Fashion Industry Predictions for Q1 2025 - Retail

Societies around the global and across the economic spectrum are all calling for change. Advancements in technology like Elon Musk's internet service company Starlink gives the most remote and underleveraged peoples the very real ability to connect, actively participate, and let their voices be counted for in the digital world. In 2024, we left off with multiple eruptions of social discourse driven by the youth in places like Africa, India, China, and here in the United States of America. And with the rise of alternative media and civilian journalism the elites in Europe and America are no longer the sole owners and distributors of the "truth". Wars are also continuing to rage in the Middle East and in Europe and has ignited conversation about the viability of old alliances, the formation of new alliances, and new players entering the fight for a seat and voice at the global level table. 

The fashion industry, specifically the retail sector left off 2024 also in a precarious state. There was the failed attempt by Tapestry Inc. to acquire and merger with Capri Holdings to create a "accessible handbag" behemoth while on the other hand Saks Global was successful in consolidating America's most storied department stores under one roof. Many companies were still sitting heavy on excessive inventory and driving a larger portion of the business during promotional events or worst-in markdowns!!! 

Let me start off by saying I am glad the Federal Trade Commission (FTC) challenged and was successful in halting the Tapestry and Capri merger. Among a host of reasons for why the government sued to block the transaction it stated "The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capris's head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing and advertising." Henry Liu, the director of the FTC's Bureau of Competition adds "Tapestry, which was built off the Coach brand, had become a serial acquirer that seeks to acquire Capri to further entrench its stronghold in the fashion industry." In response to the FTC Tapestry's CEO Joanna Crevoiserat said, "The FTC fundamentally misunderstood the marketplace, the way that consumers shop in our category and the impact of this deal on the labor and workers in employees in our industry...the FTC is the only regulator challenging this deal...which I think speaks to the way other jurisdictions consider the market and consumer behavior."

I do not agree with Ms.Crevoiserat in that the FTC "fundamentally misunderstanding (of) the marketplace" I do agree there is an increased probability that if the merger proceeded the super-fashion-firm could negatively impact the competitiveness of marketing and advertising. The super-fashion-firm could monopolize digital advertising across major social media networks, news sites, and search engines - particularly as Amazon's popularity and credibility has been rising among the fashion executives. However, I do think the primary focus on the consumer is overshadowing the negative reciprocals the deal would of had on the job market-where will she work? Tapestry which owns Coach, Kate Spade New York, and Stuart Weitzman coupled with Capri's brands Michael Kors, Versace, and Jimmy Choo could resulted in the elimination of jobs that the parent company felt were redundant or no longer a business necessity and the person, team, or department that once oversaw that function is no longer employed - resulting in an uptick in unemployment levels. The increased use of artificial intelligence in the human resource and recruiting departments to sort through resumes and applicant profiles is also cause for concern with the many reports of bias found in most AI algorithms with regard to diversity and a lack of scrutiny on the behalf of the human element when analyzing A.I generated results. Tapestry also utilizes A.I technology in its normal course of business, so much so according to Mandeep Bhatia, senior vice president, global digital product and omnichannel innovation at Tapestry, "If you're saying no to AI, its like saying 'No, we don't like money." The technology is used to analysis customer shopping behavior to better target the company's marketing and advertising activities and monitor and track customer biometrics across the web. In partnership with a third party the company also "sought to align its own site search, as well as search via platforms like Google and Facebook, with the terms shoppers may use to seek out the product."

While Saks Global was successful in its $2.7 billion bid for Neiman Marcus Group and is now home to  America's most storied department stores - Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue and its off-price channel Saks Off 5th. In a statement to WWD from Saks Global executive chairman  Richard Baker the deal represents "...an unparalleled multibrand luxury portfolio with tremendous growth potential..." The deal was also supported by funds from Amazon, Salesforce, Authentic Brands Group and G-III Apparel Group. The new "luxury retail empire" dubbed by WWD gives Saks Global a new level of clout and bargaining power over the vendors who Saks has not paid for at least several season as of Q4 2024. 

The end fighting in the Middle East, the back and forth tariff war and the growing list of companies banned or potentially blocked from importing into either United States and China is only compounding the continued inventory and supply chain woes for apparel and accessories retailers. But some issues the sector is confronting are self inflicted for example it was revealed during last year antitrust case that Michael Kors (the person not the brand) complained in emails that the brand was "chasing down-market and unfashionable customers" an issue that is not caused by any external factors rather an illustrious of managers lack of taste and culture and pulse on the marketplace. In a private email Mr. Kors also described the business leaders as "pursuing an old-fashioned customer who wasn't sleek and definitely not jet set." This sentiment was echoed by Cedric Wilmotte, then CEO of Michael Kors, while on the stand  an email between the executive and his wife seemly pointed finger at John Idol, Chairman, Chief Executive Officer and Director of Capri Holdings Limited, when he wrote "U.S. is a disaster and this is all because of JI trying to maintain top line with discounting all day long versus refocusing on creating brand heat." 

As someone who has worked several years in corporate retail primarily focused on the North American market for mid-range and contemporary fashion companies this trend towards longer promotional periods, the growth of the off price channel, and increased markdowns I predict will continue. A key reason is due to issues at the human level and how those issues manifest as it relates to recruiting and hiring efforts and company cultural. Personally, with this first hand experience I seldomly buy anything full price and I would suggest you too only buy at discount or markdown - including so-called "luxury" brands.