Fashion and Finance: the double Fs of luxury

In which way does the financial world and the luxury one, apparently far apart, actually continue to go at the same speed?

In the current age, it’s important to underline how the international finance is more and more present in the fashion industry through the so-called M&A, mergers and acquisitions operations in order to help different fashion enterprises in developing and improving their own financial and management growth. For this reason, financial advisory and asset management firms play a significant role in forming a global network of relationships between international leaders. Important shifts are happening from West to East so that emerging markets are now the focus of economic transformations the world is seeing.

The recent M&A activities in Italy are the results of the important interest of the international market for some Italian brands. This is because luxury is mainly concentrated in Italy and France, the two countries where there are the most brands. Italy has the advantage to have a traditional specialized manpower and there are a lot of peculiar skills that make the Made in Italy a fundamental point of reference for the rest of the world. So, it’s a direct consequence that, when emerging countries get their economical wealth, surely they intend to purchase the most attractive products, so they choose Italian and French brands. The M&A luxury market is a place where most of people are more interested in the brands themselves rather than in their financial logic. Recently, the fashion world has seen the purchase of some luxury brands, such as Valentino Fashion Group (acquired by Mayhoola for Investments, which is controlled by the royal family of Qatar), realized through some private equity operations although it’s very hard for financial experts to understand the intrinsic dynamics of these luxury companies in which the coordination of the creative department with the most rational financial one is a very complicated activity.

Qatari Royals buy the Italian fashion house Valentino
Qatari Royals buy the Italian fashion house Valentino

At the present time it’s better to invest in foreign countries for the control of new marketplaces rather than for resources outsourcing also because countries as China, for example, are no more affordable as some years ago for the costs of products. It is wrong to look at the market as a geographical area because people now travel all around the world so what is significant for a company is to understand which is the right place in order to deal with its own clientele in the best way possible. Moreover, the e-commerce is a new frontier that is going to run parallel to retail.

2013 stats of digital commerce spending by platform
2013 stats of digital commerce spending by platform

The clientele changes continually for each brand and now everyone tries to control the main marketplaces and they will also  go on in this way in the future. Some specific places of emerging countries, such as the so-called “second cities”, not always are the right area for each brand. Indeed, there are brands that want to go there and others that aren’t appropriate for that specific town so they need to reach their customers in another different way. At the same time, it’s not for all to understand how to convert significant investments to profits because, apart from successful brands, others can’t have the same certainty of their cash flows. In the last years, European consumptions, intended as European people’s consumptions, have decreased. Effectively, people who buy luxury products in Europe are mainly foreign people. By contrast, United States go on in the right way and emerging countries continue growing more and more. While foreign people, when choosing a brand, prefer prominent and well-known brands, the Europeans prefer no logo brands, simpler products, and they have a relationship with the luxury world less linked to showing off what they buy.

Moreover, fashion is one of the most prominent sectors in the world, therefore luxury brands especially have a relevant social role in order to deal with charities. There are two phenomenons: on the one hand enterprises use the charity as a marketing event, on the other hand they think they must return part of their success to the community. So, there are different points of view and it’s very hard to generalize their way to be involved in these social commitments. Particularly in Italy, where the beauty reigns, it’s essential to invest in all what makes this country so beautiful.

Floriana Lucchesi

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