2 - Business Models & Industry Segmentation

Question 1

business model in fashion consists of:

Answer 1

WHAT - value proposition (offer)

WHOM - client segment

HOW - value chain (degree of vertical integration)

WHO - revenue + governance model

Question 2

main business models in fashion

Answer 2

luxury brands
fashion designers
premium brands
retailers

Question 3

components of luxury brands

Answer 3

value: timelessness + exclusivity + heritage

product is king (product oriented)

compete mainly on product categories other than clothing

vertically integrated both in retail + manufacturing

governance:

• private (Chanel)
• public (Hermes)
• multibusiness groups (Kering)

Question 4

examples of brands that have different business models to compete in different market segments

Answer 4

Armani:

• Giorgio Armani for luxury
• Emporio Armani for premium brand

Question 5

components of fashion designers

Answer 5

value: prestige of name + quality + seasonality

brand building relies on clothing + fashion show

segments: RTW, diffusion, upper bridge, HC

governance:
- vertically integrated family businesses (D&G)
- licensing (DSquared2)
- designers acquired by private equity (Valentino)

Question 6

components of premium brands

Answer 6

heterogeneous group

industrial + commercial know-how

segment: bridge

main value driver: marketing

governance: multibrands, monobusiness (Diesel) family owned, public

Question 7

components of retailers

Answer 7

innovative value chain
- fashionable at convenient prices

governance: mainly multibrands (Inditex, H&M) or public

Question 8

stages of industry analysis

Answer 8

define the business

determine industry segments + build competitive map

identify strategic groups, KSFs, growth outlooks and empty spots

drive conclusions on industry attractivenesss

Question 9

factors impacting business profitability

Answer 9

perceived value + pricing power (customer)

competitive intensity (competitors)

balance of power throughout value chain (distribution)

Question 10

competitive map: strategic group analysis steps

Answer 10

identify key drivers for competition (price, style…)

position all competitors according to drivers

identify clusters with similar positioning

identify the KSF of each cluster (product, channel, media…)

Question 11

5 segments in the fashion pyramid

Answer 11

haute couture 
ready-to-wear
diffusion
bridge
mass market

Question 12

haute couture (HC)

Answer 12

high fashion - builds the dream effect

• max level of craftsmanship (clothes=art)
• losing relevance

Question 13

diffusion

Answer 13

second young lines

• targeting younger audience, more affordable
• but have now gained their own identity, not just about being cheaper
• distribution = wholesale
  ex: C by Chloe, Marc for Marc Jacobs

Question 14

bridge

Answer 14

connects mass market with high end market

• offer right level of creativity and right value for money
• not as fashionable
• fantasy names rather than designer names (Diesel, Coach…)
• mix b/w wholesale + retail

Question 15

mass market

Answer 15

lowest price for customer and lowest cost for company

• less differentiation in products
• however, groups such as Inditex have managed to segment the mass market (Bershka, ZARA, Massimo Dutti)

Question 16

trends shaping business

Answer 16

circular economy
omnichannel experience
influencers
transmedia storytelling
collaborations
customization
gender neutrality
inclusivity
end of ownership

Question 17

key drivers in segmenting fashion industry

Answer 17

clients

end uses

technology (materials, product category)

price

Question 18

ready-to-wear

Answer 18

combines high fashion w/ industrialization

• not unique pieces
• 3-5x mass market price