Innovation in Luxury Fashion Family Business

Processes and Products Innovation as a Means of Growth

E. Giacosa

• Publisher: Palgrave Pivot
• Year: 2014
• ISBN:
  9781137498663
• Topic: Negocios y empresa
• Subtopic: Negocios internacionales

A large number of family businesses operate in the luxury fashion sector which shows their importance as a source of growth, development and social and economic stability. This book analyses how a strategy of innovation in terms of products and processes can offer a competitive advantage to family businesses operating in the luxury fashion sector.

Part I

The Family Business Phenomenon in the Luxury Fashion Context

1

The Family Business Model in the Luxury Fashion Context

Abstract: We established the context for the luxury fashion business, distinguishing in relation to the affordability of the products. Taking our cue from the Miller and Le Breton-Miller model (2005), we have attempted to create a new model, identifying a series of specific features of family businesses which represent a competitive advantage in the luxury fashion context, as they typify attitudes and values typical of family businesses. These particular features are the following: corporate heritage; long-term vision in investment strategy; specialization; internal and external relationships; tendency to innovate. These particular features affect the propensity to innovate, which is the core topic of the book.

Keywords: corporate heritage; family business model; innovativeness; luxury fashion context; long-term vision; relationships

Giacosa, Elisa. Innovation in Luxury Fashion Family Business: Processes and Products Innovation as a Means of Growth. Basingstoke: Palgrave Macmillan, 2014. DOI: 10.1057/9781137498663.0007.

1.1A definition of ‘luxury fashion business’

The focus of this book is the innovation strategy implemented by companies operating in the luxury fashion business. To this end, we decided to concentrate on the product categories of clothing and accessories, and to exclude all other luxury product categories from the analysis.

It is interesting to establish the context for the luxury fashion business. For the purposes of this study, the term ‘fashion’ refers to clothing and accessories, whereas the term ‘luxury’ represents items that are perceived as being status symbols thanks to the brand appeal and to their intrinsic quality, price, rarity and creative content. Thus, luxury is placed within the context of fashion, that is, the clothing and accessories product category.

For a better definition of the luxury fashion business, it is interesting to better differentiate between the terms fashion and luxury, which, mistakenly, are often used synonymously.¹ As already stated, the term fashion refers to the clothing and accessories sector. A ‘luxury’ item, on the other hand, is a symbol of elegance and sophistication, with the emphasis on intrinsic value in numerous categories, and these characteristics justify their high price.² It follows, then, that not all fashion products are also luxury products, as they have different targets, and naturally, not all luxury products are items of fashion, as they may belong to different categories. Yet despite these differences, there are similarities between fashion and luxury. First of all, they are both widespread phenomena, in terms of how they relate to the everyday lives of people and the product categories concerned. Secondly, they both have to find a place on the market, no matter who the reference target is.

It is not easy to define luxury, as the literature does not give a sole definition. Thus, the term luxury leads to different interpretations and contextualization, which are strongly influenced by individual perceptions and the idiosyncrasies of the contexts in which companies operate and consumers live. What one person considers a luxury, may not be so for another.

We have said that the book focuses solely on the luxury fashion business, focusing on the business of companies that produce and sell clothing and accessories. Nevertheless, it is also interesting to note that the social value of a luxury product can differ according to its context and sphere of action. In order to outline the context in which luxury fashion companies operate, we should define the different sectors³ in which luxury has a place. There is no one single sector for luxury products, although they all share the fact that they allow consumers to demonstrate their membership in a certain social class. Identification of the various luxury sectors involves differentiating them according to whether they have traditionally been associated with luxury goods or are now emerging as luxury sectors:⁴

Core luxury sectors: these are traditional luxury sectors, such as clothing, accessories, jewellery and watches; perfumes and cosmetics, and cars.

New luxury sectors: in addition to the core luxury sectors, a number of sectors have begun to enter the luxury market, expanding their horizons of commercial opportunities to draw closer to the world of luxury. Among these are the following areas: wines, spirits and other gourmet products, tourism and catering, and furniture and household items.

After defining the various contexts into which the social value of a luxury product can extend, we will now focus on the luxury clothing and accessories sector.

The definition of the luxury fashion business would not be complete without specifying the type of offer to meet these needs. For this, it is appropriate to place different types of luxury fashion into different categories, in relation to the affordability of a brand. This leads to the following categories of luxury fashion⁵ (Figure 1.1):

Non-affordable luxury fashion: the Hermès Kelly, Armani and Valentino haute couture and Chanel 2.55 are non-affordable luxuries, that is, luxuries aimed at (High Net Worth Individuals (HNWIs), worth a million dollars or more (excluding their primary residence). They have what is known as argent de poche, in other words, cash they are ready and willing to spend on highly exclusive goods. Such products are of outstanding quality and creativity, and consequently a very high price, which is affordable to a select few. These characteristics make a brand unique in the eyes of the consumer,⁶ possession of which delivers status. Luxury fashion is created in limited editions or one-off pieces, is handmade or semi-handcrafted and is often customized or tailored.

Affordable luxury fashion: affordable luxury fashion is the demonstration of the new democratization of luxury.⁷ Consumers are lured by satisfactory quality and strong stylistic content, and more affordable prices than non-affordable luxuries. The prestige of owing the brand is still perceived, even without owning a haute couture dress with the same label. Owning an affordable luxury item creates a sense of belonging to a certain social group,⁸ and hence, the item is an instrument of social elevation, even if it is not non-affordable. In Japan, women aspire to own the same model of Prada bag: it makes them feel as though they belong to a high social class.

FIGURE 1.1 Typologies of luxury

Source: Personal elaboration.

1.2The presence of family businesses in luxury fashion

The family business phenomenon is considered a dominant source of growth, development and social and economic stability,⁹ representing the most widespread business model in the world. With particular reference to the European environment, the context is characterized by a significant number of family businesses playing an important role in the strength and dynamics of the European economy. In particular, 60 per cent of the companies in Europe are family businesses, compared to 80 per cent in the United States.¹⁰

In Italy, where the Made in Italy label is so strong in the luxury fashion context,¹¹ the family business phenomenon of numerous small and medium-sized companies represents a distinctive factor in the economic context.¹² Family businesses account for the majority of firms, acting as a driving force and a valid alternative business model both for public opinion and policymakers. In particular, family businesses produce around 70 per cent of the total Italian GDP.¹³ In addition, the family business phenomenon has an important place in the luxury fashion business, as 80 per cent of the medium and large companies operating in the luxury sector in Italy are family businesses:¹⁴ they continue to record interesting performances despite the world crisis in consumption, with a joint presence of historic family businesses and large multi-brand groups.

Consequently, the importance of family businesses in the economic and social context cannot be ignored.¹⁵ In addition to the importance of the family business phenomenon in itself, the luxury fashion business is also an important topic both in the literature and in the economic context, in which the family business model is so frequent and such a winner in the luxury fashion context.

This chapter focuses on the family business model in the luxury fashion context. Its purpose is to identify why the family business model is so frequently used and such a winner in the luxury fashion context, examining the typical features of family businesses which are essential for competing in this context. These particular features affect the propensity to innovate, which is the core topic of the book; therefore, identification of these features is useful for the analysis of the innovation strategy, which will be discussed in the subsequent chapters.

The choice of this topic is due t...

Table of contents

• Cover
• Title
• Introduction
• Part I  The Family Businesses Phenomenon in the Luxury Fashion Context
• Part II  The Innovativeness of Luxury Fashion Family Businesses
• Conclusions
• References
• Index