1. FASHION AND THE WEALTH OF NATIONS 3rd Lecture of LEARNING FROM MILANO The Business Model of the Italian Design Industry Intersection course by Giannino Malossi and Marco Ricchetti HERMES LAB

2. A few basic questions about the Fashion Economy What has to do fashion with the wealth of a nation ?What has to do fashion with the wealth of a nation ? How fashion generates value for the industry?How fashion generates value for the industry? How strong (and far reaching) are the linkages between manufacturing and fashion design?How strong (and far reaching) are the linkages between manufacturing and fashion design? Does an optimum management model exists for a fashion company?Does an optimum management model exists for a fashion company? FASHION AND THE WEALTH OF NATIONS

3. Over 800.000 employees in Italy Over 3.000.000 employees in Europe (just in manufacturing of fashion goods!!!) The engine of fashion: Italy as an example

4. How fashion generates value for the industry?

9. In the knowledge economy, strategy must focus on expanding existing markets or creating new ones - not beating the competition on costs.

10. Fashion is, by definition, change. Success in fashion industry comes with the ability to grasp and recreate in clothes and accessories the ethereal spirit of the time and voluble desires of customers. Fashion adds an important design dimension to textiles or leather artifacts, which is capable of providing a continual and varied flow of new products

11. Source: Marshall L. Fisher

12. The variability, unpredictability and the multiplicity of factors behind the success or the failure of a particular garment that becomes the best seller (or the worst-seller) of the season generates at every season a risk far greater than those involved in the launch of new products in other industries

13. Risk management in the fashion business Consumer tastes less predictable than in the past: department store markdowns, a key indicator of how well what is supplied by department stores matches what customers want to buy, have grown from 8% of sales in 1971 to 33% in 1995

15. The textile-clothing-fashion-home cluster is more than a mere summation of products, sectors, or statistical categories It is first and foremost a system of relationships that strengthens competitiveness. The textile-clothing-fashion-home cluster The textile-clothing-fashion-home cluster

16. 3 capabilities for the Management of risk

17. Risk management in the fashion business and the role of information flows through the pipeline. 1) The manufacturing pipeline works orders in hand. The main risk is born by the retailers. 2) Trade fairs, prototyping and sampling contribute to the streamlining the pipeline 3) The communication overload reduces the risk of large mismatching between the supply pipeline and consumer behaviour

18. Mismatchingrisk Mismatchingrisk

19. Increasing uncertainty and risk Medium to high high very high RISK

20. N. OF DIFFERENT FABRICS IN GARMENTS SOLD TO RETAILERS N. OF FABRICS ACTUALLY USED IN GARMENT COLLECTIONS N. OF SAMPLES DEIGNED BY WEAVERS ( EXCEED 60.000 SHOWED AT Première Vision) Fonte: Hermes Lab The selection process: the case of fabrics Risk management in the fashion business

21. The value created by fashion

23. How strong (and far reaching) are the linkages between manufacturing and fashion design?

24. -0.30 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40 TURKEYFRANCEGERMANYUNTD KINGDOM ITALYKOREA REP.CHINATHAILANDINDONESIAUSA,PR,USVI SPECIALIZATION IN WOMENS’WEAR OF LARGEST WORLD EXPORTING COUNTRIES THE SPECIALIZATION IN WOMENS’WEAR VS. MEN’SWEAR AS A PROXY OF SPECIALIZATION IN FASHION GOODS

25. Services are a major vehicle in adding value to manufactured goods

26. A tentative 3 circles map of the services sector selling to the fashion busines SECON TIER GENERAL COMMUNICATION/ PUBLISHING CONSULTING/TECHNICAL DESIGN TRADE SHOW ROOM FIERE STILISTI DESIGN P.R. PERIODICI SPEC. RIVISTE FEMMINILI FOTOGRAFI CONSULENZE DIREZIONALI, LOGISTICA MARKETING ECC. VISUAL DESIGNER SISTEMA ALBERGHIERO E TARSPORTI AGENZIE DI PUBBLICITA' SPAZI URBANI LOCATION DEI NEGOZI RICERCA DI BASE NUOVI MATERIALI TECNICI DI PRODUZIONE TV - RETI DI TELECOMUNIC. CORE  Core tier: Specialized services for the fashion business.  Second tier: General services but oriented to the fashion business moda,  External circle: General services

27. TRADE SERVICES: the case of Milano Show rooms in Milano 633 FASHION FAIRS IN ITALY: 41 Fashion week in Milano: Runaway shows/designers presentations 300 Buyers registered 30.000 Turnover generated by Fairs in Milano 1,5 bln Euros

28. There are more than 8.100 employed in design companies in Italy DESIGN SERVICES:

29. In Italy the yearly turnover in store fittings and design is estimated at around 5 billion Euros greater than that of machine tools or motorcycles, similar to hat of household appliances, more than double of pasta the italian national symbol, not much lower than wine, beer and beverages, and over half of that of computers. DESIGN and TRADE SERVICES

30. The cost of setting up a new shop DESIGN and TRADE SERVICES

31. Does an optimum management model exists for a fashion company?

32. The fashion business in the ‘80s Communication Retailing Design Manufacturing Culture Society Consumption

33. The fashion business in the ‘90s Design Manufacturing Communication Retailing Multi-competencecompany Culture Society Consumption

36. What has to do fashion with the wealth of a nation ? Fashion relies on industry as an economic engine The industry relies on fashion as as a competitive weapon The cultural and volatile nature of fashion produces serious challenges to the management of fashion business The result is an interesting interdependence between insubstantial frivolity and conreteli practical economic behavior

37. End of the presentation HERMES LAB WWW.HERMESLAB.IT Postmaster@hermeslab.it