Luxury Apparel, Accessories and Consumer Products Lines Compete for Growth

Some European designers are shifting production from France and Italy to other countries where labor is cheaper. In the U.S., Lafayette 148, a New York-based womenswear label, sent a production veteran to China to teach 120 workers there how to produce and finish fine-gauge knits for sweaters using cashmere or merino wool.

In the past, the finest custom lines from the runway couture rarely appeared in the same showrooms with less expensive lines, but no more. Today, designers may mix their haute couture with lower-priced ready-to-wear pieces. So-called “diffusion” lines, or lower-priced secondary labels that more consumers can afford, are shown side-by-side with this season’s couture.

One example of a diffusion line is Giorgio Armani’s Emporio Armani. With stores located around the world, Emporio Armani offers ready-to-wear apparel, sunglasses, perfume, accessories and watches for far less that its exclusive Giorgio Armani or Armani Collezioni brands. Merchandise is mass produced, and designed to appeal to younger buyers. Likewise, Dolce & Gabbana’s D&G line (which was begun in 1993 but licensed off to Italian fashion conglomerate IT Holding SpA) is now back in the hands of Domenico Dolce and Stefano Gabbana who spent $100 million to design and market the mid-priced line. Other diffusion lines include Prada’s Miu and Versace’s Versus.

Diffusion lines can be up to 50% cheaper in retail pricing than top-of-the-line designer goods. However, their profit margins are approximately 20% compared to up to 45% for high-end labels.

The Coronavirus hit luxury apparel and accessories hard. In the second quarter of 2020, Boston Consulting Group estimated that luxury sales would fall between 25% and 45% for all of 2020. Luxury brands are looking more and more to ecommerce, especially during the pandemic. Amazon launched its Luxury Stores app in 2020. Upmarket digital marketplace Farfetch saw a 60% uptick in traffic in the second quarter of 2020 compared to the same quarter in 2019.

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