from INSIGHT BUSINESS published by USC's Center for Management Communication
www.marshallinsight.com © copyright 2006 by USC Marshall School of Business. All Rights Reserved.
By Lindsey Rosenberg
The past several years have certainly challenged our nation. Rising oil prices, erupting wars, failing domestic corporations, an increasing national debt and countless other travesties the United States suffered have left us scathed, but definitely not broken.
As our country starts to put itself back together, the markets are slowly starting to settle down and trade is resuming at a more normal pace. But how do we know we are really moving into better times? One indicator—and an interesting one at that—is fashion. Forget the account book and stock portfolios. For now, let cardigans, sequins and hemlines lead us into a period of prosperity.
This February and March, the major U.S. fashion markets, New York and Los Angeles , showed their autumn/winter 2005 collections. In these twice-a-year fashion shows, major world designers make their predictions for the next big fashion trends.
Trotting the country and globe scouting for new colors, fabrics, patterns and styles for the coming seasons, these designers put together collections that not only tell us where fashion will be in six months, but also hint at the direction the economy is moving.
You may not believe the length of a hemline or cut of a jacket can explain where the economy is heading, but fashion can often be an incredible indicator of what is to come in the marketplace.
What we saw on the runways this season was intriguing in respect to the current and projected business environment. The classic “hemline effect,” an economic indicator created by Wharton economist George Taylor in the 1920s, tells us that when hemlines go up, the economy is likely to improve.
But before you get excited about where hemlines might go if the economy starts moving well, there is another theory that says just the opposite. The contradicting hypothesis explains that hemlines go up when fabric prices rise because it prevents designers from purchasing as many textiles. Ilse Metchek, Executive Director of the California Fashion Association, explains, however, that tighter budgets may not be a bad sign. Instead, it is a testament to designers pushing themselves to do better work at a lower cost. But working to fit tighter budgets is not a challenge solely for designers.
Fashion is an industry that branches out and affects many others. Weather conditions affect farming, hence cotton and wool production, hence textile manufacturing, hence dye mills, hence clothing factories, and then and only then do we finally make it to the posh runways. Fascinating transition from seed to sequins, isn’t it?
With this interconnecting web of fashion, many fashion-related businesses have felt the crunch of the dampened American economy over the past several years. Sales for luxury goods have waned and retail sales have flattened out in usually booming markets.
With this in mind, what are the runways telling us for the coming year?
To look beyond the past few years and finally treat yourself!
The runways were glowing this spring with luxury and sexiness. Furs, elaborate beading, sequins and embellishment of all kinds glittered on the runways, with menswear even moving in the direction of satin suits.
But what does this mean for business?
It means get confident in your paycheck, break out the credit card and start spending. Pricey items are ready to hit stores soon, and those retailers are waiting for you and your much-neglected platinum card.
We can already see this grab for gild in stores. In Gap, one of America ’s apparel leaders, you can already find plenty of bejeweled sweaters and sequins. At a store known for providing simple basics to a moderate clientele, Gap is winking to the public to start spending again. They know glitter always catches the eye.
Using glamorous starlet Sarah Jessica Parker in their recent ad campaign, GAP is sending consumers a message: spring is here, and it is not just the weather. We have been in an economic winter as a nation, with few of the giant retailers pursuing major corporate change-ups or controversial branding schemes. But now, GAP is even expanding the brand to create a line specifically for baby boomers, a leap that tells us they are confident in the spending habits of this aging group.
In part, this glamorous change, according to Karen Sharett of the Worth Global Style Network, a leader in the global fashion press, “reflects the sheer strength of the luxury market trickling down to mid-tier retailers, creating an aspirational market.” Middle income consumers, because of this “trickle-down effect” are thus able to acquire items that lend to a more luxurious lifestyle.
This “aspiration,” as Sharett put it, is a trait that many companies are embracing this past year as we emerge from our national rut.
Do you recall the somber Calvin Klein ads populating magazines and billboards a mere four years ago? Where are those sullen models now? None other than dressed up in shiny dresses, painted with rouge lips and even a floral print!
Luxury products, especially from such major players as Louis Vuitton, Hermes and Gucci, are also seeing a rise in sales during recent months and are introducing playful, more colorful collections to attract a younger demographic. When Louis Vuitton released a cherry-printed collection of accessories earlier this year, the fashion world took note. You have to be pretty confident in your market to release an entire line of accessories featuring such a sexual symbol, even if the cherries do have smiley faces.
Even with rising gas prices and the economic wavering of the last year, fashion—from the retail floor up to major designer advertising campaigns—are telling the American public that happier days are ahead. We are entering a period of greater bottom lines, and with that comes feeling of security for the coming years. From GAP’s bejeweled sweaters to Louis Vuitton’s cherry bedecked bags, it seems fashion is telling us to dress up and get ready for better times.
________________________________________
Lindsey Rosenberg is a senior in Marshall focusing in entrepreneurship. She is also President of the Fashion Industry Association of USC. Outside of school she is the Fashion Editor of MODA :: The Emerging Designers Resource, a fashion industry publication she helped launch last year. She loves fashion and will continue her career in the field after graduation.