Fashion Businesses Fashion Marketing. Objectives 1.What are the three main market segments of the fashion industry? 2.What are the primary forms of business.

Fashion Fashion BusinessesBusinesses

Fashion MarketingFashion Marketing

ObjectivesObjectives1. What are the three main market

segments of the fashion industry?2. What are the primary forms of

business ownership?3. What are the key risks faced by

fashion businesses?

Fashion Industry SegmentsFashion Industry Segments1. Primary market – industry segment that

includes businesses that grow and produce the raw materials that become fashion apparel or accessories.

2. Secondary market – the industry segment that includes businesses that transform the raw materials into fashion in the merchandise production phase.

• Both markets serve as a link to the retail world.

Fashion Industry SegmentsFashion Industry Segments3. Tertiary market – the industry

segment that includes retail businesses such as stores.

• People who work in the segments must have knowledge of the other segments of the industry.

• Ex. Creator of fabrics must understand how fabrics will translate into finished garments.

Primary MarketPrimary Market• A key role in the development of fashion.• Phase involves technical research,

planning, and complex production processes.

• Must be aware of current consumer needs and fashion trends.

• Production schedule is ahead other than other segments

• Generate the products used in the production of the final products.

Primary Market - TextilesPrimary Market - Textiles• Textiles – a broad term referring to any material

that can be made into fabric by any method.• The largest segment of the primary market.• Produces fiber, fabric, leather, fur, plastic, metal,

paper and any other substance involved in production.

• Helps other industries such as home furnishings and interior decorating businesses.

• The foundation in the building process of fashions.

Secondary MarketSecondary Market• Produce garments by transforming textiles

to the finished product, or wearing apparel.• Producers – are responsible for designing,

producing, and selling the goods to retailers.

• Interrelated and Interdependent.• Main types are: manufacturers,

wholesalers, contractors, product development teams.

ManufacturersManufacturers• Handle all operations such as:

– buying the fabric, – designing or buying designs, – making garments, – selling and delivering the finished

garments.

WholesalersWholesalers• Similar to manufacturers, but do not make

the clothing.• Design staff that produces the designs.• Purchase textiles or other raw materials

necessary for the designs and then plan the cutting of the materials.

• Coordinate the selling and delivery processes.

• Many of the top fashion design companies are classified as wholesalers.

ContractorsContractors• May be responsible for many aspects

of production – from sewing and sometimes cutting to the delivery of goods.

• May produce designs for merchandise that carries a store’s label, or private label.

Product Development Product Development TeamsTeams

• Teams that;– Design– Merchandise– Outsource work to contractors in the

United States or outside of the country.

Tertiary MarketTertiary Market• Also known as the retail industry• Retailing – the selling of products to

customers.• Retail operations distribute directly to the

consumers who buy and/ or use the products. (link between consumer and manufacturer).

• Direct their purchasing and marketing efforts to their target customers’ needs and desires.

Tertiary MarketsTertiary Markets• Department stores• Variety stores• Off-price stores• Warehouse stores• Outlet stores• Non-store retailers

Support IndustriesSupport Industries• Businesses do not always have their

own in-house advertising departments, accounting departments

• May help lower operations costs and allow fashion companies to focus on fashion.

Types of Fashion BusinessTypes of Fashion Business• Three types of business

organizations:– Sole proprietorship – Partnership– corporation

Sole ProprietorshipSole Proprietorship• The most common form of business• A business owned and operated by

one person• One of the oldest forms of business

ownership• Not controlled by federal government

regulations; the business does not exist apart from the owner.

Sole ProprietorshipSole Proprietorship• Risks – owner takes responsibility for

all assets owned. Personally liable for the company.

• Taxes – business profit is taxed as personal income tax at a rate less than the rate imposed on corporations.

• Pros and Cons – the freedom to operate.

PartnershipPartnership• A business created through a legal

agreement between two or more people who are jointly responsibility for success or failure of the business.

• Taxes – has fewer regulations than a corporation and each partner is taxed separately on individual tax returns.

• Personal liability – each partner is personally liable for debts of the partnership.

CorporationCorporation• A business that is chartered by a

state and legally operates apart from the owner or owners. Charter – a legal document that grants certain rights and privileges to the company by the state.

• The number one retail corporation in the world?

CorporationCorporation• Stocks and Shareholders – a corporation

has the right to issue stock. Prospective shareholders transfer money, property, or both, for the corporation's capital stock.

• Taxes – profit is taxed to both the corporation and to the shareholders when the profit is distributed as dividends.

• Death?

Fashion RisksFashion Risks• Risk – the possibility that a loss can occur

as the result of a business decision or activity.

• Risk management – a strategy to offset business risks; a systematic process of managing an organization’s risk exposure to safety, environmental factors, and the law.– Marketing information?

Types of RisksTypes of Risks• Three types of risks:

– Economic Risks – risks that occur from changes in overall business conditions.

– Human risks – risks caused by human mistakes as well as by the unpredictability of customers, employees, or the work environment.

– Natural risks – risks that result from natural causes such as the weather.

A

B

C

D

A – 48% Employee Theft

B – 32%

Shoplifting

C – 15%

Administrative and paper error

D – 5% Vendor Fraud

Other RisksOther Risks• Pure risks – risks that occur when there is

a possibility of a loss, but no chance to gain from the event.

• Speculative – risks that occur when gains or losses are possible.

• Controllable – risks that can be prevented or reduced in frequency

• Uncontrollable risks – events that a fashion business cannot prevent from occurring, such as weather.

Other risks Other risks • Insurable risk – pure risks that could

exist for a large number of businesses, including those for which the probability and amount of loss is predictable.

• Uninsurable risks – risks that occur when the chances of risk cannot be predicted or when the amount of loss cannot be estimated.

Managing Potential RiskManaging Potential Risk• Purchasing insurance• Prevention – employee training• Retailers and product warranties• Risk is one important factor affecting

the overall economies of all types of fashion business.