From Prada to Zara

Is the global recession out of fashion?

o one who visits the high street this season, be it in the USA, the UK or Europe, can

N fail to notice that the retail sector is having a tough time. Stores are relatively empty
for the time of year. Sales have started weeks in advance of the traditional date.
Incentives to buy scream from every window. Meanwhile, the newspapers tell of companies
going bankrupt every day, and world leaders speak mostly of a global economic breakdown.
Where, in this despondent picture, are the fashionistas?
Miuccia Prada, to take the queen of designers as an example, is most likely in her third floor
glass office alongside her Carsten Höller stainless steel slide, sketching the next collection
that will have the rich and famous falling over themselves to be seen in first. Her followers – a
devoted collection of designers and filmmakers, artists – appear not to have noticed a
recession. In 2007 Prada’s sales grew 17 percent to $2.5 billion.
How about Berndt Hauptkorn, chief executive of family-run luxury fashion group Labelux?
Buying things probably, and not products but companies. In 2008 he bought London-based
high end jeweller Solange Azagury-Partridge, Swiss accessories brand Bally and American
womenswear designer Derek Lam. Again, not much sign of a halt on spending.
But what about at the other end of the market? Where is the average shopper on a much
lower budget now that money is tight? If they are under fifty, there’s a good chance they are in
Zara, going back every couple of weeks to buy the latest trend, and very rarely paying less
than full price.
How on earth can this be? What is the fashion world up to that keeps it afloat when so many
other sectors are suffering so badly? Perhaps in times of depression people want to cheer
themselves up by looking good. Perhaps people are so addicted to fashion that it is the last
thing to be sacrificed. Or perhaps there are some interesting business strategies going on
that make for useful tips in any sector.

Follow fashion

1. Stick to what you know

Prada stays ahead of the pack every year because the designer knows exactly what she is
doing and she keeps doing it well. At 60, Miuccia is still the designer other designers go to
for inspiration, and she works within a recognizable aesthetic that has a firm fan base.
Without her, the company would be in trouble. Though sales figures mask it, on the business
side Prada is in a precarious position. A series of failed takeovers, including Helmut Lang
and Jil Sander, have left the company in a lot of debt, causing much speculation that Prada
will be forced to go public within the next few months. It seems that trying to move into areas

DOI 10.1108/02580540910936305 VOL. 25 NO. 3 2009, pp. 9-11, Q Emerald Group Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 9
 the firm knew less about proved a costly mistake. In a difficult climate, concentrate on what
you know you are good at.

2. Think about India

In the luxury sector, India is high on chief executive agendas. Hermes and Louis Vuitton are
already there, and other high-end brands are seriously considering the fact that the number
of millionaires in India is growing faster than anywhere else in the world. There are now over
123,000 millionaires in the country, and they are interested in showing off western luxury
goods, especially accessories. Although the Indian market might not yet be relied on to
offset any downward turn in established markets, it might well be seen as a key part of future
strategy. Be sure to research well though. Indians remain very proud of their culture and the
traditional sari is still prominent. Brands should be careful to ensure their products will fit the
established Indian tastes, but if they do the quickest movers will be the ones to profit from the
few high quality retail spaces available.

3. Change suppliers
Given the weak dollar, many fashion houses have been forced to rethink their fabric sources.
Italian silks and other European fabrics may remain the ideal, but in many cases designers
have survived tough economic conditions by looking to countries such as Japan, China and
Mexico. Debate ensues as to whether non-European materials are ready to meet couture
standards, but Bob Kamali of New York fabric company ZenTex is realistic when it comes to
sourcing from Japan: ‘‘Price-wise, they’re the only game in town.’’ A change in suppliers
might mean following another big trend in the fashion world: taking on a middle man to do the
sourcing for you. Companies such as Hong-Kong based Li & Fung, for example, procure
products from Turkey, Pakistan, Vietnam and South Africa for a variety of clients. Though
adding another step to the supply chain may seem counterintuitive, it can actually save
money and a lot of hassle to give the job of sourcing from new countries to someone with
appropriate expertise.

4. Move fast
A new strategy known as fast fashion has revolutionized the industry. Rather than wait for top
designers to set six-month trends twice a year, high street chains have adapted to better
serve their customers by taking hints on what’s in from movies, arts and other retail sectors.
Having found that the shelf life of garments can now be as short as a week, savvy fashion
retailers have overhauled their supply chains to build in fast response and flexibility. Spanish
chain Zara, for example, has developed a production line that can meet a demand almost as
soon as a new trend emerges, but that can also avoid excess discounted stock. Constantly
watching data on consumer behavior and trends, the firm’s hundreds of designers produce
thousands of prototypes a year. These are then widely discussed in house, with only 40
percent going on to be approved for a small sample. This test sample is then used to see
where the level of demand is. If an item sells out fast it can be reproduced very quickly. If not,
then production stops and very little is left over to go into the sale.

Ahead of the pack

The fashion industry has of course always relied on trendsetting for its success. But in this
time of economic uncertainty, it seems fashion houses from couture to high street are proving
to be leaders in business trends as well as hot products. The message, it seems, is think
creatively but research heavily to find ways round financial challenges. For for the real
leaders of the fashion world, the recession, it seems, it just not on trend.

‘‘ Where, in this despondent picture, are the fashionistas? ’’

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PAGE 10 STRATEGIC DIRECTION VOL. 25 NO. 3 2009
 ‘‘ Although adding another step to the supply chain may seem
counterintuitive, it can actually save money and a lot of
hassle. ’’

Comment
This is a review of ‘‘Prada goes shopping – for money’’ by Suzanne Kapner, ‘‘The business
of fashion: who’s afraid of the big bad recession?’’ edited by Vanessa Friedman, and ‘‘Fast
fashion lessons (retail strategies in high fashion)’’ by Donald Sull and Stefano Turconi.

‘‘Prada goes shopping – for money’’ explains that while the luxury Italian fashion house is
still considered the leader in design and desirability, financially it is in a precarious position.
Due to heavy debts, chief executive Patrizio Bertelli is expected to list Prada on the Milan
Stock Exchange within the next few months. Kapner explains how Prada has got into trouble
because of a series of failed turnovers, a relative lack of presence in emerging markets and
some old-fashioned business practices. The article offers feedback on the likelihood of a
takeover from various analysts.
‘‘The business of fashion: who’s afraid of the big bad recession?’’ is a Financial Times
supplement that provides an in-depth look at the current fashion industry. It concentrates on
the top end of the industry, profiling the people with power in the both the business and
creative sides. It offers information on the latest acquisitions, as well as which houses are
financially supported by investment banks or family wealth. The supplement also looks at
consumers and marketing strategies in this sector, explaining how business strategies are
changing to attract the evermore-discerning follower of fashion.
Donald Sull and Stefano Turconi explain how Spanish fashion chain Zara has adapted to the
fast fashion business strategy that has become popular on the high street. They describe a
Keywords: shift in the way the fashion world operates, from the six month cycle dictated by couture
Clothing, houses, to very quick product turnover inspired by a huge variety of cultural influences and
Fashion, consumer demand. Responding to this shift, Zara has created a business strategy that
Fashion design, allows for quick responses and flexibility in the design chain. The article outlines how the
Management strategy, company goes about absorbing real time data, making sense of it, and responding with
Retail trade hypotheses for testing before any real investment in a product line is made.

References
Friedman, V. (Ed.) (2008), ‘‘The business of fashion: who’s afraid of the big bad recession?’’, Financial
Times, September 22, pp. 1-17, (supplement).

Kapner, S. (2008), ‘‘Prada goes shopping – for money’’, Fortune, Vol. 158 No. 3, September 1, pp. 30-8.

Sull, D. and Turconi, S. (2008), ‘‘Fast fashion lessons (retail strategies in high fashion)’’, Business
Strategy Review, Vol. 19 No. 2, Summer, pp. 5-11.

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