Fashion trade is an extremely profitable business. Its turnover is estimated at 150 million dollars.
This business is heavy due to the unpredictability of fashion trends that can make the trademark owner a very wealthy person or, conversely, to ruin in one season. Tough dependence on fashion, whims and tastes of buyers leaves a special imprint on the management of the “fashionable” business, marketing practice in the fashion market.
Product: management of the range of stores selling fashionable clothes
The basis of fashion retailing, on which the success or failure of a store depends, is demand forecasting. A product that has suddenly become unfashionable or purchased in excessive volume is sometimes impossible to sell even at the purchase price. On the other hand, insufficient procurement can lead to premature depletion of stocks and customer discontent.
The fact is that many customers visit competing stores, ask the price and only then return for the goods. One loyal buyer is able to bring the store several thousand dollars a year.
The optimal volume of purchases is also important for the store owner because in this case money spent on transportation, customs, etc. is saved.
The purchasing manager, as well as the company’s marketing specialist should carefully study fashion trends, carefully tracking possible trends for the next season and planning the store’s assortment. In connection with this, a marketing technique is interesting, which is used as a standard for staff in retail stores in Western Europe, including clothing stores: if the store does not have the right size, model, color, the seller recommends the buyer to visit a competitor’s store, where now there may be something he/she needs. With the seemingly incorrect approach, reception is actually effective as a means of building customer loyalty.
Promotion: the specifics of marketing communications in the industry
Today, in Western countries, the marketing communications of fashion stores, both large chains and boutiques, are in most cases based on a popular theory called the Differencial Congruence. It takes into account the peculiarities of consumer behavior of people who want to buy fashionable things (the theory applies not only to the clothing market, but also to other markets for fashion goods – cosmetics, sports accessories, etc.). The essence of the theory is as follows: the company’s marketing policy is aimed at shaping the store’s image as being as adequate as possible to the image of potential buyers (self-image), which ultimately leads to building customer loyalty to this store: as affective (store appreciation, emotional commitment, oral recommendations, insensitivity to the proposals of competitors) and behavioral ones (repeated purchases, an increase in the cost of a one-time purchase).
Formation of loyalty does not necessarily mean the introduction of incentive programs – discounts, gifts, coupons, etc. If the brand is associated in the mind of the buyer with its own lifestyle, then he/she will buy clothes of this particular brand . But the main thing: the commitment to one brand leads to the fact that the client not only buys clothes himself/herself, but also informs his/her reference group about the brand.
If a store or network satisfies certain conditions, then the Differencial Congruence theory is possible. In particular, the store or network should be clearly positioned: who we are, what we offer, for whom we offer and what our feature or difference from competitors is.
The dominant tool for building long-term store relationships with customers is the actual communication – communication between consultants or even shop owners with clients. Knowing buyers by name, meeting a regular customer, the seller builds relationships that are close to friendly, reinforcing customer loyalty. For a chain of stores with an intense flow of customers, the application of this principle is difficult, but for a small high-end store, on the contrary, it is feasible and potentially profitable.
Location: the role of the store location
Another feature of the behavior of fashion customers is to evaluate the location of the store. There are no family trips to shop on the outskirts of the city. Why is space important? The same Differencial Congruence principle is that the area and the surrounding of the store are involved in shaping its image in the mind of the buyer.
When choosing a place for a fashion store, that is, when comparing several alternative shopping areas, you need to pay attention to:
- image (in the perception of the target market);
- density of competition;
- intensity and nature of pedestrian flows;
- the level of social and economic development of the area;
- prospects of construction sites;
- parking available.
Creating a business from scratch
The main costs when opening a fashion store is the cost of organizing a retail space. The cost of premises located in a convenient crowded place is from $ 1,000 per square meter. One of the important components are the cost of finishing the premises, commercial equipment. It should be noted that many manufacturers have certain requirements for the design of the store. It should be understood that the exquisite simplicity of the interior of some fashion stores is no less than the catchy design of others. In addition, we must bear in mind that the collections of famous brands consist mainly of a whole line of products, and not of fragmented segments. A good boutique offers a range from coats to socks – everything you need. Many famous fashion houses, entering into contracts, put one of the conditions for the purchase of a seasonal collection in full, which is often costly for store owners.
After marketing research, you can assess in advance the profitability of a clothing store. Pledged trade markup can reach 200-300%, if we are not talking about exclusive clothes of famous brand, which is already very expensive.
Another component of success in this business is qualified personnel. Employees of such stores should be able to recognize the desires of the client, offer, but not impose options, act as a stylist. There are very few professional sales assistants in the labor market, so the owners have to select people themselves, pay for their additional education or train the staff themselves. The estimated amount of investment needed to open one fashion store is on average 60-80 thousand dollars. This amount consists of the following costs:
- rental of commercial premises from 100 square meters;
- signboard (at least $ 1,000);
- repair of the premises (from $ 100 per square meter);
- equipment and lighting (an average of $ 95 per square meter);
- payment of the first delivery of clothing (depends on the brand, but not less than 10 thousand dollars).
In different regions, the amount of investment may vary depending on the cost of services and materials.