Fashioning Change: Challenges in the Worlds of Fashion and Beauty

Fashioning Change: Challenges in the Worlds of Fashion and Beauty​

The Story

London Fashion Week is traditionally the edgy filling in the New York-Milan-Paris fashion month baguette, with bleary-eyed fashion editors mincing through Heathrow in their finery and dark glasses. As Coco Chanel put it, "In order to be irreplaceable one must always be different." Being original now that the FROW is your sofa remains risky but vital.

In a bold marketing move in early January, luxury conglomerate Kering’s Bottega Veneta signed off from all social media, relying on influencers to retain that presence. ‘Going dark’ may be paying off, with Bottega growing 4% (Forbes). But on February 17, lower than expected sales were announced at Kering’s leading brand Gucci, dropping by 10.3% in Q4, and 23% over the year (FT; MarketWatch).

London-based, NYSE-listed digital marketplace Farfetch was founded in 2008. Purchases are shipped worldwide directly from the retailer: a small boutique in Italy with no other online presence can have a product with a London customer in two days. In January 2020, Chinese software firm Tencent invested US$125 million, bolstering Farfetch’s ability to sell items from partners such as Harrods through WeChat in China (Forbes). In 2015, Farfetch purchased avant-garde London boutique Browns, innovating with partners such as tech startup Wanna, and experimenting with try-on assisted reality (FashionNetwork). In December 2020, Jack Ma’s Alibaba Group Holding and luxury behemoth Richemont announced a joint venture, Farfetch China, bringing investment to US$1.1 billion.

Beauty is also under the spotlight. Harrods still plans to open a standalone ‘H Beauty’ store in Milton Keynes. But face coverings, working from home, and the closure of airport duty free have all precipitated a drop in demand. Coty, whose cosmetics include brands such as Cover Girl and Sally Hansen, lost 38% last year (MotleyFool). However, the world’s biggest cosmetics group L’Oreal posted higher than expected Q4 revenue growth, citing demand for skincare and haircare products from brands including YSL Beauty, Skinceuticals and Kerastase. “The performance of China is spectacular and its contribution to the performance of the Group is important,” said L’Oreal in a statement.

What It Means For Businesses And Law Firms

Latham & Watkins are advising on the Farfetch investment, and Baker McKenzie advised on the recent US$407 million NYSE IPO of Munich-based e-tailer Mytheresa.

An open letter to Downing Street in early February 2021 signed by 451 UK fashion and retail leaders outlined the issues facing their industry post-Brexit. Worth £35 billion to the UK GDP, more than the fishing, music and motor sectors combined, and employing almost 900,000 people, the industry is facing “decimation” (FT). Sales into Europe are down 58% since the new export regime. As photographer Nick Knight OBE noted, “Fashion is too often trivialised [...] The entire fishing industry is… similar to the income of Harrods” (Financial Times).

E-commerce doubled its share of the personal luxury goods market from 12% in 2019 to 23% (Bain). China in particular is thriving, with Bain predicting that Chinese customers will make up nearly half of this global market by 2025. Kering plans to stage more fashion events in China (FT), and continue, along with rivals LVMH and Hermès, to explore digital fashion shows and focus on online sales. Until IRL takes over from URL, 2020’s fashion term ‘phygital’ looks rather last season.

Image credit: Saranya Phu akat / Shutterstock.com

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