Profit
Fashion is a $1.2 trillion global industry, with more than $250 billion spent annually on fashion in the United States, according to industry analysts. Fashion and apparel industries employ 1.9 million people in the United States and have a positive impact on regional economies across the country (LeadFerret, 2014).
Fashion is a structurally diverse industry, ranging from major international retailers to wholesalers to large design houses to one-person design shops. It employs people across occupations—including fashion designers, computer programmers, lawyers, accountants, copywriters, social media directors, and project managers. According to a report by the California Fashion Association, manufacturing is only a fraction of the modern apparel industry as “it is a highly sophisticated industry involving fashion and market research, brand licensing/intellectual property rights, design, materials engineering, product manufacturing, marketing and finally, distribution.” (California Fashion Association, 2011).
In the fashion industry, as one of the four pillars of fashion business school, profit occupies a significant position, which reflects the social and economic situation. The profit pillar in the fashion business school discusses economy being less about monetary value and more about it being a series of systems through which humanity provisions the requirements of life and society.
In the past few years, the fashion industry’s profits have been constrained by the COVID-19 pandemic. Revenue in the fashion industry fell 20 percent in 2019 and 2020, as the earnings before interest, tax, and amortization (EBITA) margins declined by3.4 percentage points to 6.8 percent. As Covid-19 continued to spread, performance inequality, which has become a challenge in recent years, is more pronounced than ever. According to the latest data from the McKinsey Global Fashion Index (MGFI), a record 69% of companies were value destroyers in 2020, compared with 61% in 2019 and 28% in 2011. About 7% of companies have exited the market, either because of financial distress or because they were acquired by competitors. From a geographic perspective, China was the standout performer in 2021, as its economy recovered much faster than other countries. In 2022, the industry’s growth will likely be driven by both China and the United States, but growth would be less imminent for Europe (McKinsey & Co., 2021).
At the same time, in the context of capitalist decision-making in the post-pandemic global economy, contemporary artists are forging a new and positive relationship with the social relations of mass culture and production. Many brands are starting to think about the balance between creativity and commerce.
The global pandemic has pushed physical footfall to a historically low level, with many brands facing challenges from supply chain disruptions and changing consumer demand. On top of that, the acceleration of digitalization has provided brands with a dizzying range of services and media channels to advertise their products, while consumers have a greater variety of choices. These factors are forcing brands and retailers to work harder than ever to keep pace with the market and adapt to the adversity they face. Therefore, brand collaboration has become a strategic marketing solution to meet these challenges.
Brand collaborations enable consumers to experience familiar brands in novel ways, using social media to create buzz around the products and the brands who make them, leading directly to sales — and all at a fraction of the cost of equivalent digital advertising. H&M, for example, regularly collaborates with different high-end fashion brands. From Moschino to Karl Lagerfeld, H&M have successfully, and repeatedly, brought high end fashion to the high street by annually co-creating an affordable capsule collection with a high-end brand. By doing so, H&M ‘cash in’ on the exclusivity factor of these high fashion brands and continue to position themselves as an attractive place to shop.
The high-end fashion brand also benefits as they gain access to a wider customer base, greater brand recognition and broader advertising potential with more people wearing their logos and brand imagery day to day (not to mention the royalties they are presumably entitled to in respect of sales of the H&M range) (FootAnstey, 2022).
Reference:
LeadFerret, “LeadFerret Releases a Directory of Contacts in the Fashion and Apparel Industry” (press release, January 16, 2014)
The Los Angeles Area
J. Blank. (2011). FASHION INDUSTRY PROFILE. California Fashion Association. Available from https://www.econ-jobs.com/research/34815-Los-Angeles-Area-Fashion-Industry-Profile.pdf [Accessed October 22, 2022].
Available from https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion [Accessed October 22, 2022].
Stevenson, C. (2019). “(I was there) when it all went down”, in Cronberg, A. (ed) Vestoj issue 9: On Capital. Available at https://moodle.arts.ac.uk/pluginfile.php/1463893/mod_label/intro/Week%204-Pre%20seminar%20read%20-Stevenson%20%28I%20was%20there%29%20when%20it%20all%20went%20down.pdf [Accessed October 22, 2022].
Batten. (2022). The Rise of the Brand Collaboration. FootAnstey. Available from https://www.footanstey.com/our-insights/articles-news/brand-x-brand-the-rise-of-the-brand-collaboration/ [Accessed October 22, 2022].