A cursory glance at any news publication portends bad news. Economies are not doing well, recession could be around the corner, no jobs, layoffs – it seems like a bleak picture. Yet, when you talk to people around you, businesses continue to function. They may not make as much money as they used to, but they carry on. Somehow, a lot of businesses are resilient. Some more than others.
Staying Power
The resilience of a business is usually determined by four factors. First, it needs to have a certain level of inelastic demand. In other words, it needs to be resilient to pricing. Second, it needs to have steady demand or, no matter what the circumstances, it must be a product that people either need or want. Third, it needs to have scalability in scope and depth, i.e. it should have the capability of being offered to a very large audience in some format. Finally, it needs to have the potential to generate significant employment. The last factor is crucial because employment levels drive economic success or failure to a very large extent.
Resilient businesses provide stability to an economy for the simple reason that they keep the economy and the lives of its citizens moving. So, basic industries such as food, education, healthcare, banking services; these are all services, which due to their essential nature are resilient. However, there is one industry that is not essential, yet is very resilient and has high levels of economic potential – fashion.
Basics
In our first economics lecture, we learned about the basics of demand i.e. there are needs, wants and desires which determine the nature and extent of demand for a product. Fashion is a unique industry that can meet all three requirements, depending on the price point that it is being offered at. Broken down to basics, this is an industry that is interesting, aspirational, essential and scalable. That’s a potent mix that’s often neglected for its frivolous appearance. Ironically, what we see, is certainly far from the reality.
Branding
Today, branding is a very large part of almost every product. And one of the best ways to know a brand’s value is through personal experience in some format. Fashion-related products can be an effective assurance of quality. Take, for example, a brand like Armani. The first experience is indeed through fashion. When the same brand launched apartments, there was familiarity and assurance of quality and therefore a willingness to pay a premium. Fashion brands that diversify outside of clothing have an advantage of familiarity with customers.
Fashion Focus
Besides the four reasons mentioned, fashion, as a broad industry, has a very significant social and psychological role to play. Depending on the economic cycle a country is witnessing, a different form of fashion will witness greater sales. For instance, in a growing economy, top-end brands will thrive alongside the affordable ones. In a recession, the top-end brands tend to suffer, or sell at discounts. The affordable range usually thrives despite economic movements. A purchase gives a sense of achievement. It is like buying a house or car. Only this is a much smaller, more achievable, less stressful purchase. Interestingly, no matter what the income and affordability level is, there is an almost constant aspirational desire for the more expensive product or brand.
