Industry Analysis in Fashion & Luxury

Erica Corbellini
Course 20524

Main stages for industry analysis

1. Define the business (based on customer needs satisfied by the product):

facts&figures, trends, customer profile

2. Determine industry segments (select key variables for identifying clusters

of companies/brands to whom apply the same KSFs) and build a
competitive matrix

3. Identify clusters, KSFs, growth outlooks and empty spots

4. Drive conclusions on the industry attractiveness:

Is this an attractive industry? (can companies achieve

sustainable above average profits in the industry)
Which segment is better performing? Why?
Where is more potential for growth? Why?
What are the most relevant future trends?
Course 20524

Defining the business

The Abell model about business definition:

In reality the product should be considered simply as a physical manifestation of the application of a
particular technology to the satisfaction of a particular function of a particular customer group. The
choice is one of technologies, functions and customers to serve, not of products to offer. The product is
the result of such choices, not an independent decision that results in such choices
Course 20524

Defining the business

WHO
Groups of final /
intermediate
customers

BUSINESS
DEFINITION

WHAT HOW
Functionalities / Technologies /
end uses materials
Course 20524

Determining industry segments

Methods for determining industry segments / clusters of brands:

Identify key variables

Style
Price
Target
Range of products (1 line - more lines more categories)
Occasion of use
Distribution channel
Level of vertical integration
Level of internationalization

Feasibility of substitution
Managerial judgment
Customer behavior/judgment
Course 20524

Defining the business in the fashion industry:

key variables
young
CLIENTS W
adult

young
M
adult

Kids External
Underwear
u b
f c a n e
o a c d
e
a
r s t
r c
m u i
w h
H M-H M M-L L a a v
PRICE l l e
e
a
w END USES
e
r
a
r
MATERIALS: LEATHER, MAN MADE WOOL/
KNITTING, COTTON/FABRIC, SILK, etc.

PRODUCT CATEGORY
APPAREL (JACKET, OVERCOAT, SKIRT, SUIT,
TRICOT, SHIRT, etc.)
ACCESSORIES:
- FOOTWEAR (BOOTS, MOCASSIN, SANDALS, etc.)
- BAGS (HANDBAGS, SHOPPERS, BACKPACKS, etc.)

TECHNOLOGY
Course 20524

Key variables: example

Course 20524

Defining the business in the fashion industry:

main sectors
Clothing
(manufacturing)
Jeanswear
Sportswear
Formalwear
. Each sector is divided into key sub-
sectors that include different product
categories, group of clients, end uses
Underwear
Hosiery
Knitwear

Textile (yarns, fabrics)

Finishing

Footwear
Handbags
Course 20524

Defining the business in the fashion industry:

the pyramid and the different price segments
Course 20524

Issues in prices positioning: example

(Milan price range jackets S/S)
13,445 7,700 11,280
6,000

5,000
4,590

4,000
Prices in EUR

3,400
3,250
3,360
3,000
2,350 2,550 2,885
2,200
2,172 2,185 2,580
2,000 1,857 1,920
1,355
1,480 1,445 1,700
1,238 1,290
1,000 1,070
999 1,015 875 1,140
895 950
650
0

Christian Dior

Louis Vuitton
Chanel
Armani
Prada

Valentino
Versace
Dolce & Gabbana
Gucci

Herms
Competitors

Only the core price has to be considered for positioning the brands in
a competitive matrix
Course 20524

Underwear segmentation: example

Course 20524

Affordable clothing segmentation: example

Course 20524

Athletic shoes segmentation: example

300

150

100

70
Course 20524

Eyewear segmentation: example

Course 20524

Identifying KSF in the cluster

What customers How companies compete to
want: meet what customers want:

Key Success Factors are common across firms within a cluster or industry
Competitive Advantage is the way a particular brand chooses to differentiate
itself on
Course 20524

KSFs: example (menswear)

Course 20524

Industry analysis: why it is important

IA allows companies to evaluate if:

There are empty spots in the market
Where there is more potential for growth

Always remembering that:

Understanding industry dynamics allows companies to develop better
strategies
Companies can be successful in unattractive industries