Luxury brands to profit more from own retail

A new report shows luxury brands are profiting more from their own retail and distribution network, than from wholesaling. Brands surveyed by Drapers reported 55 percent of sales are derived from their wholesale channel, but these figures are expected

to fall to a modest 39.5 percent in just five years time. Respondents explained the reason for this predicted change, with one saying “the wholesale model does not have enough margin”. Another added: “The wholesale segment is falling down. Only a few established wholesalers will survive, those who are able to review their business and approach to consumers, including investments in e-business, to become more internationally known.” One respondent simply said this is now the “rule of thumb”.

The discounting by retailers and wholesalers over the past few years has led brands with a traditional wholesale model to become more protective and take more control of all elements of their business, from pricing, to marketing and distribution, though brands who operate their own stores will need to continue investing in their retail outlets.

This shift is also affecting the skillset among luxury professionals, says Mathew Dixon, director at luxury recruitment consultancy Hudson Walker International. “Nobody used to talk heavily about sales in the luxury sector but brands are developing much more aggressive business models with underlying sales ethics. It’s a very sales-driven environment now with more commercially-oriented roles.”

As for buying strategies among retailers, forward order remains the norm, representing 62 percent of total budget. But in the next year, this is expected to contribute to more than half of buyers’ budgets – 53 percent. Respondents listed the following as their best-selling brands: Vivienne Westwood, J Brand, Equipment, Isabel Marant, Alexander McQueen, Stella McCartney, Diane von Furstenberg, Louis Vuitton, Rick Owens and By Malene Birger.

Looking at specific markets, sales were up on 2011 for the majority of respondents, 89 percent, across all fashion sectors. Only 10 percent of respondents said sales were down in womenswear, kidswear, footwear and lingerie, with menswear and accessories staying the same of were increased.

Image: Vivienne Westwood