy's Inc. (M), and Polo Ralph Lauren (RL) are generally perceived by consumers as being of lower price and quality than affordable luxury goods. These brands market to middle-and-lower-class consumers. Since their prices are much lower than their luxury counterparts, these brands make less money per garment. Thus, they focus on volume, selling as many goods as they can and appealing to a large number of people. In this case the concept of exclusivity no longer applies, as their goods are made (and priced) to appeal to a large number of people.

Discount brands serve low-income consumers. This category includes not only those stores that sell goods from other stores at a decreased price, but also those that price their clothing lower than most other brands; such as: Old Navy (owned by Gap (GPS)), Payless Shoesource (owned by Collective Brands, Inc. (PSS)), Cato (CTR), Target (TGT), Wal-Mart Stores (WMT)

Although haute couture and luxury have been doing well, the current economic crisis has had an adverse effect on affordable luxury, mainstream and discount brands. Their target demographic is middle-to-lower class individuals who are more prone to poor economic conditions than their richer counterparts. These individuals are no longer splurging on clothes and accessories as much as they used to, which is bad news for all three segments.

source: www.wikinvest.com