Is the fashion industry local or global?

France

In the fashion industry, the level of internationalization of businesses still differs widely depending on where they are headquartered. Given the size and growth potential of their domestic markets, Asian companies tend to be more local. Comparatively, American and European ones are more dominant internationally, with more than 30% of their revenues generated outside their region.

The main reason coming being that, especially in the luxury and sportswear segments, people purchase and wear specific brands for what they represent, as a status and lifestyle symbol. An American invention such as sportswear, for example, benefits from the broad diffusion of the American culture and is being associated with the American lifestyle. On the other hand, luxury and affordable luxury are associated with Italian design and French prestige, characteristics that are rooted in the image of these two countries. This explains in part why the luxury and affordable luxury segment is globally dominated by Western brands, especially French conglomerates.

It is therefore quite difficult for Asian fashion companies, such as Chinese manufacturing groups building their own brands, to enter the global luxury and sportswear markets. In luxury, brand image and high quality of products are key success factors: incumbents invest a lot in research and development to preserve a distinct positioning through product differentiation, and keep processes in-house to maintain strong control over the whole process. Brands without a long heritage and tradition in the market lack strong image and reputation worldwide. In capital-intensive sportswear, success for market leaders depends on high investments to gain brand image and boost brand value, which are the key to grow. A substantial percentage of revenues is invested in sponsoring main sports teams and events, giving them a competitive advantage which makes it harder for new brands to become global.

Barriers to internationalization are slightly different in the lingerie and fast fashion segments. In the latter, the status symbol does not matter as much since style and trend are more relevant than the brand image. The supply chain needs to be particularly agile, fast and responsive to emerging fashion trends, unlike in luxury and sportswear where companies exploit their brand image to create trends. Few fast fashion groups gain global exposure, as the required brand image is given less importance than supply chain speed. In the lingerie segment, local brands tend to dominate their domestic markets because their fit is better adapted to local morphology and cultural needs. For this reason, lingerie companies mainly expand in neighboring countries, or they enter faraway markets with different products first, such as cosmetics and fragrances in the travel retail.

Overall, in most geographies, fashion markets are still dominated by local brands. Expanding in other markets is not easy as there is no cookie-cutter strategy to go international. It all depends on the brand’s strengths and weaknesses, the segment it operates in and the countries it targets. In most cases however, supply chain verticalization can facilitate the entry in a specific market – even though the extent to which this can be achieved is first and foremost related to the segment considered.

 

Silvia Lazzarini, Alica Radtke, Hanting Zhou and Sofia Zamengo worked on this project in 2016 within the Lectra – ESCP Europe Fashion & Technology Chair established in 2014. As part of the collaboration, every year Lectra invites a group of students to work on various projects related to the evolution of the industry, its challenges, innovation, emerging strategies and business models, the approaches to creation and the development of supply chain in the face of new technologies.