Luxury Fashion Industry Scrambling to Adjust to Millennial World
Emel Akan, 7 Aug 17
       

Hit by sluggish sales, once beloved fashion brands are seeking new avenues for growth

People walk by Ralph Lauren's Fifth Avenue Polo store in New York City on April 4, 2017. (Spencer Platt/Getty Images)

U.S. luxury fashion brands continue to underperform in sales growth and profitability. They have lagged behind other consumer sectors in adjusting to the new world defined by tech savvy millennials. As the gap between winners and losers continues to widen, brands are pressing ahead with new strategies including digital innovation, cost cuts, and acquisitions.

Success in the next decade requires brands to be more innovative and proactive in reaching out to younger generations, said Shawn Grain Carter, associate professor at the Fashion Institute of Technology in New York.

The younger generation is becoming more important, as millennials (born between about 1980 and 1995) and Generation Z (born between about 1996 and 2010) will represent 45 percent of the global personal luxury goods market by 2025, according to a study by consulting firm Bain & Co.

And more importantly, the “millennial state of mind is increasingly permeating across all generations,” noted the study.

American fashion company Michael Kors announced on July 24 that it is acquiring British luxury shoe brand Jimmy Choo for nearly $1.2 billion. (ILLUSTRATION BY RENAE WANG/THE EPOCH TIMES)

All consumers—not just millennials—value experience over material belongings. They travel more, go to restaurants more, and engage more with technology.

Smartphones and social media apps like Instagram and Snapchat encourage people to share their experiences, and hence “more American consumers spend their discretionary income on a wonderful experience as opposed to a new pair of shoes,” Carter said.

And this trend, which is one of the biggest challenges facing the luxury industry, is here to stay.

Carter says the survivors will be brands that have relevance, authenticity, and a niche in the marketplace.

“Hermès, Chanel, and some other prestigious brands have a staying power as long as they remain relevant,” said Carter.

“They still have very loyal senior citizen, baby boomer, and Generation X customers. So they can weather the storm.”

However, the story is quite different for brands like Michael Kors and Coach, which are aspirational luxury brands, according to Carter. These aspirational brands performed well in past decades because they managed to reach a wide audience across three generations.

“If you can get the daughter, the mother, and the grandmother to buy the same brand, that’s the ultimate win,” Carter said.

But now these brands are facing challenges, as they lack authenticity, relevance, and the kind of exclusive, innovative merchandise with great craftsmanship that appeals to consumers, she said.

“The perceived value has shifted because customers are able to price shop, look at the quality comparisons, and share comments with their friends on social media.”

The power has shifted from the designer to the consumer, and this seismic change has had a catastrophic impact on U.S. aspirational luxury brands.

Brand Appeal

After struggling with declining sales and earnings, Ralph Lauren announced restructuring plans last year, laying off 8 percent of its staff and closing 50 stores. The company also recently announced the closure of its flagship Polo store on Fifth Avenue in New York, which will save the company $140 million a year.

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