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Behind the Veil of Fashion’s Rising Prices, Including Contemporary Brands [Op-Ed]

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By Alex Mazelow 

The costs of goods and services in nearly all consumer categories have sharply increased over the last year. The world is grappling with a looming recessionary economy, rising inflation, and the Russia-Ukraine war, driving costs upward, seemingly with no end in sight. 

The fashion industry has certainly not been immune to these increases, both in the high-end luxury space, as well as the low-end, fast-fashion segment. However, the mid-market, ‘contemporary’ players are also on the move as far as price-positioning and have seized an opportunity to re-configure their place in the market. This re-positioning took place tacitly, and quickly, and this holiday season will determine if their bets on pricing models will pay off. 

With the worst of the pandemic, apparently, in our rear-view mirror, global apparel and accessory brands have begun a slow and steady, but often uneven rebound, across the major markets of the U.S., Europe, and China, leading the recovery. Both mall, and off-mall brick-and-mortar outlets have seen increased foot traffic and higher sales, despite grappling with staff shortages, shipping and freight delays, and rising costs across the board. 

Women’s contemporary floor at Holt Renfrew, 50 Bloor St. W. in Toronto. Photo: Craig Patterson

Mono-brand stores are dealing with higher raw material costs, more expensive and smaller labour forces, and are, in many cases, opting for air freight as a more reliable option than sea, but with the explosive logistics costs, are trying to avoid margin erosion wherever possible. Multi-brand retailers are victim to short-shipments, and increased shipping costs by local and domestic carriers. 

Overall, significant challenges remain; the looming global recession, high inflation, and the Russia-Ukraine war are no small matters for an industry almost solely based on discretionary spending.  

Typically, this web of seemingly never-ending challenges would spell disaster for the entire global fashion industry, or a continuation of the storm that brands suffered through during the closures and shut-downs of the COVID-19 pandemic. Interestingly, this has not been the case in the past twelve months. Instead, we have seen unprecedented spending across all fashion and apparel sectors, an insatiable appetite for luxury goods, and a complete ‘reset’ of the price positioning seen prior to the pandemic.  

Alexander Wang Campaign Image. Alexander Wang will open its first Canadian store next year on Bloor Street in Toronto.

Fashion consumers are flooded daily with messages about increased costs for manufacturers and designers, as well as the push to make more environmentally sustainable products, which of course, cost more to produce. While these factors may be true, it is clear that the brands themselves are not taking the same kind of hit to their pocketbooks that consumers are. The never-ending price increases indicate that the growing costs of doing business are partly being passed on to the consumer, while brands struggle to maintain their margins, and their bottom line. 

Luxury brands like Louis Vuitton, Chanel, Hermes, and Brunello Cucinelli have been steadily increasing their prices for years, part of an industry that will report revenue of $117 billion in 2022, and is expected to climb by 5.62% annually. There are suggestions that the main contributors for these hikes are in part to rising costs of raw materials, soaring marketing spends, and a significant investment in brick-and-mortar flagships located on the best (and most expensive) shopping streets and malls of the world. 

What we have seen, given the latest earnings from Kering Group, parent company of brands such as Gucci and Saint Laurent, reporting a revenue increase of 23% YoY for the third quarter of this year, or LVMH, parent to the namesake Louis Vuitton, reporting 56.5 billion euros in revenue, in the first nine months of 2022, up 28% from the same period in 2021. While increasing prices at that level is sure to price out a certain portion of customers, leading to fewer of them, luxury brands are happy to make their products more scarce, and, as such, more desirable by their true base; those who can really afford their products. 

In contrast, and on the low end of the pricing spectrum, the pandemic saw brands like the Chinese-owned SHEIN, favouring small-batch runs of new items, soar to success, while the Spanish behemoth Zara, used that time to perfect its supply chain, now able to have their products go from the design table to shipping container in three weeks, and demanding a turnover of inventory in it’s stores of a maximum of ten days, far shorter than the industry average. 

Women’s contemporary evening wear at Saks Fifth Avenue in downtown Toronto. Photo: Dustin Fuhs

While luxury brands occupied the high end of the pricing spectrum, and fast-fashion on the low, contemporary brands have traditionally occupied the mid-market. They are seen merchandised in their own department store floors, or online on e-commerce websites primarily dedicated to this price point, and have always hovered around the $500 space and for years have existed as the ‘sweet spot’ for many customers. Brands like Philip Lim, Alexander Wang, Theory, and Isabel Marant have been hallmarks of this space for many years, anchoring the contemporary floors of Holt Renfrew, Bloomingdales, Saks Fifth Avenue, and Nordstrom. Marant, selling a majority stake to Montefiore Investment in 2016, has seen huge success, growing from 22 stand-alone stores at that time, to the current count of 66, and doubling revenue from 2016 to 2019, from 150 million euros to 300m. However, this category segment has been on shaky ground for years, getting squeezed by both the lower and the higher on the pricing spectrum. As DTC brands entered department stores, and luxury companies became more accessible with streetwear offerings, the contemporary space was losing desirability to its traditional base. 

But as the 2022 fall/winter collections rolled into retail stores and e-commerce sites alike, we saw these mid-market brands suddenly occupying a new part of the pricing spectrum. The label L’Agence, in pre-pandemic years, had success with a blazer style at the time retailing in the $500 USD range. Now, the same, granted, newer iteration of the jacket, is in the $675 USD range as seen on the Bloomingdale’s website. 

Similarly, Ulla Johnson, coveted by the New York City socialite scene, has its boho dresses starting at $600 – a departure from the $500 ‘sweet spot’ they initially thrived in. The pricing gap left open by the increased costs of luxury brands, has resulted in the perfect time for contemporary brands to transition to the  ‘advanced contemporary,’ or ‘affordable luxury’ categories.   

The transition was quick, and with the response from consumers being favourable, it would appear that customers have accepted the explanations given by brands in order to justify their price increases. However, the closures of the pandemic also provided the perfect platform to “reset” the pricing game throughout the industry, tacitly unveiled to customers as stores merchandised their fall 2022 collections – and it’s been a largely winning formula. While popular brands climbed the pricing ladder, emerging brands like the French ba&sh, and AMI Paris have secured a top spot in the ‘new’ contemporary space, offering dresses in the USD $400 range, and secondary items like hoodies, at USD$300. 

Women’s contemporary at Saks Fifth Avenue in downtown Toronto. Photo: Dustin Fuhs

While the popular rhetoric, and that largely accepted by consumers, is that the fallout from the pandemic, as well as the current economic climate are to blame for rising costs the fashion industry has seized the opportunity to re-align pricing in all categories. They have successfully moved out of the crowded, and tightly squeezed ‘contemporary’ category, and into the new, more breathable, advanced contemporary space, hovering just below the luxury designers, all while maintaining margins and maximizing profits. 

With the Black Friday and Cyber Monday shopping holidays around the corner, fashion brands and retailers alike are watching very closely. Traditionally these four days have set the outlook for the year ahead, and this year the stakes are higher than ever. While third-quarter results have been solid for luxury, and mixed for the plethora of contemporary brands, both long-standing and emerging, the outlook has been hopeful. The proverbial clock is ticking for the newly instated advanced contemporary brands, and the upcoming weekend will be a strong determinant as to whether its most recent price positioning will spell success for them. 

About the Author:

Based in Toronto, Alex Mazelow has been working in the fashion and retail space for 15 years, and holds a Master of Business Administration from Toronto Metropolitan University, and a Bachelor of Arts from McGill University.  

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