Tuesday, March 15, 2011

Business Sense

by: Shireen Cohen

In his article “Business Sense: It Takes a Lot More than Individual Flair to Stay at the Top”, John Andrew discusses the importance of management in the success, and essentially the survival, of a fashion line. The article begins by saying fashion history is embedded with talented designers who failed to have the necessary business savvy to succeed. Examples include American designer Isaac Mizrahi and British designer Zandra Rhodes.

Zandra Rhodes
image via The Guardian UK

Isaac Mizrahi
image via Getty Images

One major component of the success of a fashion line is the foundation between the fashion designer and the manager. Most fashion designers dream of establishing their own lines, and working for an already established fashion house might seem off-track for them despite the fact that it would be what’s best for their career. As a solution, the author suggests allowing designers to have the best of both worlds by having them design for the established house and giving them the freedom to pursue their own brand. If a designer in successful in his interpretation of the design house’s aesthetics, the management will have to buy his loyalty, promising him shares in the profit.

The article continues to discuss Bernard Arnault, chairman and controlling owner of fashion and luxury goods group LVMH, and his management and business style. Mr. Arnault believes in a “big eggs many basket approach”, which means that the portfolio of the LVMH group is somewhat diversified in different goods. The purpose of doing so is to mitigate the wrinkle-effect from happening. With the diversification of industries, not all parts of the company will be effected in the same way and could balance each other out.

Bernard Arnault
image via The Wall Street Journal

A big part of successful luxury goods groups, including Richemont group and Gucci Group, is the maintenance of “brand integrity”, which is the good will or the “indefinable auro that convinces a consumer to pay a lot of money for something he or more likely she, could buy much more cheaply elsewhere.” As an effort to keep brand integrity in place, luxury groups are emphasizing exclusivity, efforts to limit counterfeiting, control of distribution, limiting licenses, and direct selling through flagship stores.

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