Profit
The term ‘Profit’ refers to the financial aspect of the fashion industry, in 2021, the global fashion industry came in at $1.55 trillion and is expected to reach $1.7 trillion by 2022. The industry provides 30 million people working within the fashion and textile industry. According to (Forbes, 2020) on top of the biggest apparel companies rank is Louis Vuitton Moet Hennessy, which includes some of the largest luxury brands such as Louis Vuitton, Christian Dior and Givenchy. The company has a market value of $194 billion and assets of more than $108 billion, making it the 73rd largest publicly traded organization in the world. ‘Profit’ is one of the four pillars of fashion business, and technically speaking describes the financial benefit realized when revenue generated from a business activity exceeds the expenses, costs, and taxes.
However, according to the ‘Mckinsey Company’, in 2019/20 the fashion industry posted a 20% decline in revenues due to the pandemic. A record 69% of companies were value destroyers in 2020, according to the latest reading of the ‘McKinsey Global Fashion Index’. About 7% of companies left the market entirely, either due to financial distress or because they were bought by rivals. However, this year the Mckinsey report returned to creating their list of ‘super winners’, but with an adapted approach; smoothing pandemic-induced distortions by calculating the average economic profit over both 2019 and 2020. The top five performers by economic profit revealed were Nike, Inditex, Kering, LVMH, and Hermes. ‘The prominence of luxury brands among the top performers was attributable to the economic resilience of wealthier demographics, leading to a continuing demand for bags, luxury jewelry, and ready-to-wear’ (Mckinsey Report, 2022).
It has become increasingly difficult for brands to remain competitive during these uncertain economic times. However, with social media being ever present, it has allowed companies within the industry to create a brand image and build awareness amongst their customers as they are more visible to their audience. The “Two-Step Flow of Communication” hypothesis emerged in 1944 and was created by Paul Lazarsfeld, Bernard Berelson and Hazel Gaudet. The purpose of the study was to examine what influenced people to vote during political campaigns. Their findings can now be used to reflect on social media within our generation, suggesting that ‘the flow of information and influence from the mass media to their audiences involves two steps: from the media to certain individuals, and from them to the public’ (Gabriel Weimann, 2015)
Fashion blogging essentially works the same way; there is one blogger who has followers who will receive sponsored goods and information from brands, which then reaches the blogger’s followers, and their opinion leads the opinion of a multitude of followers. Fundamentally, blogging has helped improve the quickness of products reaching the marketplace. The power of blogs is so evident, that even the classic printed media have resorted to launching their own blogs on their websites, for example Vogue Magazine who poached Suzy Menkes to become the editor of Vogue’s own blog in 2014. ‘On average about 18% of private bloggers turn to the help of professional editors before posting and around 50% ask someone to look over the post before making it live’ (Crestodina, 2018).
With social media being the biggest marketing platform currently, it is becoming increasingly more accessible for companies within the fashion industry to promote their brand and create an image for themselves that will appeal to our generation. For example, fashion labels from Cos to Cartier sponsor contemporary artists and art events because they all tap into a certain demographic’s sense of culture and credibility. Hence explaining how it corresponds to 2% of the world’s Gross Domestic Product (GDP).
Bibliography
Ajaz Ahmed (2013) The Guardian ‘Bridging the Gap between Art and Business’ Available at: https://www.theguardian.com/media-network/media-network-blog/2013/oct/16/bridging-gap-art-business (Accessed: 21/10/22)
Fashinnovation (2022) ‘Fashion Industry Statistics: The 4th Biggest Sector is Way More Than Just About Clothing’ Available at: https://fashinnovation.nyc/fashion-industry-statistics/ (Accessed: 21/10/22)
Gabriel Weimann (2015) ScienceDirect ‘Two-Step Flow of Communication’ Available at: https://www.sciencedirect.com/topics/social-sciences/two-step-flow-of-communication#:~:text=The%20concept%20of%20the%20’two,from%20them%20to%20the%20public. (Accessed: 21/10/22)
Mckinsey & Company (2022) ‘State of Fashion 2022: An uneven recovery and new frontiers’ Available at: https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion (Accessed: 21/10/22)
Olga Mitterfellner (2019) ‘Fashion Marketing and Communication: Theory and Practice Across the Fashion Industry’ London: Routledge, p. 82. (Accessed:21/10/22)