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Beyond apparel Global Investor, 01/2016 Credit Suisse

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Global Investor 1.16, May 2016<br />

Expert know-how for Credit Suisse investment clients<br />

INVESTMENT SOLUTIONS & PRODUCTS<br />

<strong>Fashion</strong><br />

Beyond apparel<br />

Julie Saussier <strong>Fashion</strong> companies can be a good investment – but<br />

beware overexposure and supply chain. Kurt Zihlmann Technology and<br />

fashion: Will they ever be truly compatible? Claudia Banz It’s not<br />

all glitz and glamor in the fashion industry: fast fashion comes at a cost.<br />

Christian Schindler How the advent of e-commerce is transforming<br />

the fashion industry supply chain.


Important information and disclosures are found in the Disclosure appendix<br />

CS does and seeks to do business with companies covered in its research<br />

reports. As a result, investors should be aware that CS may have a conflict of<br />

interest that could affect the objectivity of this report. Investors should<br />

consider this report as only a single factor in making their investment decision.<br />

For a discussion of the risks of investing in the securities mentioned in<br />

this report, please refer to the following Internet link:<br />

https://research.credit-suisse.com/riskdisclosure


GLOBAL INVESTOR 1.16 — 03<br />

Responsible for coordinating<br />

the focus themes in this issue<br />

PATRICIA FEUBLI joined Credit Suisse<br />

in 2013 as a senior economist for Swiss<br />

Industry Research at International Wealth<br />

Management, based in Zurich. Previously,<br />

she worked as a research associate at<br />

the University of Zurich and was a<br />

research fellow at Stanford University.<br />

She holds a PhD in Economics from<br />

the University of Zurich.<br />

JONATHAN HORLACHER is a financial<br />

analyst of Credit Suisse in the International<br />

Wealth Management Division. He<br />

specializes in macro themes, megatrends<br />

and sustainable investing and has published<br />

widely on those topics. He is a CFA<br />

charterholder, received his MSc from<br />

the Barcelona Graduate School of<br />

Economics and previously worked as an<br />

economist for the Swiss National Bank.<br />

ULRICH KAISER is a senior financial<br />

analyst at Credit Suisse in the International<br />

Wealth Management Division, covering<br />

the technology sector. He joined Credit<br />

Suisse in 1993 and has 28 years of<br />

experience in the securities and banking<br />

business. He received a Master of Economics<br />

from the University of Constance,<br />

Germany, and is a CEFA charterholder.<br />

JULIE SAUSSIER is a senior research<br />

analyst in the Global Equity team,<br />

covering the consumer discretionary<br />

sector. She has 14 years of experience<br />

as a research analyst and joined Credit<br />

Suisse in 2015. She holds a Master’s<br />

in Business and Management from<br />

the University of Paris Dauphine and<br />

a Master’s in Corporate Finance<br />

from the EM Lyon Business School,<br />

France, and is a CFA charterholder.<br />

Giles Keating<br />

Vice Chairman of Investment Solutions & Products<br />

and Deputy Global CIO<br />

“It is the cheap cloth, the cheap cotton and rayon fabric … that are<br />

the typical achievements of capitalist production, and not as a rule<br />

improvements that would mean much to the rich man. Queen Elizabeth<br />

[the First] owned silk stockings. The capitalist achievement does<br />

not typically consist in providing more silk stockings for queens, but<br />

in bringing them within reach of factory girls.” Joseph Schumpeter,<br />

Capitalism, Socialism and Democracy, 1942.<br />

It is no coincidence that Schumpeter’s brilliant analysis of how<br />

innovation drives capitalism uses an example from the fashion industry<br />

to illustrate one of the most fundamental trends driving consumer<br />

behavior: as incomes rise, luxuries reserved for the upper classes<br />

become widely affordable. Marketing spreads fashion globally, with<br />

brands often promoted by famous personalities. In a next stage – which<br />

we seem to be in the midst of – the countermove toward re-individualization<br />

sets in, illustrated by the young, innovative designers from<br />

around the world in this Global Investor.<br />

The fashion industry also epitomizes globalization of production.<br />

Textiles typified industrialization in 18th-century Manchester, and<br />

William Blake’s “satanic mills” have reappeared in places like Savar<br />

Upazila in Bangladesh. Thankfully, the worst of globalization is being<br />

confronted by some of the best, as scientists, entrepreneurs and<br />

political leaders unite to improve environmental and labor standards.<br />

Leading actors in this transformation have contributed to this Global<br />

Investor, along with those propelling innovations like 3D printing, which<br />

are pushing the frontiers of individualized fashion design and production<br />

while e-commerce transforms supply chains and distribution.<br />

<strong>Fashion</strong> provides an extraordinary platform for the creation and<br />

growth of businesses, some growing gradually to global scale through<br />

retained earnings, others tapping capital markets for rapid expansion.<br />

As a result, many well-known names are listed on major bourses while<br />

others are held privately, whether in Italy or Nigeria. And in the<br />

fast-moving business of fashion it is not just the models on the catwalks,<br />

but also investors who must be on their toes. I hope that this<br />

Global Investor helps you plan investment strategies while also being<br />

enjoyable, especially since I am now stepping aside after the privilege<br />

and pleasure of three decades at Credit Suisse and a dozen years as<br />

overall editor of Global Investor.


GLOBAL INVESTOR 1.16 — 04<br />

TEXT BY REBECCA ARNOLD Historian, The Courtauld Institute of Art<br />

THE ROOTS<br />

FASHIO<br />

Rebecca<br />

Arnold<br />

is Oak Foundation<br />

Lecturer in History of<br />

Dress and Textiles<br />

at the Courtauld<br />

Institute of Art in<br />

London. She has<br />

lectured and written<br />

extensively on 20th<br />

and 21st century<br />

fashion, including<br />

“The American Look:<br />

<strong>Fashion</strong>, Sportswear<br />

and the Image of<br />

Wom en in 1930s and<br />

1940s New York”<br />

(2009).<br />

Seemingly unconnected events<br />

conspired to trigger the modern<br />

fashion industry’s beginnings in<br />

the 17th century. On one hand,<br />

Louis XIV’s moves to boost French luxury<br />

trades laid the foundations for Paris’ domination<br />

of exquisite, handmade designs, patronized<br />

by the social elite. On the other, inventions<br />

to improve British textile production set<br />

in train what would become the Industrial<br />

Revolution, which would speed up and<br />

multiply fashion production for centuries to<br />

come. Twin forces were therefore at play –<br />

one focused on individual style, the other<br />

pushing toward collective identities formed<br />

by readymade clothes.<br />

THE ADVENT OF MARKETING<br />

But these movements were not enough<br />

to create a fully functioning fashion system –<br />

it is not just the clothes themselves that<br />

conjure an industry, it is also the way they are<br />

represented and publicized. Although there<br />

were fashion plates in the 17th century, it was<br />

not until the 1770s that regular editions of<br />

fashion magazines appeared. These brought<br />

together selections of hand-painted plates,<br />

and columns describing socialites’ outfits<br />

worn to recent events. Details such as those<br />

contained in “The Ladies Magazine” helped<br />

to disseminate fashion information, and,<br />

importantly, inspired women to follow fashions<br />

by asking their dressmakers to make<br />

gowns for them that mimicked what they<br />

saw. Each season during this period, the most<br />

influential Parisian dressmakers sent two<br />

dolls out to smaller towns across Europe and<br />

beyond to display their latest work – one doll<br />

in the most extravagant design for evening,<br />

the other in a simpler style for daywear. Along<br />

with the popular habit of describing dress<br />

seen while traveling in letters to friends and<br />

family, fashions spread and new trends grew.<br />

Textile producers, and gradually during the<br />

19th century, readymade manufacturers,<br />

became suppliers to an eager audience. The<br />

earliest readymade garments had been simple<br />

and functional – for sailors and slaves from<br />

the 17th century onward. But by the later<br />

19th century, stylish clothes were also in the<br />

newly popular department stores.<br />

INFLUENCES ACROSS THE ATLANTIC<br />

Again, there were twin, though separate,<br />

events that helped to propel the fashion business’<br />

development from the 1850s onward.<br />

In France, Englishman Charles Frederick<br />

Worth united art and commerce in his hugely<br />

influential couture house, which, patronized<br />

by Empress Eugenie herself, consolidated<br />

Paris’ haute couture industry as the center of<br />

new styles and luxury. In America, the Civil<br />

War meant vast armies needed readymade<br />

uniforms – requiring sizing systems and<br />

understanding of how to design and manufacture<br />

on a large scale.


GLOBAL INVESTOR 1.16 — 05<br />

Contents<br />

OF<br />

N<br />

BRINGING FASHION TO THE MASSES<br />

As in the 17th century, impulses from<br />

both the luxury trades and industry were essential<br />

to shape the global, multilevel fashion<br />

business that would emerge during the 20th<br />

century. Once chain stores began to emerge in<br />

the 1920s, the fashion business was set to<br />

exploit the potential of readymade fashions.<br />

Fueled by the boom in visual and popular<br />

culture, Hollywood-led trends, fashion<br />

illustrations by Georges Lepape, and photography<br />

by Edward Steichen, for example,<br />

brought the latest styles to men and women<br />

across the globe. Couturiers including Coco<br />

Chanel added further glamour to the industry,<br />

with sports-led designs that inspired copies<br />

of their simple, chic designs to be produced<br />

internationally – all supported by an increasingly<br />

professional infrastructure that streamlined<br />

every stage from production to publicity.<br />

It is upon these foundations that the<br />

globalized fashion business of today was built.<br />

In the past 30 years, the process has accelerated<br />

and become multicentered – with<br />

production outsourced, cities from Rio to<br />

Mumbai hosting fashion<br />

weeks to promote<br />

homegrown talent,<br />

and social media<br />

and e-commerce<br />

creating new ways<br />

for fashion to be<br />

experienced and sold.<br />

Global Investor 1.16<br />

28<br />

Sellers of dreams<br />

It can be both fascinating and terrifying,<br />

depending on if you’re an observer or a<br />

participant. Roger Tredre takes us behind<br />

the scenes of the fashion industry.<br />

30<br />

The rise and fall<br />

of fashion companies<br />

It’s essentially a high-stakes balancing<br />

act. Julie Saussier explains why supply<br />

chain efficiency is so crucial in the fashion<br />

industry to achieving long-term success.<br />

34<br />

Evolving industry –<br />

a work in progress<br />

China is struggling to establish a domestic<br />

fashion sector. Selina Sia explores<br />

the factors that continue to hold it back.<br />

36<br />

Global apparel retail market 2015<br />

It was worth USD 1.378 trillion last year.<br />

Who are the biggest retailers? How do<br />

demographics, e-commerce and sustainability<br />

influence it? See our infographic.<br />

38<br />

Less is more<br />

Dr. Claudia Banz discusses the part of the<br />

fashion industry that’s rarely seen – the<br />

dark and ugly side, where garment workers<br />

and the environment are the losers.<br />

41<br />

Handshake of hope<br />

The fashion apparel and textile sector is<br />

heeding the call for sustainability.<br />

Emanuel Büchlin outlines what’s happening.<br />

44<br />

How will digitazation influence<br />

fashion and the way we shop?<br />

Going digital has been truly transformative.<br />

Ulrich Kaiser examines the effects being<br />

felt in the fashion industry.<br />

46<br />

Clothing must have a soul<br />

It is, as they say, a material world.<br />

Kurt Zihlmann expands on the fascinating<br />

frontier where technology is yielding<br />

new materials and even newer ways of<br />

producing them.<br />

48<br />

The effect of e-commerce on<br />

the fashion supply chain<br />

Global economic integration and the<br />

e-revolution, says Dr. Christian Schindler,<br />

have transformed the global supply chain.<br />

SUSTAINABILITY<br />

06 Milk<br />

08 Digital printing<br />

59 Smart tailoring<br />

61 Air dyeing<br />

NEW MARKETS<br />

07 Children<br />

11 Men<br />

14 India<br />

15 Sports<br />

22 50+<br />

24 Supply chain<br />

26 Advertising<br />

PERSPECTIVES ON FASHION TRENDS<br />

10 Vassilis Zidianakis<br />

17 Ali Ansari<br />

27 Mason Jung<br />

33 Ellen Sideri<br />

53 Forrest Jessee<br />

58 Valérie Lamontagne<br />

POPULAR UPRISING<br />

12 Jeans<br />

YOUNG DESIGNERS<br />

13 Avenue 32<br />

52 Vfiles<br />

TECHNOLOGY<br />

16 Virtual reality models<br />

23 Self-healing fabrics<br />

51 3D printing<br />

60 Wearables<br />

62 Color-changing fabrics<br />

THE RISE AND FALL<br />

OF FASHION EMPIRES<br />

18 Part I: Lanvin<br />

54 Part II: Prada<br />

64 Disclaimer


GLOBAL INVESTOR 1.16 — 06<br />

SUSTAINABILITY<br />

WEARABLE<br />

COMMODITIES<br />

In the quest for sustainable<br />

apparel, even<br />

food products have<br />

a role to play. Qmilk,<br />

a German company<br />

founded by microbiologist<br />

and designer<br />

Anke Domaske, spins<br />

silky fibers out of<br />

sour cow milk that<br />

can be added to conventional<br />

fibers for<br />

an improved result.<br />

Essi Johanna Glomb<br />

and Rasa Weber, of<br />

the Blond and Bieber<br />

studio in Berlin, are<br />

using microalgae<br />

to create a “biological<br />

color palette” for<br />

dyeing clothes. They<br />

also built their own<br />

printer to apply<br />

the colors to fabric<br />

(see the QR code<br />

below). Algal dyes<br />

change on exposure<br />

to light, but that’s<br />

part of their charm.<br />

Modern Meadow, a<br />

start-up, is going<br />

one step further –<br />

developing a biomaterial<br />

alternative to<br />

leather based on<br />

animal cells and tissues<br />

that involves no<br />

slaughtering.<br />

✖<br />

FOR MORE ON<br />

SUSTAINABILITY, GO<br />

TO PAGES 38 AND 41<br />

Watch a video on how<br />

designers use ecofriendly<br />

algal pigments<br />

to print fashion fabrics.


GLOBAL INVESTOR 1.16 — 07<br />

NEW MARKETS<br />

CHILDREN<br />

The fashion press<br />

recently announced<br />

Karl Lagerfeld’s<br />

launch of a kids’ line<br />

in spring 2016. While<br />

labels such as Dior,<br />

Burberry and Ralph<br />

Lauren have had<br />

children’s lines for<br />

some time, these<br />

have attracted more<br />

attention in the media,<br />

with VIPs dressing<br />

their children in their<br />

favorite labels,<br />

like mini versions of<br />

themselves. Brands<br />

such as Burberry also<br />

frequently include<br />

children in their advertising.<br />

We see this<br />

more as a marketing<br />

initiative, where the<br />

brands try to cater to<br />

all the needs of<br />

their exclusive clientele,<br />

and it gets press<br />

coverage. Harper<br />

Beckham, the four-yearold<br />

daughter of David<br />

and Victoria Beckham,<br />

already is the subject<br />

of a blog devoted<br />

to writing about her<br />

looks, and she has<br />

several million fans on<br />

Instagram. There are<br />

children-only fashion<br />

brands, such as the<br />

French label Bonpoint,<br />

one of the most popular<br />

children’s clothing<br />

brands in the world.<br />

Bonpoint celebrated<br />

its 40-year history<br />

in 2015 and launched<br />

a couture collection<br />

that same year. It has<br />

been running fashion<br />

shows for eight<br />

years. Bonpoint has<br />

its own workroom<br />

and atelier team who<br />

prepare the prototypes,<br />

under its artistic<br />

director, with<br />

four collections a year.<br />

Bonpoint has now<br />

expanded into Asia<br />

and sells the same<br />

collection all over<br />

the world. Michelle<br />

Obama was photographed<br />

in Paris<br />

visiting a Bonpoint<br />

store with her daughters.<br />

Kate Moss<br />

dressed all of her<br />

bridesmaids in Bonpoint<br />

at her wedding<br />

in 2011. Bonpoint<br />

was acquired by EPI<br />

(Européenne de<br />

Participations Industrielles)<br />

in 2007 and<br />

had sales in the<br />

EUR 40 million range<br />

at the time. <strong>Fashion</strong><br />

companies such as<br />

Zara have also transformed<br />

kids’ wear<br />

into fashion items,<br />

copying kids’ fashion<br />

brands such as Bonpoint<br />

or more grownup<br />

looks. This is<br />

a lucrative business.<br />

✖<br />

FOR MORE ON<br />

BRANDS AND MARKETS,<br />

GO TO PAGE 30


GLOBAL INVESTOR 1.16 — 08<br />

Watch an interview<br />

with Mary Katrantzou<br />

on the impact<br />

of digital printing.


GLOBAL INVESTOR 1.16 — 09<br />

SUSTAINABILITY<br />

PRINT THAT!<br />

Forget polka dots,<br />

stripes and rows<br />

of leaves. The new<br />

digitally printed<br />

fabric patterns are<br />

more like, well, artwork.<br />

Invented in the<br />

1980s, digital printing<br />

lays down an entire<br />

image on a piece of<br />

fabric in much the<br />

way a printer transfers<br />

an image to a<br />

piece of paper. Some<br />

designers use urban<br />

images they’ve taken<br />

with their iPhones.<br />

The technique is both<br />

more sustainable (it<br />

uses less water) and<br />

less labor-intensive<br />

than traditional screen<br />

printing. Digitally<br />

printed fashions have<br />

only recently become<br />

a fixture of the<br />

runway, but they have<br />

contributed to a new<br />

enthusiasm for prints.<br />

Among the pioneers<br />

are the late Alexander<br />

McQueen, whose<br />

Plato’s Atlantis collection<br />

of scaled- serpent<br />

prints caused a stir<br />

in 2010, Mary Katrantzou’s<br />

“hyper- real”<br />

prints and pioneering<br />

Bruno Basso and<br />

Christopher Brooke’s<br />

bold styles.<br />

✖<br />

FOR MORE ON<br />

SUSTAINABILITY, GO<br />

TO PAGES 38 AND 41


GLOBAL INVESTOR 1.16 — 10<br />

PERSPECTIVES ON<br />

FASHION TRENDS<br />

1/6<br />

V . A . S . S . I . L . I . S<br />

Z . I . D . I . A . N . A . K . I . S<br />

is a Greek artist, curator and the Artistic Director of Atopos cvc.<br />

He studied ethnology and anthropology as well as history and civilization<br />

at the École des Hautes Études en Sciences Sociales, Paris.<br />

What do you see as the global<br />

trends (e.g. digitalization)<br />

influencing today’s fashions and<br />

the fashion market?<br />

I believe that one important trend<br />

that influences fashion nowadays is<br />

the subject of gender and sexuality.<br />

The androgynous look is not simply<br />

hype or a trend as I believe that<br />

gender ambiguity, either as a case of<br />

identity or a lifestyle, has affected<br />

fashion immensely.<br />

How are these trends changing<br />

fashion and the fashion market?<br />

In many cases, we have designers who<br />

keep creating men’s collections only,<br />

yet their clothes might quite often<br />

be worn by women who are fashion-conscious<br />

and confident. One<br />

example is British fashion designer<br />

Craig Green, one of Atopos’ favorites.<br />

Furthermore, our new office intern,<br />

Jonny Seven, has brought to my<br />

attention the cases of Vetements and<br />

Hood By Air, two labels that have<br />

overturned the lines between femininity<br />

and masculinity. Of course,<br />

this does not mean that women’s<br />

collections or labels will become<br />

obsolete, but certainly trends<br />

and the fashion market in general<br />

have changed in certain ways.<br />

Where do you get inspiration<br />

for your designs and collections?<br />

As I am an artist and curator, not<br />

a fashion designer, I leave the<br />

inspiration for collections to others.


GLOBAL INVESTOR 1.16 — 11<br />

NEW MARKETS<br />

MALE ORDER<br />

Typically, a brand caters<br />

for women, with<br />

men’s business on<br />

the side. But there<br />

are some successful<br />

concepts where<br />

the men’s business<br />

is the starting point.<br />

Hugo Boss was a<br />

male-only business<br />

until it started developing<br />

a women’s<br />

line in 1998. Its<br />

women’s wear business<br />

still only represents<br />

10% of sales.<br />

Tom Ford, well<br />

known for his time as<br />

designer at Gucci,<br />

finally launched his<br />

own Tom Ford line<br />

in 2006, with a male<br />

focus at first, and<br />

later introducing a<br />

women’s line. Berluti,<br />

owned by LVMH, a<br />

high-end male shoemaker,<br />

launched a<br />

ready-to-wear line a<br />

few years ago.<br />

Berluti, which generated<br />

EUR 30 million<br />

in sales in 2011, has<br />

added more than<br />

EUR 100 million to<br />

this figure after expanding<br />

its product<br />

offering and global<br />

store network.<br />

Menswear now has a<br />

biannual event focusing<br />

solely on British<br />

men’s fashion called<br />

London Collections<br />

Men, launched in 2012<br />

and covered by press<br />

and buyers from<br />

50 countries. New<br />

York started a dedicated<br />

men’s fashion<br />

week (the New<br />

York <strong>Fashion</strong> Week)<br />

in July 2015.<br />

Quoting the CEO of<br />

British <strong>Fashion</strong> Council,<br />

the menswear<br />

equivalent of the London<br />

<strong>Fashion</strong> Week,<br />

the global menswear<br />

market is now worth<br />

USD 440 billion.<br />

✖<br />

FOR MORE ON<br />

BRANDS AND MARKETS,<br />

GO TO PAGE 30


GLOBAL INVESTOR 1.16 — 12<br />

POPULAR UPRISING<br />

BLUE JEANS<br />

Today, the fashionsavvy<br />

will spend more<br />

than USD 200 on a<br />

pair of jeans, but<br />

denim’s humble past<br />

is long forgotten. It<br />

was originally made<br />

for the working class.<br />

In 1873, Levi Strauss &<br />

Co. used rivets to<br />

improve the durability<br />

of denim overalls.<br />

In the 20th century,<br />

denim gradually<br />

became a uniform of<br />

rebellion, worn by<br />

biker gangs in the<br />

1950s and by hippies<br />

in the 1960s. By the<br />

1970s, blue jeans were<br />

mainstream fashion<br />

wear. Calvin Klein<br />

made them a status<br />

symbol by adding his<br />

name to the back<br />

pocket. “Vogue”<br />

editor Anna Wintour<br />

further elevated jeans<br />

to haute couture<br />

when she put a model<br />

in a stonewashed pair<br />

on the cover in 1988.<br />

From work wear to<br />

high fashion, blue<br />

jeans’ versatility have<br />

made them a fashion<br />

classic. In 2015,<br />

3.06 billion pairs of<br />

jeans were sold<br />

globally, according<br />

to Euromonitor International.<br />

The top five<br />

markets for jeans are<br />

the US, China, Brazil,<br />

Russia and India.<br />

✖<br />

TO FIND MORE<br />

ABOUT THIS TOPIC —<br />

GO TO PAGE 34<br />

Denim – the rising price<br />

of a fashion classic in USD<br />

Source: fitnyc.edu, levistrauss.com<br />

Zara mid-rise<br />

cigarette<br />

49.90<br />

jeans <br />

Levi’s 711<br />

skinny jeans<br />

(Lone Wolf 78<br />

model) <br />

J Brand 23110<br />

Maria in<br />

188<br />

after dark <br />

Victoria Beckham<br />

super skinny<br />

313<br />

jeans <br />

Chimala cropped<br />

Japanese selvedge<br />

jeans in used 435<br />

light wash


GLOBAL INVESTOR 1.16 — 13<br />

YOUNG DESIGNERS<br />

AN AVENUE<br />

FOR RISING<br />

TALENTS<br />

Avenue 32 is an<br />

online platform for<br />

lux ury fashion.<br />

It offers established<br />

designers as well<br />

as young talents the<br />

opportun ity to sell<br />

their design pieces<br />

under one umbrella.<br />

On Avenue 32, the<br />

fame of well-known<br />

design meets the<br />

freshness of young<br />

artists. Even though<br />

Avenue 32 takes care<br />

of logistics and<br />

photography, designers<br />

keep control<br />

over sales. Instead<br />

of selling a stock<br />

of their collection to<br />

Avenue 32, designers<br />

pay a commission<br />

to the company for<br />

each piece they sell<br />

on the platform.<br />

This reduces the risk<br />

of Avenue 32 being<br />

left to shoulder<br />

the cost of unsold<br />

collections, and<br />

allows it to present<br />

pieces from yet<br />

unknown designers.<br />

“A lot of magazines,<br />

like ‘Vogue,’ won’t<br />

feature designers<br />

unless they have a<br />

stockist where customers<br />

can buy,” says<br />

Roberta Benteler,<br />

Avenue 32 founder.<br />

✖ AVENUE32.COM<br />

Total sites link to website<br />

Source: alexa.com<br />

Avenue32.com971<br />

net-a-porter.com12,772<br />

chanel.com10,937


GLOBAL INVESTOR 1.16 — 14<br />

NEW MARKETS<br />

FASHION<br />

ON THE RISE<br />

IN INDIA<br />

The Indian fashion<br />

industry is set for<br />

strong growth with<br />

favorable demographics<br />

and rising<br />

income levels<br />

driving demand for<br />

apparel and highend<br />

fashion. <strong>Fashion</strong><br />

trends in India take<br />

their cue from the<br />

West, as this gives<br />

customers social appeal<br />

and results in<br />

many successful domestic<br />

brands imitating<br />

foreign names<br />

and styles, such<br />

as Franco Leone and<br />

American Swan, or<br />

foreign brands being<br />

licensed. India enjoys<br />

skilled low-cost labor<br />

and an abundance<br />

of raw materials. The<br />

industry is highly<br />

fragmented with a low<br />

share of organized<br />

retail. Aditya Birla<br />

<strong>Fashion</strong>, one of India’s<br />

fastest- growing<br />

branded apparel companies,<br />

has grown<br />

by consolidating its<br />

market leadership<br />

with its own brands at<br />

the lower-end<br />

and later introducing<br />

premier international<br />

labels. Raymond,<br />

the largest branded<br />

fabric and suiting<br />

manufacturer, has developed<br />

a vast distribution<br />

network and<br />

acquired labels. Page<br />

Industries, an innerwear<br />

company, has<br />

grown rapidly under<br />

the licensing business<br />

model. Several<br />

international companies<br />

like Marks &<br />

Spencer, Zara, Benetton,<br />

and Tommy<br />

Hilfiger have already<br />

established a strong<br />

foothold in India.<br />

✖<br />

FOR MORE ON<br />

FASHION GLOBALIZATION,<br />

GO TO PAGES 30 AND 34


GLOBAL INVESTOR 1.16 — 15<br />

NEW MARKETS<br />

SPORTS<br />

Many popular fashion<br />

brands have had<br />

de dicated sports lines<br />

for some time, such<br />

as Ralph Lauren and<br />

Hugo Boss.<br />

Uniqlo has a tennis<br />

player as its global<br />

brand ambassador to<br />

position the brand<br />

as the ultimate functional<br />

wear. Even<br />

at the luxury end, Tom<br />

Ford is already developing<br />

a sports line<br />

to expand the reach<br />

of the brand. On<br />

the catwalks, many<br />

models are wear ing<br />

training shoes and<br />

there is soaring<br />

demand for designer<br />

trainers. Sports as<br />

a lifestyle is here to<br />

stay and fashion<br />

brands will capitalize<br />

on this. Sports<br />

brands such as Adidas<br />

are also developing<br />

fashion lines,<br />

with Adidas using<br />

the designers Yohji<br />

Yamamoto or Stella<br />

McCartney to develop<br />

lines of designer<br />

sports fashion. When<br />

Puma was bought<br />

by the luxury goods<br />

group Kering in<br />

2007, the objective<br />

was to transform<br />

the brand as a sports<br />

lifestyle brand. But<br />

Puma entered a difficult<br />

period after having<br />

been overexposed<br />

on a fashion spur.<br />

✖<br />

FOR MORE ON<br />

BRANDS AND MARKETS,<br />

GO TO PAGE 30


GLOBAL INVESTOR 1.16 — 16<br />

TECHNOLOGY<br />

VR MODELS –<br />

ONLY BUY<br />

WHAT<br />

FITS YOU!<br />

You may never fly to<br />

the moon or swim with<br />

dolphins in the ocean,<br />

but if virtual reality<br />

(VR) lives up to its<br />

promise, you may be<br />

able to do other things<br />

that you never thought<br />

you could, such as<br />

being on center stage<br />

in a fashion show,<br />

without even having<br />

to leave your home.<br />

The fashion industry<br />

could be the next<br />

place to receive a<br />

dose of this farreaching<br />

technology.<br />

In the VR fashion<br />

demo (see the QR<br />

code below), you<br />

can see the realistic<br />

cloth simulation as<br />

runway models pose<br />

at the end of a virtual<br />

runway. The concept<br />

behind VR fashion<br />

is that users could<br />

import a 3D scan of<br />

themselves and see<br />

exactly how garments<br />

would look and fit.<br />

A further step could<br />

be producing heat<br />

maps on a user’s<br />

avatar, which would<br />

show exactly where<br />

the garment was too<br />

tight or too loose.<br />

If you don’t like what<br />

you see or if it doesn’t<br />

fit, you can adjust it<br />

or move to another<br />

pattern. Finally, hit the<br />

“buy” button and the<br />

garment with your<br />

exact pattern and fit<br />

will be produced and<br />

sent to your home.<br />

✖<br />

FOR MORE ON<br />

THE VIRTUAL FITTING<br />

ROOM, SEE P. 44<br />

Enjoy a front row view<br />

of the VR modeling<br />

catwalk by using<br />

the QR code above.


GLOBAL INVESTOR 1.16 — 17<br />

PERSPECTIVES ON<br />

FASHION TRENDS<br />

2/6<br />

A . L . I<br />

A . N . S . A . R . I<br />

is a German-Persian fashion designer, product manager and trend scout. His<br />

vision is to share his knowledge, experience and expertise and to support<br />

cultivating creative consciousness in companies as well as academic institutions.<br />

What do you see as the global<br />

trends (e.g. digitalization)<br />

influencing today’s fashions and<br />

the fashion market?<br />

The speed in which digital technology<br />

has risen in just two decades has<br />

had a huge influence on today’s fashion<br />

and global fashion markets.<br />

Omnipresent and all-consuming.<br />

A “must have,” a “must do” and a<br />

“must follow.” In contrast to our<br />

superemotional, sensitive and human<br />

need for retreat and the proper time<br />

to grow. Through experience, learning<br />

and applying.<br />

The middle path of bridging and<br />

connecting seems to be vanishing.<br />

Either you are in or out. There is<br />

no in-between. We clearly embrace<br />

the future here and now. Not<br />

waiting for it to present itself in time.<br />

The power of acceleration allows<br />

us to teletransport into a multitude of<br />

conceptual realities of the future.<br />

The process of developing products<br />

in the fashion industry pays tribute<br />

to this very clear direction at all<br />

stages of product inspiration, concept,<br />

sourcing, prototyping and<br />

presentation through to production<br />

and delivery.<br />

How are these trends changing<br />

fashion and the fashion market?<br />

A few trends emerge out of this<br />

perspective of eliminating anything<br />

in the middle ground.<br />

Craftsmanship and the power of<br />

“DIY” underline our urge to make and<br />

evolve while creating an idea, developing<br />

a product as a team in its own<br />

time and environment. Using original<br />

tools and digital technology.<br />

A counterreaction derives from<br />

the socio-cultural need for new depth<br />

and purpose. Self-exploration via<br />

mindfulness, spirituality and deep<br />

reflection draws great strength<br />

out of calmness and contemplation.<br />

Attending to inner rhythms and seeing<br />

the primal effects of nature. Being<br />

open to the power of the elements<br />

and inspired by their natural diversity.<br />

People are looking for new beliefs.<br />

Play and entertainment is another<br />

big theme. Less time working and<br />

much more time escaping the daily<br />

routine of duty and responsibility.<br />

In the arts, absurdism is a powerful<br />

indication of this tendency. An<br />

experimental approach that combines<br />

opposites into an abstract work.<br />

In fashion it blends totally different<br />

directions in collections and<br />

design concepts. None is interlinked<br />

or connected but very clearly takes<br />

a different standpoint in choice of<br />

material, color, silhouette and creative<br />

language.<br />

Where do you get inspiration<br />

for your designs and collections?<br />

Observing the rhythm and rhyme<br />

of everyday urban life. And moving<br />

into it and out of it. Traveling to<br />

international metropolises and their<br />

surrounds as well as being in the<br />

countryside.<br />

Changing my view and perspective<br />

by diving into the pulse and regularly<br />

jumping out of it. Sensory perception<br />

of the balance. Of extremes and seemingly<br />

unimportant things.<br />

Online research into the multilevels<br />

of cultural communities. Letting<br />

architecture, art, music, liter a ture,<br />

journalism and design become a<br />

multilayered display of the daily echo.<br />

Witnessing society and cultural<br />

change in young and old generations.<br />

Above all, finding peaceful time in<br />

nature to sort, digest and understand<br />

the overflow of the impressions<br />

given by this kind of trend research.<br />

✖ ALIANSARI.DE


GLOBAL INVESTOR 1.16 — 18<br />

So unmistakably<br />

Lanvin. At the Museum<br />

of Decorative Arts in<br />

Paris, we see a fullscale<br />

reconstruction of<br />

one of the Rateaudesigned<br />

rooms at the<br />

Lanvin family home.


GLOBAL INVESTOR 1.16 — 19<br />

THE RISE AND FALL OF FASHION EMPIRES PART I<br />

LANVIN:<br />

CAPTURING<br />

THE JE<br />

NE SAIS<br />

QUOI OF A<br />

BYGONE ERA<br />

For almost a century, French fashion house Lanvin was revered for its fashion creations, perfumes and home décor items.<br />

But since the 1960s, the company has lost some of its cachet. Founded on a Frenchwoman’s love for her<br />

daughter, the company now sits in the hands of another woman, based in Taiwan. Will we see a renaissance of sorts?


GLOBAL INVESTOR 1.16 — 20<br />

TEXT BY JULIA REA<br />

Mother and daughter in<br />

silhouette: the iconic Lanvin<br />

logo adorns this 1930s<br />

vintage perfume bottle.<br />

As the oldest French fashion house still in<br />

operation today, the House of Lanvin<br />

maintains a delicate balance between<br />

the design traditions of its unique heritage<br />

and the necessity of a thoroughly modern<br />

approach. Drawing on art, exoticism, color and<br />

culture, Lanvin’s philosophy has always been one<br />

that embraces all the subtle nuances of a lifestyle,<br />

rather than just the formalities of fashion.<br />

The company’s founder Jeanne Lanvin (1867–<br />

1946) began her design career as an apprentice<br />

milliner in 1883. After training at the salons of<br />

Madame Félix and Suzanne Talbot, Lanvin established<br />

her own millinery workshop on Paris’s illustrious<br />

rue de Faubourg-Saint Honoré in 1889. Following<br />

her marriage to Italian nobleman Count<br />

Emilio di Pietro in 1895, she began to design and<br />

make clothes for the couple’s daughter, Marguerite<br />

Marie-Blanche. Lanvin’s friends and clients began<br />

to request copies of the child’s garments for their<br />

own children, and the overwhelming success and<br />

demand for the beautiful clothes soon prompted<br />

Lanvin to establish a womenswear line in 1909. Later<br />

that year, Lanvin was admitted to the Chambre<br />

Syndicale de la Haute Couture, the prestigious<br />

­governing body of Paris’s flourishing haute couture<br />

industry, thus formalizing her status as a couturière<br />

and confirming her power and influence within the<br />

early 20th-century fashion world.<br />

The 1920s saw Lanvin expand her burgeoning<br />

design empire to include menswear, sportswear,<br />

makeup, home décor and dedicated lingerie and<br />

fur divisions, underlining her philosophy that fashion<br />

was not solely a mode of adornment but an<br />

all-encompassing lifestyle. The hugely successful<br />

fragrance company Lanvin Parfums was founded in<br />

1924, with popular perfumes including “My Sin”<br />

(1925) and the signature scent “Arpège” (1927),<br />

which was inspired by her daughter’s love of music.<br />

as the brand’s signature shade was equally personal.<br />

Inspired by a Fra Angelico fresco glimpsed by<br />

Lanvin in Florence, Italy, the vibrant lavender hue<br />

was subsequently incorporated into the design of<br />

perfume bottles, packaging, clothing and interiors,<br />

including her Paris apartment.<br />

Lanvin continued to develop signature shades<br />

such as “Velazquez green” and “Polignac pink,”<br />

founding a dye factory in Nanterre, France, in 1923.<br />

As a frequent traveler and avid collector of antiques<br />

and objets d’art, Lanvin drew inspiration from rich<br />

Oriental embroideries, Japanese kimonos, luxurious<br />

velvet and sequined textures and motifs evocative<br />

of exotic cultural heritage. Closely associated<br />

with the Art Deco movement of her time, Lanvin<br />

became renowned for her intensely fragile yet heavily<br />

hand-embellished dresses in pale, clear colors,<br />

whose light fabrics and neat waists reflected the<br />

freedom of the post-corset age.<br />

GROWTH AND DECLINE<br />

In 1937, at the age of 70, Lanvin was appointed president<br />

of the Haute Couture committee of the Paris<br />

Exhibition and, two years later, was elected the<br />

Paris representative at the New York World’s Fair.<br />

Throughout the Second World War, Lanvin was one<br />

of several couture houses who continued business,<br />

despite strict regulations regarding materials and<br />

growing financial uncertainty. Lanvin, along with a<br />

group of couturiers including Elsa Schiaparelli and<br />

Cristobal Balenciaga, attempted to reestablish her<br />

business in Biarritz following the German occupation<br />

of Paris in order to export products to the United<br />

States. Shortly afterward, however, the French government<br />

capitulated, exports were frozen, and the<br />

scheme collapsed.<br />

After Lanvin passed away in 1946, ownership of<br />

the company transferred to her daughter Marguerite,<br />

who had been closely involved in the management<br />

of the business for four years previously. When<br />

Marguerite herself passed away in 1958, the company<br />

passed to her cousin Yves Lanvin. The company<br />

entered a period of relative obscurity, intensified by<br />

the rise of dominant ready-to-wear labels such as<br />

Yves Saint Laurent in the 1960s. Lanvin’s loyal couture<br />

clientele continued to turn to the house they<br />

had patronized for many years, but both the aesthetic<br />

and business structure of the company were<br />

increasingly archaic and uninspiring.<br />

Although it is still well known today for its<br />

perfumes, the Lanvin name was first<br />

established on the outstanding couture<br />

skills of company founder Jeanne Lanvin.<br />

Pictured here, we see a ribbed voile<br />

full-length romantic-style wedding dress<br />

with a matching hat – both of her design.<br />

LANVIN AS A BUSINESS ACQUISITION<br />

Lanvin remained an internally funded family-run<br />

business until 1971, when American pharmaceutical<br />

manufacturer Squibb acquired the company’s cosmetics<br />

division. However, Squibb were disappointed<br />

by Lanvin’s performance in the face of growing<br />

competition from other prominent cosmetics companies,<br />

and Lanvin bought back its independence<br />

in 1979. The company continued to struggle to successfully<br />

revitalize its increasingly antiquated image<br />

and, after reporting losses of USD 17.5 million in<br />

1988, British banking company Midland (now part<br />

of HSBC) acquired a significant share of the company.<br />

Despite reporting a USD 53 million profit following<br />

this restructuring, the brand remained largely<br />

unsuccessful, with designer Claude Montana’s<br />

first collection for the label being widely derided by<br />

the fashion press. A year later, Midland sold its<br />

Jeanne Lanvin was famous for creating<br />

dresses which were made of delicate<br />

light fabrics in pale clear colors with<br />

hand-stitched embellishments.<br />

DESIGN SIGNATURES<br />

Lanvin’s close relationship with her only child has<br />

always remained at the heart of the brand’s identity,<br />

most notably through its logo, which depicts a<br />

mother and daughter in silhouette. The illustration,<br />

inspired by a 1907 photograph of Jeanne and Marguerite,<br />

continues to adorn Lanvin products today<br />

as an expression of the brand’s spirit and emotion.<br />

Jeanne Lanvin’s adoption of an intense blue color<br />

Jeanne Lanvin (born Jeanne-Marie Lanvin)<br />

1867–1946. The iconic French fashion<br />

designer is pictured here reviewing sketches<br />

in her design studio in France.


GLOBAL INVESTOR 1.16 — 21<br />

stakes in Lanvin to Orcofi, an investment group<br />

owned by the Vuitton family. In 1994, leading cosmetics<br />

empire L’Oréal began a takeover of the<br />

Lanvin company, purchasing a 50% stake which<br />

increased to 66% in 1995 and finally reached 100%<br />

in 1996. In 2001, the company was taken private<br />

again after being purchased by investor group<br />

Harmonie S.A.<br />

Under Harmonie’s directorship, Moroccan-<br />

Israeli designer Alber Elbaz was appointed as the<br />

label’s artistic director in 2001. The charismatic<br />

Elbaz had previously undertaken design stints at<br />

Guy Laroche and Yves Saint Laurent, but his role at<br />

Lanvin allowed him to come into his own, and his<br />

collections immediately received widespread praise.<br />

Combining luxury and femininity, Elbaz transformed<br />

Lanvin into a blend of tradition and modernity.<br />

Acknowledging Lanvin’s unique heritage, the designer<br />

employed classic shapes on both his womenswear<br />

and menswear collections, while simultaneously<br />

using unexpected fabrics and silhouettes in<br />

order to update them for a new generation. Oversized<br />

costume jewelry, ethereal eveningwear and bright<br />

prints led Vogue International’s Suzy Menkes to<br />

describe Elbaz as “every woman’s darling,” cementing<br />

the brand’s popularity and influence.<br />

Lanvin:<br />

lahn-vahn<br />

A model walks the runway<br />

during the Lanvin<br />

Fall/Winter 2013 Readyto-Wear<br />

show as part<br />

of Paris <strong>Fashion</strong> Week<br />

on 28 February 2013<br />

in Paris, France.<br />

LANVIN FOR H&M<br />

In 2010, Swedish global high-street fashion chain<br />

H&M announced that Lanvin would become the<br />

latest in a series of luxury designer collaborations.<br />

By this time, high-end and mass-market collaborations<br />

were regarded as a powerful and mutually<br />

beneficial retail and marketing tool, with notable<br />

examples including Valentino’s 2010 range for Gap,<br />

and Stella McCartney’s long-term collaboration with<br />

Adidas, launched in 2004. H&M’s first collaboration<br />

project – a sellout capsule collection by Chanel<br />

designer Karl Lagerfeld in 2004 – boosted the company’s<br />

monthly revenue by 24%. However, discrepancies<br />

between the average H&M customer’s budget<br />

(mainline dresses can retail for less than USD 10)<br />

and the prices required to maintain a luxury brand’s<br />

superior quality and fit meant that subsequent<br />

collab orations with brands such as Jimmy Choo and<br />

Roberto Cavalli failed to generate the same level of<br />

revenue growth. Lanvin’s limited-edition range of<br />

brightly colored cocktail dresses and quirky accessories,<br />

however, was more successful. The collection,<br />

whose prices reached USD 350, sold out in<br />

the UK within hours, and the company reported an<br />

8% increase in worldwide sales that month. Despite<br />

previously being adamant that he “would never do<br />

a mass-market collection,” Elbaz stated that H&M<br />

had approached him “to see if we could translate<br />

the dream we created at Lanvin to a wider audience,<br />

not just a dress for less … what intrigued me was<br />

the idea of H&M going luxury, rather than Lanvin<br />

going public.” The boost provided by Lanvin’s involvement<br />

has set a precedent for subsequent successful<br />

sellout collaborations with Versace (2011),<br />

Isabel Marant (2013) and Balmain (2015).<br />

A NEW ERA FOR LANVIN<br />

Elbaz unexpectedly departed from Lanvin in October<br />

2015 for undisclosed reasons, but it was confirmed<br />

in an official statement that he had been<br />

discharged at “the decision of the company’s majority<br />

shareholder” Shaw-Lan Wang of Harmonie<br />

S.A. The designer’s long-term tenure as creative<br />

director had undoubtedly been successful, revitalizing<br />

its aesthetic, attracting high-profile fans such<br />

as Michelle Obama and Nicole Kidman and in 2014,<br />

the year prior to his departure, the company also<br />

reported estimated revenues of USD 321 million.<br />

Designer Alber Elbaz<br />

walks the runway<br />

during the Lanvin for<br />

H&M Haute Couture<br />

Show at The Pierre<br />

Hotel on 18 November<br />

2010 in New York City.<br />

However, this once-rapid growth had begun to slow<br />

and market sources speculated that Shaw-Lan Wang<br />

was seeking additional financial support from a<br />

major luxury group, to the reported frustration of<br />

Elbaz. His parting statement, however, insisted that<br />

Elbaz was satisfied with what he had achieved during<br />

his 14 years at the brand: “Together we have met the<br />

creative challenge presented by Lanvin and have restored<br />

its radiance, returning it to its rightful position<br />

among France’s absolute luxury fashion houses.”<br />

In March 2016, Lanvin announced that Bouchra<br />

Jarrar, a French couture designer who has previously<br />

worked for Balenciaga and Christian Lacroix,<br />

would become Lanvin’s new creative director. Jarrar<br />

is now faced with the challenge of overcoming the<br />

company’s recent turbulent period and restructuring<br />

its team. After Elbaz’s departure, Lanvin’s 330<br />

employees initiated a series of strikes and protests,<br />

demanding a meeting with owner Shaw-Lan Wang,<br />

who resides in her native Taiwan, to discuss reinstating<br />

Elbaz. The financial and sartorial future of<br />

Lanvin thus depends on Jarrar’s ability to revive the<br />

label’s image, reverse declining sales, and offer its<br />

clientele a fresh new aesthetic.<br />

FACTS<br />

AND<br />

FIGURES<br />

Lanvin posted revenue<br />

of EUR 206 million in 2014.<br />

Breakdown is shown in %<br />

Source: reuters.com, wwd.com<br />

30%<br />

Retail<br />

70%<br />

Wholesale


GLOBAL INVESTOR 1.16 — 22<br />

NEW MARKETS<br />

50+<br />

While many famous<br />

50-plus women<br />

endeavor to dress<br />

and live as if they<br />

were still in their<br />

thirties, fashion has<br />

nevertheless stopped<br />

ignoring the 50-plus<br />

woman, with designs<br />

that are not too short,<br />

too tight or too<br />

revealing. Beyoncé’s<br />

mother, Tina Knowles,<br />

started a post-50<br />

fashion Iine that was<br />

available at Wal-Mart<br />

in 2010. In 2015, the<br />

glamourous daytime<br />

TV presenter, Lorraine<br />

Kelly, unveiled her<br />

first catwalk-inspired<br />

clothing range for<br />

50-plus women in<br />

the UK, designed for<br />

JD Williams, a fashion<br />

retailer with an emphasis<br />

on plus-size<br />

clothing. The 50-plus<br />

female fashion<br />

market is worth GBP<br />

2.5 billion per season<br />

in the UK and is a<br />

fast-growing sector.<br />

So far, however, fastfashion<br />

retailers such<br />

as Zara and H&M<br />

have not developed<br />

dedicated lines,<br />

probably a testimony<br />

that 50-plus remains<br />

a small niche.<br />

✖<br />

FOR MORE ON<br />

BRANDS AND MARKETS,<br />

GO TO PAGE 30


GLOBAL INVESTOR 1.16 — 23<br />

TECHNOLOGY<br />

SELF-<br />

HEALING<br />

FABRICS –<br />

A NECESSITY<br />

Are you fed up with<br />

repairing your children’s<br />

clothes? Don’t<br />

give up hope – there<br />

is a solution for your<br />

problem. The ability<br />

of fabrics to automatically<br />

mend themselves<br />

is currently<br />

the most promising<br />

feature of smart<br />

textiles in the whole<br />

fabric industry. The<br />

capability of textile<br />

materials and fabrics<br />

to “self-heal” can<br />

ultimately lead to<br />

long-lasting products<br />

that require next to<br />

no maintenance and<br />

fewer resources<br />

for structural applications.<br />

Self-healing<br />

fabrics are a mindboggling<br />

invention<br />

that resorts to several<br />

strategies such<br />

as “reversible crosslinks”<br />

using nanotechnology<br />

that<br />

releases healing<br />

agents, and employing<br />

technologies<br />

like “shape memory<br />

effect,” “nanoparticle<br />

migration,” “electro<br />

hydrodynamics,”<br />

“conductivity” and<br />

“co-deposition.”<br />

✖ FOR MORE ON<br />

E-TEXTILES, SEE P. 44<br />

You can find out more<br />

about self-healing<br />

fabrics by using<br />

the QR code above.


GLOBAL INVESTOR 1.16 — 24


GLOBAL INVESTOR 1.16 — 25<br />

Efficient management<br />

of the supply chain<br />

is absolutely critical<br />

to delivering what’s<br />

been termed “fast<br />

fashion,” based on the<br />

just-in-time model of<br />

inventory control.<br />

✖<br />

FOR MORE ON<br />

THIS TOPIC — GO<br />

TO PAGES 30 AND 48


GLOBAL INVESTOR 1.16 — 26<br />

NEW MARKETS<br />

MUCH MORE<br />

THAN JUST A<br />

PRETTY FACE<br />

The use of celebrities<br />

in fashion advertising<br />

has increased in<br />

recent years. From<br />

Chanel to Louis<br />

Vuitton or Burberry,<br />

we all have images of<br />

celebrities representing<br />

the brand more<br />

than the specific<br />

items advertised.<br />

With the use of celebrities,<br />

companies not<br />

only advertise their<br />

latest products but<br />

also brand values by<br />

“creating the buzz.”<br />

The use of Mikhail<br />

Gorbachev in a Louis<br />

Vuitton advertising<br />

campaign received<br />

the kind of attention<br />

and buzz that is regarded<br />

as a measure<br />

of success these<br />

days. The extensive<br />

use of Kate Moss or<br />

Cara Delevingne in<br />

fashion advertising<br />

now has more to do<br />

with the way they<br />

inspire customers.<br />

Celebrities understand<br />

it well and take<br />

the opportunity to<br />

develop their own<br />

fashion lines. Kate<br />

Moss is developing<br />

a line for the UK label<br />

Topshop. Beyoncé<br />

has her own line.<br />

Victoria Beckam successfully<br />

transitioned<br />

from a singer to an<br />

influential designer.<br />

✖<br />

FOR MORE ON<br />

ADVERTISING<br />

AND MARKETING,<br />

GO TO PAGE 30


GLOBAL INVESTOR 1.16 — 27<br />

PERSPECTIVES ON<br />

FASHION TRENDS<br />

3 /6<br />

M . A . S . O . N<br />

J . U . N . G<br />

is a fashion designer based in London. His conceptual projects have appeared<br />

in exhibitions and installations, including recent presentations at Museum<br />

Boijmans Van Beuningen and Dover Street Market Ginza. He is senior lecturer at<br />

Brighton University and visiting tutor at the Royal College of Art.<br />

What do you see as the global<br />

trends (e.g. digitalization)<br />

influencing today’s fashions and<br />

the fashion market?<br />

Popular culture and amateurism.<br />

With the development of online culture<br />

in the last decade, the world<br />

has become closely linked, and things<br />

can be shared easily and widely.<br />

Anything followed by many people<br />

acquires commercial value, and<br />

popularity is an empirical measure<br />

of success in modern society.<br />

To obtain broader popularity, things<br />

need to be easy and understood<br />

by people without a trained sensibility.<br />

The border between “amateurism”<br />

and “professionalism” is blurred. This<br />

is, on one hand, a positive phenomenon,<br />

but at the same time could be<br />

dangerous when immature views<br />

or knowledge are shared by the masses.<br />

We can witness many influential<br />

bloggers and celebrities who have become<br />

designers without mastering<br />

their art.<br />

How are these trends changing<br />

fashion and the fashion market?<br />

The popularity-centric culture has<br />

been homogenizing and democratizing<br />

many things – values, opinions<br />

and even aesthetics. Especially in fashion,<br />

collections and designs became<br />

less distinctive while brands<br />

carry on intensive PR activities.<br />

Naturally, in reaction to this there<br />

is a growing demand for individual<br />

and original design and genuine<br />

quality. <strong>Fashion</strong> labels that present<br />

heterodox ideas and approaches<br />

will respond to the demand and<br />

gradually influence the mainstream,<br />

I hope.<br />

Where do you get inspiration<br />

for your designs and collections?<br />

Thoughts and emotions from my own<br />

experience. In particular, “restriction”<br />

has been the main source of<br />

my creations. I have explored it in<br />

men’s sartorial culture, in which we<br />

have established forms like tailored<br />

jackets and other conventions.<br />

I like to use irony to reveal ideas<br />

in a secretive and satirical way and<br />

try to express aversion to uniformity<br />

through the beauty of garments.<br />

✖ MASONJUNG.COM


GLOBAL INVESTOR 1.16 — 28<br />

FASHION INDUSTRY<br />

SELLERS<br />

OF<br />

DREAMS<br />

While industry watchers once got their thrills from expecting<br />

the unexpected, the unexpected now goes beyond clothing<br />

to include how it is conceived and produced. E-commerce, fashion<br />

bloggers and fast fashion are having a profound impact. Roger<br />

Tredre reflects on the inner workings of a high-risk business.<br />

INTERVIEW BY GISELLE WEISS Freelance writer<br />

The general public is also entranced<br />

by the subject of fashion.<br />

ROGER TREDRE It is. I was at the<br />

Victoria and Albert Museum here in London<br />

yesterday, which has just launched an exhibition<br />

about the Renaissance artist Sandro<br />

Botticelli – “Botticelli Reimagined.” But even<br />

at this exhibition, which I expected primarily<br />

to be a chance to look at lots of glorious<br />

old masters from 500 years ago, what did I<br />

see in the first room? A Dolce & Gabbana<br />

suit with a Botticelli print on it.<br />

Who or what shapes fashion?<br />

ROGER TREDRE <strong>Fashion</strong> is shaped<br />

by a multitude of forces. In technical industry<br />

terms, the core event that gets the<br />

next season rolling is Première Vision, which<br />

takes place in Paris twice a year. It’s<br />

a huge trade show, where designers of all<br />

levels in the clothing industry go to see<br />

the new fabrics and colors being proposed<br />

by the leading and most influential manufacturers,<br />

across Europe, but also worldwide.<br />

And when you get closer to the launch<br />

of a product in the marketplace …<br />

ROGER TREDRE … then the whole<br />

marketing machinery clicks into gear. <strong>Fashion</strong><br />

is about the selling of dreams. That is why<br />

fashion companies invest so much into marketing<br />

and promotion, which now extends<br />

to sweet talking and being nice to bloggers,<br />

sponsoring celebrities to wear clothes and<br />

GISELLE WEISS What distinguishes<br />

the fashion industry from other major<br />

industries?<br />

ROGER TREDRE <strong>Fashion</strong> defies a lot of<br />

the usual rules of the business world. In the<br />

past, companies have tried to apply a kind<br />

of McKinsey approach to creating collections<br />

and selling fashion. And it hasn’t really<br />

worked. Even now, with fashion e-commerce,<br />

big data and sophisticated algorithms to<br />

understand the consumer better, there’s always<br />

an element of chance. That’s what<br />

makes fashion endlessly fascinating to observe.<br />

If you work directly in the business,<br />

that’s also what makes it quite terrifying.<br />

You’ve called fashion the driving force of<br />

modern consumer culture. How so?<br />

ROGER TREDRE Back in the year<br />

2000, I was editor in chief for the online<br />

trends service WGSN. We discovered<br />

that the service wasn’t just useful for the<br />

fashion industry, but for every product<br />

category connected with fashion or interested<br />

in fashion in some way. There’ve been some<br />

interesting interviews recently with Tim<br />

Cook at Apple comparing what Apple does<br />

with what a fashion company does, and<br />

the importance of design in the process.<br />

And because technology is the fastest-growing<br />

product category in the world, the influence<br />

of fashion there is fascinating. Indeed,<br />

if you understand how fashion ticks, you can<br />

apply that knowledge to other industries,<br />

such as cars, food and retail more broadly.<br />

“If you understand<br />

how fashion<br />

ticks, you can apply<br />

that knowledge to<br />

other industries, such<br />

as cars, food and<br />

retail more broadly.<br />

paying designers extraordinary amounts of<br />

money to make bold statements on the<br />

runway that capture the imagination and sell<br />

the dream to consumers. Not that consumers<br />

will rush out tomorrow and buy a 2,000<br />

euro jacket they’ve just seen. But the<br />

affluent young and not-so-young will buy<br />

the fragrance the next time they’re<br />

pa s s ing through a duty-free. Or they will<br />

buy the handbag or the shoes. Accessories<br />

and fragrances are at the core of actual sales.<br />

Apart from these relatively affluent people,<br />

how would you describe the interplay of


GLOBAL INVESTOR 1.16 — 29<br />

fashion makers and consumers in shaping<br />

fashion?<br />

ROGER TREDRE Consumers are now<br />

in a more powerful position than ever before<br />

because of the power of the Internet and<br />

the ability to like and dislike. And also the<br />

extent to which they are using the old-fashioned<br />

retail environment as a showroom<br />

experience where they can wander around,<br />

try on things, take a few pics, share them<br />

with friends and then go home and buy the<br />

items cheaper online. At the same time,<br />

despite the best efforts of NET-A-PORTER<br />

or ASOS in the UK market, nothing quite<br />

matches the thrill of going into a beautiful<br />

shop. Consequently, retail is adding cafés,<br />

adding drama and building bigger flagships.<br />

How is the evolution of the mass market<br />

affecting the luxury segment?<br />

ROGER TREDRE If you’re in the business<br />

of luxury, you’ve got a problem in<br />

competition from the high street who are<br />

now able to use better-quality fabrics,<br />

are creating more fashion-forward designs<br />

and are even able to add in elements of<br />

handiwork that were previously only associated<br />

with the luxury sector. Nonetheless,<br />

luxury brands are also lifestyle brands and<br />

well aware of it. And they want to capture<br />

a share of the mid-market. “Masstige” –<br />

“mass market” plus “prestige” – is a phrase<br />

that’s been used quite a lot in recent years.<br />

In 1992, you wrote that uncertainty in the<br />

industry internationally had dampened<br />

many wilder spirits. What was going on?<br />

ROGER TREDRE Japan, which had been<br />

a key export market at the luxury end,<br />

was no longer growing at the same pace.<br />

The question was where growth would<br />

come from, and the answer was China. It<br />

took a good decade, though, before China<br />

began to deliver in the way people hoped.<br />

What challenges is the industry facing?<br />

ROGER TREDRE One of the biggest<br />

talking points for the industry at the moment<br />

is whether we need to change the timetable<br />

of fashion. In the late 1990s, the emergence<br />

of Inditex – the Spanish company<br />

that owns Zara – introduced the concept of<br />

fast fashion, the idea of stores injecting<br />

new product into shops on almost a weekly<br />

basis. This presented a major challenge<br />

for everyone in the industry: companies,<br />

designers and producers would have to leap<br />

on it immediately and make it happen.<br />

And now?<br />

ROGER TREDRE It’s reached the stage<br />

where some high-end companies, including<br />

Roger Tredre<br />

is currently pathway leader in fashion<br />

journalism (MA <strong>Fashion</strong> Communication)<br />

at Central Saint Martins, University<br />

of the Arts London. He is also a senior<br />

consultant for the Beijing Academy<br />

of Creative Arts. From 1999 to 2007,<br />

he was editor in chief of Worth Global<br />

Style Network (wgsn.com), the international<br />

fashion industry online trends<br />

and research service.<br />

Burberry (most notably at London <strong>Fashion</strong><br />

Week), are proposing a see-now, buy-now<br />

approach to the concept of a fashion show,<br />

where the consumer will be able to watch<br />

the fashion show on the Internet and place<br />

an order and get the clothes almost instantly.<br />

How likely is that to happen?<br />

ROGER TREDRE If it is adopted across<br />

the industry, it will need a complete rethink<br />

in terms of the production process. I don’t<br />

think it will happen. A lot of the bigger<br />

players in continental Europe have already<br />

suggested it’s a bit of a gimmick and<br />

“Consumers are<br />

now in a more powerful<br />

position than<br />

ever before because<br />

of the power of the<br />

Internet and the ability<br />

to like and dislike.”<br />

that part of the mystique and allure of<br />

selling dreams is the idea that you see these<br />

clothes in the fashion show and then you<br />

have to wait.<br />

Is the distinction between fashion and<br />

apparel worth making?<br />

ROGER TREDRE Apparel needs an<br />

injection of fashion. I mean, what’s apparel?<br />

It’s essentially basics. Take the case of<br />

Uniqlo – a Japanese retailer with huge ambitions<br />

that has enjoyed a meteoric rise in<br />

recent years. When it first came to the UK,<br />

it was purely apparel-focused. But once<br />

you’d bought an item, you didn’t need to go<br />

back to the shop again for a very long<br />

time. The company realized that apparel<br />

without any fashion sprinkled into the mix<br />

was dullsville. Uniqlo has since had a<br />

whole series of collaborations working with<br />

designers to inject a fashion element in<br />

what is still quite a basic range of clothing.<br />

How is fashion understood and<br />

misunderstood in society?<br />

ROGER TREDRE If you believe the<br />

Zoolander movies, fashion is full of ludicrous<br />

figures who drink a lot of champagne,<br />

do drugs and behave generally outrageously.<br />

And it’s true that, from the outside, the<br />

fashion runway season is super- glamorous.<br />

But inside it are a lot of people who<br />

work very, very hard. I’m always amazed at<br />

the commitment and the length to which<br />

people will go in the fashion industry.


GLOBAL INVESTOR 1.16 — 30<br />

MANAGING THE SUPPLY CHAIN<br />

THE<br />

RISE AND<br />

FALL<br />

OF FASHION<br />

COMPANIES<br />

It’s all about the key factors of supply and demand. For fashion companies,<br />

the secret to achieving long-term success lies in effectively managing both their<br />

supply chain and distribution channels, while at the same time keeping a<br />

very close eye on maintaining brand image – be it the apparel labels they sell,<br />

or the company brand itself.


GLOBAL INVESTOR 1.16 — 31<br />

hile brands can come and<br />

go as they become unfashionable,<br />

fashion companies<br />

have emerged with branded stores,<br />

but no branded products, and become a<br />

worldwide success. The key to succeed as a<br />

fashion company is the efficiency of the<br />

supply chain.<br />

The importance of the supply chain<br />

The unbranded fashion company Zara, owned<br />

by Inditex, and to a lesser extent H&M are<br />

fashion houses. Their stores are branded, but<br />

their clothes are not. They sell fashion. Zara<br />

has shaken the fashion world with its fast<br />

supply chain, allowing it to de-risk fashion<br />

and sell at full prices, which is the key to a<br />

fashion company’s profitability and value.<br />

The old model for an apparel company<br />

was to design a collection, produce prototypes,<br />

send it to production (most often outside<br />

the company) and have it delivered to<br />

stores – with the whole process taking a year.<br />

When the product reached the store, the<br />

company might have missed the latest fashions<br />

of the season, but would still have to<br />

promote and sell its stock because the orders<br />

were already passed on to its suppliers for<br />

most of the collection. This process is called<br />

a “push” system. For more on the supply<br />

chain, see p. 48<br />

Zara reinvented the supply chain by first<br />

waiting to see the fashion shows of the highend<br />

fashion labels (usually around six months<br />

ahead of a season) in order to gain an idea<br />

of the fashions for the next season. After<br />

that it designs and produces garments all at<br />

the same location in its headquarters in<br />

Spain and, within a few weeks, delivers the<br />

products to the stores. Zara owns its supply<br />

chain and all of its stores, whereby the stores<br />

report what is and what is not selling, so that<br />

Zara only produces what is in demand. Its<br />

designers are on the street or watching the<br />

Internet blogs to see the new fashions, so<br />

that the collection can continue to evolve<br />

during the season. This fast model avoids<br />

making fashion mistakes and having to sell at<br />

a discount.<br />

All apparel manufacturers, from Benetton<br />

and Vögele to the high-end fashion labels,<br />

have had to learn from this model and try to<br />

adapt their supply chains accordingly. H&M,<br />

which designs in Sweden, but then outsources<br />

production to Asia in order to reduce<br />

costs, has had to evolve as well. While H&M<br />

is more about price than fashion, for its fashion<br />

part it has relocated production closer to<br />

the market in order to be faster. For the jobs<br />

it outsources to Asia, H&M imposes quicker<br />

deadlines to shorten the supply chain. It has<br />

also developed capsule collections with<br />

well-known fashion designers to create more<br />

interest in the company.<br />

Japanese retailer Uniqlo, purchased by<br />

Fast Retailing in 2005, has an excellent inventory<br />

control system, and puts the right<br />

product at the right time in the right location.<br />

However, Uniqlo has a small number of designs<br />

that tend to be more simplistic and<br />

practical than those of Zara or H&M. It manufactures<br />

its clothing in Japan, but also outsources<br />

some work to China. Uniqlo organizes<br />

sports events to create interest for its<br />

brand with tennis player Novak Djokovic as<br />

its global brand ambassador.<br />

More exclusive fashion brands tend to<br />

have less efficient supply chains and lower<br />

volumes, and hence returns are more difficult<br />

to generate. The most promising ones tend<br />

to be acquired by large luxury groups that can<br />

use their negotiating power for advertising or<br />

real estate to help improve returns.<br />

Globalization of fashion<br />

While luxury goods companies have been<br />

successful selling their products around the<br />

world, fashion companies have also become<br />

global. H&M has its roots in Sweden and was<br />

first successful in Northern Europe, but has<br />

since successfully expanded into Southern<br />

Europe, China and the USA. Global growth<br />

opportunities allow it to add 10% more stores<br />

per annum. Zara was originally successful in<br />

Southern Europe and Latin America, but later<br />

expanded into Asia, Russia, and other emerging<br />

markets, and has now entered the USA.<br />

It also adds 8%–10% more stores per annum.<br />

Inditex has grown into the world’s largest apparel<br />

company, with more than EUR 20 billion<br />

in sales and a market capitalization of EUR 90<br />

billion. H&M generates around EUR 20 billion<br />

in sales and has a market capitalization of<br />

EUR 50 billion. Each company holds more than<br />

5% market share in only a few markets. See<br />

also the article on fashion in India, p. 14<br />

The pitfalls of fashion<br />

While successful models have emerged, the<br />

history of fashion is marked by failures too.<br />

One of the most common pitfalls is to become<br />

overexposed. Under new CEO Michael Jeffries<br />

in the 1990s, Abercrombie & Fitch became<br />

the top brand for teenagers. Stores with loud<br />

music, the smell of cologne, teens dancing on<br />

the floor, and a popular logo led to worldwide<br />

success. But when the logo became overexposed,<br />

it lost its teen appeal and customers<br />

moved away. The company has now been<br />

struggling to revive the brand for the past five<br />

years. For a related article on fashion marketing<br />

and advertising, see p. 26<br />

The jury is out for US fashion designer<br />

Michael Kors. After being one of the fastest-growing<br />

brands in recent years, the<br />

World’s largest apparel retailers<br />

Both companies showed similar market cap values<br />

until 2010, when Inditex (Zara) took a more<br />

vertical trajectory, while H&M continued at its<br />

previous pace. Source: Bloomberg<br />

in EUR bn<br />

120<br />

100<br />

80<br />

60<br />

40<br />

20<br />

0<br />

May 01<br />

Inditex market cap<br />

May 05 May 10<br />

H&M market cap<br />

May<br />

15


GLOBAL INVESTOR 1.16 — 32<br />

Rise and fall of<br />

Abercrombie & Fitch<br />

History reveals a series of ups and downs for<br />

Abercrombie & Fitch share price over the past<br />

15 years. While it initially recovered from the<br />

sharp plunge suffered in 2009, another threeyear<br />

downward trend followed. Source: Bloomberg<br />

Past performance is not an indicator of future performance. Performance<br />

can be affected by commissions, fees or other charges as well as exchange<br />

rate fluctuations.<br />

in USD<br />

90<br />

80<br />

70<br />

60<br />

50<br />

40<br />

30<br />

20<br />

10<br />

0<br />

Jan<br />

97<br />

Jan<br />

00<br />

Jan<br />

03<br />

Jan<br />

06<br />

Abercrombie & Fitch share price<br />

Jan<br />

09<br />

Jan<br />

12<br />

Jan<br />

15<br />

Creating value at Burberry<br />

While averaging a relatively flat profile between<br />

2002 and 2008, market cap increased sevenfold<br />

over the next three years. After peaking at just<br />

over GBP 8 bn in 2014, the trend was downward<br />

in 2015. Source: Bloomberg<br />

in GBP bn<br />

9<br />

8<br />

7<br />

6<br />

5<br />

4<br />

3<br />

2<br />

1<br />

0<br />

Jul<br />

02<br />

Jul<br />

04<br />

Jul<br />

06<br />

Burberry market cap<br />

Jul<br />

08<br />

Jul<br />

10<br />

Jul<br />

12<br />

Jul<br />

14<br />

wave of popularity seems to be declining<br />

along with sales. Kors handbags were highly<br />

coveted and the company went into aggressive<br />

store expansion and developed a broader<br />

assortment of products to capitalize on its<br />

success. Kors went public in late 2011 at a<br />

share price of USD 24. The share price peaked<br />

at close to USD 100 in the summer of 2014.<br />

Once again, the brand grew too aggressively<br />

and became overexposed, and shares of Michael<br />

Kors have plunged to their lowest levels<br />

in years. The company is now closing stores,<br />

de-emphasizing logo products, and focusing<br />

on the higher end to regain its aura.<br />

The success of a brand lies in its longevity<br />

and resilience. Hermes is a great example<br />

of a conservatively managed and expanded<br />

brand and why the company attracts one of<br />

the highest valuations in the luxury goods<br />

sector. The Birkin bag created in 1984 is still<br />

one of the most coveted handbags, even by<br />

fashionistas. The key to its longevity – a waiting<br />

list of up to six years to buy the bag!<br />

Burberry is a great example of an old raincoat<br />

brand that was successfully rejuvenated<br />

under a new CEO, Rose Marie Bravo, from<br />

1997 to 2000. The check logo subsequently<br />

became overexposed with the British football<br />

fans wearing Burberry products and cheap<br />

copies spreading everywhere. But, with<br />

Christopher Bailey as a new designer since<br />

2001, the brand has been repositioned and<br />

successfully elevated to become a fashionable<br />

luxury brand. The logo became more<br />

subtle and popular again. Advertisements<br />

featuring Kate Moss redefined the image of<br />

the brand. Higher-margin accessories, fragrances<br />

and babywear were added. A GBP<br />

200 million brand in 1997 was turned into a<br />

GBP 6 billion brand. But not every brand can<br />

stretch itself into new product categories.<br />

For more on new markets for kids, men,<br />

sports and 50+, see pp. 07, 11, 15 and 22 respectively<br />

In conclusion, fashion companies can be<br />

worth investing in when they are riding a<br />

successful trend, or conservatively managed,<br />

or recovering from a setback. But, to avoid<br />

long-lasting pitfalls, beware of overexposure<br />

and brand fatigue, and take a close look at<br />

the supply chain behind the model. Selling at<br />

full prices is the key for profitable growth.<br />

Globalization offers great growth opportunities<br />

for successful companies.<br />

We thank Nandeep Karande from Credit Suisse Business<br />

Analytics (India) for his contribution to this article.<br />

The jury is out for Kors<br />

The share price of Kors doubled in 2012 and<br />

did so again in 2013, and continued rising in<br />

2014. But unfortunately for the high-end fashion<br />

designer, the apex was followed by an equally<br />

sharp drop in share price after the brand grew too<br />

aggressively, and suffered from overexposure.<br />

Source: Bloomberg<br />

Past performance is not an indicator of future performance. Performance<br />

can be affected by commissions, fees or other charges as well as exchange<br />

rate fluctuations.<br />

in USD<br />

100<br />

90<br />

80<br />

70<br />

60<br />

50<br />

40<br />

30<br />

20<br />

Dec 11 Dec 12 Dec 13 Dec 14 Dec 15<br />

Michael Kors share price<br />

Julie Saussier<br />

Julie Saussier is a senior equity<br />

research analyst at Credit Suisse<br />

Investment Solutions and Products,<br />

covering the consumer discretionary<br />

sector. She has 14 years of experience<br />

as a research analyst and joined<br />

Credit Suisse in 2015. She holds a<br />

Master’s in Business and Management<br />

from the University of Paris Dauphine<br />

and a Master’s in Corporate Finance<br />

from the EM Lyon Business School,<br />

France, and is a CFA charterholder.


GLOBAL INVESTOR 1.16 — 33<br />

PERSPECTIVES ON<br />

FASHION TRENDS<br />

4 /6<br />

E . L . L . E . N<br />

S . I . D . E . R . I<br />

is founder and CEO of ESP Trendlab, a division of Ellen Sideri Partnership,<br />

a trend research and consulting agency located in New York City<br />

that detects and analyzes cutting-edge design trends for over 1,000 leadership<br />

brands worldwide.<br />

What do you see as the global<br />

trends (e.g. digitalization)<br />

influencing today’s fashions and<br />

the fashion market?<br />

The free flow of information and<br />

technology-at-large are changing<br />

everything, including the fashion<br />

marketplace worldwide, and the<br />

dynamics of the world are causing<br />

changes in established systems<br />

created in the past. There is a true<br />

anti-establishment movement<br />

taking place, not just in politics but<br />

also challenging publications,<br />

press/media in general, workstyles,<br />

marriage, childbearing, sexuality,<br />

medicine, health, exercise, food<br />

trends and so much more. This is<br />

a new moment, similar to the 1960s<br />

and 1970s, where the past is being<br />

disrupted. Periods like these have<br />

such an intense impact; they<br />

change our lives forever. You do not<br />

have to be a soothsayer to know<br />

that change is upon us! We all feel it.<br />

How are these trends changing<br />

fashion and the fashion market?<br />

All of these challenges to the<br />

past are bringing new methods and<br />

thinking, new lifestyles and<br />

therefore new possibilities for apparel<br />

and fashion-forward design. The<br />

tech boom, 3D design, function built<br />

in to fashion, new fabric and<br />

material options, seasonless design<br />

and shopping online only begin<br />

to touch on what we perceive as real<br />

change emerging in the fashion<br />

business now, and even more so in<br />

the future.<br />

Where do you get inspiration<br />

for your designs and collections?<br />

As a forecaster, we look at many<br />

things for inspiration, like the<br />

runways, retail trends, color and<br />

design, art, media, pop culture<br />

as well as design movements outside<br />

of fashion, like technology trends,<br />

science, architecture and religious<br />

currents. All can provide signs<br />

of change to a keen observer. But we<br />

also need to look beyond all of<br />

that to the bigger picture to define<br />

consumer trends, cultural trends,<br />

political movements, lifestyles and<br />

other currents that are shaping<br />

the world at a much higher level.<br />

The search for freedom across the<br />

planet, global warming, fair<br />

trade and the emerging countries all<br />

have an effect on the inhabitants<br />

of our global community. We factor<br />

all of this into our thinking and use<br />

it for inspiration.<br />

✖ ESPTRENDLAB.COM


GLOBAL INVESTOR 1.16 — 34<br />

FASHION IN CHINA<br />

EVOLVING<br />

INDUSTRY–<br />

A WORK IN<br />

PROGRESS<br />

While China’s manufacturing sector has flourished, finding the same degree<br />

of success in the retail sector has proven elusive – particularly in the domestic<br />

fashion industry. Consumers prefer foreign brands, supply and distribution<br />

can be problematic, the market is fragmented and competition, as always, is fierce.<br />

As the development of China’s retail market started quite<br />

late compared to its upstream manufacturing sector,<br />

the products from the manufacturing sector have been<br />

more sophisticated than their retail counterparts. The<br />

country’s garment manufacturing sector has not only been supplying<br />

China, but also the rest of the world since the seventies – products<br />

are not only tailored to the mass-end, but also to the high-end markets,<br />

in the form of both OEM (original equipment manufacturer), ODM<br />

(original design manufacturer) and branded products. For the example<br />

of jeans, see p. 12 With more than 10,000 suppliers in China manufacturing<br />

for Wal-Mart, the majority of Wal-Mart’s merchandise has<br />

been made in China, including garments. Other mass-end brands like<br />

Gap, Levi’s, H&M or Uniqlo have all had their share of fashion made<br />

in China. High-end brands like Armani, Bally, Dolce & Gabbana, Marc<br />

Jacobs and Prada have also had their fair share of fashion made in<br />

China in recent years. Branded fashion like Ports 1961, which is<br />

designed and made in China, has even made its way to the fashion<br />

weeks in New York City, Paris and Milan. Despite the recognized<br />

craftsmanship and manufacturing skills, there still seems to be a lack<br />

of nationwide domestic fashion brands at the retail end in China,<br />

especially for the high-end market, where mostly foreign brands are<br />

dominating.<br />

Branded fashion chain retailing in China in the nineties competed<br />

mostly on basic ready-to-wear items, when pricing and product materials<br />

were emphasized more than style and colors. Riding on the<br />

developed manufacturing base and in order to compete on price,<br />

brands like Giordano and Bossini introduced just-in-time product<br />

delivery to points of sale where inventory was kept to a minimal level


GLOBAL INVESTOR 1.16 — 35<br />

to save on costs. These companies mostly introduced their offshore,<br />

foreign product experience into domestic China, which worked well<br />

for a while until their retail sales network did not expand quickly enough<br />

for various reasons, including the challenges of a highly fragmented<br />

supply chain, as well as the unorganized retail market in the country.<br />

For a related article on the fashion supply chain, see p. 48 The operational<br />

challenges quickly eroded profits for these retail chains that<br />

were already operating with thin margins.<br />

Competition gathers strength<br />

As consumption growth in the country accelerated over the past<br />

20 years, especially after China joined the World Trade Organization<br />

in 2001, competition in the retail market has intensified and taken the<br />

form of both domestic, manufacturer-turned retailers as well as foreign<br />

new entrants. The sportswear brands like Anta, Dongxiang and Lining,<br />

and menswear brands like Lilang and Septwolves, are all domestic<br />

manufacturer-turned retailers in China. Most of these brands were<br />

“... there still seems to be<br />

a lack of nationwide domestic<br />

fashion brands at the retail<br />

end in China, especially for the<br />

high-end market.”<br />

not listed until after 2007–08. In addition to the retail outlets run by<br />

the brands themselves, most of them also operate through wholesale<br />

systems in order to capture market share within a shorter period of time.<br />

With the lack of direct inventory management while working with a large<br />

and unorganized wholesale system, product sales for most of these<br />

brands were challenged in 2011–12 when retail sales growth last<br />

peaked in China. For more on mens- and sportswear, see p. 11 and<br />

15 respectively<br />

Foreign new entrants in the fashion retailing market include most<br />

global fashion brands, all the way from mass-end to high-end, i.e.<br />

from Abercrombie & Fitch, H&M, Tommy Hilfiger, Uniqlo and Zara to<br />

Armani, Burberry, Chanel, Hermes, Louis Vuitton, Prada and the like.<br />

In order to build brand awareness, most of the global fashion brands<br />

set up their retail flagship stores mainly in first-tier cities in China,<br />

where population and the concentration of wealth have been aboveaverage.<br />

Since all media and many entertainment companies are<br />

based in Beijing, the most affluent fashion events are often held there.<br />

For more on fashion marketing and advertising, see p. 26 In contrast<br />

to Beijing, where media appeal has been the focus for fashion events,<br />

Shanghai has been the fashion capital of China, where most global<br />

brands host more than one store in major shopping districts and malls,<br />

while small fashion brands and local designers fill the vintage streets.<br />

The Shanghai <strong>Fashion</strong> Week has been held every year since 2003,<br />

where leading designers as well as new talents present their products<br />

and test the Chinese market.<br />

Since the global fashion brands have mostly dominated the highend<br />

market in China, most of the domestically-groomed fashion retailers<br />

are focused on the mass-end in order to avoid head-on competition<br />

with the established brands. With a lack of chain-retailing<br />

experience, most of them do not enjoy enough brand loyalty in order<br />

to gain critical mass in China. Therefore, none of them are able to<br />

claim any meaningful market share in the fashion-retailing industry<br />

in the country. The local retail chains that have grown enough to be<br />

recognized at the mid-to-high-end markets, e.g. Esprit and Ports<br />

1961, are mostly brands adopted from abroad – Esprit was founded<br />

in California, USA, in 1968 and Ports was established in Toronto,<br />

Canada in 1961. Since China is a geographically diversified country<br />

with various cultures across different provinces and scattered wealth,<br />

nation-wide recognition can be hard to achieve for consumer brands<br />

where competition has been fierce. Fragmentation is one noticeable<br />

characteristic of China’s retail market, which is almost the same for<br />

the upstream supply chain.<br />

Finding a niche<br />

In addition to the commercial fashion produced for retail chains, niche<br />

designers in China who are determined to build their own labels have<br />

also started to emerge over the past ten years, leveraging on the<br />

wealth effect among consumers as a result of the country’s prolonged<br />

economic growth. These designers typically cherish the Chinese traditional<br />

ethnic embroidery in their designs, which requires time and<br />

skill to produce. Therefore almost none of them are producing in large<br />

volumes. The fashion designer Ma Ke, personal designer of China’s<br />

“In addition to the commercial<br />

fashion produced for retail<br />

chains, niche designers have also<br />

started to emerge over the past<br />

ten years ...”<br />

first lady, Peng Liyuan, is a typical niche designer whose Wuyong<br />

fashion label has become almost as famous as herself since the first<br />

lady’s outfits have been shown on national prime time TV during her<br />

overseas visits to other countries. Guo Pei is another fashion designer<br />

known for the eastern touches in her collections, which frequently<br />

involve extensive embroidery work.<br />

These days, as the hunger for big global brands is declining, especially<br />

in large major cities like Beijing and Shanghai, demand for more<br />

innovative and authentic fashion designs is increasing, which may<br />

support the growth of niche and affordable fashion in the future.<br />

To compare fashion in India, see p. 14<br />

Selina Sia<br />

Head of Greater China Equity Research<br />

+852 2841 4036<br />

selina.sia@credit-suisse.com


GLOBAL INVESTOR 1.16 — 36<br />

1.378<br />

trilli n<br />

Global apparel<br />

retail market 2015<br />

In 2015, the value of the<br />

global apparel retail market<br />

was USD 1.378 trillion and<br />

equaled Spain’s GDP in 2014.<br />

Source: Marketline, World Bank<br />

USD<br />

3.3<br />

3.7 USD bn<br />

ABERCROMBIE & FITCH USA<br />

8.2 USD bn<br />

PHV USA<br />

USD bn<br />

AMERICAN EAGLE<br />

OUTFITTERS USA<br />

6.2 USD bn<br />

NEXT UK<br />

7.6 USD bn<br />

RALPH LAUREN USA<br />

11.4 USD bn<br />

LIMITED BRANDS USA<br />

USA 11.07%<br />

20.3 USD bn<br />

ZARA SPAIN<br />

World’s biggest<br />

fashion retailers<br />

in 2014<br />

Six of the world’s ten<br />

biggest retailers of<br />

private label apparel<br />

(private labels cover the<br />

whole value chain from<br />

retailing down to producing)<br />

are US retailers.<br />

In 2014, their aggregate<br />

sales were USD 51 bn.<br />

Gap, the biggest US<br />

private label retailer and<br />

world’s number three,<br />

accounted for a third<br />

of these sales.<br />

Source: Fast Retailing<br />

13.9 USD bn<br />

UNIQLO JAPAN<br />

16.4 USD bn<br />

GAP USA<br />

17.9 USD bn<br />

H&M SWEDEN<br />

15 %<br />

The rise of emerging countries<br />

The fashion industry benefits from the increasing<br />

wealth of emerging markets’ middle classes.<br />

In 1996, H&M stores could only be found<br />

in Europe. In 2014, H&M generated 15% of its<br />

sales in emerging markets. Source: H&M<br />

United Kingdom 7.5%<br />

France 6.92%<br />

%<br />

of total H&M<br />

sales 2014<br />

Sweden 4.8%<br />

Netherlands 4.1%<br />

Italy 3.94%<br />

Spain 3.78%<br />

Switzerland 3.7%<br />

Belgium 2.2%<br />

others 8.3%<br />

Germany 19.8%<br />

Norway 3.0%<br />

Austria 2.9%<br />

Denmark 2.8%


GLOBAL INVESTOR 1.16 — 37<br />

The importance of e-commerce will increase<br />

With ongoing digitalization, the importance of e-commerce has risen rapidly<br />

over the last few years and will further increase in the future. However, it is<br />

unlikely that brick-and-mortar stores will vanish. Retailing is rather heading<br />

to cross-channeling, i.e. the seamless and interchangeable use of online and<br />

offline channels to sell to and interact with customers. Source: US Census Bureau<br />

Sustainability – it’s worth it<br />

Increasingly, consumers expect companies to act socially responsible and<br />

to either use recycled materials or to invest in projects to lower poverty<br />

or exploitation. For companies, investing in sustainability may be lucrative:<br />

an increasing share of consumers are willing to pay extra for sustainable<br />

products. Source: Nielsen<br />

300<br />

25%<br />

70<br />

60<br />

250<br />

20%<br />

50<br />

40<br />

30<br />

200<br />

15%<br />

20<br />

10<br />

150<br />

0<br />

100<br />

50<br />

10%<br />

5%<br />

Asia<br />

Pacific<br />

Latin<br />

America<br />

Middle<br />

East / Africa<br />

North<br />

America<br />

2011 2014<br />

Share of survey respondents who are willing to pay extra for products and<br />

services from socially responsible companies<br />

Europe<br />

0<br />

in USD<br />

billion<br />

2004<br />

2005<br />

2006<br />

2007<br />

2008<br />

2009<br />

2010<br />

2011<br />

2012<br />

2013<br />

2014<br />

0%<br />

2014 <br />

Share of consumers who purchased at least one product or service<br />

in the past six months from a socially responsible company<br />

China 38.6%<br />

EU 25.6%<br />

Total US Apparel<br />

and Accessories<br />

Retail Sales<br />

in USD billion<br />

%<br />

Share in world<br />

clothing exports<br />

Leading exporters<br />

of clothing 2013<br />

China and the European Union are the world’s two<br />

main exporters of clothing, accounting for almost<br />

two-thirds of global clothing exports. In 2013,<br />

the European textile industry counted around<br />

185,000 companies employing 1.7 million people.<br />

Key players are Germany and Portugal.<br />

E-commerce share<br />

in % of Total<br />

US Apparel and<br />

Accessories<br />

Retail Sales<br />

Source: World Trade Organization, World Bank, Eurostat, European Commission<br />

Bangladesh 5.1%<br />

Vietnam 3.7%<br />

India 3.7%<br />

Turkey 3.3%<br />

others 20%<br />

Demographic aging may dampen fashion<br />

US households’ total expenditures on clothing increased between 1990<br />

and 2014. This had a positive effect on fashion market growth. However,<br />

because older people spend less money on clothing than younger ones,<br />

demographic aging may have dampened the increase in market size in the<br />

last couple of years and may continue to do so. Source: US Consumer Expenditure<br />

Survey, US Bureau of Labor Statistics, US Bureau of Economic Analysis<br />

Average annual US household expenditures on clothing<br />

by age of reference person; adjusted for price changes<br />

2,500<br />

2,250<br />

2,000<br />

1,750<br />

1,500<br />

1,250<br />

1,000<br />

750<br />

500<br />

250<br />

0<br />

in<br />

USD<br />

1990<br />

2014<br />

Under<br />

25 25–34 35–44 45–54 55–64 65–74<br />

In 1990, households<br />

with a<br />

reference person<br />

younger than<br />

25 spent more<br />

money on clothing<br />

than households<br />

with a<br />

reference person<br />

aged 65 to 74.<br />

In 2014, it was<br />

the other way<br />

around.<br />

Expenditures are<br />

highest in households<br />

with a<br />

reference person<br />

aged 35 to 44.<br />

In 2014, these<br />

households spent<br />

USD 2,250 on<br />

average (1990:<br />

USD 2,287).<br />

Average annual<br />

expenditures rose<br />

from USD 961<br />

in 1990 to<br />

USD 1,417 in<br />

2014. This is still<br />

USD 833 less<br />

than a household<br />

with a reference<br />

person aged<br />

35 to 44.<br />

75 and<br />

older


GLOBAL INVESTOR 1.16 — 38<br />

SUSTAINABILITY<br />

LESS<br />

IS<br />

MORE!<br />

<strong>Fashion</strong> apparel can make us feel serious, chic, or even sexy,<br />

showing that we are in tune with the times. What’s in today is<br />

already passé tomorrow. This has its price. But it’s the environment<br />

and laborers that pay. An exhibition at the Museum für Kunst und<br />

Gewerbe (MKG) in Hamburg examined the dark side of fashion …<br />

INTERVIEW BY JONATHAN HORLACHER Credit Suisse<br />

JONATHAN HORLACHER Last year you<br />

curated the exhibition “Fast <strong>Fashion</strong>.<br />

The dark side of fashion.” What motivated<br />

this exhibition?<br />

CLAUDIA BANZ We see ourselves as<br />

both a fashion museum and a design<br />

museum. After that horrible accident in<br />

Bangladesh – the collapse of the Rana<br />

Plaza garment factory – occurred in 2013,<br />

we were all in agreement that we needed<br />

to deal with this topic.<br />

What did you have in mind?<br />

CLAUDIA BANZ From the outset we<br />

didn’t want to mount a conventional fashion<br />

exhibition. Rather, we wanted to engage in<br />

a critical design dialogue, which is what we<br />

do at our museum. And a critical design<br />

dialogue also always asks questions about<br />

production conditions and aspects of sustainability.<br />

As work on the exhibition progressed,<br />

we then had the idea to thematize the<br />

side of the fashion world that normally isn’t<br />

in the foreground – the unglamorous side.<br />

What problem areas did you encounter?<br />

CLAUDIA BANZ One major issue is<br />

ecology. For instance, some 20,000 different<br />

chemicals are employed along the<br />

textile value chain – from the natural resource<br />

all the way to recycling or downcycling<br />

– ranking the textile industry among<br />

the world’s seven most polluting industries.<br />

What other ecological problems do you see?<br />

CLAUDIA BANZ Water plays a key role,<br />

in all respects. One of those is the squandering<br />

of water, because it takes an enormous<br />

amount of it to produce the resources used<br />

to manufacture textiles. This is particularly<br />

“We have to be conscious<br />

that by importing<br />

clothing, we are<br />

bringing chemicals<br />

that are actually<br />

prohibited in the EU<br />

into Europe through<br />

a backdoor.”<br />

true for cotton, but also for animal wool<br />

because livestock requires drinking water<br />

and grazing land, which in turn needs water<br />

itself. Then there is polluted wastewater<br />

caused by all those chemicals used in<br />

producing textiles. We have to be aware<br />

that when we import clothing, we open a


GLOBAL INVESTOR 1.16 — 39<br />

backdoor into Europe for chemicals that are<br />

actually prohibited in the EU by the REACH<br />

regulation but are not outlawed in the Asian<br />

producer countries.<br />

What about protection for workers?<br />

CLAUDIA BANZ The textile and<br />

clothing industries are mainstays of the<br />

economy in countries like Bangladesh,<br />

Vietnam and Indonesia. It isn’t in the interest<br />

of politics, and it’s even prohibited<br />

in some places, for workers to form labor<br />

unions or to demand a minimum wage,<br />

for example. The risk is just too great<br />

of the entire industry pulling up stakes and<br />

moving to a place where clothing can be<br />

manufactured even more cheaply, such as<br />

Myanmar or Ethiopia, or Africa in general.<br />

Most industries historically evolve<br />

from “dirty” production to more<br />

sophisticated, less-polluting manufacturing<br />

practices. How is the fashion industry<br />

any different?<br />

CLAUDIA BANZ One possible impediment<br />

is that the textile industry is a socalled<br />

pioneer industry, which means that a<br />

business can be set up with relatively little<br />

expense. A few sewing machines in a<br />

factory hall suffice. The positive flipside is<br />

that the textile industry gives many people,<br />

especially women, an opportunity to work<br />

and earn a little money. More safety standards<br />

are also being fought for, but as we<br />

all know, in the end it’s always about profit.<br />

Who is responsible for the excesses<br />

of the mass fashion industry?<br />

CLAUDIA BANZ That’s a very big<br />

question to which there is no easy answer.<br />

I see four relevant parties: producers and<br />

entrepreneurs, politicians, designers and, of<br />

course, consumers all bear a major respon ­<br />

sibility. Consumers should wield their power<br />

much more forcefully, for instance by voting<br />

with their feet and not shopping in stores<br />

that don’t carry any sustainable products.<br />

It is not only companies that have a duty;<br />

everyone bears some part of the blame.<br />

The responsibility associated with<br />

consumers mainly has to do with the price<br />

of clothing. Are the ideas of “cheap” and<br />

“sustainable” contradictory?<br />

CLAUDIA BANZ Our exhibition also<br />

explored precisely this question of how<br />

clothing can be so inexpensive. It is a fallacy<br />

that fashion apparel necessarily becomes<br />

more expensive when wages are raised.<br />

Wage, production and transportation costs<br />

make up only a very small part of the<br />

end price; marketing expenses and profits<br />

Dr. Claudia Banz<br />

The doctor of art history and author of<br />

numerous publications has headed the<br />

art and design collection at the Museum<br />

für Kunst und Gewerbe (Museum of<br />

Art and Crafts) in Hamburg since 2011.<br />

She previously worked as a curator at<br />

internationally renowned museums such<br />

as the National Museums in Berlin,<br />

the Dresden State Art Collections and<br />

the Kunstpalast museum in Düsseldorf.<br />

account for the lion’s share. So the main<br />

issue is the profit margin. Sustainability and<br />

cheap prices thus don’t negate each other.<br />

But a rethinking of economics has to take<br />

place, and that’s a real problem.<br />

Does that go for cheap mass merchandise<br />

as well as for luxury fashion apparel?<br />

CLAUDIA BANZ Our research revealed<br />

that in Bangladesh, for example, T-shirts<br />

produced for the cheap fast-fashion<br />

industry and for fashion labels in the upper<br />

price segment are manufactured in the<br />

same factory. That’s a bitter realization.<br />

“Companies are<br />

committed in principle<br />

… to sustainable<br />

production at all<br />

stages of the textile<br />

value chain.”<br />

The New York Times recently reported<br />

that the luxury goods industry has<br />

begun to place greater importance on<br />

sustainability. Do you agree?<br />

CLAUDIA BANZ Yes, in principle companies<br />

are increasingly espousing transparency<br />

and, in this context, are increasingly<br />

taking a stand for sustainable production at<br />

all stages of the textile value chain.<br />

“Directors for sustainability” are being<br />

hired to employ “cleaner” materials,<br />

make work environments safer and take<br />

climate change into account.<br />

CLAUDIA BANZ It’ll probably be around<br />

five years before we can judge the earnestness<br />

of these efforts. By then we’ll be<br />

able to make an interim appraisal. And<br />

let’s not forget that sustainability has since<br />

become a lifestyle issue.<br />

Meaning …?<br />

CLAUDIA BANZ Marketing departments<br />

have recognized that there’s a lot of money<br />

to be made by invoking sustainability or<br />

even purportedly sustainably manufactured<br />

products. It always sounds good when<br />

something is “sustainably manufactured,”<br />

but very few seals of approval really do<br />

any good. Still, if sustainability is a lifestyle<br />

choice today, then the fashion apparel<br />

business is perfectly positioned to develop<br />

genuinely sustainable production practices<br />

over the medium term. The knowledge<br />

and possibilities to do so already exist.


GLOBAL INVESTOR 1.16 — 40<br />

The only question is whether companies<br />

are truly interested in making it happen.<br />

When we speak of sustainability, are<br />

we talking mainly about production<br />

conditions or about the materials used?<br />

CLAUDIA BANZ Sustainability is about<br />

everything: sustainable materials, sustainable<br />

production practices and, of course,<br />

social sustainability or fair compensation.<br />

But doesn’t sustainable fashion also have<br />

the reputation of being a little homespun?<br />

CLAUDIA BANZ The term “sustainable<br />

clothing” does in fact conjure up memories<br />

of the 1970s, of jute instead of plastic,<br />

which is why this branch of the fashion<br />

industry has been labeled “eco-frumpy.”<br />

Unjustly, though, because the look of sustainable<br />

fashion has<br />

evolved incredibly in<br />

recent times.<br />

For instance?<br />

CLAUDIA BANZ<br />

Since 2006 Berlin’s<br />

<strong>Fashion</strong> Week<br />

venues have included<br />

a Green Showroom.<br />

There you<br />

can see that the look<br />

of sus tainable<br />

fashion is in no way<br />

inferior to the original.<br />

Moreover, fashion design colleges<br />

are increasingly integrating the subject of<br />

sustainability in their curriculums. That’s<br />

a very encour aging development because<br />

designers also bear a responsibility.<br />

Can you really reconcile fashion and<br />

sustainability? After all, compared<br />

to clothing that is essential for survival,<br />

fashion apparel requires additional<br />

resource and labor inputs.<br />

CLAUDIA BANZ Since the start of<br />

the 20th century, prominent sociologists<br />

like Werner Sombart have always conceptually<br />

linked the need to clothe oneself<br />

with the desire to look fashionable. The<br />

result is perpetual consumption, in the name<br />

of fashion and capitalism. But of course<br />

we must ask ourselves: How important is<br />

fashion at all? Isn’t it actually superfluous?<br />

Aren’t those questions that society<br />

as a whole must face?<br />

CLAUDIA BANZ Rethinking on the<br />

part of designers is indeed called for. And<br />

this rethinking, in turn, must then spread<br />

throughout society. We have to decide how<br />

much we really need, particularly with<br />

regard to the fast-fashion industry, which<br />

“Our exhibition<br />

explored the<br />

question of how<br />

clothing can cost<br />

so little.”<br />

cranks out a new collection practically<br />

every ten days.<br />

New needs are created continuously.<br />

CLAUDIA BANZ Yes, which makes the<br />

question of whether I need a complete new<br />

outfit every month all the more important.<br />

The motto could also be: Less is more!<br />

Li Edelkoort, the well-known Dutch trend<br />

researcher, once proclaimed that “fashion is<br />

dead.” Her colleagues were horrified!<br />

But her opinion is that designers need to<br />

start thinking again more about clothing<br />

and less about fashion.<br />

“Scarcity and excess” was also a topic of<br />

the exhibition. What did you show?<br />

CLAUDIA BANZ We visually demonstrated<br />

how much clothing we buy and how<br />

much we discard.<br />

In Germany, for example,<br />

27 kilograms<br />

of new clothing is<br />

purchased per capita<br />

each year while<br />

almost 15 kilograms<br />

of clothing gets<br />

discarded. The average<br />

in Europe is<br />

20 kilograms of new<br />

clothing purchased<br />

per capita per annum<br />

and almost 8 kilograms<br />

of used clothing thrown out.<br />

What happens to the discarded clothing?<br />

CLAUDIA BANZ Clothing disposal has<br />

turned into a global commercial industry, as<br />

impressively shown by the wonderful film<br />

“Unravel” directed by Meghna Gupta. The<br />

film is about Panipat, a city north of Delhi,<br />

which is the site of the world’s largest<br />

used clothing dump. Downcycling takes<br />

place in Panipat on a grand scale. Secondhand<br />

clothing that is still wearable gets<br />

processed into ultracheap throw blankets.<br />

As you said, the dark side of fashion<br />

concerns all of us. What were some of the<br />

most surprising responses you received<br />

from visitors to the exhibition?<br />

CLAUDIA BANZ The feedback was<br />

consistently positive. But one elderly woman<br />

made the biggest impression on me. She<br />

was deeply moved by the exhibition, particularly<br />

by the fate of the textile-working<br />

women, who earn very little. This prompted<br />

her and her friends to collect around 70,000<br />

euros, which they then donated to an<br />

NGO that works to improve social conditions<br />

for female textile workers. That impressed<br />

and pleased me enormously.


GLOBAL INVESTOR 1.16 — 41<br />

ECOLOGICAL SUSTAINABILITY<br />

HAND-<br />

SHAKE<br />

OF HOPE<br />

Sustainably produced fashion apparel is chic and hip today. Eco-fashion benefits<br />

customers in stores and cotton farmers in the field. Small labels<br />

and big retailers demonstrate that money can be made with eco-fashion.<br />

BY RUTH HAFEN Freelance writer<br />

T<br />

here is hardly anything that we allow to come closer to<br />

our bodies than cotton. It is the raw material for 40% to<br />

50% of all textiles and the most used natural fiber. Compared<br />

with synthetic fibers, cotton is very absorbent,<br />

capable of absorbing up to 65% of its weight in water. Cotton fabrics<br />

rate as being pleasant to the skin and hypoallergenic. As good as the<br />

properties of cotton fibers are, it is problematic to produce them. The<br />

biggest problem is water consumption. World Wildlife Fund International<br />

(WWF) designates cotton a “thirsty crop” alongside rice,<br />

sugar cane and wheat. The WWF calculates that it takes more than<br />

20,000 liters of water to produce one kilogram of cotton (which yields<br />

something like one T-shirt and a pair of jeans). A remarkable amount<br />

of insecticides and pesticides are also used to grow cotton. Although<br />

cotton is cultivated on only around 2.4% of the world’s farmland, the<br />

crop accounts for 24% of insecticide and 11% of pesticide usage<br />

worldwide. This, in turn, pollutes groundwater, posing a hazard to<br />

human health. For more on dyeing with air, saving gallons of water,<br />

see p. 61<br />

From Aral Sea to salt flat<br />

The Aral Sea is a testament to exactly how thirsty cotton plants are.<br />

Since the middle of the 20th century, water has been diverted from<br />

rivers feeding into the Aral Sea in order to irrigate vast cotton plantations<br />

in both Kazakhstan and Uzbekistan. Since 1960, the Aral Sea<br />

has lost some 85% of its surface area and more than 90% of its<br />

volume. Once the world’s fourth-largest inland body of water, the Aral<br />

Sea is now a salt flat. All that remains of Aralskoye More, as Russians<br />

call it, are two outsized puddles. The desiccation of the Aral Sea


GLOBAL INVESTOR 1.16 — 42<br />

is widely considered to be one of the worst-ever ecosystem catastrophes<br />

caused by humans.<br />

Given these alarming facts, it’s not surprising that more and more<br />

consumers and manufacturers are taking a stand for ecologically<br />

sustainable products. American fashion entrepreneur Yael Aflalo is<br />

one of them. Aflalo, a former model who is currently a fashion designer<br />

and the CEO of Reformation, a “rare hybrid of fast fashion and<br />

sustainability” (Forbes), which she founded in 2009, describes in a<br />

guest essay posted on Time.com the moment that she renounced<br />

conventional textile manufacturing: It was during a factory tour in<br />

China, where she witnessed firsthand the working and environmental<br />

conditions that prevail there. When she later learned how much water<br />

it takes to make a single T-shirt, she resolved to use sustainably<br />

produced textiles to manufacture her clothes. “We make killer clothes<br />

that don’t kill the environment,” proclaims her brand’s tagline. Reformation<br />

generated sales revenue of USD 25 million in 2014, and its list<br />

of paying customers includes “It” girls like Taylor Swift and Rihanna.<br />

Even better, supermodel Karlie Kloss was one of the investors in the<br />

second round of financing that raised USD 12 million in April 2015.<br />

For more on smart tailoring, see p. 59<br />

Becoming the market leader with organic cotton<br />

An example from Switzerland shows that sustainability in the textile<br />

sector is an important issue for major retailers too. Coop’s Naturaline<br />

label has already been in existence since 1993, and it has exclusively<br />

used organic cotton since 1995. After Coop did pioneering work in<br />

the food sector in Switzerland with its Naturaplan label, it followed<br />

up by rolling out the Oecoplan brand of cleaning and hygiene products<br />

in the non-food sector. Right from the launch of Naturaline, it was<br />

clear that Coop would work together with a partner, Remei AG, which<br />

produces sustainable textiles made of organic cotton and organizes<br />

the entire process from the size chart to delivery. The alliance between<br />

the two companies was symbolically sealed with a handshake in an<br />

Indian cotton field. Tanzania was later added as a cotton supplier.<br />

Standards<br />

bioRe ® standard = The textile label is a hallmark of<br />

the organic cotton fabrics manufactured by Switzerlandbased<br />

Remei AG. The bioRe ® standard regulates<br />

the processing of the organic cotton grown under the<br />

bioRe ® farming projects in India and Tanzania.<br />

SA8000 = The Social Accountability 8000 standard<br />

was developed in 1997/98 by the US-based NGO<br />

Social Accountability International (SAI). It is based on<br />

the UN Declaration of Human Rights and on recommendations<br />

by the International Labor Organization<br />

(ILO). SA8000 is an internationally accepted certification<br />

standard with an array of strict norms that include<br />

the implementation of humane working conditions,<br />

freedom of association and the prohibition of child<br />

labor and discrimination.<br />

SA8000 verifies compliance with minimum social<br />

standards in manufacturing enterprises and governs<br />

certification of factories worldwide, which is granted<br />

by independent certification bodies.<br />

Source: Lexikon der Nachhaltigkeit (Dictionary of Sustainability)<br />

Company portraits<br />

Coop = Founded as a cooperative in 1864; name<br />

changed to Coop in 1969. Largest retailer and wholesaler<br />

in Switzerland. The Coop Group encompasses<br />

retailing subsidiaries in Switzerland and wholesaling<br />

and production subsidiaries in and outside Switzerland.<br />

Its consolidated revenue in 2015 amounted to<br />

CHF 26.9 billion.<br />

bioRe ® Foundation = Founded in 1997. Promotes<br />

organic and biodynamic farming and supports needy<br />

farmer families in countries of the South; bioRe<br />

India Ltd. and bioRe Tanzania Ltd. work directly with<br />

cotton farmers.<br />

Reformation = Founded in 2009. Fast-fashion apparel<br />

made of sustainable fabrics, consisting in part of<br />

new creations based on vintage garments. Sales revenue<br />

of USD 25 million in 2014.<br />

Remei AG = Founded in 1983. Headquartered in<br />

Rotkreuz, Switzerland. Produces sustainable<br />

textiles made of organic cotton. Sales revenue of<br />

CHF 23.1 million in 2014/2015.


GLOBAL INVESTOR 1.16 — 43<br />

But why cotton at all? Emanuel Büchlin, the head of textile sourcing<br />

at Coop, says: “An incredible 25 million tons of cotton gets planted<br />

each year, accounting for a third of all textile fibers and 75% of all<br />

natural fibers. Between 70% and 80% of our products are made of<br />

cotton.” This gives the company a sense of ecological and social<br />

responsibility. And why Tanzania of all places? “Tanzania is a relatively<br />

big cotton-producing country, but what’s most important is that<br />

production there is 100% free of genetic modification. Naturaline<br />

wants to produce non-GMO clothing. We have cotton from India and<br />

Tanzania that is grown and processed in accordance with the bioRe<br />

sustainability standard. The genetic engineering issue is gradually<br />

becoming a problem in India because well over 97% of the cotton<br />

cultivated there is genetically modified.” In contrast to conventional<br />

“An incredible 25 million tons of<br />

cotton gets planted each year,<br />

accounting for a third of all textile<br />

fibers and 75% of all natural fibers.”<br />

cotton production, crops are rotated between cotton, chili peppers and<br />

corn on the fields operated by the bioRe Foundation, from which Remei<br />

AG sources its cotton. This benefits the soil and is becoming an<br />

increasingly popular practice, Büchlin explains. Moreover, he says,<br />

Coop places importance on keeping as much of the manufacturing<br />

process as possible in the cotton’s country of origin. From there product<br />

is then shipped by sea to Switzerland for final production, he adds.<br />

Alongside ecological and economic aspects, sustainability also<br />

encompasses the social aspect, which is equally as important to Coop.<br />

Around 7,000 farmers are currently employed in the Coop cotton<br />

project in the fields in India and Tanzania, a number that Büchlin<br />

proudly cites. “We put people in the foreground also in the textile<br />

value chain. That’s why our textile processing is protective of worker<br />

health and of the environment. We insist on adherence to all of the<br />

core ILO norms. All producers and suppliers in the Naturaline value<br />

chain must be audited to at least Business Social Compliance Initiative<br />

standard and obtain SA8000 certification in the medium term.<br />

We have hired an external company to verify SA8000 compliance<br />

certification.”<br />

Women lead the way<br />

More and more consumers are giving thought to where their food and<br />

clothing comes from and to how this affects the climate. Movements<br />

like Slow Food and veganism are prime evidence of this. And customers<br />

today are increasingly willing to pay more for equitably produced<br />

goods. Büchlin defines Naturaline’s core target group as being<br />

“modern fashion-conscious women who place importance on the way<br />

in which things get made.” And Coop uses a face well-known to<br />

Switzerland in its marketing. Former Miss Switzerland Melanie Winiger<br />

has been the brand ambassador for Naturaline since 2008, and<br />

since 2014 has been creating for the label “comfortable fashion apparel<br />

for people who have their own style and care about environmentally<br />

sound, equitable production.” Winiger’s declared goal is to guide<br />

fair-trade eco-fashion out of the “silk, wool and bast- fiber corner.”<br />

Emanuel Büchlin<br />

has worked for Coop for more than<br />

20 years. As the company’s head<br />

of textile sourcing, he sets strategic<br />

procurement guidelines and implements<br />

them in contact with business<br />

partners, government authorities,<br />

associations and NGOs. He co-founded<br />

Coop Naturaline and heads the<br />

operations of this very important asset<br />

for Coop. He has been a member<br />

of the bioRe Foundation’s board of<br />

trustees since 2013.<br />

When Naturaline entered the market, Coop had to subsidize the product<br />

line. Büchlin says that Coop “would not have been able to bring<br />

these items onto the market at full cost recovery. That’s different<br />

nowadays. Today we are absolutely competitive. We are situated in a<br />

mid-range price category, but our ecologically and equitably produced<br />

products remain 20% to 25% more expensive.”<br />

Büchlin still sees growth potential for Naturaline in Switzerland.<br />

Naturaline products currently generate around 60 million Swiss francs<br />

of annual sales revenue, but Coop plans to boost that to 100 million<br />

by 2020 by internationalizing the Naturaline product range in collaboration<br />

with Remei AG. A look at the Naturaline strategy through<br />

2025 reveals that Coop also continues to emphasize cotton, though<br />

it definitely sees potential for cotton blends with modal and other<br />

rayon fibers. An additional line with certified organic silk has already<br />

been launched.<br />

What can other industries learn from the fashion apparel and textile<br />

sector when it comes to sustainability? Resource-conserving processes,<br />

human rights and worker satisfaction stand in the foreground<br />

for Büchlin. Aflalo urges companies to view sustainability not as an<br />

added benefit, but as a standard. She thinks that smug calls for<br />

customers to forego consumption are unrealistic. It is businesses’ job<br />

to meet the demands of sustainability, in her view.<br />

This article is based in part on an interview with Emanuel Büchlin.


GLOBAL INVESTOR 1.16 — 44<br />

TAILORED WITH TECH<br />

HOW WILL<br />

DIGITIZATION<br />

INFLUENCE<br />

FASHION AND THE<br />

WAY WE SHOP?<br />

Until recently, the fashion industry has been all about looking good – with feeling good as a<br />

psychological by-product of successfully projecting a particular image. But with the advent of smart<br />

garments and fabrics, “feeling good” takes on a new dimension: into the field of physical health<br />

and wellness. The fashion industry has been slow off the mark to integrate technology, but we are<br />

now just beginning to see what may prove to be the ultimate union of both form and function.<br />

T<br />

he impact of technology on fashion is nothing new at all –<br />

it already has a long tradition. The timeline of clothing and<br />

textiles technology includes major changes in the manufacture<br />

and distribution of clothing. Innovations include manmade<br />

materials such as polyester, nylon, and vinyl, as well as features<br />

like zippers and Velcro. In 1969, Gore-Tex was invented, admittedly<br />

driven by chemicals. Nowadays, the digitization of the economy and<br />

society impacts fashion more and more. A very simple example is an<br />

RFID (radio-frequency identification) chip built into the garment, which<br />

enables you to track the path of the garment from production to the<br />

retail store, and shows you that you bought a brand product and not a<br />

fake. An additional benefit is you can easily retrieve it if you misplace it.<br />

<strong>Fashion</strong> industry not quick enough to embrace technology<br />

Nowadays, the compatibility of technology and fashion provides more<br />

food for thought and a vision for the future spanning from e-retail<br />

through e-textiles or smart fabrics to 3D printing. Computer design is<br />

already being used in the production of clothing, and prototypes of<br />

3D-printed fashion can be seen at fashion shows or in online videos.<br />

Francis Bitonti, a digital fashion pioneer from New York, has recently<br />

focused on applying advanced manufacturing techniques to fashion,<br />

jewelry and accessories, including a 3D-printed dress for Dita von<br />

Teese and a pair of 3D-printed shoes. He was very vocal in berating<br />

the mainstream fashion industry for not being quicker to embrace<br />

technology. For more on 3D-printed clothing, see p. 51<br />

E-commerce is already effectively in place, but could experience<br />

another boost. Replacement items such as underwear and jeans are<br />

already being bought via the Internet, mainly driven by cheaper prices<br />

and, to a lesser extent, shopping time saved. It is an easy process,<br />

especially if you know your size. But imagine you have a specific brand<br />

in mind, or are even thinking about having something tailor-made. The<br />

future holds a solution: Have your body scanned and use the mea­


GLOBAL INVESTOR 1.16 — 45<br />

surements when visiting the virtual retail store online. The items you<br />

purchase will then be sent straight to your door.<br />

Robotic mannequins to take your body measurements<br />

A pioneer in innovative biorobotics and the virtual fitting room is<br />

Fits.me, founded in 2010 and acquired by Rakuten Inc. (a global<br />

leader in e-commerce) in July 2015. The company is receiving lots of<br />

publicity these days after launching a partnership with the retailer<br />

Hawes & Curtis. Its virtual fitting room helps to solve the single biggest<br />

problem for apparel e-commerce, i.e. that consumers cannot try the<br />

clothes on before they buy them. The site’s shape-shifting robotic<br />

mannequin takes your body measurements and mimics your shape<br />

so that you can see exactly how clothing would fit you. The site has<br />

been such a success that clothing sales at online German retailer<br />

Quelle increased by three times, and the number of clothing returns<br />

fell by 28%. For more on the virtual fitting room, see p. 16<br />

Revolutionary e-textiles<br />

Another revolutionary development is e-textiles, also known as smart<br />

garments or fabrics, which enable digital components to be embedded<br />

in them to provide added value to the wearer. In an article on Forbes.com<br />

dated 7 May 2014, on the future of fabric, author Rebecca Gaddis<br />

quoted Rebeccah Pailes-Friedman of the Pratt Institute as saying<br />

that “what makes smart fabrics revolutionary is that they have the<br />

ability to do many things that traditional fabrics cannot, including<br />

communicate, transform, conduct energy and even grow.”<br />

One example is therapeutic textiles. Skin is the only organ of the<br />

body that comes directly in contact with garments. Since clothes stay<br />

in contact with the skin for the longest time, developing fabrics that<br />

can heal or protect the skin or even the body would add more value<br />

to them. Therapeutic textiles provide new approaches and are slowly<br />

gaining importance because of their many benefits and positive results.<br />

“The compatibility of technology<br />

and fashion provides more<br />

food for thought and a vision<br />

for the future spanning from<br />

e-retail to e-textiles …”<br />

Your underwear is an integral part of your wardrobe, and you are<br />

probably very selective when you buy it. In the future, you will become<br />

even more selective once you learn what your underwear and other<br />

garments can do for you in addition to making you feel comfortable<br />

and well dressed. One day, instead of looking into the mirror, you will<br />

be able to ask your clothes how you feel. For example, your underwear<br />

may tell you if you are coming down with something before you know<br />

it yourself, or notify others if you have fallen over or help doctors<br />

diagnose and treat illnesses. The next generation of wearable technology<br />

aims to embed sensors in your clothes so that you only need<br />

to get dressed to start monitoring your health.<br />

The functions required for personal health have a strong overlap<br />

with those of sports and sports training. In general, the idea is that<br />

information on the wearers’ physiology, e.g. heart rates, respiration<br />

rates, body temperature, biochemistry and activities are recorded and<br />

stored or continuously transmitted to a clinic in order to help monitor<br />

their health. In this way, people with long-term health issues can work<br />

“What makes smart fabrics<br />

revolutionary is that they have<br />

the ability to do many things<br />

that traditional fabrics cannot,<br />

including communicate,<br />

transform, conduct energy<br />

and even grow.”<br />

on gradually improving their health. Other people with chronic illnesses<br />

could stay at home instead of in hospital, but still have high-quality<br />

health supervision. How does it work? Smart fibers with sensors are<br />

knitted straight into the fabrics. With conductive or optical sensors<br />

woven into T-shirts, shorts and underwear, smart clothes will be able<br />

to pick up a greater range of body signals at much higher sensitivities<br />

than rigid sensors, such as clip-on sensors or wristbands. For a related<br />

article on wearable technology, see p. 60<br />

In the future, technology will change the way we perceive fashion<br />

and the way we shop. The sooner we grow accustomed to these innovations<br />

and inventions the better. But never fear – at the end of the<br />

day we will presumably continue to wear fashionable clothes – just<br />

from different materials.<br />

Ulrich Kaiser<br />

Research Analyst<br />

+41 44 334 56 49<br />

ulrich.kaiser@credit-suisse.com<br />

A coating of herbal extracts on the fabric can provide a remedial<br />

value. These fabrics play an important role in relieving stress, rejuvenating<br />

or curing skin ailments, and can even help you sleep better.<br />

Your underwear tells you when you are not well


GLOBAL INVESTOR 1.16 — 46<br />

ULRICH KAISER AND ZOE ARNOLD<br />

Ten years ago we heard predictions that<br />

we’d soon be able to use our clothing to<br />

recharge our cellphones, but today we’re<br />

still constantly searching for the next<br />

power socket. Has the fashion industry<br />

missed out on the digital revolution?<br />

KURT ZIHLMANN An incredible lot<br />

has happened precisely in the area of smart<br />

materials! But photovoltaic textiles capable<br />

of converting light into energy are still a<br />

challenge. In a technological respect, on<br />

one hand, because the functionality of the<br />

fabric mustn’t be impaired by the cuttingto-size<br />

and sewing involved in the clothing<br />

manufacturing process. The design side,<br />

on the other hand, poses the question of how<br />

technical the look of clothing may be. Are<br />

we willing to wear Star Trek-like apparel?<br />

What are the trends?<br />

KURT ZIHLMANN We differentiate<br />

between functional wear and fashion wear.<br />

For functional sports and protective apparel,<br />

research goes into materials that provide<br />

TECHNOLOGY<br />

“CLOTHING<br />

MUST HAVE<br />

A SOUL”<br />

Digital technologies are revolutionizing the fashion industry with<br />

new materials, new printing techniques and new sales channels.<br />

Above all, they are accelerating production speed. Yet designers<br />

and consumers are still also seeking emotion in fashion apparel.<br />

And that takes craftsmanship, experience and time.<br />

INTERVIEW BY ULRICH KAISER Credit Suisse AND ZOE ARNOLD writer<br />

safety, that keep us warm or cool, or that<br />

protect against ultraviolet radiation. Another<br />

really exciting area is the future role that<br />

clothing might play in the field of medicine.<br />

The Swiss company Schöller, for instance,<br />

is working on textiles that are capable of<br />

delivering pharmaceutical agents to the body.<br />

And in the fashion world?<br />

KURT ZIHLMANN That’s more difficult<br />

to gauge. The trends will probably tend to<br />

revolve more around textiles that are capable<br />

of changing their physical feel, shape<br />

and chromaticity. Imagine owning a garment<br />

whose color or pattern you can control with<br />

your moods.<br />

Aside from materials, where else have the<br />

new technologies already brought tangible<br />

benefits to the fashion industry?<br />

KURT ZIHLMANN The biggest developmental<br />

leap in production has occurred<br />

in the area of cutting out fabrics. In the<br />

1980s, cutting technology was adopted<br />

from the aircraft industry, where the objective<br />

was to cut out sheet metal as precisely<br />

as possible to save material and thus money.<br />

Based on that technology, the clothing<br />

industry developed a variety of automatic<br />

machines that can quickly and precisely<br />

cut out textiles using knives, lasers or<br />

waterjets. The use of such machinery today<br />

has become thoroughly routine – textiles<br />

are hardly ever cut out by hand anymore.<br />

Enormous progress has also been made in<br />

the area of digital printing. Whereas a<br />

hundred meters of fabric per pattern used<br />

to have to be woven to be cost-efficient,<br />

today just a few meters can be printed.<br />

Technology as a cost factor?<br />

KURT ZIHLMANN Not just that; digital<br />

printing also enhances individualization.<br />

It gives small enterprises entirely new access<br />

to pattern samplings and fabrics because<br />

almost any material can be printed, and<br />

very rapidly to boot. At the same time, this<br />

technology is exerting an impact on different<br />

professional fields. Originally, fabrics<br />

were conceptualized by textile designers,<br />

but today fashion designers can actively<br />

co-create them. This gives rise to new,<br />

fruitful interfaces between the parties<br />

involved. And there is exciting cooperation<br />

with artists. Art is a source of inspiration<br />

for fashion apparel in any case…<br />

…like when one thinks, for instance,<br />

of Iris van Herpen’s 3D-printed dresses,<br />

which are works of art more than they<br />

are wearable fashions. What benefits does<br />

3D printing bring to the fashion industry?<br />

KURT ZIHLMANN It enables new forms<br />

and volumes to be experimented with in<br />

the creation of clothing. Moreover, in certain<br />

“Originally, fabrics<br />

were conceptualized<br />

by textile designers,<br />

but today fashion<br />

designers can actively<br />

co-create them.”<br />

instances, the prototype of a garment or<br />

accessory can be printed out instead of<br />

being sewed or manufactured some other<br />

way. However, the range of 3D-printable<br />

materials is still very limited at present.<br />

Today’s 3D-printable substances are mostly<br />

plastics, rather rigid materials that you<br />

wouldn’t necessarily want to wear – but<br />

that will change soon.


GLOBAL INVESTOR 1.16 — 47<br />

And what about the costs?<br />

KURT ZIHLMANN High-quality 3D<br />

printing is still very expensive, with enterprise-grade<br />

printers costing between<br />

150,000 and 250,000 euros. The printers<br />

are very maintenance-intensive, and the<br />

material is expensive and has a short<br />

lifespan. But once materials that are more<br />

attractive to the touch come into existence,<br />

3D printing will become more interesting,<br />

particularly to rapidly mass-produce<br />

accessories and jewelry. Sports footwear<br />

manufacturers have already been employing<br />

this technology for a few years now to<br />

make prototypes, and in the meantime<br />

have also started to use it in serial production<br />

of individual shoe components such<br />

as soles.<br />

I will be able to print out my own<br />

sneakers at home one day?<br />

KURT ZIHLMANN Here, as well, the<br />

difficulty lies in the materials. A sneaker<br />

consists of around 20 different components<br />

such as high-tech breathable materials,<br />

fasteners etc. In the near future, it will<br />

hardly be possible to print materials of<br />

this degree of complexity. But you certainly<br />

will be able to print out a simple plastic<br />

gardening boot as soon as 3D printers reach<br />

a reasonable speed, installation space<br />

requirement and price.<br />

The new technologies have accelerated<br />

the pace of production, haven’t they?<br />

KURT ZIHLMANN They definitely have.<br />

Production speed is also being increased by<br />

3D visualization, which is being utilized<br />

more and more. It enables you to examine<br />

the cut of a garment, to simulate materials<br />

and even occasionally to skip over one<br />

or two prototypes. Moreover, it aids communication<br />

between production sites and<br />

countries. Designers, for example, use<br />

3D visualization to ensure that garment cuts<br />

developed in Asia match their designs.<br />

But isn’t this technology, too, just a tool<br />

that doesn’t replace any conventional<br />

work stages?<br />

KURT ZIHLMANN Yes, it is, because<br />

what counts most in the fashion industry is<br />

haptics – how something feels – and I can’t<br />

judge by touching a display screen whether<br />

a material doesn’t just look good on a body,<br />

but also feels good. Clothes have a soul,<br />

and designers want to feel it. They want<br />

to hold garments in their hands, they want<br />

to see how a person moves in them, they<br />

want to be able to ask the model whether<br />

he or she feels good wearing the garment.<br />

Kurt Zihlmann<br />

The director of the Institute of <strong>Fashion</strong><br />

Design at the FHNW Academy of Art<br />

and Design in Basel is a professor of<br />

product development and a specialist<br />

in design and production processes<br />

enabled by new technologies. He places<br />

importance on employing digital technologies<br />

situationally without neglecting<br />

craftsmanship expertise.<br />

What do webstores mean for<br />

the fashion industry?<br />

KURT ZIHLMANN Like with other<br />

consumer goods, customers often seek<br />

advice and try on clothes in brick-andmortar<br />

stores, but then order online from<br />

the cheapest supplier. That puts a lot of<br />

“…customers often<br />

seek advice and try on<br />

clothes in brick-andmortar<br />

stores but then<br />

order online from<br />

the cheapest supplier.”<br />

companies in a really tough position. Or<br />

consumers do their ordering directly in<br />

webstores and after trying on the clothing<br />

at home, simply send back the items they<br />

don’t want. This ecological senselessness<br />

gives me pause. On the other hand,<br />

webstores open up fantastic opportunities<br />

for young, aspiring designers by giving<br />

them quick and easy access to the market.<br />

How are body scanners changing<br />

the shopping experience?<br />

KURT ZIHLMANN Those were hyped<br />

20 years ago, but never caught on. When<br />

someone walks into a store wanting a<br />

custom-tailored garment, that’s a special<br />

moment. They reach out to the salesperson,<br />

and when the measurements are taken,<br />

physical contact ensues just like during a<br />

visit to a hairdresser or barber, and often<br />

very private matters get discussed. A body<br />

scanner can’t replicate that. Most people<br />

don’t want to stand half-naked in a machine,<br />

as the time gain is minimal compared to<br />

measuring by hand, which requires as few<br />

as around 15 measurements for a wellfitting<br />

suit.<br />

You uphold values of craftsmanship.<br />

How do you get your students technologically<br />

fit for the market of the future?<br />

KURT ZIHLMANN Our students have<br />

access to all the new technologies, from 3D<br />

printers to specialized machinery for cutting<br />

materials to size. But what’s important to<br />

me is for technology not to dictate the<br />

concept, but for the concept to determine<br />

the appropriate technology. Technologies<br />

are merely tools; what counts in the end is<br />

the object, or the garment, that people<br />

will wear.


GLOBAL INVESTOR 1.16 — 48 So what exactly happens at the very nexus of global geopolitics, global<br />

MATERIAL CHANGES<br />

THE<br />

EFFECT OF<br />

E-COMMERCE<br />

ON THE<br />

FASHION<br />

SUPPLY CHAIN<br />

economic integration and the maturation of the digital age, including<br />

e-commerce, Big Data and social media? The world’s fashion industry is proving<br />

a fertile ground for discovering the answer, as the entire fashion supply chain<br />

is being completely transformed.


GLOBAL INVESTOR 1.16 — 49<br />

T<br />

he fashion industry is truly a<br />

global industry with a rather long<br />

and complex supply chain – from<br />

fibers (natural and man-made)<br />

and yarn production via fabric formation and<br />

finishing to garmenting, designing and retailing.<br />

Not too long ago, the fashion industry<br />

was a rather “local” industry in the sense that<br />

most textiles and garments were designed<br />

and produced in relative proximity to the<br />

end-consumer market – fashion products<br />

bought by European consumers were mainly<br />

produced within Europe and/or in the immediate<br />

periphery, such as in Turkey or North<br />

Africa. The same was true for North and<br />

South America, Asia and Australia.<br />

Since the late 1990s and early 2000s,<br />

the fashion industry around the globe has<br />

been faced with structural and rather disruptive<br />

changes. These changes stem from<br />

different directions – global economic integration<br />

(globalization), technology (e-commerce,<br />

digitization) and sustainability (social<br />

and environmental concerns) – and are in<br />

many ways interconnected.<br />

Globalization<br />

in North America with the North American<br />

Free Trade Agreement (NAFTA).<br />

In this context, an additional acceleration<br />

and hence a disruptive change to the fashion<br />

industry was certainly the phasing out of the<br />

Multi-Fibre Arrangement (MFA) at the end of<br />

2004, together with the accession of China<br />

into the WTO in 2001. The MFA regulated<br />

the world trade in textiles and clothing from<br />

1974 through 2004 by imposing quotas on<br />

the amount developing countries could export<br />

to developed countries. After 2004, trade in<br />

textiles and garments was not restricted by<br />

quotas anymore, but integrated into the regular<br />

WTO framework of tariffs. China’s entry<br />

into the WTO marked another disruptive<br />

change simply due to the fact that a country<br />

with around 1.3 billion people suddenly became<br />

part of the global economy.<br />

The impact of these two major developments<br />

for the fashion supply chain was farreaching.<br />

Suddenly, an enormous pool of<br />

highly motivated workers became available at<br />

relatively much lower costs. As a consequence,<br />

more and more retailers and fashion<br />

brands around the world started sourcing in<br />

Asia in general, and China in particular. In<br />

1990, China’s textiles and clothing exports<br />

amounted to USD 16.89 billion (8% of global<br />

textile and clothing exports). In 2000, textile<br />

and clothing exports had already reached USD<br />

52.21 billion (15% of global textile and clothing<br />

exports). Data from the World Trade Organization<br />

show that by 2014, Chinese textile<br />

and clothing exports had soared to USD<br />

298.27 billion, or a global share of 38%.<br />

According to the International Textile Manufacturers<br />

Federation publication “International<br />

Textile Machinery Shipment Statistics”<br />

(2015), investments in new textile machinery<br />

in China skyrocketed in the last decade. In<br />

the year 2000, investments in new spinning,<br />

texturing, weaving and knitting machines in<br />

China’s textile industry represented around<br />

20% of global investments. In the following<br />

years, this number jumped to 50%–60% in<br />

spinning machines, 65%–75% in texturing<br />

machines, 60%–80% in weaving machines,<br />

60%–75% in circular knitting machines and<br />

40%–80% in flat knitting machines. In other<br />

words, every year since 2004 on average<br />

more than half of all new textile machines<br />

were installed in China.<br />

Technology<br />

With the spread of the Internet in the 1990s<br />

and the acceleration of the number of Internet<br />

users together with a higher speed in the following<br />

years, new opportunities opened up<br />

for everyone. Suddenly, the Internet not only<br />

offered possibilities to display products and<br />

services, but products could also be increasingly<br />

ordered online. While e-commerce<br />

seemed initially to be limited to a few categories<br />

of products like books, DVDs and CDs,<br />

this changed tremendously. As a consequence<br />

of continuous and significant technological<br />

progress in the past 15 years with<br />

regard to applying new technology (e.g. mobile<br />

phones, touch screens, apps, 3D animations,<br />

e-payment systems, etc.) people can<br />

now buy all sorts of products and services via<br />

the Internet, including textiles and apparel.<br />

According to a 2013 report by Euromonitor<br />

International on global apparel distribution and<br />

market performance, Internet retailing of apparel<br />

in 2007 was only 3% of total retail sales.<br />

In 2012, this share had already doubled<br />

A new wave of global economic integration<br />

started after World War II with the establishment<br />

of international institutions like the International<br />

Monetary Fund (IMF) and the<br />

predecessor of today’s World Trade Organization<br />

(WTO), the GATT (General Agreement<br />

on Tariffs and Trade). The main objective of<br />

these new institutions was to facilitate<br />

cross-border investments and trade of goods<br />

and services among countries around the<br />

world. Alongside these international institutions,<br />

regional economic integration also intensified,<br />

whether in Europe with the European<br />

Economic Community (EEC) which<br />

eventually became the European Union (EU),<br />

or the European Free Trade Area (EFTA), or<br />

Shipped short-staple spindles 2000–14<br />

Following China’s joining the World Trade Organization in 2001, domestic textile production –<br />

and as a consequence the requisite investment in new textile machinery – took an immediate and<br />

sustained leap. Source: ITMF<br />

in m<br />

14<br />

12<br />

10<br />

8<br />

6<br />

4<br />

2<br />

0<br />

2000 2002 2004 2006 2008 2010 2012 2014<br />

World China


GLOBAL INVESTOR 1.16 — 50<br />

and was showing the fastest growth rates<br />

compared to all other retail channels such as<br />

specialist retailers, department stores and<br />

grocery retailers.<br />

In this context, it is important to note that<br />

in Asia – and especially China – Internet retailing<br />

is expanding rapidly. As reported by<br />

Reuters news agency, at last year’s Singles’<br />

Day (11 November), Alibaba, the largest Chinese<br />

web portal, generated a record-breaking<br />

USD 14.3 billion in sales in China, the biggest<br />

online shopping day in the world. In terms of<br />

value, this is how much US citizens spent online<br />

on Black Friday and Cyber Monday combined.<br />

In terms of volume, it is even more.<br />

While, in the past, e-commerce was limited<br />

to personal computers and laptops, the emergence<br />

of mobile phones and other mobile<br />

devices with which one can access the Internet<br />

has made it possible to search and order<br />

online while on the move (m-commerce). Another<br />

distribution channel that retailers are<br />

currently looking at is so called “s-commerce,”<br />

which refers to social media commerce. The<br />

fashion industry is constantly adapting to<br />

these technological changes and most of<br />

them have developed a multichannel strategy,<br />

whereby fashion products are offered in various<br />

ways both off- and online.<br />

The new technological possibilities surrounding<br />

the Internet also had other important<br />

consequences. New brands suddenly did not<br />

necessarily require classical distribution channels<br />

anymore. They could simply open an Internet<br />

shop. Consequently, the number of brands<br />

has increased manifold in recent years. Customers<br />

are offered a greater variety of products<br />

and can increasingly specify parameters<br />

they wish to purchase. New technologies such<br />

as digital printing, digital showrooms and body<br />

scanners in combination with e-commerce<br />

have led to the possibilities of mass customization.<br />

Customers can benefit from these<br />

new technologies as they enable more individualized<br />

products to be ordered online.<br />

Another important trend to consider is<br />

the digital functionalization of the fashion<br />

industry, referred to as “wearables.” Textiles<br />

and garments are increasingly becoming the<br />

medium for the compilation and subsequent<br />

analysis of what is commonly referred to as<br />

Big Data, for example in both the health and<br />

sports industries. In other words, digitization<br />

will lead to more cross-industry cooperation<br />

and collaboration in the future. The digitization<br />

of the fashion industry, of which e-commerce<br />

is a central component, is a megatrend that<br />

offers many challenges and opportunities for<br />

the fashion industry. Those companies within<br />

the industry that quickly and efficiently<br />

adopt new technologies and act to develop<br />

new business models will benefit.<br />

Sustainability<br />

While global economic integration and new<br />

technologies have been promoted by governments<br />

and companies, respectively, sustainability<br />

is a megatrend that is based on the<br />

perception of consumers – albeit only a few<br />

in the beginning – that economic globalization<br />

and technological progress cannot be disconnected<br />

from social and environmental conditions<br />

around the world. Consequently, a few<br />

retailers and brands in the fashion industry<br />

started in the 1990s to develop and produce<br />

fashion products that met certain social and/<br />

or environmental requirements. Since the possible<br />

negative implications of global change<br />

have become mainstream concerns, sustainability<br />

has become a major issue that the<br />

fashion industry needs to take into account.<br />

Interconnections and contradictions<br />

The fashion supply chain is shaped by many<br />

forces that have an effect on each other and<br />

often contradict one another. The process of<br />

increased global economic integration and the<br />

rise and proliferation of e-commerce provide<br />

the fashion industry and its customers with<br />

more choices at lower costs. While consumers<br />

welcome an increased selection, attractive<br />

prices and good services, they are also<br />

starting to pay more attention to sustainable<br />

aspects of the production, transportation and<br />

recycling of products. Since consumers are<br />

increasingly concerned about negative social<br />

and environmental aspects, they are demanding<br />

more transparency and traceability with<br />

regard to their purchases. In turn, this offers<br />

new opportunities for companies that focus<br />

on sustainable aspects. Producing and sourcing<br />

in the proximity of the respective end-consumer<br />

markets is becoming increasingly important.<br />

The opportunities for consumers to<br />

inform themselves about producers and products<br />

alike and to comment and act via social<br />

media channels have an important impact on<br />

the fashion industry as far as image, credibility<br />

and profitability are concerned.<br />

Summary<br />

The Internet in general, and e-commerce in<br />

particular, are still transforming the entire<br />

fashion supply chain. Twenty-five years ago,<br />

the fashion industry was mainly driven by producers,<br />

retailers and designers. In the meantime,<br />

the industry is mainly driven by consumers<br />

and the use and application of all kinds of<br />

new digital technologies. For example, only<br />

ten years ago, the idea of a body scanner was<br />

still far-fetched. Today, consumers can use<br />

digital (fit) technologies like a body scanner<br />

to try on clothes or check sizes, fit or style,<br />

both in brick-and-mortar as well as online<br />

shops. Furthermore, consumers are increasingly<br />

able to design their own garments by<br />

choosing fabrics, colors, prints, style, etc.<br />

online.<br />

On the other hand, digital technologies<br />

also enable small, new or ethical fashion<br />

labels to suddenly gain access to markets<br />

around the globe. As far as production of<br />

fashion is concerned, new digital technologies<br />

also reduce the costs of small production lots<br />

and especially customized products. These<br />

new digital technologies are leading to a much<br />

more diversified and fragmented textile fashion<br />

industry along the entire fashion supply<br />

chain from production to distribution. The<br />

fashion industry as a whole is still adapting to<br />

these ongoing changes and there is little<br />

doubt that it is still at the beginning of this<br />

new digital age.<br />

Dr. Christian Schindler<br />

Graduating in 1994 with an economics<br />

degree from the University of Fribourg,<br />

Dr. Schindler joined the Federation of<br />

German Wholesale and Foreign Trade.<br />

He later earned his doctorate from<br />

the Institute for Economic Policy at<br />

the University of Cologne. Dr. Schindler<br />

was appointed economist of the<br />

International Textile Manufacturers<br />

Federation in 2004, and promoted<br />

to Director in 2006. He was elected<br />

Director General as of 1 January 2007.


GLOBAL INVESTOR 1.16 — 51<br />

TECHNOLOGY<br />

3D-PRINTED<br />

CLOTHING<br />

How is 3D printing<br />

affecting the fashion<br />

industry? Would you<br />

like to design and/<br />

or produce your<br />

clothes and shoes<br />

by yourself? If so,<br />

welcome to the world<br />

of 3D printing in<br />

fashion, and goodbye<br />

to textiles made of<br />

traditional fabrics. As<br />

simple as the answer<br />

is, reality tells us<br />

something different.<br />

Currently, 3D printing<br />

in general and 3D<br />

printing in fashion are<br />

not yet as disruptive<br />

as they may appear<br />

in theory since they<br />

still face many obstacles.<br />

One of them<br />

is the limitation of<br />

“printable” materials<br />

or fabrics; another<br />

is the length of the<br />

associated printing<br />

process. We thus<br />

believe that 3D printing<br />

may not offer an<br />

alternative to traditional<br />

fashion manufacturing,<br />

but could<br />

complement it at<br />

best. Many designers,<br />

such as Iris van<br />

Herpen, are already<br />

involved in 3D printing,<br />

and brands such<br />

as Adidas or Nike are<br />

experimenting with<br />

printing customized<br />

shoes, which could<br />

become a market.<br />

To be successful with<br />

this trend, a makeover<br />

of the business<br />

strategy is a precondition.<br />

However,<br />

tailoring done robotically<br />

either in stores<br />

or via the Internet<br />

appears to be a futuristic<br />

development.<br />

✖ FOR MORE ON TECH<br />

TAILORING, SEE P. 44<br />

You can find out more<br />

about 3D printed<br />

clothing by using the<br />

QR code above.


GLOBAL INVESTOR 1.16 — 52<br />

YOUNG DESIGNERS<br />

RAISING THE<br />

PROFILES OF<br />

NEW TALENT<br />

VFiles is a platform<br />

where young fashion<br />

designers, photographers,<br />

makeup<br />

artists, hair stylists,<br />

models and musicians<br />

can create their<br />

own profile and present<br />

their work to the<br />

public. It includes an<br />

online and brick-andmortar<br />

shop where<br />

the young talents’<br />

designer pieces can<br />

be bought. Moreover,<br />

young artists can<br />

apply for the VFiles<br />

off-schedule “runway”<br />

events at the semiannual<br />

New York<br />

<strong>Fashion</strong> Week (there<br />

were 1,000 applications<br />

for the fall/<br />

winter 2016 runway).<br />

The online community,<br />

the VFiles team<br />

and mentors (e.g. the<br />

design director of<br />

Calvin Klein menswear)<br />

then choose a<br />

couple of designers<br />

to show their collections.<br />

These runways<br />

are crowdfunded<br />

and fully produced by<br />

the VFiles community,<br />

including stylists<br />

and artists. The VFiles<br />

summer 2016 runway<br />

attracted over 600<br />

international journalists,<br />

celebrities and<br />

VFiles community<br />

members. “My goal<br />

is to change the<br />

way people think<br />

about fashion forever.”<br />

Julie Anne<br />

Quay, VFiles founder.<br />

✖ VFILES.COM


GLOBAL INVESTOR 1.16 — 53<br />

PERSPECTIVES ON<br />

FASHION TRENDS<br />

5/6<br />

F . O . R . R . E . S . T<br />

J . E . S . S . E . E<br />

is a designer, educator and founder of Forrest Jessee Studio, which works<br />

with institutions and artists to produce digital and print material.<br />

What do you see as the global<br />

trends (e.g. digitalization)<br />

influencing today’s fashions and<br />

the fashion market?<br />

Methods of production in fashion<br />

have drastically changed in the past<br />

10 to 15 years. Mass customization<br />

is now a possibility that has entered<br />

every designer’s head, whether or<br />

not it is reflected in their work. The<br />

world is really just entering the Digital<br />

Age, and I sense that we are<br />

only at the tip of the iceberg. It’s like<br />

any other age in history – the Bronze<br />

Age, Industrial Age and so on – and<br />

this age will span several generations.<br />

I think designers have really just discovered<br />

digital tool kits, but have not<br />

yet fully understood how to harness<br />

them. The onslaught of the Digital<br />

Age has been so sudden that we are<br />

scrambling to really grasp the potential<br />

to truly change the way things<br />

are designed, made and con sumed.<br />

The influence right now is mostly<br />

loose experimentation – attempts to<br />

push the limits of what we can do<br />

and begin to understand future possibilities.<br />

So, I see a lot of fumbling, a<br />

lot of successes and a lot of mistakes.<br />

It is a time I think designers should<br />

really feel free to experiment and not<br />

be afraid of the awkward or unusual.<br />

How are these trends changing<br />

fashion and the fashion market?<br />

I find the most interesting designers<br />

right now are challenging<br />

the 120-year-old model of the Paris<br />

runway. The runway model molded<br />

fashion into a discipline that ex hibits<br />

trends, and I see that has defined<br />

fashion for many years. Designers who<br />

are separating themselves out are<br />

producing fashion that builds in a<br />

different utility into the garment.<br />

This allows it to have a life beyond<br />

the trends of one season. The digital<br />

tools used in print design, architecture,<br />

sculpture, photography and<br />

many other disciplines can start<br />

a conversation with fashion and<br />

produce new typologies.<br />

Where do you get inspiration<br />

for your designs and collections?<br />

I was originally trained as an architect,<br />

and all of my projects take<br />

an interdisciplinary stance. Part of<br />

my process of understanding space<br />

is through the lens of other disciplines.<br />

I almost have to step outside<br />

of what I know to understand it<br />

better. So, I would say that a lot of<br />

my inspiration comes from other<br />

design practices.<br />

✖ FORRESTJESSEE.COM


GLOBAL INVESTOR 1.16 — 54<br />

The inner sanctum of<br />

the Prada <strong>Fashion</strong><br />

Store in New York. The<br />

Rem Koolhaas design<br />

forms an integral part<br />

of the unique Prada<br />

shopping experience.


GLOBAL INVESTOR 1.16 — 55<br />

THE RISE AND FALL OF FASHION EMPIRES PART II<br />

BUILDING A<br />

FAMILY<br />

DYNASTY<br />

WITHOUT<br />

CLICHES<br />

Under the guidance of an initially reluctant Miuccia Prada, and husband Patrizio Bertelli, the Prada name<br />

has come to be globally synonymous with simplicity and luxury, innovation and classicism. Though seemingly<br />

­incompatible elements, they define the look that is seductively understated, and sometimes subversive.


GLOBAL INVESTOR 1.16 — 56<br />

TEXT BY JULIA REA<br />

For Prada, the conceptual has always lain<br />

at the heart of both its philosophy and its<br />

design aesthetic. Adopting an intellectual<br />

approach to design and presentation, the<br />

label’s designer Miuccia Prada born 1949 has subsequently<br />

transformed her family’s Milanese luxury<br />

leather goods company into a powerful and influential<br />

global fashion brand. Steering away from the<br />

conventional ideas of surface beauty favored by her<br />

contemporaries, Prada draws upon her interests in<br />

art, film and wider culture to produce an intelligent<br />

and multifaceted vision of femininity.<br />

The Prada company began life as a luxury luggage<br />

business founded by Miuccia’s grandfather<br />

Mario Prada in 1913, where it was based in the exclusive<br />

Milanese shopping establishment Galleria<br />

Vittorio Emanuele II, favored by the Italian aristocracy.<br />

The company was granted the title of “Official<br />

Supplier to the Italian Royal Household” in 1919,<br />

thus authorizing the use of the House of Savoy coat<br />

of arms and knotted rope motif that has endured<br />

as the company’s trademark logo.<br />

Initially reluctant to become involved with the<br />

family business, which had been taken over by her<br />

mother Luisa upon Mario’s death in 1958, Prada<br />

Miuccia Prada has consistently shunned conventional<br />

notions of surface beauty, infusing her designs with an<br />

intellectual and multifaceted vision of femininity.<br />

obtained a doctorate in<br />

political science from the<br />

University of Milan before<br />

training as a mime artist.<br />

Her love of fashion has little<br />

to do with her design<br />

heritage but, instead, was<br />

focused around constructing<br />

and experimenting with<br />

a sense of individual identity<br />

out of the clothes she<br />

wore herself. As she explained<br />

to The Independent<br />

in 2015, “It started at<br />

a very personal point …<br />

I always accepted my love<br />

for clothes, but I didn’t<br />

want to enter into the fashion<br />

business.”<br />

Despite this lack of any<br />

clear business aspirations,<br />

Miuccia came to the helm<br />

of the Prada company in<br />

1978, seeking to modernize<br />

and reimagine its aesthet ic<br />

while, simultaneously, disregarding current design<br />

trends. In fact, Prada does not simply desire to be<br />

original, to break away from the idea du jour – she<br />

insists on it, stating “Too many times I don’t do<br />

something because somebody else did it.”<br />

In 1987, she married leather goods entrepreneur<br />

Patrizio Bertelli after meeting him a decade earlier<br />

at a trade fair. Shortly after their meeting, he joined<br />

the Prada company in order to overhaul its business<br />

structure, and is now co-CEO of the company alongside<br />

his wife, making them one of the most powerful<br />

partnerships in both the fashion and business<br />

worlds. When Miuccia inherited the company, sales<br />

were up to USD 450,000 and, with Bertelli assuming<br />

the financial management of the business, Prada<br />

was allowed time to focus on perfecting the brand’s<br />

new aesthetic.<br />

NEW AESTHETIC TRANSFORMS BRAND<br />

In 1985, Prada launched her first successful line of<br />

bags, a range of understated, utilitarian black nylon<br />

handbags and rucksacks, infusing synthetic fabrics<br />

with a newly glamorous appeal. This now iconic<br />

range of bags formed the antithesis of the logosaturated<br />

accessories popular in the 1980s, allowing<br />

its inherent minimalism to stand out while the<br />

brand’s triangular metal logo remained subtle. This<br />

underlying philosophy subsequently shaped Prada’s<br />

design aesthetic, combining clean lines with innovative<br />

fabrics, proudly manufactured in Italy, in order<br />

to unite luxury and wearability. Despite the popularity<br />

of the products, financial success was initially<br />

slow. The combination of high prices, minimal<br />

advertising and internally-generated funding led<br />

Prada and Bertelli to seek out wholesale accounts<br />

in high-end department stores and boutiques.<br />

Her first ready-to-wear womenswear line,<br />

launched in 1988, received unenthusiastic reviews<br />

deriding the seemingly lackluster aesthetic of its<br />

predominately black palette and minimalistic<br />

shapes. By this time, however, Prada was already<br />

an internationally recognized brand, owing to Bertelli’s<br />

cautious expansion strategies. Boutiques had<br />

begun to open in prominent shopping destinations<br />

across Europe including Milan, Madrid and Paris,<br />

before moving into Asia and the United States. The<br />

powerful yet feminine lines of this collection’s functional<br />

tailoring elevated the brand’s desirability, and<br />

transformed it into the aspirational label of choice<br />

for a new generation of active, modern women. Its<br />

Prada pursues a passion for contemporary<br />

art, design and architecture. At Prada’s<br />

chic Epicenter concept store in Tokyo,<br />

Japan, the Herzog & de Meuron design<br />

aims to meld culture and consumption.<br />

minimalism was revolutionary amid a decade awash<br />

with conspicuous luxury, setting a precedent for<br />

Prada’s signature formulation of her own trends,<br />

rather than merely reinterpreting fashion’s preoccupations<br />

of the moment. As a backlash toward<br />

using fashion as an external signifier of wealth and<br />

status began, Prada inexplicably captured the mood<br />

of a gen­eration seeking a more intellectual concept<br />

of feminine beauty. Menswear and sportswear collections<br />

followed in 1993, promoting a more discreet<br />

style of dress focused around a dark palette and<br />

characteristically Italian details: knitted polo<br />

shirts, wide-sleeved jackets and pointed shoes<br />

cemented Prada’s craft-based innovations as new,<br />

modern classics.<br />

In 1993, following the launch of her first menswear<br />

collection, Prada launched a secondary womenswear<br />

label, Miu Miu, named after Miuccia’s childhood<br />

nickname. The label was distinguished by its<br />

more whimsical aesthetic, younger target market<br />

and more affordable price point. Through its printed<br />

dresses, pastel-colored handbags, embellished<br />

footwear and Rococo-inspired costume jewelry, Miu<br />

Miu’s witty formula blends together nostalgia and<br />

modernity. Prada handpicked young actresses such<br />

as Kirsten Dunst as the models for Miu Miu’s advertising<br />

imagery, projecting a playful vision of femininity,<br />

one often tinged with a poignant sense of irony.<br />

The Fondazione Prada in Milan, Italy,<br />

fosters ideas and creative practices in art,<br />

architecture and science. It aims to<br />

promote the value of culture in society.


GLOBAL INVESTOR 1.16 — 57<br />

PRADA’S INVESTMENT PORTFOLIO GROWS<br />

In the late 1990s, Prada sought to acquire a port folio<br />

of leading luxury brands in the manner of companies<br />

such as LVMH and the Gucci Group. An investment<br />

in shares in the Gucci Group in 1997 led industry<br />

analysts to speculate that Bertelli was attempting<br />

a takeover of the company. This never materialized,<br />

but shares in brands including Helmut Lang, Fendi,<br />

Jil Sander (purchased in 1999 for a reported USD<br />

100 million) and English footwear brand Church’s<br />

soon followed. In 2001, Prada sold their 25.5% stake<br />

in Fendi to LVMH for a reported USD 225 million in<br />

order to help ease a buildup of debt caused by such<br />

continuous investment (a debt reportedly totaling<br />

GBP 1.2 bn). By 2006, Prada had sold Helmut Lang<br />

and Jil Sander, alongside a 45% stake in Church’s.<br />

In 2011, Prada listed 20% of its shares on the Hong<br />

Kong stock exchange. Today, Prada Group comprises<br />

Prada, Miu Miu, Church’s and Car Shoe, inventor<br />

of the original driving moccasin with rubber-stud-perforated<br />

uppers. In March 2014, Prada<br />

also acquired 80% of Angelo Marchesi, the historic<br />

Milanese pastry shop, with an eye to expanding<br />

its celebrated imprint. A second shop was opened<br />

on Milan’s Via Monte Napoleone in 2015.<br />

While such investments underlie the company’s<br />

business structure, Prada’s passion for contemporary<br />

art, architecture and film remains at the<br />

forefront of the creative vision of Prada and Bertelli.<br />

Fondazione Prada, founded in 1993, was established<br />

in order to nurture both the ideas and creative<br />

practices of artists, architects, filmmakers and<br />

thinkers. Over the last two decades, the foundation<br />

has been responsible for over 60 projects among<br />

solo shows, group and research exhibitions and<br />

special commissions in cities ranging from Milan<br />

and Venice to Tokyo, ­Paris and London, alongside<br />

film festivals, dance performances and conferences.<br />

The institution’s mission statement asserts<br />

that they “embrace the idea that culture is deeply<br />

useful and necessary as well as attractive and engaging.<br />

Culture should help us with our everyday<br />

lives, and understand how we, and the world, are<br />

changing.” With the opening of an exhibition venue<br />

located in Ca’ Corner della Regina, a spectacular<br />

18th-century palazzo on the Grand Canal in Venice,<br />

in 2011 and of a new permanent cultural complex<br />

designed by OMA in Milan in 2015, Fondazione Prada’s<br />

range of knowledge has been expanded with<br />

the aim of sharing new ideas and cultural stimuli.<br />

PRADA CEMENTS ITS CULTURAL SIGNIFICANCE<br />

In 2012, Prada was the subject of a major fashion<br />

exhibition entitled “Schiaparelli and Prada: Impossible<br />

Conversations” at the Metropolitan Museum<br />

of Art in New York. Here, an imaginary dialogue was<br />

established between Prada and the late fashion<br />

designer Elsa Schiaparelli, a fellow Italian renowned<br />

for her avant-garde vision and Surrealist inspirations.<br />

Both designers have sought to deconstruct<br />

conventional ideas of beauty in a style that has<br />

­become known as “ugly chic.” As Prada explained<br />

in one of the interviews drawn on for the exhibition:<br />

“<strong>Fashion</strong> fosters cliches of beauty, but I want to<br />

tear them apart. An important aspect of my work is<br />

exploring what beauty means today.” This is an<br />

approach clearly shared by the two women: both<br />

are known for their exacting, and sometimes difficult,<br />

natures and staunch refusal to conform to<br />

any prescribed notion of style, beauty, femininity<br />

or sexuality. Schiaparelli’s design signatures also<br />

often find a degree of resonance in Prada’s own<br />

designs, as she draws on her witty formula of<br />

­cartoonish prints, cheeky motifs and her “anti-fashion”<br />

attitude.<br />

Whether it’s a model striding the catwalk<br />

at a Prada seasonal fashion show in Milan,<br />

Italy or a Hollywood starlet standing on<br />

the red carpet at the Oscars, Prada designs<br />

are sure to turn heads.<br />

The following year, a creative collaboration with<br />

British artist Damien Hirst displayed particularly<br />

potent echoes of Schiaparelli’s aesthetic. The project,<br />

entitled Entomology, produced 20 exclusive<br />

handbags auctioned in aid of charity, each featuring<br />

both real and bejeweled beetles on an iconic Prada<br />

handbag shape. Miuccia’s approach to the limitededition<br />

range was characteristically subversive: “I<br />

said, ‘Listen, I don’t want to do a bag.’ So I did a<br />

bag that was so repulsive! It was so repulsive that<br />

no woman would put a hand on it!” The bags,<br />

however, sold out and were enthusiastically embraced<br />

by the fashion press – unsurprising given<br />

that 80% of Prada’s 2011 sales came from leather<br />

accessories.<br />

Regular collaborations with photographers and<br />

directors such as Steven Meisel and Glen Luchford<br />

have also produced a series of iconic advertising<br />

imagery and short films that imbue Prada’s designs<br />

with cultural relevance. Similarly, the contribution<br />

of several key dresses to director Baz Luhrmann’s<br />

2013 film adaptation of “The Great Gatsby” cemented<br />

the significance of Prada’s modern reinterpretation<br />

of femininity. Despite occasional design<br />

criticisms and periods of financial complications,<br />

Prada continues to position itself as one of the most<br />

influential and globally successful fashion brands<br />

of today. It draws its strength from its merging of<br />

simplicity and luxury, innovation and classicism,<br />

allowing it to continually blur the boundaries between<br />

the conceptual and the commercial.<br />

In 2012, Prada was<br />

featured as the subject<br />

of a major fashion<br />

exhibition. Pictured<br />

here, an installation<br />

from the “Schiaparelli<br />

and Prada: Impossible<br />

Conversations” exhibition,<br />

which was organized<br />

by The Costume<br />

Institute of The Metropolitan<br />

Museum of<br />

Art, in New York, USA.<br />

FACTS<br />

AND<br />

FIGURES<br />

Prada posted revenue<br />

of EUR 3.55 bn in 2015<br />

(including wholesale,<br />

retail and royalties)<br />

Breakdown shows retail<br />

sales in 2015, by region<br />

in EUR million<br />

Source: pradagroup.com<br />

403.7<br />

Japan<br />

410.8<br />

Americas<br />

103.5<br />

Middle East<br />

1,080.0<br />

Far East<br />

1,060.0<br />

Europe<br />

Breakdown shows retail<br />

sales in 2015 by product<br />

in EUR million<br />

Source: pradagroup.com<br />

537.5<br />

Footwear<br />

541.6<br />

Ready-to-<br />

Wear<br />

1,920.0<br />

Leather<br />

Goods


GLOBAL INVESTOR 1.16 — 58<br />

PERSPECTIVES ON<br />

FASHION TRENDS<br />

6/6<br />

V . A . L . É . R . I . E<br />

L . A . M . O . N . T . A . G . N . E<br />

is a French Canadian artist-designer and PhD scholar researching “Performative Wearables:<br />

Bodies, <strong>Fashion</strong> and Technology” at Concordia University, where she teaches<br />

in the Department of Design & Computation Arts. She is the owner and designer at 3lectromode,<br />

a wearable electronics atelier based in Montreal.<br />

What do you see as the global<br />

trends (e.g. digitalization)<br />

influencing today’s fashions and<br />

the fashion market?<br />

Fabrication<br />

• 3D printing (hard, soft, zero-waste)<br />

• On-demand fabrication<br />

• Customization<br />

• Local production<br />

• DIY (Ikea idea to clothing)<br />

• Reuse / recycle / repair (Petit h)<br />

• Reduce washing (instantly sanitized<br />

through air/sun, etc.)<br />

• Seamless design to house technology<br />

(integrated telecommunications /<br />

renewable power)<br />

Sales and distribution<br />

• Showrooms with integrated direct<br />

home delivery (no more lugging bags)<br />

• 3D body scanning / avatars<br />

(transferable from store to store)<br />

• Seamless purchase from online<br />

runway shows<br />

• Searchable algorithms for streetwear<br />

photos (you can immediately buy<br />

what you see someone wearing)<br />

• “Real” advertising: Instagram<br />

ambassadors<br />

• <strong>Fashion</strong> as experience / community<br />

vs. old model of product sales<br />

How are these trends changing<br />

fashion and the fashion market?<br />

• Consume less<br />

• Consume made-to-fit<br />

• Consume and share<br />

• Consume immediately (from runway)<br />

• Consumer as designer<br />

• Consume in collectives p2p<br />

(not corporations)<br />

The future of fashion will be less about<br />

consuming and more about experiencing.<br />

How this will take effect will come about<br />

through a radical inversion of the clientcompany<br />

relationship. Co-creative<br />

spaces, technologies and applications<br />

will provide new platforms for customers<br />

to create bespoke designs on demand.<br />

A transparency of production chains and<br />

fabrication will follow suit. Where and<br />

how things are made will become more<br />

important, along with their “carbonfootprint”<br />

afterlife. Objects’ material<br />

and historical transformations will be<br />

inscribed in our experience of them,<br />

i.e. we will know the provenance of<br />

materials, fabrication and legacy. In that<br />

process, we will also leave our<br />

mark on these objects’ histories and<br />

future uses. <strong>Fashion</strong> and technology<br />

will become an ongoing process<br />

communicated over time and space.<br />

Where do you get inspiration<br />

for your designs and collections?<br />

• History<br />

• Literature<br />

• Poetry<br />

• Art<br />

• Music<br />

• Politics<br />

Art and history are the greatest inspiration<br />

for fashion. <strong>Fashion</strong> that lives in<br />

the vacuum of the moment is dangerous<br />

because fashion is also a political force:<br />

of gender, of race, of power, of economics<br />

– and we can use that force to create<br />

change. <strong>Fashion</strong> is always straddling<br />

the past, present and future. I used to<br />

have an argument with my father about<br />

how the future would look: Would it be<br />

Terry Gilliam’s “Brazil” (1985) or Ridley<br />

Scott’s “Blade Runner” (1982)? To me it<br />

has become both: absurd and dystopian,<br />

light and heavy, in the future and in the<br />

past, atemporal and ironic, beautiful<br />

and ugly, frivolous and all-important.<br />

✖ 3LECTROMODE.COM


GLOBAL INVESTOR 1.16 — 59<br />

SUSTAINABILITY<br />

HOW SMALL<br />

IS YOUR<br />

WASTE?<br />

The Japanese kimono<br />

and the Indian sari are<br />

garments of arresting<br />

beauty. And inasmuch<br />

as they are made<br />

from a single piece<br />

of fabric, they use<br />

fabric efficiently. Now<br />

designers are trying<br />

to apply the same<br />

idea to the creation of<br />

clothes like dresses<br />

and jeans. So-called<br />

zero waste design<br />

takes aim at the 15%<br />

to 20% of fabric that<br />

the apparel industry<br />

estimates ends up<br />

in landfills. How? By<br />

creating garment patterns<br />

that fit together<br />

like jigsaw puzzles.<br />

By draping fabric<br />

rather than cutting it.<br />

And by taking waste<br />

bits of material and<br />

using them as decorative<br />

flourishes.<br />

Finally, “direct pattern<br />

on loom” technology,<br />

invented by Indian<br />

designer Siddhartha<br />

Upadhyaya, is an<br />

approach to garment<br />

construction that<br />

weaves pieces directly<br />

on a jacquard loom –<br />

no need to spread,<br />

mark or cut.<br />

✖<br />

FOR MORE ON<br />

SUSTAINABILITY, GO<br />

TO PAGES 38 AND 41<br />

Watch the video for a<br />

tutorial on how to<br />

design fashion with<br />

zero waste.


GLOBAL INVESTOR 1.16 — 60<br />

TECHNOLOGY<br />

WEARABLES<br />

IN FASHION<br />

Wearable technology<br />

has made major<br />

inroads in fashion,<br />

due to a growing installed<br />

base of mobile<br />

devices (especially<br />

smartphones), as well<br />

as component cost/<br />

performance improvements,<br />

an established<br />

software ecosystem<br />

and new apps/business<br />

models. Wearables<br />

are rapidly<br />

evolving from singlefunction,<br />

hard-toconnect<br />

devices to<br />

what we believe will<br />

increasingly become<br />

multifunctional, constantly<br />

connected,<br />

smart/aware devices.<br />

We see a market<br />

potential of about<br />

USD 40 – 50 bn. Wearables<br />

will have a significant<br />

and pervasive<br />

impact on the economy<br />

in coming years.<br />

Apparel has been<br />

early to adopt wearable<br />

technology – first<br />

in the form of wristwatches,<br />

but more<br />

recently with fitness<br />

monitors like the<br />

Fitbit. The primary<br />

purpose to date has<br />

been to boost customer<br />

engagement<br />

with athletic/ fitness<br />

brands with the<br />

potential to cannibalize<br />

the USD 56 bn<br />

watch market. But<br />

let’s be more futuristic.<br />

At some point, our<br />

clothes will be able<br />

to use our bodies as<br />

a power source, enabling<br />

us to charge<br />

smartphones and<br />

tablets – if we still<br />

have such devices.<br />

Smart fabrics that<br />

harvest kinetic energy<br />

in order to create<br />

electricity are already<br />

being turned into<br />

fashion wear.<br />

✖<br />

FOR MORE ON<br />

WEARABLE TECHNOLOGY,<br />

SEE P. 44<br />

Installed base of<br />

computing products<br />

can support<br />

wearables adoption<br />

Source: Company data,<br />

Credit Suisse estimates<br />

3,000,000<br />

2,500,000<br />

2,000,000<br />

1,500,000<br />

1,000,000<br />

500,000<br />

0<br />

2010 2015E<br />

Smartphones<br />

Mobile PCs<br />

Tablets


GLOBAL INVESTOR 1.16 — 61<br />

SUSTAINABILITY<br />

DYEING<br />

WITHOUT<br />

WATER<br />

Textile dyeing is a<br />

water-intensive process.<br />

For example, it<br />

typically takes 60 to<br />

80 liters of water<br />

to dye one kilogram<br />

of cotton. Moreover,<br />

according to the EU’s<br />

Retail Forum for<br />

Sustainability, together<br />

textile dyeing and<br />

treatment account<br />

for 20% of industrial<br />

freshwater pollution.<br />

No wonder, then, that<br />

the search is on for<br />

water-friendly alternatives.<br />

A company<br />

called ColorZen has<br />

found a way to modify<br />

the molecular structure<br />

of cotton to<br />

­enable efficient coloring<br />

with less water.<br />

AirDye, developed<br />

by the Debs Textile<br />

Corporation, uses up<br />

to 95% less water<br />

than conventional<br />

dye methods by<br />

transferring dye to<br />

polyester fabric using<br />

printing machines.<br />

And Dutch company<br />

DyeCoo employs<br />

pressurized CO 2 to<br />

transport powder<br />

dye into polyester<br />

fabric, with no need<br />

for water at all.<br />

✖<br />

FOR MORE ON<br />

SUSTAINABILITY, GO<br />

TO PAGES 38 AND 41<br />

Watch a video on<br />

an innovative textile<br />

process for dyeing<br />

fabrics without water.


GLOBAL INVESTOR 1.16 — 62<br />

TECHNOLOGY<br />

COLOR–<br />

CHANGING<br />

FABRICS<br />

Imagine you’re on<br />

your way to an important<br />

date and you<br />

notice your jacket<br />

doesn’t match your<br />

pants. It’s too late<br />

to go home and<br />

change your clothes,<br />

so you just touch<br />

your jacket or whistle<br />

a tune and magically<br />

it changes color.<br />

Crazy yes, but possible<br />

thanks to an invention<br />

of Hungarian<br />

designer Judit Eszter<br />

Karpati called<br />

“Chromosonic.” This<br />

is an experimental<br />

electronic textile that<br />

can change color and<br />

pattern in response<br />

to touch and sound.<br />

Aesthetic examples<br />

of smart textiles<br />

include everything<br />

from fabrics that light<br />

up to fabrics that<br />

change color. Some<br />

of these fabrics gather<br />

ambient energy by<br />

harnessing vibrations,<br />

sound, heat or EUV<br />

(extreme ultraviolet<br />

radiation). For<br />

example, colors are<br />

white indoors, but<br />

change colors instantly<br />

when exposed to<br />

daylight. New media<br />

artist and fashion<br />

designer Amy Winters,<br />

the woman behind<br />

the Rainbow Winters<br />

brand, has worked<br />

with such smart<br />

textiles for several<br />

years now.<br />

✖ FOR MORE ON<br />

E-TEXTILES, SEE P. 44<br />

You can find out more<br />

about color-changing<br />

materials by using the<br />

QR code above.


GLOBAL INVESTOR 1.16 — 63<br />

Authors<br />

Patricia Feubli<br />

Research Analyst.........................................................<br />

patricia.feubli@credit-suisse.com..................................<br />

+41 44 333 68 71.......................................................<br />

Patricia Feubli joined Credit Suisse in 2013 as a senior<br />

economist for Swiss Industry Research at International<br />

Wealth Management, based in Zurich. Previously, she<br />

worked as a research associate at the University of Zurich<br />

and was research fellow at Stanford University. She holds<br />

a PhD in Economics from the University of Zurich.<br />

> Pages 10, 13, 16, 27, 33, 36–37, 41–43, 48–50, 52–53, 58<br />

Jonathan Horlacher<br />

Research Analyst.........................................................<br />

jonathan.horlacher@credit-suisse.com..........................<br />

+41 44 332 80 17........................................................<br />

Jonathan Horlacher is a financial analyst for Credit Suisse<br />

in the International Wealth Management Division. He<br />

specializes in macro themes, megatrends and sustainable<br />

investing, and has published widely on those topics. He<br />

is a CFA charterholder, received his MSc from Barcelona<br />

Graduate School of Economics, and previously worked<br />

as an economist for the Swiss National Bank.<br />

> Pages 08–09, 12, 38–43, 59, 61<br />

Ulrich Kaiser<br />

Research Analyst.........................................................<br />

ulrich.kaiser@credit-suisse.com....................................<br />

+41 44 334 56 49.......................................................<br />

Ulrich Kaiser is a senior financial analyst of Credit Suisse<br />

in the International Wealth Management Division, covering<br />

the technology sector. He joined Credit Suisse in 1993<br />

and has 28 years of experience in the securities and<br />

banking business. He received his Master of Economics<br />

from the University of Constance, Germany, and is a CEFA<br />

charterholder. > Pages 17, 23, 44–47, 51, 60, 62<br />

Julie Saussier<br />

Research Analyst.........................................................<br />

julie.saussier-clement@credit-suisse.com......................<br />

+41 44 333 12 56.......................................................<br />

Julie Saussier is a senior research analyst in the Global<br />

Equity team, covering the consumer discretionary sector.<br />

She has 14 years of experience as a research analyst<br />

and joined Credit Suisse in 2015. She holds a Master’s in<br />

Business and Management from the University of Paris<br />

Dauphine and a Master’s in Corporate Finance from<br />

the EM Lyon Business School, France, and is a CFA<br />

charterholder. > Pages 07, 11, 15, 22, 26, 30–32<br />

Selina Sia<br />

Head of Greater China Equity Research.........................<br />

selina.sia@credit-suisse.com........................................<br />

+852 2841 4036.........................................................<br />

Selina Sia is the Head of Greater China Equity Research<br />

at Credit Suisse, having joined the company in 2015.<br />

She has over 20 years of experience as a research<br />

analyst covering Hong Kong and Chinese equities. She<br />

graduated from the University of Washington in the<br />

USA with a Bachelor of Business Administration majoring<br />

in Accounting and Finance, and is a qualified Certified<br />

Public Accountant. > Pages 14, 34–35<br />

Giles Keating<br />

Vice Chairman of Investment Solutions & Products<br />

and Deputy Global CIO.................................................<br />

giles.keating@credit-suisse.com...................................<br />

+41 44 332 22 33.......................................................<br />

Giles Keating is Vice Chairman of Investment Solutions &<br />

Products, Deputy Global Chief Investment Officer and<br />

the Investment Committee’s Vice Chair. He joined Credit<br />

Suisse in 1986. He was a Research Fellow at the London<br />

Business School and has degrees from the London<br />

School of Economics and Oxford, where he is Honorary<br />

Fellow. He chairs Tech4All and techfortrade, charities that<br />

use technology to reduce poverty. > Page 03


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