Showing posts with label Burberry. Show all posts
Showing posts with label Burberry. Show all posts

Thursday, February 16, 2012

Model economics: The beauty business

ON FEBRUARY 17th London’s spring fashion week begins. Across the capital, young women in vertiginous shoes and skimpy dresses will be teetering along catwalks. And thousands of young doughnut-dodgers will be inspired to queue outside agents’ offices for the slim chance of becoming the next Kate Moss.

Careers in modelling are typically short-lived, badly paid and less glamorous than pretty young dreamers imagine. Yet the business is changing. For one thing, educated models are in. This may sound improbable. In the film “Zoolander”, male models are portrayed as so dumb that they play-fight with petrol and then start smoking. But such stereotypes are so last year.

Lily Cole, a redheaded model favoured by Chanel and Hermès, recently left Cambridge University with a first-class degree in history of art. Edie Campbell, a new British star, is studying for the same degree at the Courtauld Institute in London. And Jacquetta Wheeler, one of Britain’s established catwalkers, has taken time out from promoting Burberry and Vivienne Westwood to work for Reprieve, a charity which campaigns for prisoners’ rights.

Natalie Hand of London’s Viva model agency, who represents Ms Campbell, says there has been a shift away from the “very young, impressionable models”, who were popular in the past ten years, to “more aspirational young women”. “There is an appetite now for models to be intelligent, well-mannered and educated,” says Catherine Ostler, a former editor of Tatler, a fashion and society magazine.

This is new. The best-known models of yesteryear often led rags-to-riches lives, courtesy of the rag trade. Twiggy, a star of the 1960s, was a factory worker’s daughter. Ms Moss’s mother was a barmaid.

But the big fashion houses and leading photographers are tiring of the drama that comes with plucking girls as young as 15 from obscurity and propelling them to sudden stardom. Too often, models were showing up to photo-shoots hours late or drug-addled. This wasted a huge amount of time and money. Fashion houses are now keen to avoid trouble. Many find that educated models show up to work on time and don’t go doolally as often.

Trends in the modelling business also follow those in the global economy. From the 1960s to the 1990s, America reigned supreme. The hottest “supermodels” were Americans such as Cindy Crawford and Christy Turlington. They were figures whose glossy confidence mirrored America’s. They never woke up for less than $10,000. They were cultural icons, too, celebrated in songs such as Billy Joel’s “Uptown girl”, the video of which starred Christie Brinkley, who became his wife.

As in so many fields, the rewards for a handful of stars have shot up. Contracts are wrapped in secrecy, but sources say that a one-off deal for a shoot with a top model can begin at $75,000, rising to $1.5m for a global advertising campaign. For advertisers, the right face is lucrative. Procter & Gamble’s campaign featuring Gisele Bündchen is said to have raised sales of its Pantene shampoo in Brazil by 40%.

The stars pull in more from sidelines such as franchising goods in their own name (Elle Macpherson’s underwear, Kate Moss’s lipstick). Heidi Klum, a German model, serves as a judge on “Project Runway”, a televised fashion-talent contest.

Pay for lesser models has fallen sharply, however. This is partly because the labour pool has globalised and therefore grown much bigger. International agencies now scout for talent in emerging economies. In the 1990s they hired hordes of high-cheeked Slav teenagers. Now the hottest hunting-ground is Brazil, which produces Amazonian height and athletic looks.

Ashley Mears, an American sociologist and author of “Pricing Beauty”, a study of the economics of modelling, says that although the industry has grown in the past decade, individual contracts have shrunk. Too many faces are chasing too few lenses.

Television fees have fallen, not least because technologies like TiVo allow audiences to skip commercials. One British model told your correspondent that rates for the major fashion shows have roughly halved in recent years, and that many careers are now over in two seasons (a calendar year) rather than around six. The Model Alliance, an outfit that agitates for higher wages, estimates that the average regularly-employed model makes $27,000 a year. Part-timers and men make less.

The juiciest prize is to become the face of a luxury brand such as Dior or Burberry. To have any chance, a model must first have magazine shoots under her designer belt. This fact allows fashion magazines to pay peanuts, even for a cover-shoot.

There remains an iron divide between “editorial” models, who appeal to the expensive designers, and “catalogue” models, who are often slightly larger and more conventionally pretty. The catalogue models pose in normal clothes, which is less glamorous. But they earn a steadier income, and are less likely to be dropped by the time they reach their late 20s.

Agents take around 20% of a model’s fee, plus another 20% from the client. Despite these high levies, agencies struggle. Since the financial crash, clients have been scrimping. And agencies must find models whose faces somehow capture the Zeitgeist, as defined by the big brands and their capricious artistic directors.

Large agencies are competing with a crowd of smaller upstarts, such as Viva London and DNA in New York. The giant Elite Model Management agency lost an American antitrust case on price-fixing in 2004 and drowned in a sea of recriminations. It has since been refounded under new ownership, though its Dutch branch faces a fresh lawsuit, brought by the winner of a contest who claims the agency sacked her for putting on weight.

The sheer randomness of fashion makes it a tough business. Change is more predictable in other industries. IT firms, for example, can safely assume that computers will keep getting faster. But foreseeing next year’s hot look is impossible. No one could have anticipated Kate Moss’s early “grunge” look, which set a fashion for tangled long hair, boyish hips and pale complexions. Now the fashion is for models who look a little healthier, such as Doutzen Kroes, a former speedskater.

The exquisitely sensitive Karl Lagerfeld

Despite angry campaigns against the cult of “Size 0”, skinny models are still in demand. This is partly because designers think clothes look better when there is no distracting flesh beneath them. Ms Mears adds that the industry keeps models thin to “signify elite luxury distinctiveness”. Rough translation: if normal women have curves, then the elite want something different. This infuriates those who blame fashion for fostering eating disorders among the young. But the attitude shows little sign of shifting. Karl Lagerfeld, a designer, made headlines this week by describing Adele, a pop singer, as “fat”.

Power in the fashion business depends on fame. “Super-brands” such as Gucci and Burberry don’t hesitate to throw their weight around. Gucci flustered London’s fashion week last autumn by ordering a clutch of the “mega-girls” to leave London early and fly to Milan for a more commercially important show.

Marc Jacobs, a prominent New York designer, caused a further shortage of models for British shows by detaining some prospective bookings in New York. Agents complained, but Mr Jacobs is bigger than any of them. “Where’s the camaraderie?” asked Carole White of Premier Model Management, a London agency. On the catwalk, you walk alone.

Source: http://www.economist.com/node/21547257

Thursday, September 29, 2011

The fashion industry: The glossy posse

THE shows are almost over. Next week the glossy posse, bleached weary from their month’s sprint to the world’s four fashion capitals—New York, London, Milan and finally Paris—will forsake the bright plumage of the catwalks for the mundane headaches of balance-sheets and supply chains.

Everyone now knows what will be in discerning wardrobes next spring: blocks of colour, bold prints and dainty “lingerie for feet” (formerly known as nice shoes). But the fashion industry’s financial future is much murkier. A confusion of trends preoccupies the major brands: the rapid shift east of their customer base, a generational switch, as high earners get younger, and the challenge of making luxurious clothing accessible to new markets, including digital ones, while retaining the sense of exclusivity that makes people want to pay for them in the first place.

First the good news. Luxury brands are coping well despite global economic gloom. This is because the number of “extreme net-worth individuals” (industry jargon for people with so much money that an $8,000 handbag seems a bargain) keeps growing, especially in Asia. Claudia D’Arpizio of Bain & Co, a consultancy, predicts sales will grow by 8% this year, to €185 billion ($252 billion).

Some firms are generating such a huge heap of cash that they need platform boots to see the top of it. LVMH, a French group which owns 60 brands, including Louis Vuitton and Christian Dior, various lucrative champagnes and Bulgari, an upmarket jeweller, boasts that its sales have risen by 13% in the first half of this year, to €10.3 billion ($14.4 billion). Analysts reckon that LVMH’s profit margins for its luxury brands are a healthy 40% or so—twice as high as some of its rivals.

The various fashion weeks are a snapshot of the industry’s strengths and weaknesses. Milan and Paris are the main events: they bring together the big names from across the globe. New York is run more for the benefit of the buyers, especially American department stores. London prides itself on its “edgy” feel, showcasing designers fresh out of fashion colleges, alongside some big names such as Tom Ford.

One of the main conundrums for the fashion industry concerns what Angela Ahrendts, the boss of Burberry, calls “democratic luxury”. Firms want to sell more kit, to make more money. But the more they sell, the harder it is to convince customers that they are buying something “exclusive”: ie, something that hardly anyone else has.

Burberry, a British firm that makes pricey raincoats, got a fright a few years ago when its distinctive brown checks became associated with “chavs”—a white working-class group at whom snobs poke cruel fun. (For example: What do you call a chav in a suit? The defendant.) It protected its brand by making those checks quieter and costlier, and boosted its sales by expanding into China, where no one tells chav jokes. Its global sales were up by 27% for the year to March 31st 2011, to £1.5 billion ($2.3 billion).

All of the major companies are vying to expand into emerging markets. China is Burberry’s prime target, though South Korea is also growing fast and Brazil looks promising. Several houses are opening stores in Saudi Arabia. Louis Vuitton sells bags in mineral-rich Mongolia. “There’s a lot of money there,” explains Antonio Belloni, LVMH’s group managing director.

But will snooty shoppers in the West want to own what thousands of Chinese people are wearing? “You have to constantly stretch the brand upwards and make it more luxurious at the top end,” Mr Belloni says. He points out that Dior and Vuitton are making more bespoke goods for their wealthiest clients, who want a say in what the final product looks like. Even ready-to-wear shoes in Dior’s flagship stores can retail for well over €1,000.

All this fabulousness depends on creative spirits, who can be erratic. Dior urgently needs to replace John Galliano, its creative designer, who was dismissed after an anti-Semitic outburst in a Paris bar earlier this year. The value of top creative talent is high. Negotiations between Dior and Marc Jacobs, an American designer currently at Louis Vuitton, are said to have become “complex”, with Mr Jacobs rumoured to want between $8m and $10m a year. The new favourite to replace Mr Galliano, a young American called Alexander Wang, is less well-known but surely cheaper.

Outside the top trio of LVMH, the Gucci Group and Burberry, many independent designers have had a tougher time growing. Paule Ka, a French clothes brand with a turnover of €40m and a staunch following among stylish French women, recently allowed Change Capital Partners, a London-based private-equity company, to take over 70% of the business.

It’s founder, Serge Cajfinger, admits that recent times have been precarious. “When the crisis hit in 2008, we were a bit stuck,” he recalls. Many stockists lost their credit insurance, forcing him to cancel orders. To maintain sales, he shaved prices. He also wooed investors with the promise of a push into Asia and America. (America is still regarded as the hardest market for European brands to conquer.)

Companies which trade in Zeitgeist and aspiration, as top fashion brands do, have to hold on to customers whom Mr Belloni tactfully describes as “active semi-retired” (ie, ageing baby-boomers), while simultaneously seducing the young. It is a tricky balance to strike.

Ms Ahrendts cautions that the “millennial customer” is a different creature from the 20th-century luxury-lover. “For a start, the high-net-worth customers are often about 15 years younger than they were,” she notes. She has rapidly made Burberry’s marketing more digital. Its shows are live-streamed on Facebook, and sometimes use 3D and holograms.

Recently, Ms Ahrendts booked Keane, a rock band, to fly to Beijing and turn a Burberry store launch into a gig. One of the band’s most popular songs is called “Everybody’s Changing.” Which is true, if the queues outside Asian dressing rooms are anything to go by.

Source: http://www.economist.com/node/21530989