From the runway to the register: how Fashion Week impacts on the economics of clothing retail

  • News
  • September 15, 2015
  • Sarah Dunn
From the runway to the register: how Fashion Week impacts on the economics of clothing retail
Image: World

Fashion weeks around the world have traditionally been a chance for clothing labels to show off their new collections to industry figures, specialist media and buyers. However, Mikellis says the purpose of Fashion Week has changed as fashion has democratised through the internet.

In the past, he says, consumers would never have seen the items on the runway until the next season because the lead time for fashion magazines was two to three months, but now the timeline has accellerated rapidly with the help of the internet. NZFW’s organisers have been obliged to introduce an open-to-the-public element called NZFW Fashion Weekend.

“From a New Zealand consumer’s perspective, fashion week is more about broadening and expanding the profile of the brand,” Mikellis says. “It still functions as a wholesale mechanism, with buyers attending and viewing the next season, but a marketing element has been added.”

Castles says a fashion show can cost anywhere between $20,000 to $100,000. He says World’s first and foremost goal is to capture new wholesale clients, securing orders from the collection on show to sell into those stores during the following season. He agrees with Mikellis that marketing and PR goals are also involved.

“The benefit would be different for each and every brand and would rely on what was most important to the brand at that particular time,” Castles says. “For instance when World last showed at NZFW in conjunction with the ‘NZ's Next Top Model’ finale show our main goal was media attention and with that episode being watched by over one million people, we were able to achieve that goal - our sights, however, were not set on local capturing new wholesale clients.”

Regarding the interplay of costs and return within a label or boutique itself, Mikellis says part of the business of being a fashion label is about building the reputation of the brand through product lines. Some of those lines will be more profitable than others, and some may even be loss leaders: “Most good lineups of fashion products, there’s different margins there.”

Factors affecting the margins on different products include where the product is made, how it’s made, and different consumer perceptions of value. Mikellis is reluctant to name any significant mismatches between a product’s value and consumer perceptions, but says mismatches “absolutely” depend on where its brand sits in the market.

Mikellis says simple items like t-shirts have a greater margin on them compared with more labour-intensive items such as fully tailored suits, which are less efficient to produce. In purchasing an expensive branded t-shirt, he says, people are buying the idea of their association with the brand.

This aspirational bent is most clearly seen in fast-fashion brand collaborations such as Alexander Wang for H&M.

World began in 1989 as a concept retailer offering a unique selection of fashion, beauty and ‘object d’art’ items, and has just opened a new store in Ponsonby. As well as clothing, it stocks imported perfumes and cosmetics, plus unusual items selected by designer and co-owner Francis Hooper. Castles baulks at the implication that there might be any kind of deliberate structure behind this mixture.

“The collaboration of these products in a World store is in no formal way structured [or] financially coherent - it is about our brand staying true to its ethos and aesthetic.”

He says fashion is still the most profitable line for World as “we are creating and retailing ourselves”. The beauty and ‘other’ categories are not as high in value, but are no less important to the stores’ overall feel. Castles says based on past performance, the beauty segment has the greatest potential to grow: “Whilst fashion continues to grow naturally, it is the beauty side to the business that has the potential to grow quicker as a variety of supplier can offer us an unchanging product line that continue to grow in popularity.”

Castles is philosophical about the reality of retailing items made to push boundaries, saying World will often design a line of clothes despite having an understanding that these items will be unlikely to be profitable.

“When we absolutely believe in certain items and love that they present a most honest version of our brand ideals - but realise we are unable to use our classic recommended retail structure - we simply adjust to make it work.”

World often works with specific clients in this capacity, Castles says, creating items which fill them with joy.

“If we were in it for the money, we are in the wrong industry!”

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