The Secrets of Successful Fashion BusinessesWhat the companies Prada, Chanel, Burberry and Louis Vuitton have in common, is that they are all successful fashion businesses (Divirgilio, 2013). One of the strategies these companies all share, is the idea of increasing their profit by offering new products in a different category, using the same brand name. While Louis Vuitton and Chanel decided to expand into traditional luxury sectors, Prada took a tremendous risk by choosing non traditional lifestyle segments: the competence to take new and unusual decisions. “Fashion can survive only if it has the courage to not seek widespread approval; only if it does not expect to be loved by everyone,” said Patrizio Bertelli, Prada Group’s Managing Director (Luxos). Even though these are different ways of using brand extensions, they were both fundamental to their business model and their success (Albrecht, Backhaus, Gurzki & Woisetschläger, 2013).Brands as Tommy Hilfiger, Escada and Pacific Sunwear are also successful fashion companies, however, there is a slight difference. These brands had to deal with bankruptcy due to the intern problems in their firms. Fortunately they restructured and emerged from failure. (Ward, 2016; Zerbo, 2017)These examples illustrate an interesting issue, namely the importance of strategy when it comes to a company’s success. This paper will address the following research question: What are the crucial factors that determine whether a fashion business stays successful? There are several factors that impact the success of a fashion company, however, for the aim of this paper I will only focus on the most relevant ones.Answering this question is important since it has a tremendous impact on the society. That is because the fashion industry is a high value sector which has a big share in the economy and supports the individual income all around the world (Felice & Petrillo, 2013). Fashion is everywhere and has an extensive economic and cultural impact on everyone who make, sell, wear or watch fashion (Craik, 2009). This is one of the reasons why companies have to focus on their customers. The consumers have a large impact on the progress of the company and vice versa. Not only are they the ones who have a big share in the successfulness, but also in the strategy. The behavior of the consumers will decide the strategy of the firm nonetheless, their strategy will have impact on consumers (Porter & Claycomb, 1997). Furthermore, companies need to know who their target audience is. Segmentation is the first step and is crucial for determining their way of fashion branding, which is a part of their strategy and has a big influence on the success of a firm. Besides finding the strategy based on winning and keeping customers, companies need to look at the structure of the firm itself. Certainty there are several different methods, however for the fashion industry, supply chain management(SCM) is necessary. This management ensures that the supply chains are carried out in the most effective and efficient ways to enlarge the customer value and attain a sustainable competitive advantage (NC State University). What kind of SCM and which areas should be targeted the most in order to achieve success will be discussed later on (Castelli & Sianesi, 2015). Moreover, parts of innovation are also essential for a company’s prosperity. Innovation is crucial for an organization to survive in a rapidly changing environment.Knowing all of this is not only practical for people who want to start a fashion business or for already existing firms. The academic benefits associated with this topic include a certain combination of factors and strategies that determine the success of fashion companies. Most importantly, how to make sure it stays successful. This information and the used method described in this paper is different but high in value, considering the fact that the fashion industry supports the individual incomes around the world. Besides, fashion companies need to deal with unpredictability in which fashion companies compete and adapting to a competitive environment (Cortés, Escurdero-Santana, González, 2015). Therefore, finding a solution is of great important and that is why this industry is worth studying. By giving background information about fashion, insight of strategies and other factors that are linked with success in the fashion industry, the research question could be answered. That is why this paper is organized as follows. First, the importance of the fashion sector on economic and cultural aspect. Secondly, how the companies choose their target audience. After the segmentation, this paper will give some insight at the ways of fashion branding. Further, explaining what the ‘right’ strategy is by looking at supply chain management. Then there will be a part about innovation. And finally an overall conclusion and the answer to the research question.1. The Importance of Fashion on the Economy and CultureThroughout the years, the fashion industry has developed into a global industry whereby it encompasses several sectors. Most apparel companies contain footwear, leather, jewellery, perfumes, and cosmetics in their assortment (Macchion, Moretto, Caniato, Caridi, Danese & Vinelli, 2014). Thus by expanding their market, fashion businesses possess a tremendous part of the economy. According to industry analyst D Hoovers, in 2014 the fashion industry was valued at 1.2 trillion dollar worldwide (Cobian, 2014). This number has already increased in the last few years and will continue to rise (Lu, 2016) (Euromonitor Passport, 2016; See Tables 1&2). The fashion market accounts for two percent of the world’s Gross Domestic Product. There are several reasons why this industry possesses this amount of money. First are the earnings of the 1.9 million employees working in the fashion business (Malony, 2015).The United States alone has over 17.000 fashion designers who earn an average of $73.180 annually while the employees of the Apparel Industry earn an average annual wage between $27.510 and $52.940 (Bureau of Labor Statistic, 2015)(See Table 3).Second are the consumers who are willing to spend an enormous part of their salary on the newest trends. Since it takes seven seconds for a first impression to be made (Schiller, Freeman, Mitchell, Uleman & Phelps, 2009), people are extremely aware of their appearance. They want to effect others with the way they are dressed and through the individual’s appearance the social status, values and lifestyle of the wearer can be derived. Fashion transmits non verbal communication signals, projecting an image of how we look like and how we emotionally feel (Nithyaprakash, 2015). Thus the fashion sector has besides the economic aspect, also an extensive impact on the society. On the other hand, fashion can be affected by culture and the society. Beauty standards which affect the society are created based on fashion. However, fashion can also create beauty standards based on the society. Besides if a fashion trend will be a success depends mostly on who accepts and implements it. Celebrities have more impact than an average citizen. Also culture and religion can be an inspiration for fashion. Muslim designer Iman Aldebe brought the hijab into the fashion world, kurtas from the Indian Purvi Doshi were shown on the runway and the traditional kimonos were showcased by Yoshiki (Morfin, 2017). Therefore fashion is a broad term which impact is tremendous on both economic and cultural aspect.After providing information about the importance of the fashion secor, this paper will continue with addressing the crucial factors. 2.1 Segmentation of The Target AudienceWhile it is important for marketers to know what they sell, it is crucial to recognize to who and how they will sell it.Nowadays it is impossible for companies to satisfy the whole market due to innovation and the different demands from the society (Dickson & Ginter, 1987). Thus they have to subdivide their target market into smaller, homogenous manageable groups, to identify their customers and gain a competitive advantage within the segment. This process is called segmentation.Market segmentation is crucial for companies. It is the one of the first steps a business has to make. It gives critical insights about the consumers which is useful for providing suitable product offers (Goyat, 2011). Whether a company will become or stay successful depends on how they acknowledge the importance of segmentation.There are several ways of segmenting a market. Differentiation based on demographic, geographic and psychographic variables. Knowing who their target audience is means ignoring the opposite (Lynn, 2011). Focussing on the youth means not wasting time on figuring out what the elderly wants. Women clothes differ from those for men. People in the North may dress and prefer different things than those living in the South. “Positioning usually implies a segmentation commitment—an overt decision to ignore large parts of the market and concentrate only on certain segments,” writes American organizational theorist David Aaker (Lynn, 2011).Understanding the importance of segmentation is necessary since it is the starting point of a business strategy. If companies do not know for who their product is, they can not attract the buyers. And if consumers are not attracted by the item, they will not purchase it. Even though most companies recognize this, there are still companies who fail due to the lack of knowledge about market division. After discovering the needs of their target audience, marketers can start conceptualizing their way of fashion branding.2.2 Fashion BrandingEvery company needs to label their product. They can do this by visualising their merchandise through a name, a logo, an imagine or even a slogan. This process called branding is a way of showing customers where the company stands for, promising quality which make their product special (Apparel Search). “A brand is therefore one of the most valuable elements in an advertising theme, as it demonstrates what the brand owner is able to offer in the marketplace” (Apparel Search). There are multiple reasons why this market strategy is of great importance. First, branding divides the product from already existing brands. Since the competition in the fashion world is cut-throat, marketers should aim for the best way to attract their target audience. They can achieve that by being different and unique in such a way that it arouses inquisitiveness from the consumers. Second, the accessibility, visibility and attractiveness of the product increases the willingness of people to purchase the offered merchandise (Kempen, Merwe & Sonnenberg, 2006). If a product is good presented by its brand, customers are more likely to buy it. There are several manners of branding the product into the consciousness of the customers. This can differ from a brand supporting plus-sized women, to a company which focuses on good labor conditions. However, which type of branding a fashion business needs depends mainly on the consumer behavior of the target audience (Kempen, Merwe & Sonnenberg, 2006). For example, the German company Miss Etam which brand is well-known for focussing on plus-sized women. This company sells normal and plus-size clothing. They started with having elderly women and plus-size women as their target audience. Their slogans were ‘More is More Beautiful.’ After re-emerging from bankruptcy they tried to attract the female youth as well by investigating what their interests are and what they like. They realized that their clothing line is not intended for younger girls and changed that into something more youthful. They also observed that girls struggle with loving themselves and they created slogans as ‘Your smile is the prettiest you can wear’, ‘You are beautiful just the way You are.’ It worked and they gained more younger female buyers.This example showed how the target audience chances the company way of branding. From mainly focussing on advertising ‘pro plus-size’, to promoting ‘love yourself’ to the whole women audience.Such as with the segmentation, by the fashion branding process it is crucial that marketers focuses on understanding and knowing customers in order to create a strong strategic base. 3.1 Supply Chain ManagementAfter the given strategies whereby consumers have a tremendous impact on the certainty of a business, this paper address the following market strategy: Supply Chain Management. A supply chain management is something every firm should have. It is a business network whereby materials, information and finances are in an operation both within and among different companies.This process move from supplier to manufacturer to distributors to retailer to consumer (Kokemuller, 2007; Caniato, Caridi, Castelli & Golini, 2011)(See figure 1). By doing so companies work as efficiently and effectively as possible, production cost are reduced and it creates a competitive network advantage for their company. The term SCM consist out of two elements: physical flow and information flow. Physical flows are how the goods and materials move in the supply chain. Information flows are how the goods are controlled and allows the supply chain partners discuss their long-term plans (NC State University). Both are crucial and need a different approach. Further in this paragraph they will be discussed.Besides the importance of segmentation and branding, the success of a fashion business depends on how companies apply SCM (Castelli & Sianesi, 2015). There are several reasons why it is crucial for marketers to understand why, how and what type of SCM they should use.In this industry the life cycle of the items are extremely short, predictability is low and products are often an impulse purchase (Okoroafo, Gammoh, Koh & Williams, 2014). In the fashion world they are mainly focussing on keeping up with the demand of continual consumption of the ‘new’ and at the same time discarding the ‘old’ (Kozlowski, Bardecki & Searcy, 2012). Fashion businesses have a various and complex textile collection and like mentioned before, they provide besides apparel also jewellery, perfumes, cosmetics, ect. Besides this extensive list of products they need to provide for their buyers, marketers also need to keep producing new items. People want new things every season, sometimes even every month. Not only does this put pressure on the designers, but it affects the fashion companies as well. They have to overcome the challenge of satisfying the customers by producing and delivering the requested products as quickly as possible (Lo, Hong & Jeng, 2007). Finding a strategy that deals with these problems is required. And SCM can be a perfect solution. Companies also have to know how they should manage their SC. Since the impact of technology in our daily life has increased the last few years, managing the SC through using electronic databases has become useful. Organizations can now use technology to share information, to communicate with others, to provide better customer service and to increase the productivity. This is called Information Technology(IT) and it is faster and more solid than a paper-system. However, only if it is used correctly it will improve the competitiveness. A clear vision, strong planning and technical knowledge are necessary to accomplish this. Thus building a solid system will help managing the SC (Lo, Hong & Jeng, 2007).There are different ways of applying SCM. Which method a company should use depends on what kind of fashion industry they are. Since this paper focuses on fashion companies which sell apparel, shoes, jewellery etc. it falls in the ‘high fashion sensitive’ category. This means that style, brand and emotional appeal are more relevant than the quality of the product and that the goods are season-related (Caniato, Caridi, Castelli & Golini, 2011). Knowing this, the best way to apply SCM is to have the manufacturers located in low-wage countries. They produce quick and cheap which is necessary to meet up with the given criteria discussed in this paragraph.Using this market strategy does not only ensure the health and success of a company, it also provide other advantages as well. It creates networks and connections with other businesses and countries. Hereby employment opportunities in other countries grow and good connections come in handy when needed. The production cost are lower and faster which lead to higher profits and satisfied customers. Therefore, SCM is crucial and should be applied correctly in order to benefit from the advantages it ensures.3.2 InnovationThat the fashion industry has to deal with many competitors have been mentioned several times in this paper. The previous factors already gave a quantity of ways how to gain a competitive advantage and this paragraph will explain one essential key element that contributes to this subject: innovation. Before going deeper into this topic, knowing the difference between innovation and change is important. We can describe innovation as something completely new; developing a new business model or a different way of producing products and providing services. Innovation arises from creativity and refers to the ability to introduce something unknown. Every creative idea begins with a clear vision about the start but how it will end is uncertain. However, when a company wants to change something they know exactly the whole process. They need to transition point A to B. Thus when it comes to changing, marketers should focus on good execution. Innovation is all about developing new areas and trying to implement them while change is only about implementing the alternatives and convincing others to follow it. Thus: changing does not automatically mean innovation, while innovation always implies changing (Avdhesh, 2015; Daft, Kendrick & Vershinina, 2010).After having this clarified, this paper will continue about innovation only. “Why does innovation matter? Without innovation, no company can survive over the long run.” (Daft, Kendrick & Vershinina, 2010). Especially when it comes to fashion businesses. As described in paragraph 3.1 about SCM, in this industry companies operate with short life-cycle products which are season-related (Felice & Petrillo, 2013). Thus, marketers have to be extremely innovative to keep up with the continuously changing demands of their customers and the changing environment. Creating new trends, promoting and advertising their items different than the rival and coming up with original marketing campaigns. By applying this strategy fashion companies ensures that their target audience stay interested in their products. At the same time they should be so innovative that they attract new buyers by triggering their curiosity. A perfect fitted example is the marketing campaign of H. In their commercial Close The Loop they show a list of things which are normally not accepted according to ‘fashion rules’. However, they encourage people to wear them by saying: “There are no rules in fashion but one: Recycle your clothes.”(Gilliland, 2016). Suddenly they show the real message of their campaign. Shortly after this they started placing recycling bins for clothing in their stores to stimulate buyers and to emphasize the message of their campaign. People who want to recycle their clothing can do this at H. And by giving 15% discount they stimulate the population to come to their store. Thus by becoming a recycling point they gained more customers (Campbell, 2017).After H, Zara also started having recycling bins in their stores causing a rivalry between H and Zara. Therefore, competitors will copy the marketing strategy from others. That way marketers have to come up with new things. Thus innovation is like a vicious circle. Coming up with creative concepts, implying this which will either be a success or failure and then starting all over again. 4. Conclusion and Answer to Research QuestionAfter explaining the importance of fashion, we now know how crucial it is to keep this industry alive. Not only does it possesses a tremendous part of the economy, its impact on the society is also enormous. People use fashion to express themselves and to impress others. Thus it is meaningful having knowledge of keeping fashion companies alive and successful. Coming back to the research question “What are the crucial factors that the determine whether a fashion business stays successful?” the answer can be formulated as follows: After having brainstormed about what they want to sell, marketers should think about for what kind of audience the product is suitable. In order to accomplish being a successful company they need to start with segmentation. Deciding the target audience is crucial since customers have a tremendous impact on the company’s success. Not knowing for who the product is for implies the lack of ability to attract them. No buyers means automatically no success. Having answered the questions what the product is and for who it is, the next step is fashion branding. Marketers should determine what their brand stands for to arouses inquisitiveness from the consumers. Catching the attention of the target audience in such a way that they want to buy it. Ignoring the importance of branding can be fatal and will decrease the opportunity to become successful. If the target audience does not know about the product and where it stands for, they are not stimulated to purchase the item. No buyers means automatically no success. Therefore, segmentation and branding are the first steps which have to be executed correctly to create a strong basis. Looking at the structure within the company and how the production should be managed, the strategy that should be maintained is supply chain management. It is a business network whereby materials, information and finances are in an operation both within and among different companies. There are several ways of using SCM. By using information technology the company can work in an efficient and effective way. Locating the manufacturer in low-wage countries will result in reduced production cost and it creates a competitive network advantage for their company. The last key concept that affects the success of a fashion business is innovation. Innovation is crucial in all industries, however in the fashion world it is necessary that this is implemented regularly. The product life-cycle is extremely short and the competition is cut-throat thus being unique and different is crucial to keep customers and gain new ones. Also to keep up with the changing demands and environment, innovation needs to be a priority.If the importance of these factors are recognized and executed correctly, the chances that fashion businesses stay successful will be increased. Therefore, marketers should aim to focus on these concept in this particular order to achieve the optimal outcome.