These days firms in the fashion and apparel industry are having to adapt their business models to respond to the changes in their market, which is increasingly seeing a shift to the use of new technologies.
Interview with Daniel Harari, CEO of Paris-based Lectra, a company which develops integrated technology and Product Lifecycle Management (PLM) solutions for, among others, the textile and fashion sector, following his speech at the opening session of the World Fashion Convention in Shanghai in October
L’Atelier: You were in Shanghai for the World Fashion Convention. So where does the luxury goods market stand?
Daniel Harari: According to the OECD, 2016 is the year that will see China become the largest economy in the world and by 2020 China will be the largest luxury goods market in the world. Ten years ahead of this, the vast majority of Chinese consumers were still spending very little on clothes, but for the moneyed classes – and now more recently for the middle class – clothes have become a symbol, a very strong social marker. So we are currently witnessing a transformation in the fashion market in China. Coming from an almost exclusively manufacturing industry, Chinese companies are now faced with a number of challenges. They’re trying not just to win over their national market, which is highly competitive and expanding rapidly to meet the demands of local consumers – who are increasingly exacting – but also to take market share on the international scene, where design, product fit and brand image are the keys to success.
Could you tell us more about the hybrid model that’s becoming increasing prevalent, especially as used by Chinese firms?
Chinese firms are also looking for process integration solutions in order to deal with rising cost pressures and to help ensure product quality. Although Chinese manufacturing firms have a range of very sound skills at their disposal, they often still lack knowhow when it comes to design and development. Now these are essential factors if, instead of just executing orders, they want to create innovative products able to compete for Chinese customerswith well-established international brands. It seems very likely therefore that the major changes we’re witnessing today will transform the largest manufacturing site in the world into the largest consumer market on the planet. This implies that Chinese manufacturers will have to spend an increasing amount of time on brand and sales strategies and will be looking to extend their control along the value chain. Hence the hybrid business model these companies are applying.
What are the challenges today for western markets?
The US apparel market is to a large extent a mass retail market. The major resellers are – with very few exceptions – in total control of the various sales channels and ‘brand spirit’ is not very relevant. In recent years US fashion firms set out along a path of total – or almost total – subcontracting of their design and production processes. Many of them simply surrendered control of their own brand and lost the means to differentiate themselves clearly from the competition. These companies are now aware of the problem and have recently started to backtrack fast, with a return to designing on home soil and manufacturing, if not at home, then at least in neighbouring countries such as Mexico. What’s important for these US apparel companies is to find a way of re-vitalizing their brand image. In Europe, fashion markets vary enormously from one country to another. In France and Italy, for example, fashion brands, especially luxury fashion brands, have never looked healthier. They’re benefiting from strong consumer demand in emerging countries, as they serve as a social marker for these populations. These days we see that, whatever the geographical market, the differentiator in most cases lies in the development and impact of the brand. So the business models have moved towards a focus on brand value.
What about ‘smart’ textiles? Will they lead to changes in mature markets? Will they help to bring back manufacturing to Europe, and to France especially?
‘Smart’ textiles are a potential area of growth for mature markets. Over the years there will certainly be an increasing number of areas that will use them – aeronautics, the automotive industry, etc. However, we won’t see the most significant changes for another five or ten years. At the present time smart textiles account for less than 1% of the market. In spite of the sometimes spectacular nature of these innovations, most of them haven’t yet gone beyond the research stage and haven’t yet enjoyed any real commercial success. For the moment, what we are seeing is the rising influence of composite materials. These materials first and foremost allow cost reductions and, as they are coated materials, they’re very easy to handle, easy to cut, to shape and to use in manufacture. The United States, Japan and Germany are the current market leaders here. Although composite materials are on the increase, France still has only a small market share. Somecomposites have already been very successful in recent years, especially in aeroplane and car manufacturing.