2007 Fairchild Publications, Inc.

1. 2007 Fairchild Publications, Inc.

2. Economic importance of the fashion business Scope of the fashion business Variety and competition Government regulation of business Forms of business ownership Business growth and expansion Birth of a fashion The designer’s role The manufacturer’s role The retailer’s role The Business of Fashion Fashion is a business affected by the same advances and economic forces that affect all major businesses in the world. We will examine each separately. 2007 Fairchild Publications, Inc.

3. Global Fashion Industry Flow Chart 2007 Fairchild Publications, Inc.

4. The Primary Level Composed of raw material producers The earliest stage of planning textures and color palettes Furthest from the consumer in terms of product and timing of delivery before in store date for merchandise, often two years Four Segments 2007 Fairchild Publications, Inc.

5. Composed of manufacturers and contractors, and designers They design and manufacture women’s, men’s, and children’s apparel and accessories They work from six months to one and a half years ahead of the time goods are available to the consumer The Secondary Level Four Segments 2007 Fairchild Publications, Inc.

6. Composed of retailers who buy their goods from the secondary level Ultimate distributor of fashion to the consumer They prepare three to six months in advance to receive goods in a timely manner for sale The Retail Level Four Segments 2007 Fairchild Publications, Inc.

7. The only level that functions with all the other levels simultaneously Composed of support services for the other three levels Performs a variety of functions from publicity to advertising to trend reporting to private label development and market trips The Auxiliary Level Four Segments 2007 Fairchild Publications, Inc.

8. Antitrust Laws Government Regulations that affect the Fashion Business. 2007 Fairchild Publications, Inc.

9. Product and Labeling LawsDesigned to Protect Consumers Wool Products Labeling Act–1939; amended in1984Protects consumers against unrevealed substitutes Protects consumers against false fiber content, packaging, labeling and lack of care instructions 2007 Fairchild Publications, Inc.

10. Product and Labeling Laws Fur Products Labeling Act–1951Protects consumers and retailers against misbranding, false advertising, and false invoicing Flammable Fabrics Act–1954; revised in 1972Prohibits sale of flammable fabrics and apparel Care Labeling of Textile Wearing ApparelRuling–1972; amended in 1984, 1997Requires all apparel have labels that inform consumers about care and maintenance 2007 Fairchild Publications, Inc.

11. Forms of Business Ownership 2007 Fairchild Publications, Inc.

12. Business Expansion and Growth Internal • Horizontal When a company expands its capabilities on the level at which it operates currently, e.g., retailer opens more stores • Vertical When a company expands its capabilities on levels other than its primary function, e.g., an apparel company begins to produce its own fabric, or retails its manufactured goods 2007 Fairchild Publications, Inc.

13. Business Expansion and Growth External • Mergers Where the sale of one company to another occurs, with the purchasing company remaining the dominant force, e.g., Federated Department Stores purchases Macy’s and then acquires May Company • Diversification Where a company adds various lines, products, or services to serve different markets, e.g., Gap purchases Banana Republic and creates Old Navy giving Gap three overlapping price ranges 2007 Fairchild Publications, Inc.

14. Business Expansion and Growth Franchise • Franchises are purchased operations that conform to the franchisers directives, and benefit from the franchiser's name, buying power and merchandising expertise • One-third of all retail sales come from franchising efforts 2007 Fairchild Publications, Inc.

15. Advantages of Franchising • Quick start-up • Franchiser's methods are proven • Ready market; traffic already exists • Rapid expansion is possible • Limited liability for the franchiser • Control over distribution • No need for additional capital 2007 Fairchild Publications, Inc.

16. Disadvantages of Franchising • Profits are smaller for the franchisee • Limited flexibility for the franchisee • Franchiser may not support franchisee fully – they just want to sell more franchises • Franchiser may want to buy back stores under certain circumstances that are beneficial to them 2007 Fairchild Publications, Inc.

17. Licensing • A legal agreement between a designer and manufacturer • Licensing allows the manufacturer to produce and market product under the designer’s name 2007 Fairchild Publications, Inc.

18. Licensing • In 1950, Christian Dior is the first designer to license his name to an outside manufacturer • The product licensed was men’s ties • Many of today’s most popular fashion labels, e.g., Ralph Lauren and Donna Karan, license their names for a wide variety of goods, encompassing not only apparel, but home furnishings and accessories, including fragrances. • Even manufacturers use licenses to manufacture clothing 2007 Fairchild Publications, Inc.

19. Advantages of Licensing • Manufacturers have a highly recognizable name attached, literally, to the merchandise, connoting high quality • Licensor does not have to endure the risks of production • Retailers present a fashion image using the designer name, appealing to consumers through quality and status 2007 Fairchild Publications, Inc.

20. Disadvantages of Licensing • An ever expanding empire may lose its exclusivity • Poor quality products reflect on the name of the designer, or licensor, not the licensee • The manufacturer also endures the designers loss of popularity 2007 Fairchild Publications, Inc.

21. Birth of a Fashion Designers, Manufacturers and Retailers • Must study all trends available • Be everywhere, see everything, remain current and in touch with the consumer 2007 Fairchild Publications, Inc.

22. Birth of a Fashion • Fashions start with consumers and the charting, forecasting, and satisfaction of consumer demand is the industry’s main concern • Some common reasons for failure are: • Introduction too early for widespread acceptance • Introduction of styles considered too extreme by the general public • Introduction of styles with appeal to a limited audience • Although many precautions are taken to ensure the success of new designs,two-thirds of them will fail each season 2007 Fairchild Publications, Inc.

23. Types of Designers • High-fashion or “name” designers are responsible for the full range of decisions of a fashion house, as well as for establishing the image and creating designs for the company. They design ready-to-wear lines as well as custom designs, and many license the use of their prestigious names to manufacturers of accessories, fragrances and cosmetics, and home fashions. • Freelancer designers sell sketches of their original designs or adaptations to manufacturers. Freelancers typically work out of design studios. They are not involved in the selection of fabrics and colors or in the business decisions that are required to manufacture the products based on their designs. • Stylist-designers work for manufacturers and adapt the designs of others, typically of name designers. Usually they create variations in less expensive fabrics to appeal to a market for lower priced merchandise at the late rise or early culmination stage of the fashion cycle. 2007 Fairchild Publications, Inc.

24. Types of Manufacturers • Designer market: At the top of the chain, produces innovative high fashion apparel that is very expensive • Bridge market: Between very expensive designer and high-quality better merchandise • Better market: Below bridge with correspondingly lower prices and less panache 2007 Fairchild Publications, Inc.

25. Types of Manufacturers • Moderate-priced market: Includes adaptations of styles in “rise” stage of the fashion cycle • Budget market: Creates mass produced close copies of goods in the “mass acceptance” stage 2007 Fairchild Publications, Inc.

26. Types of Retailers 2007 Fairchild Publications, Inc.

27. Buying Cycles 2007 Fairchild Publications, Inc.