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Saturday 5 June 2010

Cutting Back.

Fashion And The Reccession.

The 2008 Wall Street crash caused people to loose obscene amounts of money. Millions of people lost every penny they'd invested in stocks and their homes. People were faced with financial ruin that they couldn't have anticipated including their pensions.

Blue chips like Bank Of America and Alcoa lost more than sixty-five percent of their value. The Wall Street Journal reported the broader Standard & Poor 500-Stock Index sank thirty-nine and a half percent, almost excatly matching its 1937 decline. That translates into about seven trillion dollars-( yes that's a T, trillion) of shareholders' wealth, which equates a gain of the last six years wiped out in one year of incredible market swings.

"What happens to Bank Of America or Alcoa does not concern me, and how does this affect fashion anyway?" I know what you are thinking. Allow me to explain.

What affects Alcoa, banks and Fortune 500 Companies affects us, all believe it or not. The grim realty of 2008 only confirmed what investors had known for months. 2008 was a very bad year to own stocks and also be in negative equity on your house. And I mean ALL stocks. Almost no industry was spared and that includes tha fashion industry as well. The subprime mortgage market mestastasized like a cancer and sank the American economy into what could be a long reccession.

The stock and housing crisis not only affected America, but worldwide the effects were felt as well. The European and Asian markets also fell sharply, but less than their emerging market counterparts. Many commodities like copper and oil crashed. The BRIC cuontries which is an acronym for Brazil, Russia, India and China became targeted places for brokers when the market was booming because they have what econonimsts deem emerging economies.

No one was safe except for those who 'parked' their funds in United States Treasury Securities-only disadvantage is they yield little or no return. Better to gain nothing than loose it all. Or those who fore-saw it all and bought Credit Default Swaps on subprime morgtage bonds and also shorted financial stocks as well.

This brings me to the fashion industry. After the mini-lesson above, it is worth noting that the fashion indutry was also affected in this crisis. Many small and meduim sized fashion businesses went bankrupt most notably Christian Lacroix- the french couturier whose hedge-fund owners went to the wall bringing it down with it. In London, Luella and Aquascutum went down as well but it was rescued by fashion investor and current chairman of The British Council, Harold Tillman. In Germany, Escada was a casuality of this as well.

Many fashion businesses still struggle to get by today because the consumer learnt their lessons in 2008 and have now cut back on their descretionary purchases of which fahion makes a big percentage to save for a rainy day. This brought about what was has come to be known as 'The Savvy-shopper.'
This 'savvy-shopping' involves looking for bargains i.e. good quality, on trend and at the best possible price thus the emergence of The Value-Sector.

The Value-Sector includes fashion companies that sell their products at very low prices i.e. single-digit and lower to mid double-digit. They are so smart in their market offer that their products are on trend, good quality and at low prices which attracts this savvy shopper to their doors.
I'll give you an example; it's hard to tell the difference between a plain black Polo t-shirt from say Lacoste at £45 and one from H&M at £8 if it wasn't for the aligater on the Lacoste because the cut and fit are the same, the quality is very good for the H&M, and best of all, H&M have stores on every high street in Britain and the world over.

This is a prime example of what the fashion industry is dealing with. That is why we are now seeing designers falling over themselves left right and centre to do collaborations with these high street giants for survival. Where before you had the high street giants churning out copies of designers' items right after they'd hit the runway- for example, Mango the Spanish retailer, and New Look in Britain have been known to have these much -coveted fashion items on their shop floors two weeks after the runway season in the four major fashion capitals has ended. This aggrevated the designers so much that they now decided, "if you can't beat 'em, join 'em." The list of designer collabos with H&M is as long as my arm but atleast the designers are now 'eating' together at the same table with these high street retailers.

In conclusion, When times are hard financially, one needs to boost their self-esteem and one of the ways to acomplish this is to dress fabulously which helps one to feel good inside. You don't have to spend a fortune to look good nowadays, you can just hop into, say for example, your local H&M and come out looking and feeling like a million dollars. No one will be the wiser. You might as well be dressed in Ralph Lauren for all they know.


daniela kate morosini said...

firstly, this has massively explained a lot of the credit crunch to me, so thanks! also, i can't believe luella went down - very funny that aquascutum did, after some lady who worked there said on radio 4 she wasn't concerned at all...lucky they got bailed out.
as someone who can't afford designer, i love the collaborations. do you think this will force the high street to be more sustainable in their creations, or not?
lovely as always sir :)

*sunday* said...

fair point! couldnt agree more... saw SATC2 on the weekend - what a load of rubbish - I thought your review was spot on. I am a massive fan of the series but THIS was just too much. Crap acting, crap plot, crap script FABULOUS clothes :)

Biana said...

I have never thought about the crisis that way. I like your perspective on it. I agree on it that the look maybe is the same, but to keep the price so low, the quality is unfortunaltely a bit less sometimes. I do agree that you don't have to spent a fortune nowadays to look good, though.

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