The Business of Fashion Cover Image

The Business of Fashion

Designing, Manufacturing, and Marketing, 5th Edition

eBook

5th Edition

Leslie Davis Burns, Kathy K. Mullet and Nancy O. Bryant

Fairchild Books Library


Table of contents

Global Fashion Supply/Value Chain

Book chapter

DOI: 10.5040/9781501315244.ch-002
Pages: 25–41

The Material–Brand–Retail Supply/Value Chain

Before exploring the design, development, manufacturing, marketing, and distribution of fashion merchandise in greater detail, we must first describe the overall business operations involved in the global supply/value chain for fashion. supply chain networks include all of the interconnected individuals, businesses, and processes that are necessary to get a product to the ultimate consumer.

Throughout these supply chain networks are processes that add value to the product for each of the customers along the way. As with other industries, the fashion industries rely on supply and value chain networks to take the product from material (e.g., fibers, fabrics) to fashion brands sold through one or more of many types of retail venues to the ultimate consumer of the fashion. In today’s global economy, effective coordination of the purchasing and movement of materials and components to factories and from factories to distribution centers and to the retailer is central to the company’s success. logistics is the term used to describe the processes of coordinating these interconnected activities. Imagine the challenges of assuring that fabrics, thread, zippers, production patterns in multiple sizes, construction instructions, and skilled labor are all in place at the same time at a factory to meet retailers’ deadlines for the merchandise.

Fashion companies often compete based on how efficient and effective their supply chain networks are. Thus supply chain management is an important element in successful fashion companies’ operations. For example, according to industry analysts, a key aspect of turning around the profitability of lifestyle brand Billabong was to reorganize the brand’s global sourcing organization, reduce the number of vendors with which the brand was working, and overhaul the brand’s logistics systems to achieve quality improvements and price reductions (Barrie 2015).

Marketing Channels

Within the supply chain networks are marketing channels or routes that products follow to get to the ultimate user. They consist of businesses that perform manufacturing, wholesaling, and retailing functions in order to get merchandise to the consumer. Marketing channels have several structural systems, including the following (see also Table 2.1):

  • direct marketing channel

  • limited marketing channel

  • extended marketing channel

With the direct marketing channel, fashion companies sell directly to consumers. For example, consumers may purchase goods directly from the fashion company through catalogs or over the internet. With the growth of fashion brand companies selling merchandise directly to the consumer, direct marketing channels have become more prevalent in the fashion industries. However, consumers do not have the resources to deal directly with fashion companies for all of their fashion purchases, nor do all fashion companies have the resources to deal directly with individual consumers. Therefore, consumers must rely on retailers to search for and screen fashion brands and products for them.

Table 2.1. Marketing Channels


In a limited marketing channel, retailers survey the various fashion brand companies and select (i.e., buy) merchandise that they believe their customers will want. Retailers also serve as gatekeepers by narrowing the choices for consumers and providing them with access (through retail outlets) to the merchandise, thus performing an important service to consumers. Retailers may also arrange for the production of specific goods (private label merchandise) that they then make available to their customers. In some cases, fashion brand companies sell merchandise through their own retail stores (e.g., Ralph Lauren, Nike, Eileen Fisher). Because a retail store is used in the process, this form of distribution is considered a limited marketing channel rather than a direct marketing channel, even though the product is sold by the fashion brand company. The limited marketing channel is the most typical marketing channel for fashion brands.

Extended marketing channels involve one of the following:

  • Wholesalers acquire products from manufacturers and make them readily available to buyers, usually retailers.

  • Intermediaries buy products from wholesalers at special rates and make them available to retailers. Intermediaries are sometimes referred to as jobbers in this segment of the industry.

Extended marketing channels are used in the distribution of many basic items, such as T-shirts, underwear, and hosiery. For example, a company may produce white T-shirt “blanks” and sell them to wholesalers. The wholesalers sell the T-shirts to manufacturers that will have designs screen-printed on the shirts, using a textile converter for the screen printing process. The shirts are then sold to retailers. However, because of the increased time involved, this type of marketing channel is seldom used for fashion goods that companies want to get to the consumer as quickly as possible.

Marketing Channel Integration

Marketing channel integration is the process of connecting the various levels of marketing channels so that they work together to provide the right products to consumers in the right quantities, in the right place, and at the right time. Integration can be created through conventional marketing channels or through vertical marketing channels.

Conventional marketing channels consist of independent companies that separately perform the designing, manufacturing, and retailing functions. For example, KEEN Inc. with headquarters in Portland, Oregon, designs outdoor footwear that is manufactured by contractors and sold through a variety of bricks-and-mortar and online retailers. Each of these segments represents separate companies. vertical marketing channels (also called vertical integration) consist of companies that work as a united group to design, produce, market, and distribute merchandise. Examples of vertical marketing channels include the following:

  • An apparel manufacturer sells merchandise only through its own (or franchised) retail stores.

  • A textile producer also manufactures and distributes finished textile products (e.g., hosiery, sheets, towels) to retail stores.

  • Private label (e.g., JCPenney’s Arizona brand, Nordstrom’s Caslon brand) and specialty store retailer of private label apparel (SPA)/store brand merchandise (e.g., Crate and Barrel, The Limited, Gap, Old Navy) are produced specifically for a retailer.

The hosiery/legwear industry is dominated by large firms (e.g., Kayser-Roth, Gold Toe Brands, HanesBrands, Inc.) that are often part of vertically integrated companies that produce knitted fabrics as well as the finished hosiery and legwear products. For example, Courtaulds Socks, a part of Sara Lee Courtaulds, is a leading vertically integrated sock supplier to British retail giant Marks & Spencer, as well as other department stores and supermarkets in the UK. Through advanced technologies in design and production in a vertically integrated context, these hosiery companies take advantage of enhanced supply chain management opportunities for their efficiencies and cost savings.

In some cases, fashion brand companies will sell their merchandise through their own stores as well as through other retailers. This distribution strategy is known as dual distribution. Many manufacturers, such as Tommy Hilfiger, Ralph Lauren, Pendleton, Eileen Fisher, and Nike, distribute merchandise through both their own retail outlets and through the outlets of other retailers. Thus they are engaged in dual distribution. Some brands will also develop separate brand assortments for their different retail clients. For example, Nike develops different assortments for Foot Locker, JCPenney, and their own Niketown stores.

With the growth of non-store retailing, including web-based and mobile retail formats, many fashion companies have moved to a multichannel distribution approach. In multichannel distribution, companies offer merchandise through varying retail venues: bricks-and-mortar stores, catalogs, and/or websites. For example, J. Jill offers merchandise through bricks-and-mortar stores, catalogs, and a website. More recently, fashion brand companies have taken on an omnichannel distribution approach. With omnichannel distribution, retail formats are integrated to create a seamless shopping experience for the consumer. For example, a consumer may research a fashion using a smartphone, purchase the fashion through the company website using a laptop, and pick up the merchandise at the company’s bricks-and-mortar store. Multichannel and omnichannel retailing are discussed in greater detail in Chapter 13.

Marketing Channel Flows

A marketing channel connects the companies within it in several streams, including ones for physical flow, ownership flow (or title flow), information flow, payment flow, and promotion flow. Each stream relates to specific functions that companies perform throughout the marketing channel.

  • Physical flow: This is the tracking of fashion merchandise from the factory to the retailer or ultimate consumer. It includes warehousing (or storing), handling, and transporting merchandise so that it is available to consumers at the right time, at the right place, and in the right quantity.

  • Ownership flow or title flow: This is the transfer of ownership or title from one company to the next. For example, does the retailer own the merchandise when it leaves the factory, or the manufacturer’s distribution center, or when the retailer actually receives the merchandise? The manufacturer and retailer negotiate when the title is to be transferred.

  • Information flow: This is communication among companies within the marketing channel pipeline. Increased information flow between manufacturers and retailers has resulted from many supply chain management strategies.

  • Payment flow: This is the transfer of monies among companies as payment for merchandise or services rendered. This includes both the methods used for payment and the company to whom payments are made.

  • Promotion flow: This is the flow of communications designed to promote the merchandise either to other companies (trade promotions) or to consumers (consumer promotions) in order to influence sales.

Fashion Brand Strategies

What Is a Brand?

We can all think of famous fashion brands—Chanel, Ralph Lauren, Levis, Nike, H&M, and Zara. These brand names create images in the minds of consumers—images that influence their decision to purchase the brand. As such, effective brand management strategies are important for the success of fashion brand companies. A brand is “an entity with a distinctive idea expressed in a set of functional and experiential features with a promise of a value reward relevant to its end user and in economic return to its producers (through the building of equity). A successful brand has a strong identity (mentally and physically), is innovative, consistent, competitively positioned, and holds a matching positive image in the consumer’s mind” (Hameide 2011, pp. 5–6). Key aspects identified by Hameide (2011) in this definition include brand distinction, promise of a value, brand identity, innovation, consistency, positioning, and image. Think of your favorite fashion brand. How does this brand name reflect these key aspects (Figure 2.1)?

Figure 2.1

A successful fashion brand, such as H&M, has a strong brand identity and brand position. Mathias Kniepeiss/Getty Images for H&M.


Brand Identity, Brand Positioning, Brand Image

Brands have meanings to the consumer that include both functional and experiential aspects of the product carrying the brand (Davis, 2009; Hancock, 2009). Fashion companies strive to create a positive and strong brand identity through marketing and advertising efforts. Brand identity is controlled by the fashion brand company and includes all means by which a company portrays the brand and communications with the consumer. This brand identity is determined through the process of brand positioning, or how the company positions its brand on key characteristics as compared to its competitors. Merchandisers for fashion brand companies will use brand positioning processes to analyze how their brand compares with competitors—and more importantly, how their brand is different from competitors on characteristics important to the target customer. brand differentiation results in creating distinct brand images in the minds of consumers. For example, Figure 2.2 shows a brand position map of women’s swimwear.

Consumers create a brand image in their minds based on their experiences with the brand and their attention and interpretation of the company’s marketing and advertising efforts. Thus brand identity and brand image are not necessarily the same thing. Think again about your favorite fashion brand. What is the brand image for this brand? How do you think this brand differentiates itself from its competitors?

Figure 2.2

Example of a brand positioning map for women’s swimwear.


Fashion Brand Classifications

Fashion brands fall into one or more of the following categories. These categories are not mutually exclusive. That is, a luxury brand may also be considered a lifestyle brand.

  • International designer or luxury brands: Some designers have international recognition and sell their licensed merchandise through boutiques or other high-end retail venues (e.g., Armani, Chanel, Louis Vuitton, Dolce & Gabanna). In addition, a number of brands have positioned themselves along with designer brands at the luxury level (e.g., Burberry, Tiffany). designer brands and other luxury brands are associated with high prices, high quality, and distinct prestige. Numerous lists of top luxury brands exist. However, these lists consistently include the following brands: Louis Vuitton, Hermès, Gucci, Chanel, Prada, Burberry, Tiffany & Co, Dolce & Gabbana, Armani, and Fendi.

  • National/local designer or luxury brands: Some designers have more local or national recognition and sell their merchandise through boutiques in their community or country. These brands are also associated with high prices and high quality but may not have the international reputation as the international designer or luxury brands. For example, the luxury brand Michelle Lesniak, named for the winner of Season 11 of Project Runway, is well known in the Portland, Oregon, area where this designer’s studio and boutique are located.

  • International name brands: Some companies have established international recognition as a brand name. Examples include companies such as Nike, Adidas, Roots, and Timberland.

  • Private label brands: A private label brand is specific to a particular retailer that oversees the design and marketing of the brand.

    • Department store private label brands: Examples include JCPenney’s Worthington label and Nordstrom’s Classiques Entier and Treasure&Bond brands.

    • Exclusive licensing brands: Examples include

      • Jaclyn Smith’s line of apparel licensed to Kmart.

      • Vera Wang’s Simply Vera Vera Wang exclusive brand for Kohl’s.

      • Target’s GO International program that has featured exclusive licenses. with designers including Luella Bartley, Tracy Feith, and Zac Posen.

      • Shaun White shoes and clothing available through an exclusive license with Target.

    • SPA retail brands: One type of private label brand is the SPA retail brand. SPA stands for “specialty store retailer of private label apparel.” In these cases, the retailer and the brand are one and the same and so are sometimes referred to as store brands. Examples include Gap, Banana Republic, Victoria’s Secret, and A&F.

    • Fast fashion retail brands: One type of SPA retail brand is the fast fashion retail brand. Fast fashion companies are characterized by their low prices, fashion trends, and short time from concept to retail. Examples include Uniqlo, Zara, H&M, and Forever 21 Table 2.2 presents a comparison of three fast fashion SPA brands (Figure 2.3).

Table 2.2. Comparison of the Top Three Fast Fashion SPA Brands

Brand

Zara

Uniqlo

H&M

Adapted from Yuntak Cha (2013, September 6). “The Big 3: Fast Fashion (SPA) Brands and Strategies”. Maeil Business Newspaper (www.mk.co.kr)

Company

Inditex

Fast Retailing Company, Ltd.

H&M Hennes & Maruitz AB

Headquarters (Founding Year)

Spain (1975)

Japan (1984)

Sweden (1947)

Stores

Over 2,000 stores across 88—countries

1,486 (2014) stores across 16 countries

3,700 stores across 61 countries

Design and Product Development

Over 200 design professionals focus on trend analysis and customer feedback

Research and design teams analyze trends, customer feedback, and focus on new materials

In house design teams focus on trends, quality, price and sustainability

Supply Chain Management

  • Secure fabrics in advance

  • 14 company-owned factories

  • Secure fabrics in advance

  • No company-owned factories

  • Partner companies secure fabrics

  • No company-owned factories


Figure 2.3

Fast fashion brands, such as Zara, focus on low prices, fashion trends, and short time from concept to retail. Stephen Ehlers/Getty Images.


  • Lifestyle brands: A lifestyle brand is a term used to describe brands that are associated with a particular target customer’s activities and way of life. Tommy Bahama is a good example of a lifestyle brand as the merchandise is associated with the lifestyle of people who live or vacation in tropical locations. Ralph Lauren is also a lifestyle brand that exemplifies upper-class sensibilities and activities.

  • All other brands: In addition to these brands, licensed merchandise and specialized brands exist. Examples include Wilson, Mickey & Co., and Looney Tunes/Warner Bros.

Table 2.3 presents the apparel brands with the highest value based on corporate earnings, potential for future earnings, and characteristics associated with brand image (Millward Brown & WPP 2015).

Table 2.3. Apparel Brands with the Highest Value Based on Corporate Earnings

Brand

Brand Value (2015) US$M

  1. Nike

29,717

  2. Zara

22,036

  3. H&M

13,827

  4. Uniqlo

8,074

  5. Next

5,973

  6. Ralph Lauren

5,643

  7. Adidas

4,615

  8. Hugo Boss

4,320

  9. Lululemon

2,898

10. TOMMY HILFIGER

2,580


Fashion Brand Licensing

One method that fashion companies use to create a perceived difference in their product is licensing. Because of the widespread use of licensing within the fashion industries, an understanding of the role it plays in the creation of fashion brands is important. Licensing is the selling by the owner (licensor) of the right to use a particular name, image, or design to another party (licensee), typically a manufacturer, for payment of royalties. The licensee buys the right to use the name, image, or design, referred to as the property, on merchandise to add value to the merchandise. Licensing has grown dramatically as companies recognize the value of established brand names, characters, and brand extensions. Here are some examples of licensed products:

  • Licensing agreement between Cherokee Global Brands (licensor) and 5 Horizons (licensee) to produce Everyday California brand backpacks, bags, and luggage and with NTD Apparel (licensee) for certain apparel and accessory categories for distribution throughout the United States and Canada

  • Licensing agreement between Perry Ellis International (licensor) and Itochu Prominent USA (licensee) to produce Perry Ellis and Original Penguin brands men’s dress shirts for distribution through U.S. department stores

  • Licensing agreement between Sean John (licensor) and Evy of California, Inc. (licensee) to produce Sean John children’s sportswear and outerwear. Evy of California also holds licenses for children’s wear for Hello Kitty, My Little Pony, Transformers, DC Comics, and Peanuts.

  • Licensing agreement between Authentic Brands Group (licensor) and Global Brands Group to design, produce, and distribute Jones New York brand women’s wear, menswear, children’s wear, accessories, and footwear.

  • Licensing agreement between Richloom Fabrics Group, a home furnishings and fabric converter company, and Christie Brinkley to produce the Christie Brinkley Home collection of home decorative fabrics.

Some companies’ products are entirely licensed (e.g., Hang Ten); other companies license only certain product lines (e.g., Vera Wang fragrances, Donna Karan sunglasses, Polo by Ralph Lauren boys’ wear). Many designer/luxury brands that started in apparel use licensing agreements to expand their offerings into accessories including belts, hosiery, footwear, and eyewear. Similarly, designer/luxury brands that started in accessories have used licensing agreements to expand their offerings. For example, Kenneth Cole has successfully licensed a broad range of merchandise, including all of the company’s non-footwear products except handbags. Many name brands use licensing agreements to expand their production and distribution in other countries. For example, Hong Kong–based brand Esprit (licensor) recently signed a licensing agreement with retailer Groupe Zannier (licensee) to develop, produce, and distribute Esprit Kids in Europe and the Middle East.

Types of Licensed Names, Images, and Designs

The types of names, images, and designs that are licensed vary widely, although most of them fall into the following categories:

  • Celebrity name licensing: As noted by Teri Agins in Hijacking the Runway: How Celebrities Are Stealing the Spotlight from Fashion Designers, “a celebrity’s name on a label effectively fast-tracks a new fashion brand—shaving off as much as ten years to develop widespread recognition.” Celebrity name licensing includes

    • Camuto Group licensing agreements with Jessica Simpson and Tory Burch for brands of footwear bearing the celebrities’ names.

    • Lancaster Group (a division of Coty Inc.) licensing agreements for fragrances with Sarah Jessica Parker and Jennifer Lopez; Coty Beauty (another division of Coty Inc.) licensing agreements for fragrances with Celine Dion and Isabella Rossellini.

    • A range of licensing agreements between Kathy Ireland and companies including Martin Furniture (kathy ireland Home), Root Candle Company (kathy ireland Home candles), The RFA Group (kathy ireland footwear), Alok (kathy ireland Home bed linens and bath towels).

  • Designer name licensing: Designers—including Chanel, Christian Dior, Yves Saint Laurent, Ralph Lauren, Calvin Klein, Giorgio Armani, Vera Wang, Donna Karan, and many others—license their names as brand names for products including scarves, jewelry, fragrances, cosmetics, home fashions, and shoes. For example, the Camuto Group has a licensing agreement with Tory Burch for footwear.

  • Exclusive licensing for a retailer: Retailers often team up with celebrities and designers to create merchandise sold exclusively at a particular retailer, creating a unique form of private label merchandise. Whether it is Alexander Wang’s exclusive collection for H&M, Missoni’s exclusive collections for Target, or the Kate Moss collection for British retailer Topshop, exclusive licensing programs can contribute to the brand identity of retailers.

  • Character and entertainment licensing: Such images as cartoon characters, movie or television characters, and fictional characters are often licensed to appear on a range of merchandise, from sleepwear to backpacks to sheets and towels. Examples include Disney characters, Marvel comic book and movie characters, and South Park cartoon characters.

    In recent years, licensed merchandise relating to movies and movie characters has been extremely popular, particularly for infant and children’s clothing and other children’s merchandise.

  • Corporate licensing: Licensing of brand names and trademarks of corporations such as IBM, Harley-Davidson, or Coca-Cola is also common. This type of brand extension licensing extends a brand that is well known in a particular product area to a different product area. Examples include Porsche sunglasses, Moet & Chandon iPhone cover, Coca-Cola stuffed-toy polar bears, and Harley-Davidson armchairs.

  • Nostalgia licensing: Manufacturers license the names and images of legends, such as Marilyn Monroe, James Dean, and Babe Ruth, as well as old-time movies and radio and TV shows, such as The Lone Ranger, Superman, and King Kong.

  • Sports and collegiate licensing: Professional sports team and university logos are licensed to appear on sport-related merchandise, such as sweatshirts with the Green Bay Packers logo, jackets with the Boston Red Sox logo, hoodies with the FC Barcelona logo, and caps with the University of Michigan logo. Athletic footwear companies often have unique licensing agreements with professional and collegiate sports leagues (e.g., Major League Baseball) or individual teams. In these agreements, footwear companies pay the leagues or teams for the right to sell merchandise with the league or team logo. They may also purchase the right to outfit the team with athletic footwear and/or uniforms bearing the company’s logo (Figure 2.4).

  • Event and festival licensing: Names or logos of events including the Kentucky Derby, the Indianapolis 500, Wimbledon, the Olympics, the World Cup, and the Masters golf tournament are also licensed for use on products.

  • Art licensing: Manufacturers license great works of art to be reproduced on their merchandise.

The success of licensing depends on consumers’ desire for goods with a perceived difference based on brand name, trademark, or image. The diversity of licensed goods proves their effectiveness in creating a favorable difference in consumers’ minds.

Figure 2.4

Licensing of collegiate and professional sports is a growing trend worldwide. Doug Pensinger/Getty Images.


Development of Licensed Products

To succeed, any licensed product must have a well-established, visually oriented property (an image or design). When such a property exists, the following stages are involved in developing the licensed product:

  1. The image or design, commonly referred to as the property, is created. For example, the red, white, and blue logo of Tommy Hilfiger is established.

  2. Consumers are exposed to the property through the media. The Tommy Hilfiger name and trademark are used in advertising, hangtags, publications, and so on.

  3. The property is marketed by the licensor to build name or image recognition. Tommy Hilfiger builds a reputation among consumers for trendy fashion, quality, and value. The name and trademark are associated with these characteristics in consumers’ minds.

  4. Merchandise with the property added is produced by a variety of manufacturers. Tommy Hilfiger licenses the name and trademark to several manufacturers of apparel, accessories, and fragrances.

  5. Merchandise is distributed by retailers. Retailers who have been successful with Tommy Hilfiger sportswear will also want to carry licensed Tommy Hilfiger merchandise, such as accessories and fragrances.

  6. Merchandise is demanded by consumers. Consumers identify with the Tommy Hilfiger name and perceive the licensed products as having an added value because the Tommy Hilfiger name and trademark are attached to the merchandise.

The Licensing Contract

The terms of the agreement between the licensee and licensor are outlined in a contract. Typically, a licensing agreement includes the following elements:

  • Time limit: For many licensed products, timing is everything. For example, the contract for the image of a currently popular movie character may be for a shorter time than for a classic designer name.

  • Royalty payment: Typically, the licensee pays the licensor royalties of 7 to 14 percent of the wholesale price of the goods sold.

  • Image: Contract clauses specify how the image will appear, giving the licensor control over graphics, colors, and other design details. For example, Ocean Pacific (OP) controls the design of all graphics on its licensed merchandise.

  • Marketing and distribution: Licensors often want to control the marketing consistency of their licensed merchandise. Also, many designers do not want their licensed merchandise distributed through discount or off-price retailers, and they put clauses in their contracts to prevent it.

  • Quality: Clauses about the materials and manufacture of merchandise and the submission of samples of merchandise for approval by the licensor give the licensor control over product quality.

  • Advances: Contract clauses set the amount of advance money that will be paid up front and then deducted from the royalty payments.

  • Guarantees: Contracts often guarantee that the licensee will be paid a minimum dollar amount, even if royalties fall below this amount.

  • Notification of agreements to customs department: If goods are being manufactured offshore, or outside the United States, this notification is needed so the goods will clear customs and not be confiscated as counterfeit goods. Contract clauses assure licensees that the licensor will provide notification if needed.

Advantages of Licensing

Licensing agreements have some advantages for both the licensee and licensor. For the licensee, the value added to the merchandise by a licensed name, image, or design comes in many interrelated forms. The licensee gets automatic brand identification (Figure 2.5). For example, a youth T-shirt with a picture of characters from the 2015 movie Star Wars: The Force Awakens received automatic recognition from children and parent-consumers.

Figure 2.5

Licensed products create immediate brand identification in the consumers’ minds. Ethan Miller/Getty Images.


In many instances, the licensed product is trusted for qualities that stem from the licensor—a designer name attached to a handbag adds fashion credibility to the handbag. For manufacturers, a licensed product can also be a marketing shortcut for launching new products. By purchasing the rights to a designer or celebrity name, a fragrance company can launch a new fragrance with immediate brand name recognition.

The licensor also gains from licensing agreements. Licensing allows for brands to extend into other categories of merchandise without revealing to consumers that the licensor is not manufacturing the merchandise. Such arrangements allow companies to expand their product lines by taking advantage of the manufacturing and distribution expertise and facilities of other companies.

For example, when Nike decided to expand its product line into women’s swimwear, rather than spending the resources to develop the expertise in this area, it licensed its name to Jantzen, one of the world’s largest women’s swimwear manufacturers. That agreement allowed Nike to take advantage of the expertise at Jantzen, and it gave Jantzen the opportunity to expand its business by producing a new line of women’s swimwear for a new target market.

As another example of this cooperation between corporations in licensing, Hartmarx, a well-known and well-respected producer of men’s tailored clothing, is one of Tommy Hilfiger’s licensees. Hartmarx handles both tailored and business-casual clothing and slacks for Tommy Hilfiger (owned by Phillips–Van Heusen). Hilfiger controls the design, distribution, and visual presentation of the products, and Hartmarx handles the production. Designer–manufacturer licensing collaborations are common in intimate apparel and legwear. For example, over the past 25 years, Calvin Klein hosiery has been licensed by Kayser-Roth Corporation. HanesBrands Inc. holds the license for Donna Karan and DKNY hosiery. For well-established names or images, licensing arrangements can also be lucrative. Designers such as Calvin Klein and Ralph Lauren likely make millions of dollars each year in royalties from licensed merchandise.

Disadvantages of Licensing

Licensing also has some disadvantages for the licensor and licensee. For the licensor, overuse of licensing arrangements may result in saturation of the property in the marketplace. This can lead consumers not perceiving a distinct image with the property. For example, thanks to hundreds of licensing agreements, Pierre Cardin’s name can be seen on everything from luggage to cookware to children’s apparel. Because of this, the name has lost some of its prestige.

When a licensed product sells well, the licensor must rely on the licensee’s ability to react by producing goods quickly. Depending on the licensing contract, licensors also risk losing control over quality or distribution of licensed merchandise. To assure consistent quality, the licensor must arrange for constant monitoring of production quality by inspecting samples or production facilities.

A tragic example of the risk involved in losing control of a licensed name is that of the designer Halston. In the 1960s and 1970s, Halston became a well-known designer of expensive apparel worn by celebrities. In 1973, Halston sold the exclusive rights to his name to Norton Simon Industries (NSI). In 1982, NSI asked Halston to design a line of affordable mass-merchandised clothing for JCPenney. After Halston introduced this line, high-end retailers dropped his designer-priced collection. Although Halston received some royalties until his death in 1990, he never regained control over the use of the Halston name, which changed ownership at least eight times during its almost forty-year history. Today the Halston name is regaining prestige after the Halston Heritage brand was launched in 2011 and its flagship store opened in New York City in 2013.

For licensees, the major disadvantage of licensing is the risk associated with predicting the popularity of the licensed name or image. Timing is extremely important for the success of many licensed products, and licensees must be experts in understanding and predicting consumer demand. Sometimes, however, the license does not turn out as anticipated. This often happens when big-budget movies flop.

Licensees also bear the expense of controlling channels of distribution and trying to prevent counterfeiting of the licensed goods. They are responsible for additional costs related to the manufacture of licensed products according to the licensor’s rules and regulations. For example, many licensors have rules governing where a product may be manufactured, which may make production more expensive than it otherwise might be. Despite these disadvantages, licensing will continue to be an important business strategy for many fashion companies.

Summary

Supply chain networks within the fashion industries include all the interconnected individuals, businesses, and processes necessary to get a fashion product to the ultimate consumer. Because the success of fashion companies often depends on the effectiveness of supply chain networks, effective and efficient logistics and supply chain management are essential. Within these supply chain networks are marketing channels or routes that products follow in getting to the ultimate consumers.

In the fashion industries, direct marketing channels, limited marketing channels, and extended marketing channels are used. Limited marketing channels are the most common for fashion merchandise. With conventional marketing channel integration, fashion companies will separately preform functions within the marketing channel. However, fashion companies may also engage in vertical integration of marketing channels by performing more than one function. In addition, fashion companies may engage in dual or multichannel distribution strategies, leading to omnichannel strategies whereby the multiple distribution strategies appear seamless to the consumer.

Fashion brands are entities with a set of functional and experiential features that create distinct images in the minds of consumers. Fashion brand companies strive to create a positive and unique brand identity through the process of brand positioning. Through a variety of company-controlled communication strategies and experiences with the brand, consumers develop a brand image. Fashion brands can be classified by type of brand (e.g., designer brand, luxury brand, international name brand, private label brand, lifestyle brand).

Through fashion brand licensing strategies, licensors (owners of the property) sell the rights to use the brand, image, or design to the licensee (typically a manufacturer) for the payment of royalties. Licensing agreements in the fashion industries are common and include celebrity name licensing, designer name licensing, exclusive licensing agreements with retailers, character and entertainment licensing, corporate licensing, nostalgia licensing, sports and collegiate licensing, event licensing, and art licensing. Licensing agreements or contracts involve a number of elements including the time limit, royalty payment, image control, marketing and distribution control, quality standards, royalty advances, and royalty guarantees. To use these strategies successfully, fashion brand companies must thoroughly analyze the advantages and disadvantages of licensing.

Key Terms

brand

brand differentiation

brand extension

brand identity

brand image

brand positioning

conventional marketing channel

designer brand

direct marketing channel

dual distribution

extended marketing channel

fashion brand

fast fashion retail brand

licensing

lifestyle brand

limited marketing channel

logistics

luxury brand

marketing channel

marketing channel integration

multichannel distribution

omnichannel distribution

private label brand

SPA

store brands

supply chain management

supply chain networks

vertical integration

vertical marketing channel

Discussion Questions and Activities

1.

Select a fashion item currently in your closet. What is the brand name of the product? Look at the label; in what country was it produced? Describe the supply/value chain for this product, including material, brand, and retail aspects.

2.

Think of your three favorite fashion brands. What category of brand are they? How does the fashion brand company convey a brand identity for each of them? What is the brand image for each?

3.

What are some examples of licensed fashion products that you own? In which category of licensed goods does each product fall? What characteristics of the property or product were appealing to you as a consumer? Why?

Case Study

Brand Positioning: Tomboy Style Brands

Over the past five years, a number of tomboy style brands have emerged on the market as lifestyle brands. Wildfang, a tomboy style brand based in Portland, Oregon, is expanding its product lines and has added a bricks-and-mortar store. It is now time for Wildfang to analyze its brand position.

Background information:

9 Androgynous Clothing Labels You Should Know by Lily Hiott-Millis

http://www.buzzfeed.com/lilyhiottmillis/9-androgynous-clothing-labels-you-should-know#.wemNklqyA

10 Tomboy Clothing Companies You Didn’t Know Existed

http://askatomboy.blogspot.com/2014/10/10-tomboy-clothing-companies-you-didnt.html

Tomboy Style Brands

Wildfang http://www.Wildfang.com

TomboyX http://tomboyx.com

TomboyBKLYN http://tomboybklyn.com

All Saints http://www.us.allsaints.com

OAK NYC http://www.oaknyc.com

VEER NYC http://veernyc.com

  1. Select six tomboy style brands to analyze for this brand positioning case study. One of the brands must be Wildfang. Go to the websites of the brands to answer the following questions about each brand:

    • Name of brand

    • Retail organization—web, bricks-and-mortar, and/or other?

    • Private label brands only or a mix of private label and other brands?

    • Price range/price point of the merchandise?

    • Stated/inferred target customer?

    • Look at the merchandise offered—what is the brand image? (What words or phrases come to mind when you look at the merchandise, website, and/or store?)

  2. Define brand differentiation. Why is brand differentiation important for these tomboy style brands?

  3. Construct a brand positioning map to illustrate each brand/retailer’s positioning. (Tip: Use the categories related to how the brands differentiate themselves.)

  4. What challenges in differentiating their brand do the six tomboy style brand identities face? That is, what are the similarities and differences among brands? How do the brands attempt to differentiate themselves from other similar brands (e.g., style, price, sizing, service, product assortment, etc.)?

  5. How does Wildfang compare to the other brands in its brand positioning? Based on this analysis, how might Wildfang become more competitive? In other words, what does this brand need to do in the next three years to set itself apart from the other brands? Identify at least three strategies that Wildfang might take to differentiate itself, and detail the advantages and disadvantages of each approach.

  6. What course of action would you recommend Wildfang take to strengthen its competitive advantage? Why?

  7. Cite resources/references you use in this case study, and include a reference list.

Career Opportunities

Careers in creating and managing fashion brands include these opportunities:

  • Brand manager

  • Marketing researcher with focus on brand image and brand positioning

  • Marketing professional with focus on brand identity communications

  • Graphic designer with focus on visual brand communications

  • Licensing agent

References

Find in Library Agins Teri. (2014). Hijacking the Runway: How Celebrities Are Stealing the Spotlight from Fashion Designers. New York: Penguin Group.

Barrie Leonie. (2015, September 2). “Supply Chain Improvements to Save Billabong $30m.” http://www.just-style.com/analysis/supply-chain-improvements-to-save-billabong-30m_id126107.aspx (accessed September 8, 2015).

Find in Library Davis Mellissa. (2009). The Fundamentals of Branding. Lausanne, Switzerland: AVA Publishing SA.

Find in Library Hameide K. (2011). Fashion Branding Unraveled. New York: Fairchild Books.

Find in Library Hancock Joseph. (2009). Brand Story. New York: Fairchild Books.

Millward Brown & WPP (2015). BrandZ Top 100 Most Valuable Global Brands 2015. http://www.millwardbrown.com/BrandZ/2015/Global/2015_BrandZ_Top100_Report.pdf (accessed September 10, 2015).