Memo: In Good Fashion

The merits of fashion retail have never been logical but for the best operators, there is a way to make sense of the chaos.

Likeability, brand equity, and appeal can shift in an instant. But there are predictors of success and failure. Historical benchmarks have long been available to serve as guideposts for the savviest retailers looking to navigate tumultuous times of the present. Manufacturers have thrived during war, recession, protest, and pandemic, and only the poorer performers cited external factors as cause for concern.

A common misconception in the digitally native vertical brand industry is that the previous year of the pandemic is thwarting the growth of fashion retailers, harming sales projections, stifling growth, or shuttering doors. The hard data contends there’s more to the story. Of the current top 100 fastest-growing direct-to-consumer brands tracked by 2PM, 40 are fashion retailers, while four are in the top 10. This has been a breakout year for fashion.

Updated for the week of 2/8/2021

A number of modern brands deepened community and developed foundations for explosive growth over the last 12 months: Parade, Rowing Blazers, Madhappy, Aime Leon Dore, Tracksmith, Buck Mason, Gymshark, and Monica & Andy are but a few. For the retailers who struggled through the last year, this memo can serve as a helpful reset.

The average American buys a piece of clothing every five days. A study of historical crises will show that our behaviors do not slow to halt during moments of distress. Instead, they change; we allocate our spend differently. We limit our purchases to “affordable pleasures” or we shift to differing styles that represent the feel of the moment in question. We are wired to buy things to wear and we do so frequently, even the most frugal of us. What changes is how we express our individuality in evolving times.

Consider Ralph Lauren’s rise in the late 1970s and early 1980s despite a catastrophic American recession. A 1990 article in Utah’s 171-year-old daily paper Deseret News began:

If the 1980s were a movie – and the metaphor is almost unavoidable given actor/president Ronald Reagan’s domination of the decade – the credit lines would have to include costumes by Ralph Lauren. [1]

The designer identified and marched forward on a new approach to an established idea, the article explains: The New Traditionalism or “the baby boom’s kitschification of the middle age.” Lauren wasn’t the first; an even greater example of this strategy is 1947’s launch of then-obscure designer Christian Dior’s first line.

In 1947, my first collection was successful beyond my wildest dreams. 

After departing the army in 1942, the 37-year-old Dior joined the Lucien Lelong fashion house alongside a gentleman named Pierre Balmain, the house’s other primary designer. Drio, along with Lelong and Balmain, labored to maintain France’s fashion industry throughout World War II. Five years later, Dior launched his design house’s debut fragrance. The bottled Miss Dior perfume was a tribute to his sister Catherine who was liberated from a concentration camp just two years prior. Inspired by the country’s Belle Époque period of the late 1800s, Dior preceded Ralph Lauren in a period-driven return to tradition. It was his admiration of that period, 50 years on, that influenced a femininity in his design that would eventually take the contemporary fashion world by storm.

Fashion has never been logical. Sometimes, timing is as much a factor as anything else. For Dior, timing couldn’t have been better. Fast Company’s Liz Segran recently covered COVID-19’s effect on fashion trends. She cited Dior’s prescient strategy and brilliant timing:

During World War II, for instance, women wore jeans and overalls as they took over men’s jobs. Then, in 1947, Christian Dior unveiled his debut collection, which featured figure-hugging jackets, fitted waists, and A-line skirts. It was a radically feminine look that repudiated the utilitarian, masculinized garments of the previous years—and that was the point. Around the world, women swooned over this style, dubbed the “New Look,” which became a dominant fashion trend of the late 1940s and early 1950s. [2]

This next part is prescient. In that Fast Company report, Segran went on to explain the dynamic of women wearing men’s workwear, including overalls and denim, during the war. She cited author Kimberly Chrisman-Campbell explaining how, even after the war concluded and the pendulum swung to a radically feminine look, the fashion trends of the war persisted:

After a crisis, there is a backlash, but there is also a lasting effect. Both of these can be true at the same time.

The war years normalized a new era for womenswear, including pants and garments that were never before considered customary. This sheds light on the potential post-pandemic behaviors of today.

The retail industry has suffered from foundational issues. The reliance on debt leverage to fund growth and inventory has contributed to legacy companies filing for bankruptcy. Of these, J.Crew, Brooks Brothers, JCPenney, and Neiman Marcus are three of many.

However, like womenswear post-World War II, the reset is not as clear as once thought. America’s current comfort in casual wear is likely to persist in the home and places of work for years to come. Consumers did buy clothes to wear during the pandemic despite the remote work trend, stay-at-home orders, and distance learning. The clothes or the messages by the retailers were just unique to the time.

Good Fashion, Bad Everything

This year, traditional retailers like VF Corporation’s The North Face grew in prominence through careful merchandising, streetwear adoption, and savvy collaborations (See: Gucci). Lululemon’s stock is trading near all-time highs. And Gucci has become the “preferred” luxury brand of Generation Z.

While many brands are suffering, and some have had to take drastic measures like permanently closing stores, other brands like Dior or Louis Vuitton have been performing well, indicating that the pandemic is hitting brands with pre-existing conditions harder. [3]

Direct brands like Parade climbed from relative obscurity to $10 million in annual revenue. Rowing Blazers, a traditional menswear retailer, showed up on everything from NBA stars to Princess Diana in Netflix’s The Crown. Madhappy used savvy merchandising, a persisting message, and their partnership with LVMH to earn Lebron James’ attention in the NBA bubble. The brand is now one of the most coveted streetwear brands born in the last five years. Gymshark accepted its first funding, landing at a valuation north of $1 billion. And Tracksmith, the amateur running brand, finally caught the attention of the mainstream after years of quiet growth. It is now featured across the airwaves thanks to the success of their succinct and aspirational advertising strategy.

Like Ralph Lauren’s rise to prominence during an economic recession and political and cultural reset, and Christian Dior’s establishing of a new post-war tone for American women that flew in the face of other trends, the brands that succeeded during our most recent global crisis did so because they were properly equipped. In each case, they all share (1) smart marketing, (2) savvy merchandising, (3) a messaging strategy that cuts through the worried noise, and most importantly, (4) appreciation for the history of the industry.

For the brands that struggle to regain their footing, at least one of the above four are missing. The pandemic has served as a mirror for modern and traditional retailers alike. Walk into a J.Crew and you may feel soulless. Walk into a Rimowa store and you will feel the sense of New Traditionalism that catapulted Dior and Ralph Lauren to generational success. An over-reliance on physical distribution, pay-per-click advertising, traditional merchandising cycles, academic marketing strategies, and stale interpretations of customer profiles are the preexisting conditions that culminated with the current state of retail distress.

It doesn’t have to be this way. Study the best practices of the past. There will always be momentum shifts, forth and back, over time. The brands that survive are studied in sociology, customer understanding, brand history, communication, and the experiences that elevate a product into a moment. These brands capture more than eyeballs; they capture imagination. It’s the one constant of an enduring brand over decades of ebbs and flows.

By Web Smith | Editor: Hilary Milnes

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Memo: The End of Conglomeration

Monopoly is not a suitable term for what Amazon is in the process of accomplishing. A monopoly is defined as the exclusive possession or control of the supply or trade in a commodity or service. There is no term for a corporation becoming the supply or the trade.

I am not anti-Amazon but it’s becoming easier to see how this current administration could bend precedent to break up a web-based conglomerate.

Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space.

Yale Law Journal: Lina M. Khan, Amazon’s Antitrust Paradox

Amazon is trading at near all-time highs, with a market cap in excess of $700B. Historically, Wall Street investors and consumers have been tremendous fans of Amazon, Main Street businesses have not. This is an important distinction.

Until the 1970’s and 80’s, antitrust litigation has focused on structuralism: a focus on relationships of contrast between elements in a conceptual system that reflect patterns underlying a superficial diversity. 

After Reagan’s Antitrust Explosion of 1982, elements of the law began to shift from structuralism and toward consumer welfare. That year, AT&T and IBM faced antitrust litigation that forced changes in each company by 1984. As you know, Amazon Web Services (AWS) and Prime have helped the public company to minimize losses. Thus far, Amazon has been immune to consumer welfare pressures. Due to the successes of AWS and Prime subscriptions, the direct-to-consumer side of the business has operated as a relative loss leader. As Yale Law Journal’s Linda Khan pointed out, this loss leading metric has blinded regulators to the hazards of Amazon’s business strategy.

[My] analysis reveals that the current framework in antitrust—specifically its equating competition with “consumer welfare,” typically measured through short-term effects on price and output—fails to capture the architecture of market power in the twenty-first century marketplace. In other words, the potential harms to competition posed by Amazon’s dominance are not cognizable if we assess competition primarily through price and output. Focusing on these metrics instead blinds us to the potential hazards.

Yale Law Journal: Lina M. Khan, Amazon’s Antitrust Paradox

The 1982 antitrust guidelines introduced by Reagan and his administration set a meaningful departure from ninety years of legal precedent; these guidelines were re-emphasized in 1968. The actions of the Reagan administration in 1982 reflected a new focus. Lina Khan went on to say: “The law against vertical mergers is merely a law against the creation of efficiency.” With the election of President Reagan, this view of vertical integration became national policy. This has been known as the Chicago School approach.

The Chicago School approach to antitrust, which gained mainstream prominence and credibility in the 1970s and 1980s, rejected the structuralist view. In the words of Richard Posner, the essence of the Chicago School position is that “the proper lens for viewing antitrust problems is price theory.”

To pursue an Amazon antitrust case, President Trump will have to reverse the revered national policy of the Reagan Justice Department. It can be implied that the Reagan administration’s shift from structuralism and towards price theory was meant to emphasize middle-class consumerism. But no one could have foreseen Amazon’s role in building a modern monopoly over America’s consumer web. Frankly, their version of a monopoly is altogether different. Here is an illustration for you:

The 4% / 43% figure doesn’t begin to tell the story. No one could have predicted how effective an internet-based conglomeration could be. Or the impact that Amazon’s sales could have on commercial real estate woes. Or how Amazon lobbies for potentially detrimental state / local tax benefits. Around the country, real estate brokers are in a panic as warehouse / office park leasing have fallen off a cliff. In addition, Amazon’s HQ2 campaign is leading to a growing criticism from those who believe that Amazon may have too many tax and cost benefits and at the peril of middle-class workers and retail entrepreneurs.

Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen.

Jonathan Swan, Axios

Amazon built its business around the belief that as long as consumer prices were low, antitrust laws wouldn’t apply. Lina Khan went on to say: “Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole; antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

The health of the retail sector has been on decline for quite some time. Retail business owners, real estate brokers, lenders, and commercial developers didn’t foresee how much of an effect Amazon and eCommerce would have on their adjacent sectors. Where there was originally confusion and apathy, there is now a shared disdain for the Seattle eCommerce giant. Main Street business owners, politicians and pundits have taken notice. And this is the audience to whom President Trump speaks.

Under the current interpretation of antitrust laws, Amazon seems to be getting a free pass. So I should say that antitrust laws in, their current state, don’t prohibit conglomeration. They don’t prohibit a single company from being involved in all these different lines of business. But what they are supposed to prevent is a company that enjoys a dominant footprint in one area of the market, using that footprint to leverage its way into other markets, and so I think that’s the area where Amazon potentially should be facing scrutiny.

From Korva Coleman’s interview of Lina M. Khan, NPR

In 1890, the father of the Sherman Act, Mr. John Sherman (R-OH) stood on the floor of the Senate and declared the following:

If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity.

When the gentleman from Ohio made this statement, he couldn’t envision a future where one man presided over a corporation responsible for a great deal of production, transportation, and the sale of any necessities of life. Sherman also couldn’t envision the internet, a virtual destination void of political governance or etiquette. Amazon’s strategy continues to be the forging of an antitrust-proof conglomeration – loved by consumers and feared by both incumbents and challengers.

Antitrust law is overdue for change. The language no longer matches the time. And while Amazon may not be the most deserving of this scrutiny, they are the most likely target.

The laws will change to address the modern day concerns of retailers, logistics networks, newspaper publishers, ad firms, shipping companies, grocers, auction houses, book publishers, movie studios, software companies, hardware manufacturers, credit lenders, payment services, and internet service providers. In our modern American economy, any business that touches the internet has been affected by Amazon.

Bezos is aiming to possess the entire board upon which a monopoly can be formed  — the consumer internet. And populist politicians may eventually conclude that no corporation should be able to own the consumer internet. But for now, Amazon has every advantage.

Report By Web Smith | About 2PM