Diversification and Segmentation in Fashion retail

Andy Warhol Cambell´s segmentation version

Many brands have evolved into groups that focus on different customer profiles. On the one hand, we have companies such as GAP, H&M, Inditex, Mango, Armani…that are focus on many segments in order to respond to different income, gender, style (e.g. COS vs H&M), size (e.g. Violeta by Mango) or categories (e.g. beauty, homewear) profiles. On the other hand, there are conglomerates like LVMH, Kering or VF Corp that are specializing in a higher segmentation level. These corporations are growing thru acquisitions and have created thematic galaxies around luxury goods, apparel and/or sportswear. Regarding LVMH, the galaxy includes Nowness media platform and next “24 sèvres“, multibrand e-commerce platform that I will comment in coming articles.

A clear example of a company that grew with many sub-brands, designed under a parent umbrella brand, is Armani. The “Emporio” of Giorgio Armani, a good example of a designer with a sense of business. An artist that understood fashion and retail. He used the main power of Armani brand to create different luxury experiences far from apparel (i.e. Flowers, Chocolates, hotels), applying a segmentation and diversification strategy. He also segmented his brands to respond to different customer grades: from premium to absolute luxury. Armani is wearing all the customer segments in the luxury fashion pyramid. Customers can purchase the most expensive suit at Armani Privé but also an “affordable-luxury” pair of jeans at Armani Jeans. The first made in Italy, the second, probably, in China.

But diversification can be a double-edged sword. All the brands need to retain and protect its core DNA and values while, at the same time, keep evolving and attracting at the pace of new generations. Brands that concentrate their marketing efforts in a specific customer segments will have better probabilities to survive and retain loyal customers.

Armani announces that the company will cease the brands…

On February 2017, Giorgio Armani announced that the company will cease the brands Armani Jeans and Armani Collezioni. Armani is the latest in a string of designers and companies that have streamlined collections, including Ralph Lauren, Burberry, Marc Jacobs, Dolce & Gabbana and Paul Smith. Read more about Armani brands restructure on WWD.

Maslow and Pyramid of Fashion_Diversification_Fashion retail

After his Fashion Show, on February 2017, Armani revealed his decision to cease the Armani Collezioni and Armani Jeans brands and use only the Giorgio Armani, Emporio Armani and A|X Armani Exchange names. This new strategy will bring a clear message to their customers, instead of many different communications according to different labels.

Inditex has created a retail galaxy too but not under the same name umbrella. In this way, Inditex avoids to disorientate te customer. Every brand of Inditex is oriented to different customer segments and “try” to avoid cannibalization. But this doesn´t mean that a customer is not buying in more than a brand of the group. Each brand has a special characteristic or DNA and customers will use a different brand according the “time of the day” or the motivation (e.g. work, ceremony, sport, casual…).

Inditex brands portfolio

The new Meca – the revolution of retail

A consequence of growing in many segments is the trend of megastores/ megaflagships. An “all-in-one” store that concentrate all the brands of the group. Most of those stores are developed by mass-market brands and are located in premium locations. A clear effect on retail is the decrease of expansion as we got used to . As a retailer, you don´t need any more 20 stores in a city. Or more than that, having a lot of stores in the city don´t ensure you market share any more.

“Walmart´s retail expansion strategy is dead”.

Global cities are concentrating their fashion, apparel and luxury goods offer in a few streets. Brands have invested in premium locations within the golden shopping line. And mass-market brands have created “apparel supermarkets” (new “departments stores”), puzzles to keep their customers inside while covering many needs for the whole family (men, kids, accessories, women).

At the same time, departments stores are struggling and pure players are gaining market share. The consequence is that competition on street is higher and this will boost innovation. Omnichannel is pushing retailers to adapt to new technologies like smart dressing rooms, mobile payment solutions and data analytics for effective planning, demand forecasting and inventory optimization. In the back end, CRM, ERP and PLM, amongst others.

  massimo-dutti_womens-area-1st-floor-9-1-copia-1140x660  massimo20dutti20vinc3a7on20948

Massimo Dutti Flagship – Paseo de Gracia, Barcelona

Some of the objectives are more traffic,  more cross-sell and higher average tickets while reducing in-store warehouse. Price per square meter is very expensive and brands are investing in omnichannel in order to act as showrooms. Then customers will enjoy a better shopping experience, showrooming and other omnichannel options. But brands also gain brand awareness and reputation because some of these stores are “museum flagships”, historical buildings integrated to the retail shopping line. Customers visit those stores like new museums, looking for something else than products: retailtainment.

hm-flagship-store-barcelona-1-1200x800

New H&M flasgship store on Paseo de Gracia, Barcelona. The first one with a cafeteria Flax & Kale (sustainable food concept) inside.

The customer profile is dead: Millenials and the “I-profile”

New generations can wear a pair of Golden Goose (luxury sneakers) today and a pair of Zara shoes tomorrow. The first ones cost 300€, the second ones, 20€. Millenials like to combine styles and to customize their looks. They want to feel part of their identity creation. First impression is based on appearance and brands like Nike is helping their customers to cover this need (e.g. NIKEiD – Nike by You).

“What you wear is how you present yourself to the world, especially today, when human contacts are so quick. Fashion is instant language” — Miuccia Prada.

Wearing a total look from the same brand, already packed, is out of date. Millenials even create their “I-brand” when they send their selfies thru facebook, watsapp or instagram. They wear many brands from different segments and the trend catalogue is not any more the rule to follow.

New generations (as a Millenial born in 84) are looking for true stories and real experiences. Did elder people have earthliest desires? Maybe, but new generations are victims of technology/media consumption and the avalanche of information. Too much data to digest, and just a few filters helping to choose the right option. There is a need of a master in content curation to understand the environment. We are living in a ephemeral and liquid society (Modern Liquidity, Z. Bauman), spending one second per picture on instagram and touching our smartphones 2,617 time every day (Dscout Research).

Millenials and the following generations are getting “lost in translations” and they want something real, solid. Every brand tries to look trendy, omnichannel, sustainable… Even Primark says it´s sustainable… A Millenial is highly social being, but still part of a micro-tribe or tribes. This means, he/she is going to look for a specific identity, linked to a few peers, different from the mass.  Throwing the net away doesn´t work anymore. It´s time for hyper-diversification and hyper-segmentation.


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